<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1999
REGISTRATION NO. 333-75235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTERNATIONAL PAPER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW YORK 2600 13-0872805
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
TWO MANHATTANVILLE ROAD
NEW YORK, NEW YORK 10577
(914) 397-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES W. GUEDRY, ESQ.
VICE PRESIDENT,
SECRETARY & ASSOCIATE GENERAL COUNSEL
INTERNATIONAL PAPER COMPANY
TWO MANHATTANVILLE ROAD
NEW YORK, NEW YORK 10577
(914) 397-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
DENNIS S. HERSCH, ESQ. DIRK R. SOUTENDIJK, ESQ. JAMES C. MORPHY, ESQ.
DAVIS POLK & WARDWELL UNION CAMP CORPORATION SULLIVAN & CROMWELL
450 LEXINGTON AVENUE 1600 VALLEY ROAD 125 BROAD STREET
NEW YORK, NEW YORK 10017 WAYNE, NEW JERSEY 07470 NEW YORK, NEW YORK 10004
(212) 450-4000 (973) 628-2000 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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. [ ]
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INTERNATIONAL PAPER COMPANY
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
LOCATION IN JOINT PROXY
ITEM NUMBER IN FORM S-4 STATEMENT/PROSPECTUS
----------------------- -----------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page of the Registration
Statement; Outside Front Cover Page of
Joint Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Where You Can Find More Information;
Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Outside Front Cover Page of Prospectus;
Summary; Risk Factors; Selected Financial
Information; Historical and Pro Forma Per
Share Data; The Merger; Comparative Per
Share Market Price and Dividend
Information; Where You Can Find More
Information
4. Terms of the Transaction................. Outside Front Cover Page of Prospectus;
Summary; The Merger; Role of Financial
Advisors; Certain Provisions of the
Merger Agreement; Comparison of
Shareholder Rights; Description of
International Paper Capital Stock
5. Pro Forma Financial Information.......... Pro Forma Condensed Consolidated
Financial Data
6. Material Contacts with the Company Being
Acquired................................. *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
8. Interests of Named Experts and Counsel... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants.............................. Where You Can Find More Information
11. Incorporation of Certain Information by
Reference................................ Where You Can Find More Information
12. Information with Respect to S-2 and S-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
LOCATION IN JOINT PROXY
ITEM NUMBER IN FORM S-4 STATEMENT/PROSPECTUS
----------------------- -----------------------
<C> <S> <C>
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants........ *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies................................ Where You Can Find More Information
16. Information with Respect to S-2 or S-3
Companies................................ *
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies.......... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Outside Front Cover Page of Joint Proxy
Statement/Prospectus; Summary; Interests
of Certain Persons in the Merger; The
Merger; Certain Provisions of the Merger
Agreement; The Meetings; Comparison of
Shareholder Rights; Where You Can Find
More Information
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer..................... *
</TABLE>
- -------------------------
* Omitted because the Item is inapplicable or the answer thereto is negative.
<PAGE> 4
INTERNATIONAL PAPER COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A special meeting of stockholders of International Paper Company will be
held at the offices of Davis Polk & Wardwell at 9:00 a.m., local time, on April
30, 1999 for the following purposes:
1. To consider and vote upon a proposal to issue shares of
International Paper common stock in the merger of Maple
Acquisition, Inc., a wholly owned subsidiary of International
Paper, with and into Union Camp Corporation, upon the terms and
subject to the conditions set forth in the Merger Agreement dated
as of November 24, 1998 among International Paper, Union Camp and
Maple Acquisition; and
2. To amend the International Paper certificate of incorporation to
increase the number of authorized International Paper common stock
to 1,000,000,000 shares.
Only holders of record of International Paper common stock at the close of
business on March 18, 1999 are entitled to vote at the special meeting or any
adjournments or postponements thereof. Approval of the share issuance proposal
at the special meeting requires the favorable vote of the holders of a majority
of the International Paper common stock present in person or by proxy at the
special meeting, assuming a quorum is present, and approval of the charter
amendment proposal at the special meeting requires the favorable vote of the
holders of a majority of the outstanding shares of International Paper common
stock.
James Guedry
Vice President & Secretary
March 30, 1999
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
THE BOARD OF DIRECTORS OF INTERNATIONAL PAPER UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE MATTERS TO BE VOTED UPON
AT THE SPECIAL MEETING.
<PAGE> 5
UNION CAMP CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A special meeting of stockholders of Union Camp Corporation will be held at
The Union League Club, 38 East 37th Street, New York, NY, at 10:30 a.m., local
time, on April 30, 1999 for the following purposes:
To consider and vote upon a proposal to adopt the Merger Agreement dated as
of November 24, 1998 among UCC, International Paper Company and Maple
Acquisition, Inc., a wholly owned subsidiary of International Paper,
providing for the merger of Maple Acquisition with and into Union Camp.
Only holders of record of Union Camp common stock at the close of business
on February 23, 1999 are entitled to vote at the special meeting or any
adjournments or postponements thereof. Approval of the merger proposal at
the special meeting requires the affirmative vote of the holders of more
than two-thirds of the outstanding shares of Union Camp common stock.
Dirk Soutendijk
Vice-President, Secretary and
General Counsel
March 30, 1999
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
THE BOARD OF DIRECTORS OF UNION CAMP UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE MATTERS TO BE VOTED UPON
AT THE SPECIAL MEETING.
<PAGE> 6
[INTERNATIONAL PAPER LOGO] [UNION CAMP CORPORATION LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of International Paper Company and Union Camp
Corporation have approved a merger and a merger agreement and are seeking your
approval of this important transaction.
If we complete the merger, Union Camp's shareholders will receive between 1.47
and 1.6247 International Paper common shares for each Union Camp common share
that they own. We will determine the exchange ratio by referring to the average
price per International Paper common share, calculated based on market prices on
ten randomly selected days during a 20-trading day period shortly prior to the
merger. International Paper shareholders will continue to own their existing
shares after the merger. International Paper common stock is listed on the New
York Stock Exchange under the symbol "IP". On March 26, 1999, the closing price
of International Paper common stock was $44.25. The following chart briefly
summarizes the exchange ratio for the merger:
<TABLE>
<S> <C>
- -----------------------------------------------
NUMBER OF
INTERNATIONAL PAPER
CALCULATED AVERAGE SHARES TO BE ISSUED IN
PRICE PER THE
INTERNATIONAL MERGER PER UNION CAMP
PAPER COMMON SHARE COMMON SHARE
- -----------------------------------------------
Less than $43.70 1.6247
- -----------------------------------------------
$43.70-$48.30 71 divided by average
price per
International
Paper common share
- -----------------------------------------------
More than $48.30 1.47
- -----------------------------------------------
</TABLE>
PLEASE SEE PAGES 5-6 AND 60 FOR DETAILED INFORMATION ABOUT THE EXCHANGE RATIO,
AS WELL AS PAGES 11-13 FOR A DESCRIPTION OF ADDITIONAL FACTORS THAT MAY AFFECT
THE VALUE OF THE
INTERNATIONAL PAPER COMMON SHARES TO BE ISSUED IN THE MERGER, ALONG WITH SEVERAL
OTHER RISK FACTORS PERTAINING TO THE MERGER THAT YOU SHOULD CONSIDER.
Please call 1-877-278-9293 (toll-free) if you would like more information about
the exchange ratio.
International Paper and Union Camp have scheduled special meetings to vote on
the following proposals, which are necessary for the completion of the merger:
- - Approval and adoption by the Union Camp shareholders of the merger and the
merger agreement; and
- - Approval by the International Paper shareholders of the following proposals:
- an amendment to International Paper's certificate of incorporation
increasing the number of authorized common shares from 400,000,000 to
1,000,000,000, and
- the issuance of International Paper common shares in the merger.
If you are a Union Camp shareholder and fail to return the enclosed proxy card
or call in your vote, the effect will be a vote against the merger agreement
proposal, unless you attend your meeting and vote for that proposal. If you are
an International Paper shareholder and fail to return the enclosed proxy card or
call in your vote, the effect will be a vote against the proposal to amend
International Paper's certificate of incorporation, and, accordingly, against
the merger, unless you attend your meeting and vote for that proposal.
WE ENCOURAGE YOU TO READ THIS DOCUMENT CAREFULLY.
[John Dillon Signature]
- ------------------------------------------------------
John T. Dillon
Chairman and Chief Executive
Officer, International Paper Company
[W. Craig McClelland Signature]
- ------------------------------------------------------
W. Craig McClelland
Chairman and Chief Executive
Officer, Union Camp Corporation
Neither the Securities and Exchange Commission nor any state securities
commission has approved the International Paper common stock to be issued under
this document or determined if this document is accurate or adequate. Any
representation to the contrary is a criminal offense.
Joint Proxy Statement/Prospectus dated March 30, 1999, and first mailed to
shareholders on March 31, 1999.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
MERGER............................ 1
WHO CAN HELP ANSWER YOUR
QUESTIONS......................... 2
SUMMARY............................. 3
The Companies....................... 3
Reasons for the Merger.............. 3
Additional International Paper
Reasons for the Merger............ 3
Additional Union Camp Reasons for
the Merger........................ 4
Our Recommendations to
Shareholders...................... 4
The Merger.......................... 5
RISK FACTORS........................ 11
The International Paper common
shares to be issued in the merger
will fluctuate in value........... 11
Risks posed by systems compatibility
and overlapping customers to
realizing anticipated cost
savings........................... 12
Forward-looking statements may prove
inaccurate........................ 12
THE MERGER.......................... 14
General............................. 14
Background of the Merger............ 14
Reasons for the Merger.............. 18
Recommendation of the International
Paper Board; Additional
Considerations of the
International Paper Board......... 19
Recommendation of International
Paper's board of directors........ 21
Recommendation of the Union Camp
Board; Additional Considerations
of the Union Camp Board........... 21
Recommendation of Union Camp's board
of directors...................... 23
Accounting Treatment................ 23
Material Federal Income Tax
Consequences...................... 23
Regulatory Matters.................. 25
No Appraisal or Dissenters'
Rights............................ 26
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Federal Securities Laws
Consequences; Stock Transfer
Restriction
Agreements........................ 26
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION.......... 27
SELECTED FINANCIAL INFORMATION...... 28
International Paper................. 28
Union Camp.......................... 29
HISTORICAL AND PRO FORMA PER SHARE
DATA.............................. 31
SELECTED UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL
DATA.............................. 33
ROLE OF FINANCIAL ADVISORS.......... 42
Opinion of Union Camp's Financial
Advisor........................... 42
Opinion of International Paper's
Financial Advisor................. 49
INTERESTS OF INSIDERS IN THE
MERGER............................ 56
Interests of Union Camp Officers and
Directors......................... 56
PRINCIPAL PROVISIONS OF THE MERGER
AGREEMENT......................... 60
General............................. 60
Consideration to be Received in the
Merger............................ 60
Exchange of Shares.................. 60
Principal Representations and
Warranties........................ 61
Principal Covenants................. 61
Conditions to the Consummation of
the Merger........................ 70
Termination......................... 71
Termination Fees Payable by
International Paper............... 73
Termination Fees Payable by Union
Camp.............................. 73
Expenses............................ 74
</TABLE>
i
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE SHAREHOLDERS'
MEETINGS.......................... 75
Times and Places; Purposes.......... 75
Voting Rights; Votes Required for
Approval.......................... 75
Voting of Proxies................... 76
INTERNATIONAL PAPER CERTIFICATE OF
INCORPORATION AMENDMENT
PROPOSAL.......................... 78
COMPARISON OF SHAREHOLDER RIGHTS.... 80
DESCRIPTION OF INTERNATIONAL PAPER
CAPITAL STOCK..................... 96
International Paper Common Shares... 97
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
International Paper Preferred
Stock............................. 98
LEGAL MATTERS....................... 99
EXPERTS............................. 99
FUTURE SHAREHOLDER PROPOSALS........ 100
WHERE YOU CAN FIND MORE
INFORMATION....................... 100
LIST OF ANNEXES
Annex A Agreement and Plan
of Merger
Annex B Opinion of Goldman,
Sachs & Co.
Annex C Opinion of Credit
Suisse First Boston
Corporation
</TABLE>
ii
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What do I need to do now?
A: Just indicate on your proxy card how you want to vote, sign it and mail it
in the enclosed postage-prepaid return envelope as soon as possible, so
that your shares may be represented at your shareholders' meeting. The
shareholders of both International Paper and Union Camp also have the
option of submitting their vote by telephone. If you sign and send in your
proxy card and do not indicate how you want to vote, we will count your
proxy card as a vote in favor of the proposals submitted at your
shareholders' meeting. You may attend your shareholders' meeting and vote
your shares in person, rather than signing and mailing your proxy card, or
call in your vote.
Q: Can I change my vote after submitting my proxy card?
A: Yes. Any person who gives a proxy in connection with this solicitation,
including one given by telephone, may revoke the proxy at any time before
it is voted. The proxy may be revoked in writing, by telephone or by
appearing at your company's shareholders' meeting and voting in person. You
can find further details on how to revoke your proxy on page 77.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares, following the
directions provided by your broker.
Q: Should I send in my stock certificates now?
A: No. We will send instructions to Union Camp shareholders on how to exchange
their Union Camp stock certificates for International Paper stock after
completion of the merger.
Q: What happens to my future dividends?
A: We expect no changes in International Paper's or Union Camp's dividend
policies before the consummation of the merger. After the consummation of
the merger, International Paper expects that its initial annual dividend
rate will be $1.00 per International Paper common share, which is
equivalent to the current annual dividend payment on International Paper
common shares, but lower than Union Camp's current annual dividend of $1.80
on Union Camp common shares. The payment of dividends by International
Paper in the future will depend on business conditions, its financial
condition and earnings, and other factors.
Q: When do you expect to complete the merger?
A: We are working to complete the merger as soon as possible. We hope to
complete the merger shortly after the special shareholders' meetings, if we
obtain the required shareholder approvals at those shareholders' meetings.
1
<PAGE> 10
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger you should contact:
if you are an
INTERNATIONAL PAPER SHAREHOLDER:
International Paper Company
Two Manhattanville Road
Purchase, New York 10577
Attention: Office of Investor Relations
Phone Number: (914) 397-1625
if you are a
UNION CAMP SHAREHOLDER:
Union Camp Corporation
1600 Valley Road
Wayne, New Jersey 07470
Attention: Office of Investor Relations
Phone Number: (973) 628-2273
If you have any questions about the exchange ratio, please call
(877) 278-9293 (toll-free).
If you would like additional copies of this document,
or if you have questions about the merger, you should contact:
if you are an
INTERNATIONAL PAPER SHAREHOLDER:
Georgeson & Company Inc.
Wall Street Plaza
New York, NY 10005
Phone Number: (800) 223-2064 (toll-free)
if you are a
UNION CAMP SHAREHOLDER:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Phone Number: (212) 929-5500 (collect for international callers)
or
(800) 322-2885 (toll-free)
2
<PAGE> 11
SUMMARY
This summary contains selected information from this document and may not
contain all of the information that is important to you. To understand the
merger more fully and for a more complete description of the legal terms of the
merger, you should read this entire document carefully, including the Annexes,
and the documents to which we refer. A list of documents that we incorporate by
reference appears below under the heading "Where You Can Find More Information".
THE COMPANIES
INTERNATIONAL PAPER COMPANY
Two Manhattanville Road
Purchase, New York 10577
Telephone: (914) 397-1500
International Paper is a worldwide producer of printing and writing papers,
paperboard and packaging and wood products. It is also a leading distributor of
paper and office supply products, primarily in the United States and Europe. On
December 31, 1997, International Paper had manufacturing operations in 31
countries and sales in more than 130 countries. It also produces pulp, laminated
products and specialty products, including chemicals and minerals.
UNION CAMP CORPORATION
1600 Valley Road
Wayne, New Jersey 07470
Telephone: (973) 628-2000
Union Camp is a diversified forest products company operating in five business
areas including packaging products, paper and paperboard, wood products,
distribution and chemicals, primarily in the United States. Union Camp controls
approximately 1,600,000 acres of timberlands in Georgia, Alabama, Virginia,
Florida, North Carolina and South Carolina, approximately 1,500,000 acres of
which are owned by Union Camp.
REASONS FOR THE MERGER (SEE PAGES 18-19)
International Paper and Union Camp believe that the merger will:
- create one of the world's premier manufacturers of printing paper and
paper-based packaging materials, with annual net sales, based on 1997
results, of approximately $24.4 billion;
- create opportunities for significant operational and financial cost
savings through the integration of International Paper's and Union Camp's
operations; and
- significantly strengthen the combined company's product distribution arm,
enabling it to provide its customers with better service.
However, you should note that achieving these objectives is subject to
particular risks which we discuss below in the section entitled "Risk Factors".
These risks include possible difficulties in integrating two companies that have
previously operated independently and in achieving anticipated cost savings and
other financial and operating benefits from the merger.
ADDITIONAL INTERNATIONAL PAPER REASONS FOR THE MERGER (SEE PAGES 19-21)
International Paper also believes that the merger will:
- focus International Paper's product strategy by increasing its market
share for uncoated printing paper and containerboard, reflecting its
long-term strategy to focus on those businesses in which it believes it
can develop a more competitive position;
- boost International Paper's timberland holdings by about 25%; and
3
<PAGE> 12
- enhance the strategic position of International Paper beyond that which
it could achieve on its own.
ADDITIONAL UNION CAMP REASONS FOR THE MERGER (SEE PAGES 21-23)
Union Camp also believes that the merger offers Union Camp's shareholders:
- an attractive premium for their shares;
- the opportunity to hold a less volatile, more liquid stock in a
significantly larger, more diversified company; and
- the ability to participate in the future growth potential of the combined
company and share in any cost reduction and revenue enhancements realized
as a result of the merger.
OUR RECOMMENDATIONS TO SHAREHOLDERS
TO THE INTERNATIONAL PAPER SHAREHOLDERS:
International Paper's board of directors believes that the merger is in your
best interests and unanimously recommends that you vote FOR the proposals to:
- approve an amendment to International Paper's certificate of
incorporation, increasing the number of authorized International Paper
common shares from 400,000,000 to 1,000,000,000; and
- approve the issuance of International Paper common shares in the merger.
TO THE UNION CAMP SHAREHOLDERS:
Union Camp's board of directors believes that the merger is in your best
interests and unanimously recommends that you vote FOR the proposal to:
- approve and adopt the merger and the merger agreement.
RECORD DATE; VOTING POWER (SEE PAGES 75-76)
If you are an International Paper shareholder, you are entitled to vote at your
shareholders' meeting if you owned shares of common stock as of the record date
for that shareholders' meeting, which was the close of business on March 18,
1999.
If you are a Union Camp shareholder, you are entitled to vote at your
shareholders' meeting if you owned shares of common stock as of the record date
for that shareholders' meeting, which was the close of business on February 23,
1999.
On March 18, 1999, there were 306,851,559 International Paper common shares
outstanding. For each International Paper common share owned on that date,
International Paper shareholders will have one vote at the International Paper
shareholders' meeting.
On February 23, 1999, there were 69,781,473 Union Camp common shares
outstanding. For each Union Camp common share owned on that date, Union Camp
shareholders will have one vote at the Union Camp shareholders' meeting.
REQUIRED VOTES OF INTERNATIONAL PAPER SHAREHOLDERS
The following approvals of International Paper's shareholders are required for
the merger to occur:
- the approval of a majority of all outstanding shares entitled to vote at
the International Paper shareholders' meeting in order to approve and
adopt the proposal to increase the number of International Paper's
authorized common shares; and
- the approval of a majority of the holders of International Paper common
shares present and voting at the International Paper shareholders'
meeting in order to approve and adopt the proposal to
4
<PAGE> 13
issue the International Paper common shares required to consummate the merger.
REQUIRED VOTE OF UNION CAMP SHAREHOLDERS
The following approval of Union Camp's shareholders is required for the merger
to occur:
- the approval of the merger and the merger agreement by more than
two-thirds of the outstanding Union Camp common shares.
SHARE OWNERSHIP OF MANAGEMENT AND DIRECTORS
On March 18, 1999, the record date for International Paper's shareholders'
meeting, directors and executive officers of International Paper and their
affiliates owned and were entitled to vote 1,790,726 International Paper common
shares, or less than 1% of the International Paper common shares outstanding on
that date.
On February 23, 1999, the record date for Union Camp's shareholders' meeting,
directors and executive officers of Union Camp and their affiliates owned and
were entitled to vote 179,728 Union Camp common shares, or less than 1% of the
Union Camp common shares outstanding on that date.
THE MERGER
We have attached the merger agreement as Annex A to this document. We encourage
you to read the merger agreement because it is the legal document that governs
the merger.
WHAT UNION CAMP SHAREHOLDERS WILL HOLD AFTER THE MERGER
As a result of the merger, Union Camp shareholders will receive, for each Union
Camp common share that they own, between 1.47 and 1.6247 International Paper
common shares. We will determine the exchange ratio by referring to the average
International Paper share price, calculated based on market prices on ten
randomly selected days during a 20-trading day period shortly prior to the
merger.
The following chart briefly summarizes how the exchange ratio for the merger is
calculated:
<TABLE>
<S> <C> <C>
- ---------------------------------------------------
HYPOTHETICAL
VALUE PER
UNION CAMP
NUMBER OF COMMON SHARE
INTERNATIONAL BASED ON THE
CALCULATED PAPER SHARES CALCULATED
AVERAGE TO BE ISSUED AVERAGE
PRICE PER IN THE MERGER PRICE PER
INTERNATIONAL PER UNION INTERNATIONAL
PAPER CAMP PAPER COMMON
COMMON SHARE COMMON SHARE SHARE
- ---------------------------------------------------
Less than 1.6247 Less than
$43.70 $71/share
- ---------------------------------------------------
71 divided
$43.70 -- by Approximately
Average
$48.30 Price $71/share
per
International
Paper Share
- ---------------------------------------------------
More than 1.47 More than
$48.30 $71/share
- ---------------------------------------------------
</TABLE>
We have described more fully how the exchange ratio for the merger works under
the heading "Principal Provisions of the Merger Agreement -- Consideration to be
Received in the Merger".
Based on the closing prices of International Paper common stock over the twenty
trading days prior to and including March 26, 1999, the most recent practicable
date prior to the filing of this document, the exchange ratio would be 1.6247,
if one calculates the average of the ten trading days with the lowest closing
prices in this period, or 1.5815, if one calculates the average of the ten
trading days with the highest closing prices in this period. Assuming these
exchange ratios and average prices, the hypothetical value of the International
Paper common shares to be received by Union Camp shareholders would be $66.42
per Union Camp share, based on an exchange ratio of 1.6247, or $71.00 per Union
5
<PAGE> 14
Camp share based on an exchange ratio of 1.5815. Furthermore, if the average
International Paper share price is equal to $44.25, the closing price of
International Paper common stock on March 26, 1999, the most recent practicable
date prior to the filing of this document, the exchange ratio would be 1.6045
and the hypothetical value of the International Paper shares to be received by
Union Camp shareholders would be $71.00 per Union Camp share.
However, the actual value of the International Paper common shares to be issued
in the merger will depend on market prices at that time, and may be more or less
than the value implied by this hypothetical average International Paper share
price or by the chart above. We explain this matter in more detail on page 11
under the heading "Risk Factors -- The International Paper common shares to be
issued in the merger will fluctuate in value", which also provides a further
description of risk factors that may affect price volatility or the value of the
International Paper common shares issued in the merger.
International Paper will not issue any fractional common shares in the merger.
Instead, Union Camp shareholders will receive cash for any fractional common
shares owed to them in an amount based upon the exchange ratio for the merger.
Union Camp shareholders should not send in their stock certificates for exchange
until instructed to do so after we complete the merger.
WHAT INTERNATIONAL PAPER SHAREHOLDERS WILL HOLD AFTER THE MERGER
International Paper shareholders will continue to own their existing
International Paper common shares after the merger. International Paper
shareholders should not send in their stock certificates in connection with the
merger.
OWNERSHIP OF INTERNATIONAL PAPER AFTER THE MERGER
Based upon the number of International Paper and Union Camp common shares
outstanding on March 26, 1999, and not taking into account stock options or
convertible securities of Union Camp or International Paper, International Paper
will issue between 101.7 and 112.4 million International Paper common shares to
Union Camp shareholders in the merger. The International Paper common shares
that will be issued to Union Camp shareholders in the merger will represent
between 24.9% and 26.8% of the outstanding International Paper common shares
after the merger, excluding stock options and convertible securities.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGES 23 - 25)
We have structured the merger so that none of International Paper, its merger
subsidiary, Union Camp, or holders of either Union Camp common shares or
International Paper common shares will recognize any income, gain or loss for
federal income tax purposes as a result of the merger, except for gain on cash
received by Union Camp shareholders for fractional shares.
It is a condition to closing of the merger that Union Camp receives an opinion
of Sullivan & Cromwell, special counsel to Union Camp, that the merger will be a
reorganization for federal income tax purposes. Union Camp does not currently
intend to waive this condition. In the unlikely event that Union Camp does waive
this condition because the merger is a taxable transaction, Union Camp would
recirculate this document to disclose the waiver of this condition and the
resulting risks to Union Camp's shareholders, including all related material
disclosures, and would resolicit proxies from Union Camp's shareholders.
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TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO YOU
WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. WE URGE YOU TO CONSULT YOUR TAX
ADVISORS FOR A FULL DESCRIPTION OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
NO APPRAISAL OR DISSENTERS' RIGHTS (SEE PAGE 26)
Union Camp is a Virginia corporation. Under Virginia law, Union Camp
shareholders have no right to an appraisal of the value of their Union Camp
common shares in connection with the merger.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION (SEE PAGE 27)
International Paper common shares are listed on the New York Stock Exchange
under the symbol "IP". Union Camp common shares are also listed on the New York
Stock Exchange under the symbol "UCC". On November 23, 1998, the last full
trading day prior to public announcement of the proposed merger, the last sales
price per International Paper common share was $45.8125 and the last sales price
per Union Camp common share was $48.9375. On March 26, 1999, the most recent
practicable date prior to the filing of this document, the last sales price per
International Paper common share was $44.25 and the last sales price per Union
Camp common share was $67.9375.
LISTING OR QUOTATION OF INTERNATIONAL PAPER COMMON SHARES
It is a condition to the closing of the merger that the International Paper
common shares to be issued to Union Camp shareholders in the merger be approved
for listing on the New York Stock Exchange.
ACCOUNTING TREATMENT (SEE PAGE 23)
We expect the merger to qualify as a "pooling of interests." This means we will
treat our companies as if they had always been combined for accounting and
financial reporting purposes at their current book value.
REGULATORY APPROVALS (SEE PAGES 25-26)
The parties have already obtained all material regulatory approvals required to
permit consummation of the merger from the applicable U.S. and foreign
regulatory authorities. The Hart-Scott-Rodino statute prohibits completion of a
merger until statutory notification requirements and waiting periods have been
satisfied. The waiting period under the statute applicable to the merger expired
on February 3, 1999. However, the Department of Justice and the FTC have the
authority to challenge the merger on antitrust grounds before or after we
complete the merger. Additionally, on February 5, 1999, the European Commission
rendered a decision not to oppose the merger.
INTERESTS OF UNION CAMP'S OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGES 56-59)
The International Paper and Union Camp shareholders should note that a number of
Union Camp directors and executive officers may have interests in the merger
that are different from, or in addition to, the interests of the Union Camp
shareholders generally. These interests exist because of the rights that these
Union Camp directors and executive officers have under the terms of their Union
Camp benefit and compensation plans and also, in the case of the officers, under
the terms of various agreements with Union Camp. These agreements may provide
some officers with severance benefits if International Paper terminates their
employment under specified circumstances following the merger. Some of the plans
provide for the accelerated vesting of stock options and restricted stock.
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The members of Union Camp's board of directors knew about and considered these
additional interests when they approved the merger and the merger agreement.
DIRECTORS AND MANAGEMENT OF INTERNATIONAL PAPER AFTER THE MERGER (SEE PAGE 56)
Following the merger, International Paper's board of directors will consist of
International Paper's directors elected either by its board of directors or by
its shareholders at its 1996, 1997 and 1998 annual shareholders' meetings. In
addition, International Paper agreed in the merger agreement that, upon
completion of the merger, W. Craig McClelland and two current members of Union
Camp's board of directors approved by the nominating committee of International
Paper's board of directors will become members of International Paper's board of
directors. These three additional directors will be allocated equally among the
three classes of directors on International Paper's board.
International Paper has established an integration committee composed of senior
executive officers of both International Paper and Union Camp who were selected
by International Paper's chairman. The purpose of this committee is to propose
alternatives and recommend actions to International Paper's chairman regarding
issues and matters arising in connection with the integration of the two
companies.
Following the merger, International Paper's chairman will appoint the combined
company's management and executive officers, which will include members of the
existing management of International Paper and/or Union Camp. International
Paper has announced the members of the combined company's executive officer and
management group, which will include former Union Camp executive officers.
CONDITIONS TO THE MERGER (SEE PAGES 70 - 71)
We will complete the merger only if specific conditions are satisfied or, in
some cases, waived, including the following:
- the International Paper proposals having been approved by its
shareholders and the merger agreement having been approved by the Union
Camp shareholders;
- there being no law or final and nonappealable court order that prohibits
the merger;
- receipt by International Paper of a letter from Arthur Andersen LLP that
the acquisition should be treated as a "pooling of interests" and receipt
by Union Camp of a letter from PricewaterhouseCoopers LLP that Union Camp
is a pooling candidate for purposes of the merger, in each case in
conformity with U.S. generally accepted accounting principles; and
- receipt of an opinion of Union Camp's special counsel that the merger
will be a reorganization for federal income tax purposes.
The company entitled to assert the condition may waive some of the conditions to
the merger, but not the first two conditions listed above.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGES 71 - 73)
Our boards of directors can jointly agree to terminate the merger agreement at
any time before completing the merger. In addition, either company can terminate
the merger agreement if:
- the parties do not complete the merger by September 30, 1999;
- a law or final and nonappealable court order prohibits the merger;
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- either company's shareholders fail to approve that company's merger
proposal(s);
- the other party willfully breaches any of its representations or
warranties or fails to comply with any of its obligations under the
merger agreement, resulting in its inability to satisfy a condition to
the completion of the merger by September 30, 1999;
- the other party's board of directors amends, modifies, withdraws,
conditions or qualifies its recommendation of the merger proposal(s) to
its shareholders in a manner adverse to the other party; or
- Union Camp's board of directors decides to recommend an alternative
transaction by a third party after determining it is superior to the
merger and to enter into an agreement relating to that transaction.
However, Union Camp must give International Paper five business days to
match the third party's offer before either party can terminate the
merger agreement based on this condition.
In addition, International Paper can terminate the merger agreement if Union
Camp either willfully and materially breaches the covenant restricting its
ability to negotiate with a third party concerning an alternative transaction or
recommends an alternative transaction to its shareholders.
TERMINATION FEES AND EXPENSES (SEE PAGES 73 - 74)
Union Camp must pay International Paper a termination fee of $150 million in
cash, plus out-of-pocket expenses not to exceed $10 million, in specified
circumstances, including termination of the merger agreement because:
- Union Camp enters into an agreement with a third party that its board of
directors determines is superior to the merger agreement, or
- Union Camp's board of directors has recommended an alternative
transaction.
If Union Camp's board of directors has adversely changed its recommendation of
the merger agreement proposal, Union Camp must pay International Paper a
termination fee of $75 million, plus out-of-pocket expenses of up to $10
million. However, if Union Camp enters into an agreement for the sale of Union
Camp within the following 12 months, it must pay International Paper an
additional $75 million.
If Union Camp's shareholders reject the merger agreement proposal after a third
party has publicly announced a takeover proposal for Union Camp and, within
twelve months of the termination of the merger agreement, Union Camp and that
third party enter into a definitive agreement for the acquisition of Union Camp,
then Union Camp must pay International Paper a termination fee of $75 million,
plus out-of-pocket expenses of up to $10 million. If that transaction is
completed, Union Camp must pay International Paper an additional $75 million.
International Paper must pay Union Camp a termination fee of $150 million in
cash, plus out-of-pocket expenses of up to $10 million, in specified
circumstances, including upon a termination of the merger agreement because
International Paper's shareholders reject the International Paper proposals.
International Paper also must pay Union Camp a termination fee of $75 million in
cash, plus out-of-pocket expenses of up to $10 million, if International Paper's
board of directors changes in a manner adverse to
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Union Camp its recommendation of the International Paper proposals.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 42 - 55)
In connection with the merger, each company's board of directors received an
opinion from its financial advisor as to the fairness of the exchange ratio in
the merger from a financial point of view. International Paper received an
opinion from Credit Suisse First Boston Corporation and Union Camp received an
opinion from Goldman, Sachs & Co. We have attached the full text of these
opinions as Annexes B and C to this document. These opinions set forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinions. We encourage you to read and consider the opinion
addressed to the board of directors of your company. These opinions are directed
to the boards of directors and do not constitute a recommendation to any
shareholder as to how that shareholder should vote in connection with the merger
proposals.
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RISK FACTORS
Union Camp's shareholders should consider the following matters in deciding
whether to vote in favor of the merger agreement proposal. International Paper's
shareholders should consider the following matters in deciding whether to vote
in favor of the International Paper proposals. Shareholders should consider
these matters in conjunction with the other information that we have included or
incorporated by reference in this document.
THE INTERNATIONAL PAPER COMMON SHARES TO BE ISSUED IN THE MERGER WILL FLUCTUATE
IN VALUE
The value of the International Paper common shares to be issued in the merger
will fluctuate and will depend on both the market price of the International
Paper common shares and the actual exchange ratio for the merger. The market
price of the International Paper common shares to be issued in the merger may
vary as a result of changes in the business, operations or prospects of
International Paper or Union Camp or market assessments of the impact of the
merger. The exchange ratio may vary from 1.47 to 1.6247 shares of International
Paper common stock issuable in the merger per Union Camp common share, as
described in the "Summary" section above.
So long as the average price per International Paper share is between the
exchange ratio collar of $43.70 and $48.30, the International Paper common
shares to be issued in the merger are generally intended to have a value close
to $71.00 per Union Camp common share at the effective time of the merger.
Because the actual calculated average International Paper share price and the
actual International Paper share price at the effective time of the merger are
likely to be different, however, even if the average International Paper share
price is between $43.70 and $48.30, the exchange ratio is unlikely to yield a
number of International Paper common shares worth exactly $71.00 either at the
time of the merger or at the time the International Paper common shares are
received.
Based on the closing prices of International Paper common stock over the twenty
trading days prior to and including March 26, 1999, the most recent practicable
date prior to the filing of this document, the exchange ratio would be 1.6247,
if one calculates the average of the ten trading days with the lowest closing
prices in this period, or 1.5815, if one calculates the average of the ten
trading days with the highest closing prices in this period. Assuming these
exchange ratios and average prices, the hypothetical value of the International
Paper shares to be issued in the merger per Union Camp common share would be
$66.42, based on an exchange ratio of 1.6247, or $71.00 per Union Camp share
based on an exchange ratio of 1.5815. Furthermore, if the average International
Paper share price is equal to $44.25, the closing price of International Paper
common stock on March 26, 1999, the most recent practicable date prior to the
filing of this document, the exchange ratio would be 1.6045 and the hypothetical
value of the International Paper shares to be received by Union Camp
shareholders would be $71.00 per Union Camp share.
However, the actual exchange ratio, which we will calculate as set forth in
"Principal Provisions of the Merger Agreement -- Consideration to be Received in
the Merger", has not yet been determined. BECAUSE BOTH THE ACTUAL EXCHANGE RATIO
AND THE AVERAGE INTERNATIONAL PAPER SHARE PRICE AT THE EFFECTIVE TIME OF THE
MERGER MAY VARY FROM THE HYPOTHETICAL EXCHANGE RATIO AND THE AVERAGE
INTERNATIONAL PAPER SHARE PRICE SET FORTH
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ABOVE, THE ACTUAL VALUE OF THE MERGER CONSIDERATION MAY VARY, PERHAPS
SUBSTANTIALLY, FROM THAT INDICATED BY THE HYPOTHETICAL VALUE SET FORTH ABOVE.
Subject to these qualifications, for every $1.00 fluctuation in the average
International Paper share price outside of the exchange ratio collar of 1.47 to
1.6247, the value of the merger consideration received per Union Camp share will
vary by $1.62 if the actual exchange ratio is 1.6247 and by $1.47 if the actual
exchange ratio is 1.47.
During the period from September 1, 1998 to March 26, 1999, the highest closing
price per International Paper common share was 29.75% greater than its lowest
closing price. HOWEVER, SHAREHOLDERS SHOULD NOT VIEW THIS FACT AS NECESSARILY
INDICATIVE OF THE FUTURE MARKET PERFORMANCE OR VOLATILITY OF INTERNATIONAL PAPER
COMMON STOCK. The actual performance and volatility of International Paper
common stock and/or the financial markets could be significantly more or less
than that indicated by the data set forth above.
We refer you to the information found under the headings "Principal Provisions
of the Merger Agreement -- Consideration to be Received in the Merger". WE URGE
YOU TO REVIEW THE INFORMATION FOUND IN THOSE SECTIONS CAREFULLY. We believe that
it is necessary for you to do so in order to understand more fully how the
exchange ratio works.
RISKS POSED BY SYSTEMS COMPATIBILITY AND OVERLAPPING CUSTOMERS TO REALIZING
ANTICIPATED COST SAVINGS IN THE MERGER
The merger involves the integration of two companies that have previously
operated independently. International Paper expects the combined company to
realize approximately $300 million of cost savings and other financial and
operating benefits from the merger, but there can be no assurance regarding when
or the extent to which the combined company will be able to realize these cost
savings or benefits. There are numerous systems that the companies must
integrate, including management information, purchasing, accounting and finance,
sales, billing, payroll and regulatory compliance. Specifically, the two
companies have a number of information systems that are dissimilar. The
companies will have to integrate, or, in some cases, replace, these systems.
Furthermore, in some instances, International Paper and Union Camp serve the
same customers. Some of these customers may decide that it is desirable to have
additional suppliers. Difficulties associated with integrating International
Paper and Union Camp could have a material adverse effect on the combined
company and the value of International Paper common shares.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This document contains forward-looking statements about International Paper,
Union Camp and the combined company which International Paper and Union Camp
believe are within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements in this document that are not historical facts are hereby
identified as "forward-looking statements" for the purpose of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. When used in this
document, the words "anticipates," "believes," "expects," "intends", and similar
expressions as they relate to International Paper, Union Camp or the combined
company or the management of either company are intended to identify such
forward-looking statements. In making any such statements, we believe that our
expectations are based on reasonable assumptions. However, any such statement
may be influenced by factors that could cause actual outcomes and results to be
materially different from those projected. These forward-looking statements are
subject to numerous
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risks and uncertainties. There are numerous important factors that could cause
actual results to differ materially from those in forward-looking statements,
some of which are beyond the control of International Paper, Union Camp or the
combined company, including: the impact of general economic conditions in the
U.S. and Canada and in other regions in which they currently do business,
including Asia, Europe and Latin and South America; industry conditions,
including competition and product and raw material prices; fluctuations in
exchange rates and currency values; capital expenditure requirements;
legislative or regulatory requirements, particularly concerning environmental
matters; interest rates; access to capital markets; and the timing of and value
received in connection with asset divestiture. The actual results, performance
or achievement by International Paper, Union Camp or the combined company could
differ materially from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur, or if any
of them do so, what impact they will have on the results of operations and
financial condition of International Paper, Union Camp or the combined company.
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THE MERGER
GENERAL
We are furnishing this document to holders of International Paper common shares
and holders of Union Camp common shares in connection with the solicitation of
proxies by International Paper's board of directors at a special meeting of its
shareholders and by Union Camp's board of directors at a special meeting of its
shareholders, and at any adjournments or postponements of either shareholders'
meeting.
At the International Paper special shareholders' meeting, International Paper
will ask its shareholders to vote upon:
- an amendment to International Paper's restated certificate of
incorporation increasing the number of authorized International Paper
common shares from 400,000,000 to 1,000,000,000; and
- the issuance of International Paper common shares in the merger.
At the Union Camp special shareholders' meeting, Union Camp will ask its
shareholders to vote upon:
- a proposal to approve and adopt the Agreement and Plan of Merger, dated
as of November 24, 1998, among International Paper, Union Camp and Maple
Acquisition, Inc., a wholly-owned subsidiary of International Paper, and
the merger and the related transactions.
The merger agreement provides for the merger of Maple Acquisition, Inc. with and
into Union Camp, with Union Camp surviving the merger. The merger will become
effective in accordance with the articles of merger to be filed with both the
State Corporation Commission of the Commonwealth of Virginia and the Secretary
of State of the State of Delaware and at the time that the Virginia Commission
issues the certificate of merger. We anticipate that the parties will make this
filing as soon as practicable after the last of the conditions precedent to the
merger contained in the merger agreement has been satisfied or waived.
Immediately after the merger becomes effective, we expect that Union Camp will
be merged with and into International Paper, with International Paper surviving
that merger. We have attached a copy of the merger agreement as Annex A to this
document. We urge all shareholders of International Paper and Union Camp to read
the merger agreement in its entirety because it is the legal document governing
the merger.
BACKGROUND OF THE MERGER
As part of its strategic planning, International Paper continually reviews
trends and strategic opportunities in the forest products industry. With
continuing consolidation in the worldwide pulp and paper industry, as indicated
by several recent business combinations such as Jefferson Smurfit/Stone
Container, Stora/Enzo and UPM/Kymmene, International Paper believed that it
needed to increase its scale in printing papers and industrial packaging to
supplement its expansion in consumer packaging accomplished with the acquisition
of Federal Paper Board Company in 1996. International Paper believed that
increased scale was important to reduce costs through lower overhead and
manufacturing expenses and to develop broader product offerings. Although
International Paper has a number of low-cost facilities in printing papers and
industrial packaging, it viewed the addition of other low-cost, large-scale
facilities as an important objective. In connection with this review of business
plans, Credit Suisse First Boston Corporation began to provide
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financial advisory services to International Paper in April 1998 and formalized
its relationship with International Paper on October 20, 1998.
International Paper's management considered numerous strategic alternatives
including a sale of one or more of its large divisions to generate funds for
investment in the remaining segments, as well as joint venture combinations with
other companies with printing papers or industrial packaging operations. In each
case, management concluded that International Paper could better achieve its
long-term interests by acquiring businesses in these areas and applying its
manufacturing and cost-reduction expertise through a combination with its own
businesses.
Beginning in June 1998, Mr. John T. Dillon, International Paper's Chairman and
Chief Executive Officer, discussed on several occasions with International
Paper's board of directors the competitive trends in the forest products
industry and the importance of focusing on areas where International Paper could
develop a more competitive position. During these discussions, Mr. Dillon
identified and compared domestic and international competitors, finally focusing
on an intensive review of five or six domestic competitors as candidates for
merger or acquisition. Each of these companies offered different opportunities
to one or more of International Paper's core printing papers and industrial
packaging businesses. Each was also a major integrated paper and forest products
company with a significant presence either in printing papers, industrial
packaging or both. To pursue these objectives, Mr. Dillon secured the board of
directors' approval to investigate the possibility of a merger with another
forest products company.
Ultimately, Mr. Dillon concluded that a combination transaction with Union Camp
was the most compelling and strategic choice, as he viewed Union Camp as
providing the best fit and requiring the least restructuring in a combination
with International Paper. Mr. Dillon believed that each of Union Camp's
businesses fit well with comparable International Paper businesses and that
International Paper could integrate Union Camp with relatively little
disruption. Moreover, International Paper judged Union Camp's facilities to be
among the lowest cost mills in the industry.
On October 13, 1998, International Paper's board of directors reviewed the
advisability of a merger with Union Camp. After this review, it authorized Mr.
Dillon to pursue a transaction by contacting Union Camp.
On October 21, 1998, Mr. Dillon called Mr. W. Craig McClelland, Union Camp's
Chairman and Chief Executive Officer, to express International Paper's interest
in combining with Union Camp and to advise Mr. McClelland that he was sending a
letter to him proposing a transaction. Mr. McClelland indicated that Union Camp
would duly consider the letter, but told Mr. Dillon that Union Camp was pursuing
its own strategic plan as an independent company and was not looking for a
merger partner. On October 22, 1998, Union Camp received International Paper's
letter dated October 20, 1998 to Mr. McClelland, in which International Paper
proposed a merger of Union Camp and International Paper, whereby Union Camp
shareholders would receive International Paper common shares with a value of $58
for each Union Camp common share.
On October 26 and 27, 1998, Union Camp's board of directors met with management
and its legal and financial advisors to consider the merger proposal set forth
in International Paper's October 20 letter. After completing its review, the
board of directors unanimously determined that the International Paper proposal
was not in Union Camp's best interests. The board of directors authorized Mr.
McClelland to inform International Paper that Union Camp had rejected the
proposal and had no interest in any further discussions
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unless International Paper was prepared to improve its proposal substantially.
Mr. McClelland telephoned Mr. Dillon on October 27, 1998 to advise him of the
board of directors' decision.
On November 3, 1998, Mr. Dillon telephoned Mr. McClelland to request a
face-to-face meeting. In the course of their discussion, Mr. Dillon advised Mr.
McClelland that International Paper would be willing to negotiate a merger
agreement with Union Camp, whereby Union Camp's shareholders would receive
International Paper common shares with a value of $62 for each Union Camp common
share. Mr. McClelland advised Mr. Dillon that he would not recommend a
combination at $62 per share to Union Camp's board of directors and would not be
willing to meet to discuss such a transaction.
On November 5, 1998, Mr. Dillon telephoned Mr. McClelland to pursue further the
merger proposal and the reasons why Mr. McClelland had rejected it. Mr.
McClelland advised him that, based on, among other things, Union Camp's asset
quality and earnings potential, as well as the significant cost savings and
other financial and operating benefits that would be derived from any business
combination between International Paper and Union Camp, Mr. McClelland believed
that International Paper should be willing to pay significantly more than $62
per share. Unless International Paper was prepared to do so, Mr. McClelland
informed Mr. Dillon that he would not be willing to meet to discuss a business
combination. In response, Mr. Dillon stated that he might consider a transaction
above $62 per share under certain circumstances. After further discussion, Mr.
Dillon requested a meeting with Mr. McClelland to discuss preliminarily what
level of synergies the two companies might be able to achieve in a business
combination. The two CEOs agreed to meet on November 9, 1998.
At the November 9 meeting between Mr. McClelland and Mr. Dillon, Mr. Dillon
described his overview of the proposed transaction and his preliminary views
with respect to the potential cost savings and other financial and operating
benefits that could be obtained through a merger. The two CEOs concluded that a
more detailed analysis of synergies from a business combination might benefit
their discussions. However, Mr. McClelland reiterated his view that further
discussions would depend on International Paper's willingness to provide Union
Camp shareholders with value significantly higher than $62 per share. The
following day, Mr. Dillon telephoned Mr. McClelland to state that he understood
Union Camp's views on value and, if sufficient synergies from a combination were
present, International Paper would be prepared to increase the value of its
offer to Union Camp shareholders. The two agreed to schedule a meeting for
November 17, 1998 to review the potential synergies in more detail.
On November 11, 1998, Union Camp's board of directors met by conference call
with its management and legal and financial advisors to review the status of the
discussions with International Paper. Mr. McClelland reported on his various
conversations with Mr. Dillon, their meeting on November 9, 1998, and the plans
for a meeting scheduled for November 17, 1998 with International Paper to
discuss potential cost savings and other potential financial and operating
benefits from a merger. Mr. McClelland also noted that he believed that fair
treatment of Union Camp employees would be an important component of any
transaction with International Paper. After further discussion, the board of
directors authorized Mr. McClelland and management to continue their dialogue
with International Paper.
On November 13, 1998, International Paper's board of directors met by conference
call to review the status of discussions with Union Camp. Mr. Dillon reported on
his various conversations with Mr. McClelland and the plans for a meeting
scheduled for
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November 17, 1998 with Union Camp to discuss potential cost savings and other
potential financial and operating benefits from a combination.
On November 17, 1998, Mr. McClelland, Mr. Jerry H. Ballengee, Union Camp's
President and Chief Operating Officer, Mr. A. William Hamill, Union Camp's
Executive Vice President and Chief Financial Officer, and Mr. Charles H.
Greiner, Jr., a Union Camp Executive Vice President, met with Mr. Dillon, Mr. C.
Cato Ealy, International Paper's Vice President -- Business Development and
Planning, Ms. Marianne Parrs, International Paper's Senior Vice President and
Chief Financial Officer, and Mr. C. Wesley Smith, International Paper's
Executive Vice President -- Operations, to discuss possible cost savings and
other financial and operating benefits from a business combination. Based on
Union Camp's estimates and assumptions regarding the two companies, its
representatives identified approximately $300 million of potential cost savings
from an International Paper/Union Camp combination and significant other
operating benefits the financial impact of which would be difficult to quantify.
At the conclusion of the meeting, International Paper's representatives
undertook to study further the information on potential synergies from a
business combination presented by Union Camp's representatives.
On both November 19 and 20, 1998, Mr. Dillon telephoned Mr. McClelland. During
those conversations, the two CEOs discussed their views about the appropriate
value of an International Paper/Union Camp combination. Mr. McClelland repeated
his unwillingness to meet further with Mr. Dillon unless International Paper
proposed a transaction at a price to Union Camp shareholders that recognized the
substantial earnings power and value that Union Camp would contribute to the
combined entity. At the conclusion of those conversations, Mr. Dillon indicated
to Mr. McClelland that International Paper was willing to negotiate a merger
agreement whereby Union Camp shareholders would receive International Paper
common shares with a value of $70 for each Union Camp common share based on the
current market prices. Mr. McClelland agreed to meet with Mr. Dillon that day to
discuss further Mr. Dillon's proposal and the issues posed by a possible
transaction.
During the November 20 meeting, the two CEOs continued to review their positions
on the proper pricing of a transaction. Mr. McClelland also emphasized that
International Paper would need to treat Union Camp's employees fairly in any
business combination. Accordingly, Mr. McClelland proposed that International
Paper agree to establish an integration committee composed of both International
Paper and Union Camp executives who would be involved in decisions relating to
employees and the integration of the two companies. The parties concluded the
meeting without reaching agreement on the value of any merger consideration.
On November 21, 1998, Mr. Dillon called Mr. McClelland and advised him that,
after considering their prior discussions and the prospective cost savings and
other benefits of an International Paper/Union Camp combination, International
Paper would be prepared to agree, subject to the further review of the
prospective cost savings, to a transaction that would provide Union Camp
shareholders with International Paper common shares with a value of $71 per
Union Camp common share, based on then current market prices. Subject to
reaching agreement on all other aspects of the deal, Mr. McClelland agreed that
he would recommend such a transaction to Union Camp's board of directors.
The parties and their external financial and legal advisors negotiated the terms
of the merger agreement, including the ultimate mechanism for the exchange ratio
for the
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merger, in a series of meetings and telephone conversations held between
November 21 and November 23, 1998.
On November 22, 1998, International Paper executives Mr. Dillon, Mr. Smith and
Ms. Parrs met with Union Camp executives Mr. McClelland, Mr. Ballengee, Mr.
Greiner and Mr. Heald. At this meeting, Union Camp's executives outlined to a
greater extent the cost savings and other financial and operating benefits that
they believed were achievable from the merger, based on Union Camp's estimates
and assumptions regarding the two companies.
On November 23, 1998, International Paper's board of directors met by conference
call to review the proposed merger agreement. After considering reports from
management and management's analysis of the proposed merger based on information
received from International Paper's financial and legal advisors, the board of
directors voted unanimously to enter into the merger agreement and to recommend
that the International Paper shareholders vote to approve the International
Paper proposals.
On November 23, 1998, Union Camp's board of directors met to consider the
revised International Paper offer. After considering reports from management and
Union Camp's financial and legal advisors, the board of directors voted
unanimously to enter into the merger agreement and to recommend that Union
Camp's shareholders vote to approve the merger agreement proposal.
Following the approvals of the companies' boards of directors, Union Camp,
International Paper and one of its subsidiaries, Maple Acquisition, Inc.,
entered into the merger agreement on November 24, 1998.
REASONS FOR THE MERGER
International Paper and Union Camp believe that the merger will:
- CREATE ONE OF THE WORLD'S PREMIER MANUFACTURERS OF PRINTING PAPER AND
PAPER-BASED PACKAGING MATERIALS.
Upon consummation of the merger, the combined entity will be among the
world's premier producers of timber, corrugated containers, folding
cartons, industrial bags, recycled paperboard, coated and uncoated paper
and paper recycling and containerboard. Based on pro forma 1997 data, the
combined company will have approximately $24.4 billion in annual net
sales and be one of the larger companies in various segments in the
forest products industry.
- ENABLE THE COMBINED COMPANY TO PROVIDE BETTER SERVICE TO ITS CUSTOMERS.
The companies believe that the merger will strengthen the combined
company's product-distribution arm, which will allow the combined company
to service the needs of customers better than either company would be
able to do on its own.
- CREATE OPPORTUNITIES FOR SIGNIFICANT COST SAVINGS AND OTHER FINANCIAL AND
OPERATING BENEFITS THROUGH THE INTEGRATION OF THE TWO COMPANIES'
OPERATIONS.
International Paper and Union Camp have identified significant annual
operating and financial cost savings, without any planned asset
divestitures, in excess of those savings that could be achieved by
operating the two companies independently. The
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<PAGE> 27
companies believe that the combined company can achieve $300 million of
cost savings as follows:
- The companies anticipate that the largest part, about $200 million in
cost savings, will come from reduced selling and administrative
expenses. These reduced expenses would include eliminating duplicate
activities in the two companies, resulting in fewer employees and
lower support costs such as telephone, travel and computer costs. The
parties also anticipate that the combined company will be able to
reduce fees for duplicate activities, such as auditing.
- The companies anticipate that another $35 million in cost savings will
come from lower costs for purchased items that they believe will be
possible because the combined company should get larger volume
discounts.
- The companies anticipate that a further $65 million in cost savings
will come from operating the manufacturing systems more efficiently.
Many of the machines that produce paper and paperboard products are
large and can make a wide variety of sizes and weights. After the
merger, the parties believe that there should be opportunities to
consolidate production of sizes and weights on machines best designed
to produce specific products efficiently. Also, production runs can
last longer which will reduce costs for changing from one product to
another.
We describe the uncertainties associated with realizing these anticipated
cost savings under the heading "Risk Factors -- Risks posed by systems
compatibility and overlapping customers to realizing anticipated cost
savings in the merger".
RECOMMENDATION OF THE INTERNATIONAL PAPER BOARD; ADDITIONAL CONSIDERATIONS OF
THE INTERNATIONAL PAPER BOARD
At its meeting on November 23, 1998, International Paper's board of directors
voted unanimously to enter into the merger agreement and to recommend that the
International Paper shareholders vote to approve the shareholder proposals.
International Paper's board of directors made its determination after careful
consideration of, and based on, a number of factors including those described
below, which are the material factors that the board of directors considered:
- all the reasons described above under "Reasons for the Merger";
- upon completion, the merger will boost International Paper's timberland
holdings by approximately 25% to approximately 7.6 million acres;
- following the merger, International Paper expects the annual U.S.
revenues of the combined entity from uncoated printing paper will be
approximately $3 billion. International Paper also anticipates that the
merger should almost double its revenue for containerboard in the U.S.
This reflects International Paper's long-term strategy to focus on
businesses in which it believes it can develop a more competitive
position;
- information concerning the business, assets, capital structure, financial
performance and condition and prospects of International Paper and Union
Camp, focusing in particular on the quality of Union Camp's assets and
the compatibility of the two companies' operations;
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<PAGE> 28
- current and historical prices and trading information with respect to
each company's common stock, which assisted the board of directors in its
conclusion that the merger was fairly priced;
- the anticipated increasing worldwide competition in, and consolidation
of, the forest products industry;
- the composition and strength of the expected senior management of the
combined company and the proximity and familiarity of the companies and
their similar corporate cultures;
- the likelihood of the enhancement of the strategic position of the
combined company beyond that which International Paper could achieve on
its own;
- the opinion of Credit Suisse First Boston Corporation to International
Paper's board of directors to the effect that, as of the date of its
opinion and based upon and subject to the matters stated in that opinion,
the exchange ratio provided for in the merger was fair to International
Paper from a financial point of view. We have described Credit Suisse
First Boston Corporation's opinion in detail under the heading "Role of
Financial Advisors -- Opinion of International Paper's Financial
Advisor";
- the challenges of combining the businesses of two major corporations of
this size and the attendant risks of not achieving the expected cost
savings, other financial and operating benefits or improvement in
earnings and of diverting management focus and resources from other
strategic opportunities and from operational matters for an extended
period of time;
- the risk that the merger would not be consummated;
- the terms and structure of the merger and the terms and conditions of the
merger agreement, including the exchange ratio for the merger, the size
of the termination fees and the circumstances in which they are payable
and the ability of both companies to negotiate with third parties that
make acquisition proposals and to accept superior proposals; and
- the accounting treatment for the merger.
In view of the number and wide variety of factors considered in connection with
its evaluation of the merger and the complexity of these matters, International
Paper's board of directors did not find it practicable to, nor did it attempt
to, quantify, rank or otherwise assign relative weights to the specific factors
it considered. In addition, the board of directors did not undertake to make any
specific determination as to whether any particular factor was favorable or
unfavorable to the board of directors' ultimate determination or assign any
particular weight to any factor, but rather conducted an overall analysis of the
factors described above, including through discussions with and questioning of
International Paper's management and management's analysis of the proposed
merger based on information received from International Paper's legal, financial
and accounting advisors. In considering the factors we have described above,
individual members of International Paper's board of directors may have given
different weight to different factors. International Paper's board of directors
considered all these factors as a whole, and overall considered the factors to
be favorable to and to support its determination.
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<PAGE> 29
RECOMMENDATION OF INTERNATIONAL PAPER'S BOARD OF DIRECTORS
INTERNATIONAL PAPER'S BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF INTERNATIONAL PAPER AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS TO ITS SHAREHOLDERS THAT THEY VOTE "FOR"
THE PROPOSALS TO AMEND THE INTERNATIONAL PAPER CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED INTERNATIONAL PAPER COMMON SHARES AND TO ISSUE
INTERNATIONAL PAPER COMMON SHARES IN THE MERGER.
RECOMMENDATION OF THE UNION CAMP BOARD; ADDITIONAL CONSIDERATIONS OF THE UNION
CAMP BOARD
At its meeting on November 23, 1998, Union Camp's board of directors voted
unanimously to enter into the merger agreement and to recommend that Union Camp
shareholders vote to approve the merger and the merger agreement.
Union Camp's board of directors made its determination after careful
consideration of, and based on, a number of factors including those described
below, which are the material factors that the board of directors considered:
- all the reasons described above under "Reasons for the Merger";
- information concerning the business, earnings, operations, competitive
position and prospects of Union Camp and International Paper both
individually and on a combined basis including, but not limited to, the
compatibility of the two companies' operations, the potential
efficiencies, cost savings and other synergies expected to be realized as
a result of the consolidation of Union Camp's and International Paper's
operations as well as Union Camp's board of directors' own knowledge of
Union Camp, International Paper and the paper industry;
- analyses and other information with respect to Union Camp and
International Paper and current industry and economic conditions and
trends presented to Union Camp's board of directors by management,
including, without limitation, a discussion of the complementary nature
of some product lines of Union Camp and International Paper;
- the presentation of Goldman, Sachs & Co. at the Union Camp board of
directors' meeting held on November 23, 1998, and the opinion of Goldman
Sachs to the effect that, as of the date of Goldman Sachs' opinion, the
exchange ratio for the merger is fair to the Union Camp shareholders from
a financial point of view. The full text of Goldman Sachs' opinion, which
sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with Goldman Sachs' opinion, is attached
hereto as Annex B and is incorporated herein by reference. We urge Union
Camp shareholders to read Goldman Sachs' opinion in its entirety;
- the amount and form of the consideration to be received by Union Camp
shareholders in the merger and information on the historical trading
ranges of Union Camp common shares and International Paper common shares;
- that the merger would provide Union Camp shareholders with an opportunity
to receive a premium over the market price for their Union Camp common
shares immediately prior to the announcement of the merger. On November
24, 1998, the exchange ratio for the merger represented a premium of
approximately 45% over the closing sales price of $48.9375 per Union Camp
common share on
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<PAGE> 30
November 23, 1998, the last trading day prior to the announcement of the
merger, and a premium of approximately 35% over the average price at
which Union Camp common shares had traded in the year prior to the
announcement of the merger;
- that the transaction will provide Union Camp shareholders with an
opportunity to hold a less volatile, more liquid stock in a significantly
larger, more diversified company. Union Camp expects that Union Camp
shareholders will own approximately 25% of the combined entity and that
the merger will provide them with the opportunity to share in the
combined company's long-term growth and any synergies realized as a
result of the merger. In addition, employees of Union Camp should benefit
from expanded business opportunities due to Union Camp's premier
facilities becoming part of a combined company that is a leader in the
paper industry;
- the conditions to the merger agreement that the merger will be accounted
for under the pooling of interests method of accounting and will be a
tax-free transaction for federal income tax purposes, described under the
sub-headings "-- Accounting Treatment" and "-- Federal Income Tax
Consequences"; and
- the financial and other terms and conditions of the merger and the merger
agreement including, without limitation: the limited conditions to
International Paper's obligation to close the merger; the collar pricing
mechanism that is intended to provide Union Camp shareholders with
International Paper common shares valued at approximately $71 per Union
Camp common share so long as the average International Paper closing
price is between $43.70 and $48.30, subject to the qualifications noted
above under the heading "Risk Factors"; the obligation of International
Paper, for one year following the effective time of the merger, to
provide Union Camp employees with salary and benefits that are no less
favorable in the aggregate to those currently provided by Union Camp; the
obligation of International Paper to establish an integration committee
composed of senior executive officers of both International Paper and
Union Camp that will be responsible for proposing alternatives and
recommendations to the chairman of International Paper's board of
directors regarding issues arising in connection with the integration of
the two companies and their businesses, assets and organizations; and the
fact that the terms of the merger agreement should not unduly discourage
third parties from making bona fide proposals subsequent to signing the
merger agreement and, if any such proposal were made, Union Camp's board
of directors, in the exercise of its fiduciary duties in accordance with
the merger agreement, could authorize Union Camp to provide information
to, engage in negotiations with, and, subject to payment of the
termination fee, enter into a transaction with, another party.
In view of the number and wide variety of factors considered in connection with
its evaluation of the merger, and the complexity of these matters, Union Camp's
board of directors did not find it practicable to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the specific factors it
considered. In addition, the Union Camp board did not undertake to make any
specific determination as to whether any particular factor was favorable or
unfavorable to the board of directors' ultimate determination or assign any
particular weight to any factor, but rather conducted an overall analysis of the
factors described above, including through discussions with and questioning of
Union Camp's management and management's analysis of the proposed merger based
on information received from Union Camp's legal, financial and accounting
advisors. In
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<PAGE> 31
considering the factors described above, individual members of the board of
directors may have given different weight to different factors. Union Camp's
board of directors considered all these factors as a whole, and overall
considered the factors to be favorable to and to support its determination.
RECOMMENDATION OF UNION CAMP'S BOARD OF DIRECTORS
UNION CAMP'S BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR
TO AND IN THE BEST INTERESTS OF UNION CAMP AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS TO ITS SHAREHOLDERS THAT THEY VOTE "FOR" THE PROPOSAL TO APPROVE AND
ADOPT THE MERGER AND THE MERGER AGREEMENT.
ACCOUNTING TREATMENT
The merger is conditioned upon:
- the receipt by International Paper of a letter from Arthur Andersen LLP,
dated as of the effective time of the merger and addressed to
International Paper, stating that Arthur Andersen LLP believes that the
transactions contemplated by the merger agreement should be treated as a
"pooling of interests" in conformity with U.S. generally accepted
accounting principles as described in Accounting Principles Board Opinion
No. 16 and applicable rules and regulations of the SEC; and
- such letter not having been withdrawn or modified in any material
respect.
Similarly, the merger is also conditioned upon:
- Union Camp having received a letter from PricewaterhouseCoopers LLP,
dated as of the effective time of the merger and addressed to Union Camp,
stating that PricewaterhouseCoopers LLP believes that Union Camp is a
pooling candidate for purposes of the transactions contemplated by the
merger agreement in conformity with U.S. generally accepted accounting
principles as described in Accounting Principles Board Opinion No. 16 and
applicable rules and regulations of the SEC; and
- such letter not having been withdrawn or modified in any material
respect.
In rendering the letter, PricewaterhouseCoopers LLP will rely upon
representations from Union Camp for purposes of the letter.
Under the "pooling of interests" accounting method, the assets and liabilities
of Union Camp will be carried forward to International Paper at their historical
recorded bases. Results of operations of International Paper will include the
results of both International Paper and Union Camp for the entire fiscal year in
which the merger occurs. The reported balance sheet amounts and results of
operations of the separate companies for prior periods will be restated, as
appropriate, to reflect the combined financial position and results of
operations for International Paper. We present these restated amounts under the
heading "Unaudited Pro Forma Condensed Combined Financial Statements".
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
TAX OPINION. We have structured the merger so that it will constitute a
"reorganization" within the meaning of Section 368(a) of the federal tax code,
and that each of International Paper, its merger subsidiary and Union Camp will
be a party to the reorganization within the meaning of Section 368(b) of the
federal tax code. It is a condition to Union Camp's obligation to consummate the
merger that Sullivan &
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Cromwell render an opinion to this effect at the effective time of the merger.
Accordingly, we anticipate that:
- none of International Paper, its merger subsidiary or Union Camp will
recognize any gain or loss as a result of the merger, except Union Camp
may recognize gain or loss on any assets held by it that are required to
be marked to market at the end of its taxable year;
- Union Camp shareholders will not recognize any gain or loss upon the
exchange of their Union Camp common shares solely for International Paper
common shares pursuant to the merger, except with respect to any cash
that they receive in lieu of fractional International Paper common
shares;
- the aggregate tax basis of the International Paper common shares received
solely in exchange for Union Camp common shares pursuant to the merger,
including fractional International Paper common shares for which cash is
received, will be the same as the aggregate tax basis of the Union Camp
common shares exchanged therefor;
- the holding period for International Paper common shares received in
exchange for Union Camp common shares pursuant to the merger will include
the holding period of the Union Camp common shares exchanged therefor,
provided that the relevant Union Camp shareholder held those Union Camp
common shares as a capital asset at the effective time of the merger; and
- a Union Camp shareholder who receives cash in lieu of fractional
International Paper common shares will recognize gain or loss equal to
the difference, if any, between his tax basis in the fractional share and
the amount of cash received.
In rendering its opinion, Sullivan & Cromwell will rely upon representations
contained in certificates from Union Camp and International Paper delivered for
purposes of the opinion and will assume that those representations are true as
of the effective time of the merger. Union Camp does not currently intend to
waive the condition that Sullivan & Cromwell will render its opinion. In the
unlikely event that Union Camp does decide to waive this condition, however,
Union Camp will recirculate this document to disclose the waiver of this
condition and all related material disclosures, including the risks to Union
Camp shareholders resulting from the waiver, and will resolicit proxies from the
Union Camp shareholders.
The foregoing discussion is a summary of the material United States federal
income tax consequences of the merger to a United States shareholder who holds
Union Camp common shares as a capital asset but does not purport to be a
complete analysis or description of all potential tax effects of the merger. In
addition, the discussion does not address all of the tax consequences that may
be relevant to particular taxpayers in light of their personal circumstances or
to taxpayers subject to special treatment under the federal tax code. For
example, such taxpayers may include insurance companies, financial institutions,
dealers in securities, traders that mark to market, tax-exempt organizations,
shareholders who acquired the Union Camp common shares through the exercise of
options or otherwise as compensation or through a tax-qualified retirement plan,
foreign corporations, foreign partnerships or other foreign entities and
individuals who are not citizens or residents of the United States.
We have not provided any information in this document relating to any tax
consequences of the merger under applicable foreign, state, local and other tax
laws. We have based the
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foregoing discussion upon the provisions of the federal tax code, applicable
Treasury regulations, and IRS rulings and judicial decisions, as in effect as of
the date of this document. There can be no assurance that future legislative,
administrative or judicial changes or interpretations will not affect the
accuracy of the statements or conclusions set forth herein. Any such change
could apply retroactively and could affect the accuracy of this discussion. No
rulings have been or will be sought from the IRS concerning the tax consequences
of the merger and the opinion of counsel as to the federal income tax
consequences set forth above will not be binding on the IRS.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. WE URGE UNION
CAMP SHAREHOLDERS TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS,
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX
LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
REGULATORY MATTERS
We have already obtained all material regulatory approvals required to permit
consummation of the merger from the applicable U.S. and foreign regulatory
authorities, including the antitrust authorities in the United States and in the
European Union.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated under that Act, prohibited International Paper
and Union Camp from consummating the merger until they notified and furnished
information to the FTC and the Antitrust Division of the United States
Department of Justice and specified waiting period requirements were satisfied.
On January 4, 1999, in connection with the merger, International Paper and Union
Camp each filed with the FTC and the Antitrust Division a Notification and
Report Form under the Hart-Scott-Rodino Act. The applicable waiting period under
the Hart-Scott-Rodino Act relating to the merger expired at 11:59 pm on February
3, 1999.
Notwithstanding the expiration of the waiting period under the Hart-Scott-Rodino
Act relating to the merger, at any time before or after the completion of the
merger, either the Antitrust Division or the FTC could take any action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the merger or seeking the
divestiture of substantial assets of International Paper or Union Camp. Private
parties and the state attorneys general may also bring actions under the U.S.
antitrust laws depending on the circumstances. Although International Paper and
Union Camp believe that the merger is legal under the U.S. antitrust laws, 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.
Both International Paper and Union Camp conduct business in member states of the
European Union. European Union Council Regulation 4064/89, as amended, requires
notification of and approval by the European Commission of specific mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding given thresholds before such mergers or
acquisitions are implemented. International Paper and Union Camp duly notified
the European Commission of the merger on January 4, 1999. On February 5, 1999,
the European Commission rendered a decision not to oppose the merger and
declared it compatible with the common market and the functioning of the
European Economic Area Agreement.
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Both International Paper and Union Camp conduct operations in a number of other
foreign countries where regulatory filings, notifications or approvals with
applicable commissions and other authorities may be required in connection with
consummation of the merger.
NO APPRAISAL OR DISSENTERS' RIGHTS
Shareholders of a corporation that is proposing to merge or consolidate with
another entity are sometimes entitled to appraisal or dissenters' rights in
connection with the proposed transaction depending on the circumstances. Most
commonly, these rights confer on shareholders who oppose the merger or
consolidation the right to receive the fair value for their shares as determined
in a judicial appraisal proceeding, in lieu of the consideration being offered
in the merger.
Union Camp shareholders are not entitled to appraisal or dissenters' rights
under Virginia law in connection with the merger because Union Camp common
shares were listed on the New York Stock Exchange on the record date for its
special shareholders' meeting and the International Paper common shares that
Union Camp shareholders will be entitled to receive in the merger will be listed
on the New York Stock Exchange at the effective time of the merger.
International Paper shareholders are not entitled to appraisal or dissenters'
rights under New York law in connection with the merger because International
Paper is not a constituent corporation in the merger.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
This document does not cover any resales of the International Paper common
shares to be received by Union Camp's shareholders upon consummation of the
merger, and no person is authorized to make any use of this document in
connection with any such resale.
All International Paper common shares that Union Camp shareholders receive in
the merger will be freely transferable, with the exception of the International
Paper common shares received by persons who are deemed to be "affiliates" of
Union Camp under the Securities Act of 1933, as amended, and the rules and
regulations promulgated under that Act, at the time of the Union Camp
shareholders' meeting. These "affiliates" may only re-sell their International
Paper common shares in transactions permitted by Rule 145 under the Securities
Act of 1933 or as otherwise permitted under that Act. Persons who may be deemed
to be affiliates of Union Camp for such purposes generally include individuals
or entities that control, are controlled by, or are under common control with,
Union Camp and may include some officers, directors and principal shareholders
of Union Camp. The merger agreement requires Union Camp to use commercially
reasonable efforts to deliver or cause to be delivered to International Paper on
or prior to the effective time of the merger from each of those affiliates an
executed letter agreement to the effect that those persons will not offer or
sell or otherwise dispose of any International Paper common shares issued to
them in the merger in violation of the Securities Act of 1933.
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COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION
For the calendar quarters indicated, the table below sets forth
1. the high and low sales prices per International Paper common share and
Union Camp common share, in each case as reported on the New York Stock
Exchange Composite Transaction Tape and based on published financial
sources, and
2. the cash dividends per International Paper common share and Union Camp
common share for the calendar quarters indicated below.
The sales prices per International Paper common share reflect the stock split
effective on September 15, 1995.
<TABLE>
<CAPTION>
INTERNATIONAL PAPER UNION CAMP
COMMON SHARES COMMON SHARES
------------------------------ -----------------------------
MARKET PRICE MARKET PRICE
------------------ CASH ----------------- CASH
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------- -------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter...... $43.625 $ 38.750 $0.25 $52.250 $46.875 $ 0.45
Second Quarter..... 51.875 38.625 0.25 54.875 45.125 0.45
Third Quarter...... 61.000 48.250 0.25 63.125 50.250 0.45
Fourth Quarter..... 58.500 39.875 0.25 64.562 49.750 0.45
1998
First Quarter...... $52.625 $ 40.875 $0.25 $63.250 $50.375 $ 0.45
Second Quarter..... 55.250 42.500 0.25 64.437 49.125 0.45
Third Quarter...... 49.375 35.500 0.25 49.750 34.000 0.45
Fourth Quarter..... 49.188 40.188 0.25 68.000 38.375 0.45
1999
First Quarter
(through March
26)............. $46.500 $39.5625 $0.25 $69.500 $61.750 $ 0.45
</TABLE>
On November 23, 1998, the last full trading day prior to the public announcement
of the proposed merger, the closing price per International Paper common share
quoted on the New York Stock Exchange Composite Transaction Tape was $45.8125
and the closing price per Union Camp common share reported on the New York Stock
Exchange Composite Transaction Tape was $48.9375. On March 26, 1999, the most
recent practicable date prior to the printing of this document, the closing
price per International Paper common share reported on the New York Stock
Exchange Composite Transaction Tape was $44.25 and the closing price per Union
Camp common share reported on the New York Stock Exchange Composite Transaction
Tape was $67.9375. WE URGE SHAREHOLDERS TO OBTAIN CURRENT MARKET QUOTATIONS
PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE MERGER.
After the merger, International Paper expects that it will pay quarterly
dividends to International Paper shareholders at an annual dividend rate per
International Paper common share of $1.00, which is equivalent to the current
annual dividend payment on International Paper common shares, but is lower than
the current annual dividend of $1.80 on the Union Camp common shares. The
payment of dividends by International Paper in the future, however, will depend
on business conditions, its financial condition and earnings, and other factors.
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SELECTED FINANCIAL INFORMATION
Shareholders should read the selected financial data presented below in
conjunction with the financial statements and the notes thereto incorporated by
reference for International Paper and Union Camp.
INTERNATIONAL PAPER
The following selected historical financial data for, and as of the end of, each
of the five years in the period ended December 31, 1997 have been derived from
International Paper's consolidated financial statements, which have been audited
by Arthur Andersen LLP, International Paper's independent public accountants.
The data as of September 30, 1998 and 1997 and for the nine months ended
September 30, 1998 and 1997 are 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.
We have presented the financial information below to include the impact of
special items which included gains on the sales of businesses, reversals of
previously established restructuring reserves, a provision for legal reserve,
impairment charges and restructuring and other charges. These special items
reduced net after-tax earnings by $60 million for the nine-month period in 1998;
$478 million for the nine-month period in 1997; $461 million for the year ended
December 31, 1997; and $131 million for the year ended December 31, 1996. The
information also reflects the July 1998 acquisition of the Zellerbach
distribution business for $263 million in cash; the April 1998 acquisition of
Weston Paper and Manufacturing Company for International Paper common stock
worth $232 million; the March 1996 purchase of Federal Paper Board for $1.3
billion in cash and International Paper common stock worth $1.4 billion; and the
consolidation of Carter Holt Harvey in 1995.
Shareholders should read this data together with the audited and unaudited
consolidated financial statements of International Paper, including the notes
thereto, incorporated herein by reference. We have listed the documents that we
incorporate by reference under the heading "Where You Can Find More
Information". Operating results for the nine-month period ended September 30,
1998 are not necessarily indicative of the results that can be expected for the
year ending December 31, 1998. We have adjusted per share data to reflect the
impact of a two-for-one stock split in September 1995.
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<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED AS OF OR FOR THE
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales................... $14,514 $15,015 $20,096 $20,143 $19,797 $14,966 $13,685
Costs and expenses,
excluding interest........ 13,913 14,881 19,760 19,403 17,276 13,902 12,837
Earnings (loss) before
income taxes, minority
interest, and cumulative
effect of accounting
change.................... 292 (241) 16 802 2,028 715 538
Earnings (loss) before
cumulative effect of
accounting change......... 182 (283) (151) 303 1,153 432 289
Earnings (loss) per common
share before cumulative
effect of accounting
change.................... $ .60 $ (.94) $ (.50) $ 1.04 $ 4.50 $ 1.73 $ 1.17
Earnings (loss) per common
share before cumulative
effect of accounting
change -- assuming
dilution.................. .60 (.94) (.50) 1.04 4.41 1.72 1.17
Cash dividends per common
share..................... .75 .75 1.00 1.00 .92 .84 .84
BALANCE SHEET DATA:
Working capital............. $ 2,620 $ 279 $ 1,065 $ 104 $ 1,010 $ 796 $ 472
Plants, properties and
equipment, net............ 12,066 12,387 12,369 13,217 10,997 9,139 8,872
Forestlands................. 2,790 3,152 2,969 3,342 2,803 802 786
Total assets................ 27,080 27,394 26,754 28,252 23,977 17,836 16,631
Long-term debt.............. 6,908 6,656 7,154 6,691 5,946 4,464 3,601
Common shareholders'
equity.................... 8,969 8,749 8,710 9,344 7,797 6,514 6,225
</TABLE>
UNION CAMP
The following selected historical financial data for, and as of the end of, each
of the five years in the period ended December 31, 1997 have been derived from
Union Camp's consolidated financial statements, which have been audited by
PricewaterhouseCoopers LLP, Union Camp's independent accountants. The data as of
September 30, 1998 and September 30, 1997 and for the nine months then ended are
derived from Union Camp'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 Union Camp for the periods and dates presented.
We have presented the financial information below to include the impact of
special charges for restructuring activities and asset write-downs of $26
million after-tax in 1998 and $24 million after-tax in 1996 and a gain of $35
million pre-tax on the sale of a minority interest in Bush Boake Allen, Inc. in
1994. Shareholders should read this data together with the audited and unaudited
consolidated
29
<PAGE> 38
financial statements of Union Camp, including the notes thereto, incorporated
herein by reference. We have listed the documents that we incorporate by
reference under the heading "Where You Can Find More Information". Operating
results for the nine-month period ended September 30, 1998 are not necessarily
indicative of the results that can be expected for the year ending December 31,
1998.
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS
ENDED AS OF OR FOR THE
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................... $3,386 $3,290 $4,477 $4,013 $4,212 $3,396 $3,120
Costs and other charges............. 3,241 3,116 4,220 3,761 3,370 3,112 2,889
Income before income taxes, minority
interest and accounting change.... 55 89 144 151 731 195 100
Net income.......................... 24 48 81 85 451 114 50
Net income per common share:
Basic............................. $ .34 $ .69 $ 1.17 $ 1.23 $ 6.45 $ 1.62 $ .72
Diluted........................... .34 .69 1.16 1.23 6.39 1.61 .71
Dividends per common share.......... 1.35 1.35 1.80 1.80 1.66 1.56 1.56
BALANCE SHEET DATA (END OF PERIOD):
Working capital..................... $ 339 $ 316 $ 409 $ 354 $ 414 $ 67 $ 1
Plant and equipment, net............ 3,327 3,383 3,396 3,401 3,385 3,431 3,399
Timberlands, net.................... 379 360 364 351 275 254 247
Total assets........................ 5,191 5,155 5,242 5,096 4,838 4,777 4,685
Long-term debt...................... 1,302 1,231 1,367 1,252 1,152 1,252 1,245
Stockholders' equity................ 1,965 2,055 2,036 2,094 2,122 1,836 1,816
</TABLE>
30
<PAGE> 39
HISTORICAL AND PRO FORMA PER SHARE DATA
The following table sets forth selected historical and unaudited pro forma per
share data for International Paper and historical and equivalent unaudited pro
forma per share data for Union Camp. The unaudited pro forma financial data
assumes that the merger was consummated at the beginning of each period
presented and gives effect to the merger as a "pooling of interests" under U.S.
generally accepted accounting principles. We have based the unaudited pro forma
per share data for International Paper upon the historical average number of
outstanding International Paper common shares adjusted to include the number of
International Paper common shares that would be issued in the merger based upon
an assumed exchange ratio of 1.6247, which is the highest possible exchange
ratio permitted by the merger agreement. The actual exchange ratio will
potentially range from a minimum of 1.47 to a maximum of 1.6247, depending on
the calculated average International Paper common share price shortly prior to
the merger. For more details, see "Principal Provisions of the Merger
Agreement -- Consideration to be Received in the Merger". The highest possible
exchange ratio has been used because International Paper common shares are
trading below the low end of the exchange ratio collar as of the most recent
practicable date prior to the filing of this document. We have based the
unaudited pro forma equivalent per share data for Union Camp on the unaudited
pro forma amounts per share for International Paper, multiplied by an assumed
exchange ratio of 1.6247, which is the highest possible exchange ratio permitted
by the merger agreement. Shareholders should read the information set forth
below in conjunction with the historical consolidated financial data of
International Paper and Union Camp incorporated by reference herein.
Pro forma cash dividends per common share are calculated by dividing the total
of the combined cash dividends paid by International Paper and Union Camp in
each period by the pro forma average common shares outstanding in each period.
The equivalent cash dividends per Union Camp common share were $1.22 for the
nine-month period in 1998; $1.62 for each of the years 1997 and 1996; and $1.49
for 1995. The equivalent expected annual cash dividend per Union Camp common
share after the merger will decrease relative to the $1.80 annual cash dividend
per share that Union Camp shareholders received in 1996, 1997 and 1998.
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS AS OF OR FOR THE YEAR ENDED
ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------
1998 1997 1996 1995
---------------- ------- ------- -------
<S> <C> <C> <C> <C>
INTERNATIONAL PAPER COMMON SHARES --
HISTORICAL
Earnings (loss) per common share.... $ .60 $ (.50) $ 1.04 $ 4.50
Earnings (loss) per common share --
assuming dilution................. .60 (.50) 1.04 4.41
Cash dividends per common share..... .75 1.00 1.00 .92
Book value per common share (at end
of period)........................ 29.22 28.82
</TABLE>
31
<PAGE> 40
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS AS OF OR FOR THE YEAR ENDED
ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------
1998 1997 1996 1995
---------------- ------- ------- -------
<S> <C> <C> <C> <C>
UNION CAMP COMMON SHARES --
HISTORICAL
Earnings per common share........... $ .34 $ 1.17 $ 1.23 $ 6.45
Earnings per common
share -- assuming dilution........ .34 1.16 1.23 6.39
Cash dividends per common share..... 1.35 1.80 1.80 1.66
Book value per common share (at end
of period)........................ 28.40 29.39
PRO FORMA COMBINED COMPANY
Pro forma earnings (loss) per common
share............................. $ .49 $ (.17) $ .96 $ 4.34
Union Camp equivalent pro forma
earnings (loss) per common
share............................. .80 (.28) 1.56 7.05
Pro forma earnings (loss) per common
share -- assuming dilution........ .49 (.17) .96 4.29
Union Camp equivalent pro forma
earnings (loss) per common
share -- assuming dilution........ .80 (.28) 1.56 6.97
Pro forma cash dividends per common
share............................. .77 1.03 1.03 .96
Union Camp equivalent pro forma cash
dividends per common share........ 1.25 1.67 1.67 1.56
Book value per common share (at end
of period)
Pro forma......................... 25.98 25.82
Union Camp equivalent pro forma... 42.21 41.95
</TABLE>
32
<PAGE> 41
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data gives effect
to the merger. The unaudited pro forma condensed combined statement of earnings
data for the nine months ended September 30, 1998 was prepared based upon
International Paper's unaudited consolidated financial statements for the nine
months ended September 30, 1998, and Union Camp's unaudited consolidated
financial statements for the nine months ended September 30, 1998, as if the
merger had occurred as of the beginning of that period. The unaudited pro forma
combined statement of earnings data for the three years ended December 31, 1997
was prepared based upon International Paper's audited consolidated financial
statements for the three years ended December 31, 1997 and Union Camp's audited
consolidated financial statements for the three years ended December 31, 1997,
as if the merger had occurred at the beginning of each of the three years. The
selected unaudited pro forma combined balance sheet data was prepared based upon
the balance sheet data of International Paper at September 30, 1998 and Union
Camp at September 30, 1998, giving effect to the merger. The unaudited data may
not be indicative of the results that actually would have been achieved if the
merger had been in effect as of the date and for the periods indicated or which
may be obtained in the future. The pro forma financial data does not reflect any
cost savings or other synergies discussed elsewhere in this document. The pro
forma adjustments are based upon the "pooling of interests" method of
accounting, available information and particular assumptions described on page
41 that International Paper and Union Camp believe to be reasonable.
The pro forma condensed consolidated financial statements and accompanying notes
should be read in conjunction with the historical financial statements of
International Paper and Union Camp, and the related notes thereto, that are
incorporated by reference or included elsewhere in this document.
The pro forma condensed consolidated financial statements are provided for
informational purposes only in response to SEC requirements and do not purport
to represent what International Paper's financial position or results of
operations would actually have been if the merger had in fact occurred at such
dates or to project International Paper's financial position or results of
operations for any future date or period.
33
<PAGE> 42
<TABLE>
<CAPTION>
PRO FORMA COMBINED
--------------------------------------------------
AS OF OR FOR THE AS OF OR FOR THE
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------
1998 1997 1996 1995
----------------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net Sales..................... $17,873 $24,568 $24,192 $24,150
Costs and expenses, excluding
interest.................... 17,131 23,971 23,189 20,786
Earnings before income taxes
and minority interest....... 346 160 953 2,757
Net earnings (loss)........... 205 (70) 388 1,602
Earning (loss) per common
share....................... $ .49 $ (.17) $ .96 $ 4.34
Earnings (loss) per common
share -- assuming
dilution.................... .49 (.17) .96 4.29
Cash dividends per common
share....................... .77 1.03 1.03 .96
BALANCE SHEET DATA (END OF
PERIOD):
Working capital............... $ 2,918
Plants, properties and
equipment, net.............. 15,393
Forestlands................... 3,169
Total assets.................. 32,257
Long-term debt................ 8,210
Common shareholders' equity... 10,893
</TABLE>
34
<PAGE> 43
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
TO REFLECT THE PROPOSED UNION CAMP MERGER
NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
IP UCC PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Net Sales........................ $14,514 $3,386 $ (27)(a)(b) $17,873
------- ------ ----- -------
Costs and Expenses
Cost of products sold.......... 10,959 2,586 (239)(a)(b)(d) 13,306
Selling and administrative
expenses.................... 1,105 380 1,485
Depreciation and
amortization................ 890 235 (10)(b) 1,115
Distribution expenses.......... 640 189(b) 829
Taxes other than payroll and
income taxes................ 144 37(b) 181
Equity (earnings) losses from
investment in Scitex........ 15 15
Restructuring and other
charges..................... 160 40 200
------- ------ ----- -------
Total Costs and Expenses.... 13,913 3,241 (23) 17,131
------- ------ ----- -------
Gain on sale of business......... 20 20
Reversals of reserves no longer
required....................... 45 45
------- ------ ----- -------
Earnings Before Interest, Income
Taxes and Minority Interest.... 666 145 (4) 807
Interest expense, net.......... 374 87 461
Other (income) expense, net.... 3 (3)(b)
------- ------ ----- -------
Earnings Before Income Taxes and
Minority Interest.............. 292 55 (1) 346
Provision for income taxes..... 69 23 92
Minority interest expense, net
of taxes.................... 41 8 49
------- ------ ----- -------
Net Earnings (Loss).............. $ 182 $ 24 $ (1) $ 205
======= ====== ===== =======
Earnings Per Common Share........ $ 0.60 $ 0.49
======= =======
Earnings Per Common Share --
Assuming Dilution.............. $ 0.60 $ 0.49
======= =======
Average Shares of Common Stock
Outstanding.................... 305.4 417.8
======= =======
</TABLE>
The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed Combined Financial Statements.
35
<PAGE> 44
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS TO
REFLECT THE PROPOSED UNION CAMP MERGER
YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
IP UCC PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Net Sales............................. $20,096 $4,477 $ (5)(a)(b) $24,568
------- ------ ----- -------
Costs and Expenses
Cost of products sold............... 14,974 3,400 (313)(a)(b)(d) 18,061
Selling and administrative
expenses......................... 1,581 509 2,090
Depreciation and amortization....... 1,258 311 (10)(b) 1,559
Distribution expenses............... 933 264(b) 1,197
Taxes other than payroll and income
taxes............................ 205 50(b) 255
Equity (earnings) losses from
investment in Scitex............. (1) (1)
Restructuring and other charges..... 810 810
------- ------ ----- -------
Total Costs and Expenses......... 19,760 4,220 (9) 23,971
------- ------ ----- -------
Gain on sale of west coast partnership
interest............................ 170 170
------- ------ ----- -------
Earnings Before Interest, Income Taxes
and Minority Interest............... 506 257 4 767
Interest expense, net............... 490 117 607
Other (income) expense, net......... (4) 4(b)
------- ------ ----- -------
Earnings Before Income Taxes and
Minority Interest................... 16 144 0 160
Provision for income taxes.......... 38 52 90
Minority interest expense, net of
taxes............................ 129 11 140
------- ------ ----- -------
Net Earnings (Loss)................... $ (151) $ 81 $ 0 $ (70)
======= ====== ===== =======
Earnings (Loss) Per Common Share...... $ (0.50) $ (0.17)
======= =======
Earnings (Loss) Per Common Share --
Assuming Dilution................... $ (0.50) $ (0.17)
======= =======
Average Shares of Common Stock
Outstanding......................... 301.6 414.0
======= =======
</TABLE>
The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed
Combined Financial Statements.
36
<PAGE> 45
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS TO
REFLECT THE PROPOSED UNION CAMP MERGER
YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
IP UCC PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Net Sales............................. $20,143 $4,013 $ 36(a)(b) $24,192
------- ------ ----- -------
Costs and Expenses
Cost of products sold............... 14,883 2,972 (237)(a)(b)(d) 17,618
Selling and administrative
expenses......................... 1,509 451 1,960
Depreciation and amortization....... 1,194 299 (9)(b) 1,484
Distribution expenses............... 925 222(b) 1,147
Taxes other than payroll and income
taxes............................ 194 49(b) 243
Equity (earnings) losses from
investment in Scitex............. 28 28
Restructuring and other charges..... 670 39 709
------- ------ ----- -------
Total Costs and Expenses......... 19,403 3,761 25 23,189
------- ------ ----- -------
Gain on sale of west coast partnership
interest............................ 592 592
------- ------ ----- -------
Earnings Before Interest, Income Taxes
and Minority Interest............... 1,332 252 11 1,595
Interest expense, net............... 530 112 642
Other (income) expense, net......... (11) 11(b)
------- ------ ----- -------
Earnings Before Income Taxes and
Minority Interest................... 802 151 0 953
Provision for income taxes.......... 330 55 385
Minority interest expense, net of
taxes............................ 169 11 180
------- ------ ----- -------
Net Earnings.......................... $ 303 $ 85 $ 0 $ 388
======= ====== ===== =======
Earnings Per Common Share............. $ 1.04 $ 0.96
======= =======
Earnings Per Common Share -- Assuming
Dilution............................ $ 1.04 $ 0.96
======= =======
Average Shares of Common Stock
Outstanding......................... 292.1 404.5
======= =======
</TABLE>
The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed
Combined Financial Statements.
37
<PAGE> 46
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS TO
REFLECT THE PROPOSED UNION CAMP MERGER
YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
IP UCC PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Net Sales............................. $19,797 $4,212 $ 141(a)(b) $24,150
------- ------ ----- -------
Costs and Expenses
Cost of products sold............... 13,886 2,681 (117)(a)(b)(d) 16,450
Selling and administrative
expenses......................... 1,381 401 1,782
Depreciation and amortization....... 1,031 288 (6)(b) 1,313
Distribution expenses............... 794 214(b) 1,008
Taxes other than payroll and income
taxes............................ 174 49(b) 223
Equity (earnings) losses from
investment in Scitex............. 10 10
------- ------ ----- -------
Total Costs and Expenses......... 17,276 3,370 140 20,786
------- ------ ----- -------
Earnings Before Interest, Income Taxes
and Minority Interest............... 2,521 842 1 3,364
Interest expense, net............... 493 114 607
Other (income) expense, net......... (3) 3(b)
------- ------ ----- -------
Earnings Before Income Taxes and
Minority Interest................... 2,028 731 (2) 2,757
Provision for income taxes.......... 719 269 988
Minority interest expense, net of
taxes............................ 156 11 167
------- ------ ----- -------
Net Earnings (Loss)................... $ 1,153 $ 451 $ (2) $ 1,602
======= ====== ===== =======
Earnings Per Common Share............. $ 4.50 $ 4.34
======= =======
Earnings Per Common Share -- Assuming
Dilution............................ $ 4.41 $ 4.29
======= =======
Average Shares of Common Stock
Outstanding......................... 256.5 368.9
======= =======
</TABLE>
The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed
Combined Financial Statements.
38
<PAGE> 47
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
TO REFLECT THE PROPOSED UNION CAMP MERGER
SEPTEMBER 30, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
IP UCC PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and temporary investments.... $ 857 $ 38 $ $ 895
Accounts and notes receivable,
net............................ 2,516 566 (13)(c) 3,069
Inventories....................... 2,729 542 (1)(d) 3,270
Other current assets.............. 447 56 503
------- ------ ----- -------
Total Current Assets........... 6,549 1,202 (14) 7,737
------- ------ ----- -------
Plants, properties and equipment,
net............................... 12,066 3,327 15,393
Forestlands......................... 2,790 379 3,169
Investments......................... 1,234 75(e) 1,309
Goodwill............................ 2,537 75(e) 2,612
Deferred charges and other assets... 1,904 283 (150)(e) 2,037
------- ------ ----- -------
Total Assets................... $27,080 $5,191 $ (14) $32,257
======= ====== ===== =======
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable and current
maturities of long-term debt... $ 1,330 $ $ 331(e) $ 1,661
Accounts payable and accrued
liabilities.................... 2,599 519(c)(e) 3,158
40(g)
Current liabilities............... 863 (863)(e)
------- ------ ----- -------
Total Current Liabilities...... 3,929 863 27 4,819
------- ------ ----- -------
Long-term debt...................... 6,908 1,302 8,210
Deferred income taxes............... 2,672 752 3,424
Other liabilities................... 1,165 309 (110)(e) 1,364
Minority interest................... 1,632 110(e) 1,742
International Paper -- obligated
mandatorily redeemable preferred
securities of subsidiaries holding
International Paper debentures.... 1,805 1,805
</TABLE>
39
<PAGE> 48
<TABLE>
<CAPTION>
IP UCC PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Common Shareholders' Equity
Common Stock...................... 308 69 43(f) 420
Paid-in capital................... 3,867 39 (43)(f) 3,863
Retained earnings................. 5,139 1,874 (1)(d) 6,972
(40)(g)
Accumulated other comprehensive
income (loss).................. (313) (17) (330)
------- ------ ----- -------
9,001 1,965 (41) 10,925
Less: Common stock held in
treasury, at cost.............. 32 32
------- ------ ----- -------
Total Common Shareholders'
Equity............................ 8,969 1,965 (41) 10,893
------- ------ ----- -------
Total Liabilities and Common
Shareholders' Equity.............. $27,080 $5,191 $ (14) $32,257
======= ====== ===== =======
</TABLE>
The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed Combined Financial Statements.
40
<PAGE> 49
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The following is a summary of reclassifications and adjustments reflected in the
Unaudited Pro Forma Condensed Combined Financial Statements.
(a) Represents the elimination of intercompany transactions between Union Camp
and International Paper.
(b) Represents the reclassification of items in Union Camp's financial
statements to conform with International Paper's financial reporting
presentation, including the reclassifications of cost of timber harvested
and other (income) expense, net, to cost of products sold; distribution
expenses and taxes other than payroll and income taxes to separate cost and
expense line items; and sales with containerboard trading partners from an
offset in costs of goods sold to net sales.
(c) Represents the elimination of intercompany balances between Union Camp and
International Paper.
(d) Represents the elimination of intercompany profit on sales between
International Paper and Union Camp. The intercompany profit elimination in
each year was approximated by multiplying the change in intercompany
inventory balances on hand at both Union Camp and International Paper by the
average margin on such sales.
(e) Represents the reclassification of items in Union Camp's financial
statements to conform with International Paper's financial reporting
presentation, including the reclassification of investments, goodwill,
minority interest, accounts payable and accrued liabilities, and notes
payable and current maturities of long-term debt to separate balance sheet
line items.
(f) Represents the balance sheet effect of the exchange of Union Camp common
shares for International Paper common shares.
(g) The companies expect merger-related costs to be approximately $40 million.
The combined company will charge these costs to earnings in the period in
which the merger is consummated. The companies have reflected these costs in
the September 30, 1998 unaudited pro forma condensed combined balance sheet.
41
<PAGE> 50
ROLE OF FINANCIAL ADVISORS
OPINION OF UNION CAMP'S FINANCIAL ADVISOR
On November 23, 1998, Goldman Sachs delivered its oral opinion to Union Camp's
board of directors that, as of the date of its opinion, the exchange ratio for
the merger is fair from a financial point of view to Union Camp shareholders,
other than International Paper or any of its subsidiaries. Goldman Sachs
subsequently confirmed its opinion in writing.
WE HAVE ATTACHED HERETO AS ANNEX B TO THIS DOCUMENT AND INCORPORATE HEREIN BY
REFERENCE THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED NOVEMBER
24, 1998. THIS OPINION SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION. WE URGE
UNION CAMP SHAREHOLDERS TO READ THIS OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
-- the merger agreement;
-- Annual Reports to Stockholders and Annual Reports on Form 10-K of
Union Camp and International Paper for the five years ended December
31, 1997;
-- interim reports to stockholders and Quarterly Reports on Form 10-Q of
Union Camp and International Paper;
-- other communications from Union Camp and International Paper to their
respective stockholders; and
-- internal financial analyses and forecasts for Union Camp prepared by
its management, including the cost savings and operating synergies
projected by the management of Union Camp to result from the
transaction contemplated by the merger agreement.
Goldman Sachs also held discussions with members of the senior management of
Union Camp and International Paper regarding the strategic rationale for, and
the potential benefits of, the transaction contemplated by the merger agreement
and the past and current business operations, financial condition, and future
prospects of their respective companies. In addition, Goldman Sachs reviewed the
reported price and trading activity for the Union Camp common shares and
International Paper common shares, compared financial and stock market
information for Union Camp and International Paper with similar information for
various other companies whose securities are publicly traded, reviewed the
financial terms of several recent business combinations in the paper and forest
products industry specifically and in other industries generally, and performed
such other studies and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the financial
and other information reviewed by it and has assumed the accuracy and
completeness of this information for purposes of rendering its opinion. In that
regard, Goldman Sachs assumed, with the consent of Union Camp, that the costs
savings and operating synergies projected to result from the merger have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of Union Camp. International Paper's senior management informed
Goldman Sachs that internal financial projections for International Paper were
not available. Accordingly, Goldman Sachs' review of International Paper's
future financial performance for purposes of rendering its opinion was limited
to discussions with International Paper's management of various research
analysts' estimates
42
<PAGE> 51
of International Paper's future financial performance. In addition, Goldman
Sachs has not made an independent evaluation or appraisal of the assets and
liabilities of Union Camp or International Paper or any of their subsidiaries
and Goldman Sachs has not been furnished with any such evaluation or appraisal.
Goldman Sachs also assumed, with the consent of Union Camp, that the transaction
contemplated by the merger agreement will be accounted for as a pooling of
interests under U.S. generally accepted accounting principles. Goldman Sachs
provided the opinion described herein for the information and assistance of
Union Camp's board of directors in connection with its consideration of the
transaction contemplated by the merger agreement. Goldman Sachs' opinion does
not constitute a recommendation as to how any Union Camp shareholder should vote
with respect to the merger agreement proposal.
The following is a summary of the material financial analyses used by Goldman
Sachs in connection with providing its opinion to Union Camp's board of
directors on November 23, 1998. Some of the summaries of financial analyses
include information presented in tabular format. In order to more fully
understand the financial analyses used by Goldman Sachs, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
(1) HISTORICAL STOCK TRADING ANALYSIS. The purpose of this analysis was to
provide information regarding the fairness of the exchange ratio based
on periodic historical data regarding average weighted market prices
and trading volumes of the Union Camp common shares. Goldman Sachs
reviewed the historical trading prices and volumes for the Union Camp
common shares. In addition, Goldman Sachs analyzed the consideration to
be received by Union Camp shareholders pursuant to the merger agreement
in relation to various market prices for the Union Camp common shares.
This review included, among other things, Goldman Sachs' analysis of
the weighted average market prices of the Union Camp common shares and
the total volume of the Union Camp common shares traded as a percentage
of Union Camp common shares outstanding during the period from November
22, 1993 to November 20, 1998. These analyses indicated a weighted
average market price of $51.14 per share with 389.4% of the total
outstanding stock of Union Camp common shares traded in such period.
This review also included Goldman Sachs' assessment of the latest
twelve months from November 20, 1997, to November 20, 1998. Such
analysis indicated a weighted average market price of $50.43 per share,
based on the daily closing prices for that period, with 85.0% of the
total outstanding Union Camp common shares traded in that period.
(2)SELECTED COMPANIES ANALYSIS. The purpose of this analysis was to
provide information regarding the fairness of the exchange ratio based
upon a comparison of specific financial information of Union Camp with
several comparable public companies. Goldman Sachs reviewed and compared
specific financial information relating to Union Camp to corresponding
financial information, ratios and public market multiples for the
following ten publicly-traded corporations: Boise Cascade Corporation,
Champion International Corporation, Georgia-Pacific Corporation,
Jefferson Smurfit Corporation, International Paper, The Mead
Corporation, Temple-Inland Inc., Westvaco Corporation, Willamette
Corporation and Weyerhaeuser, Inc. These companies were chosen for
comparison because they are publicly-traded companies with operations
that for purposes of analysis may be considered similar to Union Camp.
Goldman Sachs calculated and compared various financial multiples and
ratios. Goldman Sachs calculated the
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<PAGE> 52
multiples of Union Camp using a price of $48.88 per share, the closing
price for the Union Camp common shares on November 20, 1998. The
multiples and ratios for Union Camp and the comparative companies were
based on the most recent publicly available information and recently
published research estimates.
Due to the historical volatility and cyclicality of paper prices and
earnings in the industry and related difficulty in projecting those
prices and earnings, Goldman Sachs considered the industry-wide peak
earnings of 1995 as a basis for its analysis of peak earnings for Union
Camp and the companies selected for comparison. Goldman Sachs
calculated peak price/earnings multiples as a multiple of 1995 earnings
with respect to the comparative companies. Goldman Sachs also analyzed
price/earnings multiples for Union Camp and the comparative companies
based on price as a multiple of Institutional Brokers Estimate System
consensus earnings estimates for the years 1998 and 1999. The following
table presents the ranges of price/earnings multiples for each of the
relevant periods with respect to the selected companies, as compared to
Union Camp.
<TABLE>
<CAPTION>
RANGES FOR
SELECTED
COMPANIES UNION CAMP
------------- ----------
<S> <C> <C>
Price/Earnings Multiple (1995 actual)....... 5.1x - 10.2x 7.6x
IBES Median Price/Earnings Multiple (1998
estimated)................................ 19.2x - 56.3x 54.3x
IBES Median Price/Earnings Multiple (1999
estimated)................................ 18.1x - 52.4x 40.7x
</TABLE>
This analysis also considered enterprise value calculated as a
multiple of the average earnings before interest, taxes, depreciation
and amortization, commonly known as EBITDA, for the years 1994 to
estimated 1998 with respect to the selected companies. The following
table presents the ranges of enterprise value as a multiple of EBITDA
for the years 1994 to estimated 1998, for the industry peak for the
year 1995 and for the years 1998 and 1999 with respect to the selected
companies, in each case as compared to Union Camp.
<TABLE>
<CAPTION>
RANGES FOR
SELECTED
COMPANIES UNION CAMP
------------ ----------
<S> <C> <C>
Enterprise Value/EBITDA (average -- 1994 to
1998 estimated)............................ 4.8x - 10.0x 7.3x
Enterprise Value/EBITDA (1995 actual)........ 3.5x - 7.0x 4.4x
Enterprise Value/EBITDA (1998 estimated)..... 6.9x - 12.4x 9.4x
Enterprise Value/EBITDA (1999 estimated)..... 6.7x - 11.2x 8.8x
</TABLE>
Goldman Sachs also analyzed dividend yield as a percentage of
estimated earnings for 1998, reviewed the ratio of price to estimated
1998 book value and considered enterprise value as a multiple of
estimated sales for 1998. The
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<PAGE> 53
following table presents the ranges of these percentages, ratios and
multiples for the selected companies, compared to the values indicated
for Union Camp.
<TABLE>
<CAPTION>
RANGES FOR
SELECTED
COMPANIES UNION CAMP
----------- ----------
<S> <C> <C>
Dividend Yield/Earnings (1998 estimated).... 0.0% - 3.3% 3.7%
Price/Book Value (1998 estimated)........... 1.2x - 2.1x 1.7x
Enterprise Value/Sales (1998 estimated)..... 0.6x - 1.5x 1.1x
</TABLE>
(3)DISCOUNTED CASH FLOW ANALYSIS. The purpose of this analysis was to
provide information regarding the fairness of the exchange ratio using
valuations of Union Camp based upon a discounted cash flow methodology.
Goldman Sachs performed a discounted cash flow analysis using Union
Camp's management projections. Goldman Sachs calculated a net present
value of free cash flows for the years 1999 through 2002 using discount
rates ranging from 10% to 15%. Goldman Sachs calculated Union Camp's
terminal value in the year 2002 based on multiples ranging from 4.0x
EBITDA to 8.0x EBITDA. This terminal value was then discounted to
present value using discount rates from 10% to 15%.
Adding the net present value of free cash flows to the net present
value of Union Camp's terminal value in the year 2002, Goldman Sachs
calculated the implied per share values for Union Camp, which ranged
from $36 to $100.
In addition, Goldman Sachs considered the impact, in each year, of a
change in paper prices on free cash flows and on Union Camp's terminal
value. Pursuant to this sensitivity analysis, Goldman Sachs assumed a
terminal multiple of 6.0x EBITDA, a 12% discount rate and projected
1998 paper shipments of 3.55mm tons. Goldman Sachs considered a range
of paper prices increasing or decreasing from $5 per ton to $30 per
ton, in increments of $5 per ton. A potential price change of $5 per
ton would result in a change in value of $1 per share, while a
potential price change of $30 per ton would result in a change in value
of $9 per share.
Goldman Sachs further calculated the value per share of Union Camp
common stock of the cost savings and operating synergies projected to
result from the merger, assuming Union Camp management's estimate of
$300 million of such savings and synergies as at October 26, 1998 and a
multiple of 6x EBITDA, discounted at a rate of 12%, excluding costs to
achieve these savings and synergies. Goldman Sachs considered the value
per share of the savings and synergies based on assumptions of
achievement of such savings and synergies of 25%, 50% and 100%.
Assuming that 25%, 50% and 100% of the synergies were achieved, the
value per share of those synergies would be $6, $12 and $25.
(4)SELECTED TRANSACTIONS ANALYSIS. The purpose of this analysis was to
provide information regarding the fairness of the exchange ratio based
upon a comparison of the financial terms of the merger with the
financial terms of several other proposed, pending or completed business
combinations. Goldman Sachs analyzed various information relating to
selected transactions in the paper industry since 1986, including: the
acquisition of Hammermill Paper by International Paper on November 11,
1986; the acquisition of Great Northern Nekoosa by Georgia Pacific
Corporation on June 26, 1990; the acquisition of Scott Paper by
Kimberley-Clark on December 12, 1995; the acquisition of Federal Paper
Board
45
<PAGE> 54
by International Paper on March 12, 1996; the acquisition of Fort Howard
by James River on August 13, 1997; the acquisition of Avenor by Bowater
on July 24, 1998; and the acquisition of Stone Container by Jefferson
Smurfit Corporation on November 18, 1998. This analysis focused on the
multiples of EBITDA and earnings per share based on the relevant
industry peak year for each of the selected transactions, as well as
measuring premium to stock market prices. The following table presents
the range of multiples of the relevant peak year EBITDA for the selected
transactions, the range of multiples of earnings per share for each
relevant peak year for the selected transactions and the stock price
premiums based on market prices one day prior to announcement of each of
the selected transactions, each as compared to the corresponding values
indicated for the merger.
<TABLE>
<CAPTION>
RANGES FOR
SELECTED
TRANSACTIONS THE MERGER
------------ ----------
<S> <C> <C>
Multiple of Peak Year EBITDA................ 4.3x - 10.2x 5.8x
Multiple of Peak Year Earnings Per Share.... 5.2x - 20.0x 11.0x
Premium to Day Prior Price.................. 9.3% - 53.8% 45.3%
</TABLE>
(5)PRO FORMA MERGER ANALYSIS. The purpose of this analysis was to evaluate
the potential pro forma impact of the merger on the earnings per share
of International Paper's common stock before and after taking into
account potential synergies resulting from the merger. Goldman Sachs
prepared pro forma analyses of the financial impact of the merger. Using
earnings for the peak year 1995 and Institutional Brokers Estimate
System estimates for the years 1998, 1999 and 2000, Goldman Sachs
considered the impact of the merger on the earnings per share of
International Paper common stock. Goldman Sachs performed this analysis
based on an exchange ratio for the merger of 1.543. This analysis
indicated that:
(a) the proposed transaction would be dilutive to the International
Paper shareholders on an earnings per share basis in each of 1998,
1999 and 2000; and
(b) the pre-tax savings and operational synergies required to break even
for the estimated years 1998, 1999 and 2000 were $61.0, $106.4 and
$98.6 million, respectively.
(6)CONTRIBUTION ANALYSIS. The purpose of this analysis was to provide
information regarding the fairness of the exchange ratio based on
specific historical and estimated future operating and financial
information comparing Union Camp's contribution to the combined company
resulting from the merger with what Union Camp's shareholders would
receive. Goldman Sachs reviewed specific historical and estimated future
operating and financial information, including, among other things,
sales, EBITDA, net income, Institutional Brokers Estimate System median
earnings estimates, equity value and enterprise value, for Union Camp,
International Paper and the pro forma combined entity resulting from the
merger.
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<PAGE> 55
This analysis indicated, and the following table presents, the
percentages of sales, EBITDA and net income that Union Camp would have
contributed for the years 1995, 1996 and 1997.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Sales............................................. 18% 17% 18%
EBITDA............................................ 24% 19% 19%
Net Income........................................ 28% 21% 21%
</TABLE>
This analysis also indicated that:
(a) With respect to Institutional Brokers Estimate System median
earnings estimates, Union Camp would have contributed 18% of
earnings for the estimated year 1998 and 16% of earnings for the
estimated year 1999; and
(b) Union Camp shareholders would have contributed 19% of the equity
value and 17% of the enterprise value to the combined entity as at
November 20, 1998; and
(c) Union Camp shareholders would receive 26% of the outstanding common
equity of the combined entity and 21% of the implied enterprise
value of the combined entity after the merger, assuming an exchange
ratio for the merger of 1.543.
(7)HISTORICAL EXCHANGE RATIO ANALYSIS. The purpose of this analysis was to
provide information regarding the fairness of the exchange ratio range
in the merger through comparison to the exchange ratios of the
historical monthly trading prices for Union Camp and International Paper
common shares. Goldman Sachs reviewed historical monthly trading prices
for Union Camp common shares and International Paper common shares
during the five-year period from October 31, 1993 to October 31, 1998
and for the period from November 20, 1997 to November 20, 1998. Goldman
Sachs conducted this analysis by dividing the closing price per Union
Camp common share by the closing price per International Paper common
share. This analysis indicated, and the following columns present,
exchange ratio ranges for the five-year period from October 31, 1993 to
October 31, 1998, calculated on a monthly basis and for the period from
November 20, 1997 to November 20, 1998, calculated on a daily basis, as
compared with an assumed exchange ratio of 1.5435 for the merger.
<TABLE>
<CAPTION>
RANGE OF EXCHANGE RATIOS RANGE OF EXCHANGE RATIOS
FROM OCTOBER 31, 1993 FROM NOVEMBER 20, 1997
TO OCTOBER 31, 1998 TO NOVEMBER 20, 1998 ASSUMED EXCHANGE RATIO
(CALCULATED MONTHLY) (CALCULATED DAILY) FOR MERGER
------------------------ ------------------------ ----------------------
<S> <C> <C>
0.84 - 1.45 0.83 - 1.28 1.5435
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all these analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Union Camp or International Paper or the contemplated transaction. Goldman Sachs
prepared the analyses solely for purposes of allowing it to provide its opinion
to Union
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<PAGE> 56
Camp's board of directors as to the fairness from a financial point of view of
the exchange ratio for the merger to Union Camp shareholders and these analyses
do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, as they are based
upon numerous factors or events beyond the control of the parties or their
respective advisors, none of Union Camp, International Paper, Goldman Sachs or
any other person assumes responsibility if future results are materially
different from those forecasted. As described above, Goldman Sachs' opinion to
Union Camp's board of directors was one of many factors taken into consideration
by Union Camp's board of directors in making its determination to approve the
merger agreement. The foregoing summary describes material financial analyses
used by Goldman Sachs in connection with providing its opinion to Union Camp's
board of directors on November 23, 1998, but does not purport to be a complete
description of the analyses performed by Goldman Sachs in connection with its
opinion and is qualified by reference to the Goldman Sachs opinion as set forth
in Annex B hereto.
As part of its investment banking business, Goldman Sachs is continually engaged
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 other purposes. Union Camp
selected Goldman Sachs as its financial advisor because it is a nationally
recognized investment banking firm that has substantial experience in
transactions similar to the merger. In addition, Goldman Sachs is familiar with
Union Camp, having provided investment banking services to Union Camp from time
to time, including: having acted as lead manager of a public offering of $150
million of 6.50% Notes due November 15, 2007 in November 1997, and as lead
manager of a public offering of $150 million of 7% Notes due August 15, 2006 in
August 1996; acted as co-dealer on Union Camp's commercial paper program; and
acted as Union Camp's financial advisor in connection with, and having
participated in several of the negotiations leading to, the merger agreement.
Goldman Sachs has also provided several investment banking services to
International Paper from time to time, including acting as sole dealer for
International Paper's commercial paper program, and may provide investment
banking services to International Paper in the future.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Union Camp and/or International Paper for its own account and for
the account of customers.
Pursuant to its engagement letter dated October 23, 1998, Union Camp engaged
Goldman Sachs to act as its financial advisor in connection with the
contemplated transaction. Pursuant to the terms of the engagement letter, Union
Camp paid Goldman Sachs an initial financial advisory fee of $1,000,000, to be
credited against an additional fee equal to 0.355% of the aggregate value of the
consideration received by Union Camp shareholders in the merger. Assuming the
merger is consummated at an exchange ratio based on $44.25 per share, the
closing price of International Paper's stock on March 26, 1999, Goldman Sachs
estimates that its fee will total approximately $17.44 million. Union Camp has
further agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorneys' fees, and to indemnify Goldman Sachs against
specified liabilities, including liabilities under the federal securities laws.
In the opinion of the SEC,
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<PAGE> 57
indemnification for liabilities arising under the federal securities laws may
not be enforceable.
OPINION OF INTERNATIONAL PAPER'S FINANCIAL ADVISOR
Credit Suisse First Boston Corporation has acted as financial advisor to
International Paper in connection with the merger. International Paper selected
Credit Suisse First Boston based on its experience, expertise and familiarity
with International Paper and its business. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, International Paper
requested that Credit Suisse First Boston evaluate the fairness of the exchange
ratio provided for in the merger from a financial point of view to International
Paper. On November 24, 1998, the date of the merger agreement, Credit Suisse
First Boston delivered to International Paper's board of directors a written
opinion to the effect that, as of that date and based upon and subject to the
matters stated in its opinion, the exchange ratio in the merger was fair to
International Paper from a financial point of view.
WE HAVE ATTACHED AS ANNEX C TO THIS DOCUMENT AND INCORPORATE BY REFERENCE THE
FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S OPINION TO INTERNATIONAL PAPER'S BOARD
OF DIRECTORS, WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN. WE URGE YOU TO READ
THIS ENTIRE OPINION CAREFULLY. CREDIT SUISSE FIRST BOSTON'S OPINION IS ADDRESSED
TO INTERNATIONAL PAPER'S BOARD OF DIRECTORS AND RELATES ONLY TO THE FAIRNESS OF
THE EXCHANGE RATIO PROVIDED FOR IN THE MERGER FROM A FINANCIAL POINT OF VIEW TO
INTERNATIONAL PAPER, DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR
ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER AS TO HOW THAT SHAREHOLDER SHOULD VOTE AT THE INTERNATIONAL PAPER
SPECIAL SHAREHOLDERS' MEETING. THE SUMMARY OF CREDIT SUISSE FIRST BOSTON'S
OPINION SET FORTH IN THIS DOCUMENT DESCRIBES THE MATERIAL ASPECTS OF ITS OPINION
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and publicly available business and financial information relating to
International Paper and Union Camp. Credit Suisse First Boston also reviewed
other information relating to International Paper and Union Camp, including
financial forecasts from publicly available sources, and discussed with the
managements of International Paper and Union Camp the businesses and prospects
of International Paper and Union Camp. Credit Suisse First Boston also
considered financial and stock market data of International Paper and Union Camp
and compared those data with similar data for other publicly held companies in
businesses similar to International Paper and Union Camp and considered, to the
extent publicly available, the financial terms of other business combinations
and transactions recently effected. Credit Suisse First Boston also considered
other information, financial studies, analyses and investigations and financial,
economic and market criteria which it deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by it and relied on that information being complete and
accurate in all material respects. With respect to the publicly available
financial forecasts, International Paper informed
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<PAGE> 58
Credit Suisse First Boston that International Paper had reviewed those forecasts
and believed that they represented reasonable estimates and judgments of the
future financial performance of International Paper and Union Camp. With respect
to the cost savings and other potential synergies anticipated to result from the
merger, including the amount, timing and achievability of those cost savings and
other potential synergies, International Paper informed Credit Suisse First
Boston that those estimates represented the best currently available estimates
of the managements of International Paper and Union Camp. International Paper
also informed Credit Suisse First Boston that the merger will be treated as a
tax-free reorganization for federal income tax purposes and accounted for as a
pooling of interests in accordance with U.S. generally accepted accounting
principles.
Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of International Paper or Union Camp, nor was Credit Suisse First
Boston furnished with any such evaluations or appraisals. Credit Suisse First
Boston's opinion was necessarily based upon information available to, and
financial, economic, market and other conditions as they existed and could be
evaluated by, Credit Suisse First Boston on the date of its opinion. Credit
Suisse First Boston did not express any opinion as to the actual value of the
International Paper common shares when issued pursuant to the merger or the
prices at which the International Paper common shares will trade subsequent to
the merger. Although Credit Suisse First Boston evaluated the exchange ratio for
the merger from a financial point of view, Credit Suisse First Boston was not
requested to, and did not, recommend the specific consideration payable in the
merger, which consideration was determined between International Paper and Union
Camp. No other limitations were imposed on Credit Suisse First Boston with
respect to the investigations made or procedures followed by Credit Suisse First
Boston in rendering its opinion.
In preparing its opinion to International Paper's board of directors, Credit
Suisse First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses set forth below does not purport to be a complete description of the
analyses underlying Credit Suisse First Boston's opinion. The preparation of a
fairness opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore, an
opinion is not readily susceptible to summary description. Credit Suisse First
Boston's opinion was not based on any single factor or analysis, but rather on
the totality of the factors considered and analyses performed. In arriving at
its opinion, Credit Suisse First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor considered by it.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors or
focusing on information presented in tabular format, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston made numerous assumptions with
respect to International Paper, Union Camp, industry performance, regulatory,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of International Paper and Union Camp. No
company, transaction or business used in its analyses as a comparison is
identical to International Paper or Union Camp or the proposed merger, nor is an
evaluation of the results of Credit Suisse First Boston's analyses entirely
mathematical. Rather, Credit Suisse First Boston's analyses involve complex
considerations and judgments concerning financial and operating characteristics
50
<PAGE> 59
and other factors that could affect the acquisition, public trading or other
values of the companies, business segments or transactions being analyzed. The
estimates contained in Credit Suisse First Boston's analyses and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, Credit Suisse First Boston's
analyses and estimates are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one of
many factors that International Paper's board of directors considered in its
evaluation of the proposed merger and should not be viewed as determinative of
the views of International Paper's board of directors or its management with
respect to the merger or the exchange ratio for the merger.
The following is a summary of the material analyses performed by Credit Suisse
First Boston in connection with its opinion dated November 24, 1998. SOME OF THE
FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR
FORMAT. IN ORDER TO FULLY UNDERSTAND CREDIT SUISSE FIRST BOSTON'S FINANCIAL
ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE
TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES.
CONSIDERING THE DATA SET FORTH IN THE TABLES BELOW WITHOUT CONSIDERING THE FULL
NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND
ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE
VIEW OF CREDIT SUISSE FIRST BOSTON'S FINANCIAL ANALYSES.
ESTIMATED SYNERGIES ANALYSIS. The purpose of this analysis was to estimate the
capitalized value of the cost reductions and synergies that would accrue to
International Paper's shareholders as a result of the merger. Based on estimates
of the managements of International Paper and Union Camp as to the potential
pre-tax annual cost savings and synergies that could be achieved in the merger,
Credit Suisse First Boston derived an implied reference range for these
synergies of approximately $1.8 billion to $2.2 billion using a multiple and a
discounted cash flow approach. Based on the pro forma ownership of International
Paper shareholders in the combined company of approximately 73%, Credit Suisse
First Boston estimated International Paper's share of the capitalized synergies
to be between approximately $1.314 billion and $1.606 billion, or approximately
$18.26 and $22.32 per Union Camp common share.
SELECTED COMPANIES ANALYSIS. The purpose of this analysis was to compare the
exchange ratio range in the merger with the implied exchange ratio range derived
by valuing Union Camp based on the trading multiples of a peer group of publicly
traded companies, both before and after taking into account potential synergies
resulting from the merger. Credit Suisse First Boston compared publicly
available financial, operating and stock market data of Union Camp to
corresponding data of the following selected companies in the global paper and
forest products industry: International Paper, Champion International
Corporation, Georgia-Pacific Corporation, Weyerhaeuser Company, and Willamette
Industries, Inc. Credit Suisse First Boston analyzed equity values per share as
a multiple of estimated calendar year 1999 earnings per share, average earnings
per share for calendar years 1995 through 1999 and peak earnings per share for
calendar year 1995. In addition, Credit Suisse First Boston analyzed enterprise
values, calculated as equity value plus total debt plus the face value of
preferred stock, if any, plus the value of minority interests, if any, minus
cash and short-term investments, as multiples of earnings before interest,
taxes,
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depreciation and amortization, commonly referred to as EBITDA, and earnings
before interest and taxes for estimated calendar year 1999, average EBITDA and
earnings before interest and taxes for calendar years 1995 through 1999 and peak
EBITDA and earnings before interest and taxes for calendar year 1995. All
multiples were based on closing stock prices on November 20, 1998. Estimated
financial data for Union Camp and the selected companies listed above were based
on estimates of selected investment banking firms as compiled by First Call.
Credit Suisse First Boston applied the following ranges of multiples for the
selected companies listed above to corresponding financial data of Union Camp:
<TABLE>
<CAPTION>
RANGE OF SELECTED MULTIPLES
OF THE GLOBAL PAPER AND
FOREST PRODUCTS COMPANIES
---------------------------
<S> <C>
Equity Value per Share as a Multiple of:
1999 Estimated Calendar Year Earnings Per Share......... 27.0x to 35.0x
Average Earnings per Share for Calendar Years 1995 through
1999.................................................... 20.0x to 25.0x
Peak Earnings per Share for Calendar Year 1995.......... 8.0x to 10.0x
Enterprise Value as a Multiple of:
Estimated Calendar Year 1999 EBITDA..................... 8.0x to 10.0x
Average EBITDA for Calendar Years 1995 through 1999..... 7.0x to 9.0x
Peak EBITDA for Calendar Year 1995...................... 5.0x to 7.0x
Estimated Calendar Year 1999 Earnings Before Interest
and Taxes............................................ 16.0x to 20.0x
Average Earnings Before Interest and Taxes for Calendar
Year 1995 through 1999............................... 13.0x to 17.0x
Peak Earnings Before Interest and Taxes for Calendar
Years 1995 through 1999.............................. 7.0x to 10.0x
</TABLE>
This analysis indicated an implied equity reference range for Union Camp of
approximately $45.00 to $73.00 per share before taking into account potential
synergies anticipated by the managements of International Paper and Union Camp
to result from the merger, and approximately $63.26 to $95.32 per share, after
taking into account these potential synergies. Based on the closing stock price
of International Paper common shares on November 20, 1998, this analysis
indicated an implied exchange ratio range of 0.98 to 1.59 before taking into
account potential synergies anticipated by the managements of International
Paper and Union Camp to result from the merger, and 1.38 to 2.07 after taking
into account these potential synergies.
Because of inherent differences between the businesses, operations and prospects
of Union Camp and the global paper and forest products companies listed above,
Credit Suisse First Boston believes that a purely quantitative analysis of the
selected companies without considering qualitative judgments concerning
differences between the financial and operating characteristics of Union Camp
and the selected companies that could affect the public trading values of Union
Camp and the selected companies, would not be particularly meaningful in the
context of the merger.
ASSET ANALYSIS. The purpose of this analysis was to compare the exchange ratio
range in the merger with the implied exchange ratio range derived by valuing
Union Camp based on the estimated value of Union Camp's assets. Credit Suisse
First Boston analyzed, among other things, the implied purchase prices paid in
more than 50 selected recent
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transactions and estimated replacement cost to estimate asset values for Union
Camp from which Credit Suisse First Boston then derived an equity reference
range for Union Camp. This analysis indicated an implied equity reference range
for Union Camp of approximately $50.00 to $80.00 per share. Based on the closing
stock price of International Paper common shares on November 20, 1998, this
analysis indicated an implied exchange ratio range of 1.09 to 1.74.
Because the market conditions, rationale and circumstances surrounding the
selected transactions utilized in Credit Suisse First Boston's asset analysis
were specific to each transaction and vary between transactions and because of
inherent differences between the businesses, operations and prospects of Union
Camp and the assets and/or companies involved in the selected transactions,
Credit Suisse First Boston believes that a purely quantitative analysis of the
selected transactions, without considering qualitative judgments concerning
differences between the characteristics of the selected transactions and factors
specific to Union Camp, would not be particularly meaningful in the context of
the merger.
DISCOUNTED CASH FLOW ANALYSIS. The purpose of this analysis was to compare the
exchange ratio range in the merger with the implied exchange ratio range derived
by valuing Union Camp based on the present value of Union Camp's projected free
cash flows, both before and after taking into account potential synergies
resulting from the merger. Credit Suisse First Boston estimated the present
value of the future streams of the stand-alone, unlevered, after-tax free cash
flows that could be produced by Union Camp from calendar years 1999 through
2007, based on analysts' estimates for calendar years 1998 and 1999 and
extrapolations of these estimates for calendar years 2000 to 2007. Ranges of
estimated terminal values were calculated using terminal multiples of trendline
estimated calendar year 2007 EBITDA of 5.0x to 6.5x. The free cash flow streams
and estimated terminal values were then discounted to a present value based upon
the estimated weighted average cost of capital of Union Camp of 8.5% to 10.0%.
This analysis indicated an implied equity reference range for Union Camp of
approximately $54.91 to $61.91 per share before taking into account potential
synergies anticipated by the managements of International Paper and Union Camp
to result from the merger, and approximately $73.17 to $84.23 per share after
taking into account these potential synergies. Based on the closing stock price
of International Paper common shares on November 20, 1998, this analysis
indicated an implied exchange ratio range of 1.19 to 1.35 before taking into
account potential synergies anticipated by the managements of International
Paper and Union Camp to result from the merger, and 1.59 to 1.83 after taking
into account these potential synergies.
CONTRIBUTION ANALYSIS. The purpose of this analysis was to compare the exchange
ratio range in the merger with the implied exchange ratio range, both before and
after taking into account potential synergies resulting from the merger, derived
from Union Camp's contribution to the combined company resulting from the merger
based upon various operational measures. Credit Suisse First Boston analyzed the
relative contributions of International Paper and Union Camp to the estimated
EBITDA, earnings before interest and taxes and net income of the pro forma
combined company for calendar years 1998 and 1999 based on estimates of selected
investment banking firms as compiled by First Call. This analysis indicated that
International Paper would contribute the following to the pro
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<PAGE> 62
forma combined company's EBITDA, earnings before interest and taxes and net
income in calendar years 1998 and 1999:
<TABLE>
<CAPTION>
BEFORE TAKING INTO AFTER TAKING INTO
ACCOUNT POTENTIAL ACCOUNT POTENTIAL
SYNERGIES SYNERGIES
ANTICIPATED BY THE ANTICIPATED BY THE
MANAGEMENTS OF MANAGEMENTS OF
INTERNATIONAL PAPER INTERNATIONAL PAPER
AND UNION CAMP TO AND UNION CAMP TO
RESULT FROM THE RESULT FROM THE
MERGER MERGER
-------------------- --------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
EBITDA................................ 80.7% 80.3% 75.9% 75.1%
Earnings Before Interest and Taxes.... 81.9% 81.3% 72.6% 71.0%
Net Income............................ 82.5% 81.9% 67.1% 63.6%
</TABLE>
This analysis indicated implied exchange ratios ranging from 0.93 to 1.40 before
taking into account potential synergies anticipated by the managements of
International Paper and Union Camp to result from the merger and 2.02 to 2.88,
after taking into account these potential synergies.
HISTORICAL EXCHANGE RATIO ANALYSIS. The purpose of this analysis was to compare
the exchange ratio range in the merger with the implied exchange ratio range
based on historical trading prices for Union Camp and International Paper, both
before and after taking into account potential synergies resulting from the
merger. Credit Suisse First Boston analyzed the historical trading prices for
Union Camp and International Paper during the five-year period from November 20,
1993 through November 20, 1998 and calculated the implied exchange ratio based
on prevailing market prices of Union Camp common shares and International Paper
common shares seven days, 30 days, 90 days, 180 days, one year, two years, three
years, four years and five years prior to November 20, 1998. This analysis
indicated an implied exchange ratio range of 0.98 to 1.44 before taking into
account potential synergies anticipated by the managements of International
Paper and Union Camp to result from the merger, and 1.35 to 1.96 after taking
into account these potential synergies.
SUMMARY OF EXCHANGE RATIO ANALYSES. On the basis of the valuation methodologies
employed in the analyses described above, Credit Suisse First Boston derived low
to high aggregate exchange ratio ranges of 0.93 to 1.74 before taking into
account potential synergies anticipated by the managements of International
Paper and Union Camp to result from the merger, and 1.35 to 2.88 after taking
into account these potential synergies, as compared with the exchange ratio
range in the merger of 1.47 to 1.62.
PRO FORMA MERGER ANALYSIS. The purpose of this analysis was to evaluate the
potential pro forma impact of the merger on International Paper's estimated
earnings per share after taking into account potential synergies resulting from
the merger. Credit Suisse First Boston analyzed the potential pro forma effect
of the merger on International Paper's projected 1999 earnings per share and
average earnings per share for calendar years 1995 through 1999 based, in the
case of calendar years 1995 through 1997, on International Paper's and Union
Camp's actual earnings per share and, in the case of calendar years 1998 and
1999, on estimates of selected investment banking firms as compiled by First
Call. This analysis indicated that the merger would be accretive to
International Paper's earnings per share commencing in calendar year 1999, the
first full year after the closing of
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the merger is expected to occur, and on an estimated five-year average basis,
assuming cost savings and other potential synergies anticipated by the
managements of International Paper and Union Camp to result from the merger are
achieved. The actual results achieved by the combined company may vary from
projected results and the variations may be material.
MISCELLANEOUS. International Paper has agreed to pay Credit Suisse First Boston
for its financial advisory services in connection with the merger an aggregate
fee of $14.5 million, which fee is contingent upon consummation of the merger.
International Paper also has agreed to reimburse Credit Suisse First Boston for
all out-of-pocket expenses incurred by Credit Suisse First Boston in performing
its services, including the fees and expenses for legal counsel and any other
advisor retained by Credit Suisse First Boston, and to indemnify Credit Suisse
First Boston and related persons and entities against liabilities, including
liabilities under the federal securities laws, arising out of Credit Suisse
First Boston's engagement. In the opinion of the SEC, indemnification for
liabilities arising under the federal securities laws may not be enforceable.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to International Paper and its affiliates unrelated to the
proposed merger, for which services Credit Suisse First Boston and its
affiliates have received compensation. In the ordinary course of business,
Credit Suisse First Boston and its affiliates may actively trade the debt and
equity securities of both International Paper and Union Camp and their
respective affiliates for their own accounts and for the accounts of customers
and, accordingly, may at any time hold long or short positions in such
securities.
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INTERESTS OF INSIDERS IN THE MERGER
In considering the recommendations of International Paper's board of directors
and Union Camp's board of directors with respect to the merger proposals,
International Paper shareholders and Union Camp shareholders should be aware
that some directors and members of management of Union Camp have interests in
the merger that are in addition to their interests as Union Camp shareholders
generally. The names and titles of the individuals who are directors and/or
executive officers of Union Camp and who are known to have these additional
interests are listed on the table located on page 59 of this document. Union
Camp's board of directors was aware of these interests and considered them,
among other matters, in approving the merger.
INTERESTS OF UNION CAMP OFFICERS AND DIRECTORS
INTERNATIONAL PAPER'S BOARD OF DIRECTORS. The merger agreement provides that,
as of the effective time of the merger, W. Craig McClelland and two additional
persons who are current members of Union Camp's board of directors and are
reasonably acceptable to International Paper's board of directors' nominating
committee, in its sole discretion, are to become members of International
Paper's board of directors. It has not yet been decided which two current Union
Camp directors in addition to Mr. McClelland will be named to the International
Paper board upon consummation of the merger. The Union Camp directors who are to
be appointed to International Paper's board will be apportioned equally among
the three classes of directors comprising International Paper's board of
directors. Upon the election of these three individuals, and assuming no change
in the size of the current International Paper board of directors, International
Paper's board of directors will consist of 15 directors, including the former
Union Camp directors.
STOCK OPTIONS AND STOCK AWARDS. Pursuant to the terms of the Union Camp stock
option and stock award plans, as a result of the merger, some Union Camp options
will become fully vested and exercisable and the restrictions on awards of
restricted stock will lapse. The number of unvested Union Camp options and the
number of Union Camp common shares underlying awards of restricted stock that
will become nonforfeitable and transferable as a result of the merger that are
held by the executive officers of Union Camp are set forth in the table on page
59 of this document.
SEVERANCE. Each Union Camp executive officer has entered into a severance
agreement with Union Camp. In addition, the remaining Union Camp officers
participate in the Union Camp Severance Policy for Key Employees. These
severance arrangements provide for the cash payment of some severance benefits
in the event that the officer's employment is terminated under specific
circumstances within two years of a change in control, or while the severance
agreements are in effect, if longer. The merger will constitute a change of
control under these severance arrangements.
If the officer's employment is terminated within two years of the merger for any
reason, other than death, by Union Camp for cause or disability, each as defined
under the relevant severance arrangement, or by the officer without good reason,
as defined under the relevant severance arrangement, the officer will be
entitled to receive accrued base salary and the value of accrued and banked
vacation, and any outstanding amounts due and owing to the officer as of the
date of termination under the Union Camp Policy Group Executive Annual Incentive
Plan and the Union Camp Restricted Stock Performance Plan, in the case of the
severance agreements, or amounts due and owing under Union Camp's incentive
compensation plan, in the case of the Severance Policy for Key Employees, or any
successor, substitute or additional incentive plans, plus all other
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amounts to which the officer is entitled under any Union Camp compensation or
benefit plan or policy. In addition, if the officer's employment is terminated
during the remainder of the calendar year in which the merger occurs, a pro rata
annual target incentive award under each of the Union Camp Policy Group
Executive Annual Incentive Plan and the Union Camp Restricted Stock Performance
Plan, in the case of the severance agreements, or the target incentive under
Union Camp's annual incentive plan, in the case of the Severance Policy for Key
Employees, or any successor plans, in an amount equal to the products of (A) the
quotient resulting from dividing the number of days the officer was employed
during such year through the date of termination by 365, and (B) the annual
target awards under each applicable plan, to the extent the officer participates
in such plans and such pro rata payment is to be made under such plans.
The severance benefits also include:
1. a lump sum cash severance payment equal to the sum of (A) 300%, or 200%
under the Severance Policy for Key Employees, reduced by 8.33% for each
full month that the officer's age is in excess of 62, or 63 under the
Severance Policy for Key Employees, as of the date of termination, of
the greater of the officer's annual rate of base salary in effect
immediately prior to the date of termination and such rate of base
salary in effect immediately prior to the merger, and (B) 300%, or 200%
under the Severance Policy for Key Employees, reduced by 8.33% for each
full month that the officer's age is in excess of 62, or 63 under the
Severance Policy for Key Employees, as of the date of termination, of
the greater of the amount of the officer's annual target incentive in
effect under the applicable Union Camp annual incentive plan immediately
prior to the merger and the target incentive in effect with respect to
the year in which the date of termination occurs;
2. payment of all legal fees and expenses incurred by the officer in
connection with the interpretation or enforcement of the severance
arrangements;
3. continuation for 36 months, or 24 months under the Severance Policy for
Key Employees, but not beyond age 65 in either case, of life,
disability, accident and health insurance benefits equivalent to those
that the officer was receiving immediately prior to termination, to the
extent an equivalent benefit is not actually provided to the officer
during such period; and
4. solely with respect to the severance agreements, the lump sum cash
payment of the sum of all amounts credited to the officer's book account
under the Union Camp Supplemental Retirement Plan, plus the actuarial
equivalent of the supplemental pension benefit, determined as a straight
life annuity commencing at the greater of age 62 or the officer's age at
the date of termination, accrued under the Supplemental Retirement Plan,
plus, under the severance agreements, the amount due to the officer
under the Union Camp Supplemental Retirement Income Plan for Executive
Officers determined under the applicable lump sum provisions as if the
officer had been credited with three additional years of age and
service, but not beyond age 65 and 20 years of service, with the amount
reduced to the extent necessary to prevent duplicative payment of
benefits.
The severance benefits also include a gross-up payment to cover the imposition
of any excise taxes imposed under Section 4999 of the federal tax code and any
taxes on such gross-up payment. The severance arrangements further provide,
however, that if payment to or for the benefit of the officer would not be
subject to the excise tax if such payments were reduced by an amount that is
less than 10% of the portion of such payments that are
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treated as "parachute payments" under Section 280G of the federal tax code, then
the severance benefits will be reduced to the maximum amount that could be paid
without giving rise to the excise tax, and no gross-up payment will be payable.
STOCK UNIT PLAN. After the effective time of the merger, the amounts payable to
participants pursuant to Section 9(c) of Union Camp's Deferred Stock Unit Plan
for Outside Directors shall be paid in International Paper common shares. The
number of International Paper common shares payable to any participant in the
Deferred Stock Unit Plan for Outside Directors shall be an amount equal to (A)
the number of stock units credited to such participant's account under the
Deferred Stock Unit Plan for Outside Directors immediately prior to the
effective time of the merger multiplied by (B) the exchange ratio for the
merger.
RESTRICTED STOCK PLAN. After the effective time of the merger, any amounts
payable to participants pursuant to Article X of the Union Camp Restricted Stock
Performance Plan shall be paid in International Paper common shares. The number
of International Paper common shares payable shall be an amount equal to (A) the
amount payable to such participant determined in accordance with Article X of
the Union Camp Restricted Stock Performance Plan, divided by (B) the average
International Paper share price which is used to determine the exchange ratio in
the merger.
INDEMNIFICATION AND INSURANCE. Under the merger agreement, International Paper
has agreed to, or cause Union Camp to,
- indemnify and hold harmless present or former directors or officers of
Union Camp or its subsidiaries for all acts or omissions occurring prior
to the effective time of the merger, including the transactions
contemplated by the merger agreement, to the same extent such persons are
indemnified and held harmless in Union Camp's articles of incorporation
or bylaws as of the date of the merger agreement, and
- provide, for a period of six years after the effective time of the
merger, an insurance and indemnification policy that grants Union Camp's
officers and directors in office immediately prior to the effective time
of the merger coverage substantially equivalent to Union Camp's policy in
effect as of the date of the merger agreement; provided, however, that in
no event will expenditures in any one year for such coverage exceed 200%
of the annual premiums currently paid by Union Camp; provided, further,
that if the annual premiums for such coverage exceed such amount, then a
policy providing the best available coverage not exceeding such amount
will be provided.
See "Principal Provisions of The Merger Agreement -- Principal
Covenants -- Benefits Continuation" for a description of the benefits provided
by the merger agreement for employees of Union Camp generally.
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The following table shows the benefits that may become payable to the executive
officers of Union Camp as a consequence of the merger. An executive officer's
employment must be terminated to receive the dollar amounts listed. The
accelerated vesting of the stock options and restricted stock shown will occur
regardless of termination of employment. The amounts shown assume a merger date
of April 1, 1999 and that the executive officer's employment is terminated on
that date.
<TABLE>
<CAPTION>
PRO-RATED ACCELERATED
PRO-RATED RESTRICTED CONTINUED ACCELERATED VESTING
SEVERANCE ANNUAL STOCK BENEFIT VESTING OF RESTRICTED
BENEFIT BONUS BONUS COVERAGE OF OPTIONS STOCK
----------- --------- ---------- --------- ------------- -------------
(# OF SHARES) (# OF SHARES)
<S> <C> <C> <C> <C> <C> <C>
W. Craig McClelland........... $ 694,278 $140,875 $ 78,000 $ 872 84,600 6,779
Chairman of the Board and
Chief Executive Officer
Jerry H. Ballengee............ 2,887,785 79,500 51,500 26,058 39,100 4,581
President and Chief
Operating Officer
Charles H. Greiner, Jr.* ..... 2,150,657 48,125 33,300 22,400 17,000 2,546
Executive Vice President
A. William Hamill............. 1,534,000 45,375 33,000 22,339 17,000 2,196
Executive Vice President and
Chief Financial Officer
John T. Heald, Jr. ........... 2,256,958 48,125 33,300 22,400 17,000 2,546
Executive Vice President
John C. Albert................ 1,666,291 32,125 25,700 20,871 8,000 930
Senior Vice President
Susan M. Arseven*............. 1,017,900 26,325 23,400 20,410 7,500 428
Senior Vice President and
Chief Information Officer
Jerome N. Carter*............. 1,329,884 25,875 23,000 20,329 8,000 682
Senior Vice President
Thomas G. Lambrix............. 1,445,654 25,775 22,900 20,309 7,500 0
Senior Vice President
Willis J. Potts............... 1,716,450 33,250 26,600 21,053 13,500 959
Senior Vice President
L.H. Puckett.................. 1,376,968 27,275 24,250 20,581 9,000 0
Senior Vice President
Dirk R. Soutendijk............ 1,298,928 31,625 28,100 21,355 9,500 2,604
Vice President, General
Counsel and Secretary
TOTAL................. $19,375,753 $564,250 $403,050 $238,973 237,700 24,251
=========== ======== ======== ======== ======= ======
</TABLE>
There is uncertainty whether the options granted to employees of Union Camp in
November 1998 will be subject to accelerated vesting due to pooling of interests
accounting restrictions. If these options do vest upon the merger, the number of
shares subject to options with accelerated vesting will be as follows: Mr.
McClelland -- 172,600; Mr. Ballangee -- 80,151; Mr. Greiner -- 36,073; Mr.
Hamill -- 36,073; Mr. Heald -- 36,073; Mr. Albert -- 16,000; Ms.
Arseven -- 15,000; Mr. Carter -- 16,200; Mr. Lambrix -- 16,500; Mr.
Potts -- 27,000; Mr. Puckett -- 18,000; Mr. Soutendijk -- 19,000; and 488,670
for the group as a whole.
* Effective upon the completion of the merger, Messrs. Greiner and Carter have
been named Senior Vice Presidents of the combined company and Ms. Arseven will
assume responsibility for Information Technology for merger integration of the
combined company.
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PRINCIPAL PROVISIONS OF THE MERGER AGREEMENT
GENERAL
The merger agreement contemplates the merger of Maple Acquisition, Inc., a
subsidiary of International Paper, with and into Union Camp, with Union Camp
surviving the merger. The merger will become effective at the date and time that
the certificate of merger is issued by the Virginia Commission in accordance
with the articles of merger to be filed with the Virginia Commission and the
Secretary of State of the State of Delaware. We anticipate that we will make
these filings as soon as practicable after the last of the conditions precedent
to the merger, as set forth in the merger agreement, has been satisfied or
waived. Immediately after the merger becomes effective, we expect that Union
Camp will be merged with and into International Paper, with International Paper
surviving that merger. The merger agreement obligates International Paper to
have the International Paper common shares to be issued in connection with the
merger approved for listing on the New York Stock Exchange, subject to official
notice of issuance, prior to the effective time of the merger. The following
description of the merger agreement is only a summary and therefore is not
complete. We encourage shareholders to refer to the complete text of the merger
agreement, which we attach to this document as Annex A and incorporate by
reference herein.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the effective time of the merger, each issued and outstanding Union Camp
common share, together with the associated rights, which are described in detail
under the heading "Comparison of Shareholder Rights -- Shareholder Rights Plan",
will be converted into the right to receive a number of International Paper
common shares equal to the exchange ratio for the merger. However, each Union
Camp common share, together with the associated rights, owned by International
Paper or any International Paper subsidiaries will be canceled and retired. Cash
will be paid in lieu of any fractional International Paper common shares that
would otherwise be issuable.
The exchange ratio is to be determined by dividing 71.00 by the average
International Paper share price, which is to be calculated by averaging the last
sales price per International Paper common share on ten randomly selected days
out of the 20-trading day period ending on the fifth trading day preceding the
effective time of the merger. However, if the average International Paper share
price is less than $43.70, the exchange ratio will be 1.6247, and if the average
International Paper share price is greater than $48.30, the exchange ratio will
be 1.4700. One officer of each of International Paper and Union Camp or their
designated appointees will perform this random selection in the presence of
representatives from each company's independent accountants who will both
certify the outcome of the selection.
EXCHANGE OF SHARES
Subject to the terms and conditions of the merger agreement, International Paper
will deposit with an exchange agent designated by International Paper and
reasonably acceptable to Union Camp, as needed, certificates representing the
International Paper common shares issuable in exchange for the outstanding Union
Camp common shares and will from time to time deposit cash in an amount required
to be paid for fractional International Paper common shares and dividends and
other distributions on the International Paper common shares. As promptly as
practicable after the effective time of the merger, International Paper will
send, or will cause the exchange agent to send, to each holder of record of
Union Camp common shares a letter of transmittal and
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instructions. Thereafter, holders of Union Camp common shares may surrender
their certificates to the exchange agent, together with a duly executed letter
of transmittal. In exchange for such share certificates, holders will receive
International Paper common share certificates representing such number of shares
as described under "-- Consideration to be Received in the Merger". Holders of
unexchanged Union Camp common shares will not be entitled to receive any
dividends or other distributions payable by International Paper with respect to
those International Paper common shares represented by such unexchanged Union
Camp certificates until the applicable Union Camp certificate is surrendered.
Upon surrender, however, subject to applicable laws, those holders will receive
accumulated dividends and distributions, without interest, together with cash in
lieu of fractional shares.
International Paper will not issue fractional common shares to holders of Union
Camp common shares. For each fractional share that would otherwise be issued,
the exchange agent will pay the relevant holder an amount equal to the
fractional part of an International Paper common share multiplied by the average
International Paper share price used to determine the exchange ratio for the
merger consideration.
PRINCIPAL REPRESENTATIONS AND WARRANTIES
The merger agreement contains a number of reciprocal representations and
warranties of International Paper and Union Camp as to, among other things, due
incorporation and good standing, corporate authority to enter into the
contemplated transactions, required consents and filings with government
entities, absence of conflicts with organizational documents and material
agreements, capitalization, reports filed with the SEC, financial statements,
undisclosed liabilities, litigation, material changes or events, compliance with
laws, title to properties, tax matters, pooling matters, finder's fees,
intellectual property, environmental matters, information supplied for use in
this document and the required shareholder approvals. Representations and
warranties made solely by Union Camp relate to the ownership of subsidiaries and
particular employee benefits matters.
Many of these representations and warranties are qualified by material adverse
effect, which, for purposes of the merger agreement, means with respect to
International Paper or Union Camp, as the case may be, a material adverse effect
on the financial condition, business or results of operations of either party
and its subsidiaries, taken as a whole, other than any material adverse effects
arising out of any change or development relating to:
- U.S. or global economic or industry conditions;
- changes in U.S. or global financial markets or conditions;
- any generally applicable change in law, rule or regulation or U.S.
generally accepted accounting principles or related interpretations;
and/or
- the announcement of the merger agreement or the transactions contemplated
thereby.
None of the representations and warranties contained in the merger agreement
will survive the effective time of the merger.
PRINCIPAL COVENANTS
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the merger agreement, Union
Camp has agreed that from the date of the merger agreement until its
effectiveness, except as consented to by International Paper, which consent is
not to be unreasonably withheld or delayed, Union Camp will, and will cause each
Union Camp subsidiary to, conduct its
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business in all material respects in the ordinary course consistent with past
practice and will use commercially reasonable efforts to:
- preserve intact its present business organization;
- maintain in effect all material foreign, federal, state and local
licenses, approvals and authorizations, including, without limitation,
all material licenses and permits that are required for Union Camp or any
Union Camp subsidiary to carry on its business; and
- preserve existing relationships with its material customers, lenders,
suppliers and others having material business relationships with it.
Without limiting the generality of the foregoing, except as consented to by
International Paper, which consent is not to be unreasonably withheld or
delayed, Union Camp will not, nor will it permit any Union Camp subsidiary to:
(a) amend Union Camp's articles of incorporation or bylaws;
(b) split, combine or reclassify any shares of capital stock of Union Camp or
any less-than-wholly-owned Union Camp subsidiary or declare, set aside or
pay any dividend or other distribution, in any form, in respect of its
capital stock, or redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire any of its securities or any
securities of any Union Camp subsidiary, except
- for regular quarterly cash dividends having customary record and payment
dates, not in excess of $0.45 per Union Camp common share,
- for regular dividends by less-than-wholly-owned Union Camp subsidiaries
on a pro rata basis to the equity owners of those subsidiaries, or
- pursuant to the existing terms of any Union Camp employee benefit plan;
(c)(1) issue, deliver or sell, or authorize the issuance, delivery or sale of,
any shares of its capital stock of any class or any securities
convertible into or exercisable for, or any rights, warrants or options
to acquire, any such capital stock or any such convertible securities,
except, in connection with the Union Camp employee benefit plans or
benefit plans or arrangements existing on the date of the merger
agreement and covering the members of Union Camp's board of directors,
- the issuance of Union Camp common shares upon the exercise of stock
options in accordance with their present terms, or
- the granting of options to acquire Union Camp common shares in the
ordinary course of business consistent with past practice,
(2) amend in any material respect any material term of any outstanding
security of Union Camp or any Union Camp subsidiary;
(d) other than in connection with transactions permitted by clause (e) below,
incur any capital expenditures or any obligations or liabilities relating to
any capital expenditures, except for those
- contemplated by the capital expenditure budgets for Union Camp and the
Union Camp subsidiaries made available to International Paper,
- incurred in the ordinary course of business of Union Camp and its
subsidiaries, or
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- not otherwise described under this subsection (d) which, in the
aggregate, do not exceed $10 million;
(e) acquire, whether pursuant to merger, stock or asset purchase or otherwise,
in one transaction or series of related transactions,
- any assets, including any equity interests, having a fair market value in
excess of $10 million, or
- all or substantially all of the equity interests of any third party or
any business or division of any third party having a fair market value in
excess of $5 million;
(f) sell, lease, encumber or otherwise dispose of any assets, other than
- sales in the ordinary course of business consistent with past practice,
- equipment and property no longer used in the operation of Union Camp's
business, and
- assets related to discontinued operations of Union Camp or any Union Camp
subsidiary;
(g) incur any indebtedness for borrowed money or guarantee any such indebtedness
or issue or sell any debt securities or warrants or rights to acquire any
debt securities of Union Camp or any Union Camp subsidiary or guarantee any
debt securities of others, except in the ordinary course of business
consistent with past practice, which shall include, without limitation,
borrowings under Union Camp's existing credit agreements and overnight
borrowings;
(h)(1) enter into any agreement or arrangement that limits or otherwise
restricts Union Camp, any Union Camp subsidiary or any of their
respective affiliates or any successor thereto or that would, after the
effective time of the merger, limit or restrict Union Camp, any Union
Camp subsidiary, the surviving corporation, International Paper, any
International Paper subsidiary or any of their respective affiliates,
from engaging or competing in any line of business or in any location,
which agreement or arrangement would be material to the business of Union
Camp and the Union Camp subsidiaries or the business of International
Paper and the International Paper subsidiaries, assuming the merger had
taken place, in either case taken as a whole, or
(2) except in the ordinary course of business, amend, modify or terminate
any material contract, agreement or arrangement of Union Camp or any
Union Camp subsidiary or otherwise waive, release or assign any material
rights, claims or benefits of Union Camp or any Union Camp subsidiary
under any material contract, agreement or arrangement;
(i)(1) except in the ordinary course of business consistent with past practice
or as required by law or an existing agreement, increase the amount of
compensation of any director or executive officer or make any increase in
or commitment to increase any employee benefits,
(2) except as required by law or an existing agreement or Union Camp
severance policy, grant any severance or termination pay to any director,
officer or employee of Union Camp or any Union Camp subsidiary,
(3) adopt any additional employee benefit plan or, except in the ordinary
course of business, make any contribution to any existing such plan, or
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(4) except as may be required by law, amend in any material respect any Union
Camp employee benefit plan;
(j) change Union Camp's methods of accounting in effect at September 30, 1998,
except as required by changes in U.S. generally accepted accounting
principles or by Regulation S-X of the Securities Exchange Act of 1934, as
concurred in by its independent accountants, or change Union Camp's fiscal
year;
(k)(1) settle, or propose to settle, any litigation, investigation, arbitration,
proceeding or other claim that is material to the business of Union Camp
and the Union Camp subsidiaries, taken as a whole, other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice of liabilities
- recognized or disclosed in the most recent consolidated financial
statements, or the notes thereto, of Union Camp included in Union
Camp's SEC filings or
- incurred since the date of such financial statements in the ordinary
course of business consistent with past practice, or
(2) other than in the ordinary course of business consistent with past
practice, make any tax election or enter into any settlement or
compromise of any tax liability that in either case is material to the
business of Union Camp and the Union Camp subsidiaries, taken as a whole;
or
(l) agree or commit to do any of the foregoing.
Pursuant to the merger agreement, International Paper has agreed that from the
date of the merger agreement until its effectiveness, except as consented to by
Union Camp, which consent is not to be unreasonably withheld or delayed,
International Paper shall, and will cause each of the International Paper
subsidiaries to, conduct its business in all material respects in the ordinary
course consistent with past practice and shall use commercially reasonable
efforts to:
- preserve intact its present business organization;
- maintain in effect all material foreign, federal, state and local
licenses, approvals and authorizations, including, without limitation,
all material licenses and permits that are required for International
Paper or any International Paper subsidiary to carry on its business; and
- preserve existing relationships with its material customers, lenders,
suppliers and others having material business relationships with it.
Without limiting the generality of the foregoing, except as consented to by
Union Camp, which consent is not to be unreasonably withheld or delayed,
International Paper will not, nor will it permit any International Paper
subsidiary to:
(a) make any amendment to the International Paper certificate of incorporation
that changes any material term or provision of the International Paper
common shares;
(b) make any material changes to Maple Acquisition's certificate of
incorporation;
(c) engage in any material repurchase at a premium, recapitalization,
restructuring or reorganization with respect to International Paper's
capital stock, including, without limitation, by way of any extraordinary
dividend on, or other extraordinary distributions with respect to,
International Paper's capital stock;
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(d) acquire by merging or consolidating with, or by purchasing a substantial
portion of the assets of or equity in, or by any other manner, any third
party or any third party business or division, or otherwise acquire any
assets, unless International Paper concludes in good faith that such
acquisition or the entering into of a definitive agreement relating to or
the consummation of such transaction would not
- impose any material delay in the obtaining of, or significantly increase
the risk of not obtaining, any authorizations, consents, orders,
declarations or approvals of any governmental entity necessary to
consummate the merger or the expiration or termination of any applicable
waiting period,
- significantly increase the risk of any governmental entity entering an
order prohibiting the consummation of the merger or
- significantly increase the risk of not being able to remove any such
order on appeal or otherwise; or
(e) agree, resolve or otherwise commit to do any of the foregoing.
NO SOLICITATION OF TRANSACTIONS. Pursuant to the merger agreement:
(a) Union Camp has agreed that it will not, nor will it permit any Union Camp
subsidiary to, nor will it authorize or knowingly permit any officer,
director, employee, investment banker, attorney, accountant, agent or other
advisor or representative of Union Camp or any Union Camp subsidiary,
directly or indirectly, to:
1. solicit, initiate or knowingly facilitate or encourage the submission of
any acquisition proposal, which is defined in the merger agreement to
include an offer to acquire 15% or more of the assets or common shares
of Union Camp or any significant subsidiary of Union Camp;
2. participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action
knowingly to facilitate any inquiries or the making of any proposal that
constitutes, or may be reasonably expected to lead to, any acquisition
proposal;
3. grant any waiver or release under any standstill or similar agreement
with respect to any class of Union Camp's equity securities; or
4. enter into any agreement with respect to any acquisition proposal, other
than in the manner contemplated by clause (d) below.
However, Union Camp may take any action(s) described in the foregoing clauses 1,
2, 3 or 4, but only if
- a bona fide written acquisition proposal is delivered that, in the
reasonable judgment of Union Camp's board of directors, could be
reasonably likely to lead to the delivery to Union Camp of a superior
proposal, which is defined in the merger agreement to mean an acquisition
proposal for at least a majority of Union Camp's common stock, which has
been determined by Union Camp's board of directors, after consultation
with an investment bank, to be more favorable to Union Camp shareholders
from a financial point of view than the transaction proposed in the
merger agreement, and
- Union Camp's board of directors determines in good faith, on the basis of
written advice from its outside legal counsel, that it is required to
take such action(s) in order to comply with its fiduciary duties under
applicable law.
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Prior to Union Camp taking any such action(s), the third party must have entered
into a confidentiality agreement with Union Camp on customary terms, and Union
Camp must provide the notice required by clause (c) below. In addition, Union
Camp may not enter into any agreement with respect to any third party
acquisition proposal without first complying with clause (d) below.
(b) Unless Union Camp's board of directors has previously withdrawn, or is
concurrently withdrawing, its recommendation of the merger in order to
satisfy its fiduciary duties, as determined in good faith by a majority of
its members on the basis of the written advice of its outside legal counsel,
neither Union Camp's board of directors nor any board committee may
recommend any third party acquisition proposal to Union Camp shareholders.
Notwithstanding the foregoing, nothing contained in the merger agreement
will prevent Union Camp's board of directors from complying with Rule 14e-2
under the Exchange Act with respect to any acquisition proposal or making
any disclosure required by applicable law.
(c) Union Camp must notify International Paper within 24 hours after receipt by
Union Camp or any Union Camp subsidiary, or any of their respective
directors, officers, agents or advisors, of any acquisition proposal.
Similarly, Union Camp will notify International Paper of any negotiations,
discussions or contacts concerning, or any request for nonpublic information
or for access to the properties, books or records of Union Camp or any Union
Camp subsidiary or any request for a waiver or release under any standstill
or similar agreement, by anyone that has made an acquisition proposal. Such
notice to International Paper must be made orally and in writing and must
indicate the identity of the offeror and the terms and conditions of such
proposal, inquiry, contact or request. Union Camp must keep International
Paper informed, on a reasonably current basis, of the status and details,
including amendments or proposed amendments, of any such acquisition
proposal or request and the status of any negotiations or discussions.
(d) Either International Paper or Union Camp may terminate the merger agreement
if Union Camp's board of directors determines, pursuant to the terms of this
covenant, to approve or recommend and to enter into an agreement concerning
an acquisition proposal after concluding that such acquisition proposal
constitutes a superior proposal. However, Union Camp may not exercise its
right to terminate under this covenant, and may not enter into a binding
written agreement with respect to such acquisition proposal, unless:
1. Union Camp has provided to International Paper at least five business
days' prior written notice that Union Camp's board of directors has
authorized and intends to terminate the merger agreement pursuant to
this covenant, specifying the material terms and conditions of such
acquisition proposal and providing the most current version of the
agreement relating thereto, if any;
2. International Paper does not make, within five business days of
receiving such notice, an offer such that a majority of Union Camp's
board of directors determines that the foregoing acquisition proposal no
longer constitutes a superior proposal to the transaction proposed
herein or its fiduciary duties no longer require it to take such
action(s); and
3. on or prior to such termination, Union Camp has paid to International
Paper the termination fee. Further details concerning the termination
fee can be found under the subheading "-- Termination Fees Payable by
Union Camp".
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In connection with the foregoing, Union Camp agrees that it will:
1. not enter into a binding agreement with respect to that acquisition
proposal until at least the sixth business day after it has provided the
notice to International Paper required by the merger agreement;
2. negotiate in good faith with International Paper, and consider in good
faith any offer made by International Paper during that period; and
3. notify International Paper promptly if its intention to enter into such
an agreement shall change at any time after such notification.
STANDSTILL AGREEMENT. International Paper has agreed that if the merger
agreement is terminated, then, for two years after the date of such termination,
neither International Paper, its successors, assigns nor its affiliates will:
(a) acquire, offer, propose or otherwise seek to acquire, or agree to acquire,
directly or indirectly, by merger, purchase or otherwise, beneficial
ownership of any assets or in excess of 1% of any class of securities of
Union Camp or its affiliates or any direct rights or options to acquire,
through purchase, exchange, conversion or otherwise, any assets or in excess
of 1% of any class of securities of Union Camp or its affiliates;
(b) make, or in any way participate in, directly or indirectly, any solicitation
of proxies, or seek to advise, encourage or influence any person or entity
with respect to the voting of any voting securities of Union Camp;
(c) call, or in any way participate in a call for, any meeting of shareholders
of Union Camp, or take any action with respect to shareholders acting by
written consent;
(d) form, join or in any way participate in a group with respect to any voting
securities of Union Camp; or
(e) otherwise act to control or influence, or seek to control or influence,
Union Camp or the management, board of directors, policies or affairs of
Union Camp, including, without limitation, by:
- making any offer or proposal to acquire any securities or assets of Union
Camp or any of its affiliates or soliciting or proposing to effect or
negotiate any form of business combination, restructuring,
recapitalization or other extraordinary transaction involving Union Camp,
its affiliates or any of their respective securities or assets;
- seeking board representation or the removal of any directors or a change
in the composition or size of Union Camp's board of directors;
- making any request to amend or waive any provision of this covenant;
- disclosing any intent, purpose, plan or proposal with respect to matters
covered by this covenant or Union Camp, its affiliates or the boards of
directors, management, policies or affairs or securities or assets of
Union Camp or its affiliates that is inconsistent with this covenant,
including an intent, purpose, plan or proposal that is conditioned on, or
would require, waiver, amendment, nullification or invalidation of any
provision of this covenant, or take any action that could require Union
Camp or any of its affiliates to make any public disclosure relating to
any such intent, purpose, plan, proposal or condition; or
- assisting, advising or encouraging any person with respect to, or seeking
to do, any of the foregoing.
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The standstill agreement will not bind International Paper if Union Camp does
not pay any portion of the termination fee if and when due or if International
Paper terminates the merger agreement as a result of a willful breach of the
merger agreement by Union Camp. In addition, any obligations of International
Paper under the standstill agreement will cease if:
- Union Camp shall have entered into an agreement with respect to any
transaction that constitutes an acquisition proposal for at least a
majority of either the voting securities of Union Camp then outstanding
or the assets of Union Camp and the Union Camp subsidiaries, taken as a
whole; or
- any person or group shall have commenced any tender or exchange offer
that constitutes an acquisition proposal for at least a majority of the
voting securities of Union Camp then outstanding, which offer is
recommended by Union Camp's board of directors to the Union Camp
shareholders.
INDEMNIFICATION AND INSURANCE. These matters are discussed above under the
heading "Interests of Insiders in the Merger -- Interests of Union Camp Officers
and Directors -- Indemnification and Insurance".
UNION CAMP STOCK OPTIONS. The merger agreement provides that at the effective
time of the merger, each outstanding Union Camp option, regardless of the extent
vested and exercisable, shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Union Camp stock
option, the same number of International Paper common shares as the holder of
such Union Camp option would have been entitled to receive pursuant to the
merger agreement had such holder exercised such Union Camp option in full
immediately prior to the effective time of the merger, rounded up to the nearest
whole number. The price per share, rounded down to the nearest whole cent, will
equal:
- the aggregate exercise price for the Union Camp common shares otherwise
purchasable pursuant to such Union Camp option, divided by
- the number of full International Paper common shares deemed purchasable
pursuant to such Union Camp option in accordance with the foregoing.
BENEFITS CONTINUATION. For a period of one year following the effective time of
the merger, International Paper has agreed in the merger agreement that it will
provide, or will cause Union Camp to provide, for employees of Union Camp and
its subsidiaries, salary and benefits under employee benefits plans that are, in
the aggregate, no less favorable than those currently provided by Union Camp and
the Union Camp subsidiaries to such employees.
For purposes of any employee benefit plan or arrangement maintained by
International Paper, Union Camp or any International Paper subsidiary,
International Paper will recognize service with Union Camp and the Union Camp
subsidiaries and any predecessor entities and any other service credited by
Union Camp under similar benefit plans for all purposes; provided, that solely
to the extent necessary to avoid duplication of benefits, amounts payable under
employee benefit plans provided by International Paper, Union Camp or an
International Paper subsidiary may be reduced by amounts payable under similar
Union Camp employee benefit plans with respect to the same period of service.
Any benefits accrued by employees of Union Camp and its subsidiaries prior to
the effective time of the merger under any defined benefit pension plan of Union
Camp or any Union Camp subsidiary that employs a final average pay formula will
be calculated based
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on the relevant employee's final average pay with International Paper, Union
Camp or any International Paper subsidiary or other affiliate employing such
employees. From and after the effective time of the merger, International Paper
will, and will cause the International Paper subsidiaries to, waive any
pre-existing condition limitations and credit any deductibles and out-of-pocket
expenses that are applicable and/or covered under the Union Camp employee
benefit plans, and are incurred by employees of Union Camp and its subsidiaries
and their beneficiaries during the portion of the calendar year prior to
participation in the benefit plans provided by International Paper, Union Camp
and the International Paper subsidiaries.
International Paper has also agreed to provide, and to cause Union Camp and the
International Paper subsidiary to provide, at least 30 days' advance written
notice of termination of employment of any employees or former employees of
Union Camp or any Union Camp subsidiary.
Amounts payable to participants pursuant to Section 9(c) of the Union Camp
Deferred Stock Unit Plan for Outside Directors shall be paid in International
Paper common shares, and the number of International Paper common shares payable
shall be an amount equal to:
- the number of stock units credited to such participant's account under
the Deferred Stock Unit Plan for Outside Directors immediately prior to
the effective time of the merger, multiplied by
- the exchange ratio in the merger.
Amounts payable to participants pursuant to Article X of the Union Camp
Restricted Stock Performance Plan shall be paid in International Paper common
shares. The number of International Paper common shares payable shall be an
amount equal to:
- the amount payable to such participant determined in accordance with
Article X of the Union Camp Restricted Stock Performance Plan, divided by
- the average International Paper share price, as used to calculate the
exchange ratio in the merger.
Pursuant to the merger agreement, International Paper will honor, and will cause
Union Camp and the International Paper subsidiaries to honor, in accordance with
their terms, Union Camp's existing severance programs, and each existing Union
Camp employment, change of control, severance and termination agreement between
Union Camp or any Union Camp subsidiary, and any officer, director or employee
of Union Camp or any Union Camp subsidiary.
OTHER COVENANTS. The merger agreement contains additional covenants, including
covenants relating to preparation and distribution of this document,
coordination of shareholders' meetings, access to information, mutual
notification of particular events, public announcements and cooperation
regarding filings with governmental and other agencies and organizations. In
addition, the merger agreement contains a general covenant requiring each of the
parties thereto to use its reasonable best efforts to effect the consummation of
the merger.
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CONDITIONS TO THE CONSUMMATION OF THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. Each party's
obligation to consummate the merger is subject to the satisfaction of the
following conditions:
(a) SHAREHOLDER APPROVALS.
- Union Camp's shareholders having approved and adopted the merger and the
merger agreement; and
- International Paper's shareholders having approved both
- an amendment to its certificate of incorporation, increasing the
number of authorized International Paper common shares from
400,000,000 to 1,000,000,000, and
- the issuance of International Paper common shares in the merger.
(b) LISTING OR QUOTATION OF STOCK. The International Paper common shares to be
issued in the merger having been approved for listing on the New York Stock
Exchange, subject to official notice of issuance.
(c) NO GOVERNMENTAL RESTRAINTS. No governmental entity shall have issued any
order, injunction or decree, or taken any other action, that permanently
restrains, enjoins or otherwise prohibits the consummation of the merger.
(d) POOLING OF INTERESTS ACCOUNTING TREATMENT. International Paper shall have
received a letter from Arthur Andersen LLP addressed to it, dated as of the
effective time of the merger, stating that the merger should be treated as a
"pooling of interests" in conformity with U.S. generally accepted accounting
principles. Union Camp shall have received a letter from
PricewaterhouseCoopers LLP addressed to it, dated as of the effective time
of the merger, stating that Union Camp is a pooling candidate for purposes
of the merger. Both of these letters may not be withdrawn or modified in any
material respect.
ADDITIONAL CONDITION TO OBLIGATIONS OF INTERNATIONAL PAPER. The obligation of
International Paper and Maple Acquisition to consummate the merger is subject to
the satisfaction of the following additional condition, which may be waived in
writing exclusively by International Paper:
(a)PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. Union Camp shall
have performed in all material respects all of its obligations under the
merger agreement required to be performed by it at or prior to the effective
time of the merger. The representations and warranties of Union Camp set
forth in the merger agreement that are not qualified as to a material adverse
effect shall have been true and correct when made and at and as of the time
of the filing of the articles of merger, as if made at and as of such time,
and all other representations and warranties of Union Camp shall have been
true and correct when made and at and as of the time of filing of the
articles of merger, as if made as of such time, except for such inaccuracies
as are not reasonably likely, individually or in the aggregate, to have a
Union Camp material adverse effect.
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ADDITIONAL CONDITIONS TO OBLIGATIONS OF UNION CAMP. The obligation of Union
Camp to effect the merger is subject to the satisfaction of each of the
following additional conditions, any of which may be waived in writing
exclusively by Union Camp:
(a)PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. International
Paper and Maple Acquisition each shall have performed in all material
respects all of its obligations under the merger agreement required to be
performed by it at or prior to the time of the filing of the articles of
merger. The representations and warranties of International Paper contained
in the merger agreement that are not qualified by reference to a material
adverse effect shall have been true and correct when made and at and as of
the time of filing the articles of merger, as if made at and as of such time,
and all other representations and warranties of International Paper shall
have been true and correct when made and at and as of the time of the filing
of the articles of merger, as if made at and as of such time, except for such
inaccuracies as are not reasonably likely, individually or in the aggregate,
to have an International Paper material adverse effect.
(b)TAX OPINION. Union Camp having received a written opinion from Sullivan &
Cromwell, special counsel to Union Camp, to the effect that the merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the federal tax code.
TERMINATION
The merger agreement may be terminated at any time prior to the effective time
of the merger, whether before or after approval of the matters presented in
connection with the merger by the International Paper shareholders or the Union
Camp shareholders:
(a) by mutual written consent of International Paper and Union Camp;
(b) by either International Paper or Union Camp, if the merger has not been
consummated by September 30, 1999; provided, however, that the right to
terminate the merger agreement under this clause (b) will not be available
to any party whose breach of any obligation under the merger agreement has
been the cause of or resulted in the failure of the merger to occur on or
before that date;
(c) by either International Paper or Union Camp, if there is any law or
regulation that makes consummation of the merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree of any
governmental entity having competent jurisdiction enjoining Union Camp,
International Paper or Maple Acquisition from consummating the merger is
entered and such judgment, injunction or order shall have become final and
nonappealable and, prior to such termination, the parties shall have used
reasonable best efforts to resist, resolve or lift, as applicable, such law,
regulation, judgment, injunction, order or decree;
(d) by either International Paper or Union Camp if,
1. at the Union Camp special shareholders' meeting, including any
adjournment or postponement, the requisite vote of the Union Camp
shareholders in favor of the merger and the merger agreement is not
obtained, or
2. at the International Paper special shareholders' meeting, including any
adjournment or postponement, the requisite vote of International Paper's
shareholders is not obtained in favor of the International Paper
proposals to amend the International
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Paper certificate of incorporation and to issue International Paper
common stock in the merger;
(e) by Union Camp, if a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of International Paper or Maple
Acquisition set forth in the merger agreement has occurred which would cause
the conditions set forth in "-- Conditions to the Consummation of the
Merger -- Additional Conditions to Obligations of Union Camp" not to be
satisfied, and such conditions are incapable of being satisfied by September
30, 1999;
(f) by Union Camp, if International Paper's board of directors has amended,
modified, withdrawn, conditioned or qualified in a manner adverse to Union
Camp its recommendation of the International Paper proposals to amend the
International Paper certificate of incorporation and to issue International
Paper common stock in the merger;
(g) by International Paper, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of Union Camp
set forth in the merger agreement has occurred which would cause the
conditions set forth under "-- Conditions to the Consummation of the
Merger -- Additional Conditions to Obligations of International Paper" not
to be satisfied, and such conditions are incapable of being satisfied by
September 30, 1999;
(h) by International Paper, if Union Camp's board of directors has
1. amended, modified, withdrawn, conditioned or qualified in a manner
adverse to International Paper its recommendation of the merger and the
merger agreement, and/or
2. recommended any other acquisition proposal to the Union Camp
shareholders;
(i) by International Paper, if Union Camp, any Union Camp subsidiary or any of
their respective officers, directors, employees, advisors or other agents
has willfully and materially breached the covenant described under "-- No
Solicitation of Transactions"; or
(j) by International Paper or Union Camp, if Union Camp's board of directors
shall have determined, in accordance with the requirements described under
"-- No Solicitation of Transactions," to approve or recommend an acquisition
proposal after concluding that such acquisition proposal constitutes a
superior proposal and to enter into a binding agreement concerning such
acquisition proposal. However, Union Camp may not exercise such right to
terminate, and may not enter into a binding written agreement with respect
to such acquisition proposal, unless
1. Union Camp shall have provided to International Paper at least five
business days' prior written notice that Union Camp's board of directors
has authorized and intends to terminate the merger agreement, specifying
the material terms and conditions of such acquisition proposal and
providing the most current version of the agreement relating thereto, if
any,
2. International Paper does not make, within five business days of
receiving such notice, an offer such that a majority of Union Camp's
board of directors determines that the foregoing third party acquisition
proposal no longer constitutes a superior proposal or its fiduciary
duties no longer require it to take such action(s), and
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3. on or prior to such termination, Union Camp must have paid to
International Paper a $150 million termination fee, plus up to $10
million in out-of-pocket expenses, which is more fully described under
the subheading "-- Termination Fees Payable by Union Camp" below.
International Paper may exercise its right to terminate under these
circumstances five business days after receiving the notice contemplated above.
In connection with the foregoing, Union Camp agrees that it will
1. not enter into a binding agreement with respect to such acquisition
proposal until at least the sixth business day after it has provided the
notice to International Paper required by the merger agreement,
2. negotiate in good faith with International Paper, and consider in good
faith any offer made by International Paper, during that period, and
3. notify International Paper promptly if its intention to enter into such
an agreement shall change at any time after such notification.
TERMINATION FEES PAYABLE BY INTERNATIONAL PAPER
If the merger agreement is terminated pursuant to paragraph (d)2. or (e), to the
extent such breach is willful, under "-- Termination" above, International Paper
will pay to Union Camp a termination fee of $150 million in cash within one
business day after such termination plus out-of-pocket expenses not to exceed
$10 million.
If the merger agreement is terminated pursuant to paragraph (f) under
"-- Termination" above, International Paper will pay to Union Camp a termination
fee of $75 million in cash within one business day after such termination plus
out-of-pocket expenses not to exceed $10 million.
TERMINATION FEES PAYABLE BY UNION CAMP
If the merger agreement is terminated pursuant to paragraph (g), to the extent
such breach is willful, (h)2., (i) or (j) under "-- Termination" above, Union
Camp will pay to International Paper a termination fee of $150 million in cash
within one business day after such termination plus out-of-pocket expenses not
to exceed $10 million.
If the merger agreement is terminated pursuant to paragraph (d)1. under
"-- Termination" above, and
1. prior to the Union Camp special shareholders' meeting a third party
shall have publicly announced an intention to make an acquisition
proposal for Union Camp, and
2. concurrently with or within 12 months after such termination, Union Camp
enters into a merger or similar transaction involving the acquisition of
a majority of Union Camp common stock with the party that had publicly
announced such acquisition proposal,
then Union Camp shall:
A. pay to International Paper a $75 million termination fee within one
business day of the entering into of any such agreement, plus
International Paper's out-of-pocket expenses not to exceed $10 million;
and
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B. within one business day of any consummation of the transaction
contemplated by such agreement pay to International Paper a further $75
million termination fee.
If the merger agreement is terminated pursuant to paragraph (h)1. under
"-- Termination" above, Union Camp shall pay to International Paper a $75
million termination fee plus International Paper's out-of-pocket expenses not to
exceed $10 million, and if within 12 months after such termination Union Camp
enters into an agreement for a merger or a similar transaction with a third
party, which involves the acquisition of a majority of Union Camp common stock,
then Union Camp shall pay to International Paper a further $75 million
termination fee within one business day of the consummation of the transaction
contemplated by such third party agreement.
EXPENSES
All fees and expenses incurred in connection with the merger agreement and the
transactions contemplated by the merger agreement, other than termination fees
payable upon termination under "-- Termination Fees Payable by International
Paper" and "-- Termination Fees Payable by Union Camp", will be paid by the
party incurring such expenses, whether or not the merger is consummated.
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THE SHAREHOLDERS' MEETINGS
This document is furnished in connection with the solicitation of proxies from
the holders of International Paper common shares by International Paper's board
of directors for use at the International Paper special shareholders' meeting
and from the holders of Union Camp common shares by Union Camp's board of
directors for use at the Union Camp special shareholders' meeting. This document
and accompanying form of proxy are first being mailed to the respective
International Paper shareholders and Union Camp shareholders on or about March
31, 1999.
TIMES AND PLACES; PURPOSES
The International Paper special shareholders' meeting will be held at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, Eighth Floor, New York,
New York on April 30, 1999, starting at 9:00 a.m., local time. At the
International Paper special shareholders' meeting, the International Paper
shareholders will be asked to consider and vote upon the International Paper
proposals to amend the International Paper certificate of incorporation and to
issue International Paper common shares in the merger.
The Union Camp special shareholders' meeting will be held at The Union League
Club, 38 East 37th Street, New York, New York on April 30, 1999, starting at
10:30 a.m., local time. At the Union Camp special shareholders' meeting, the
Union Camp shareholders will be asked to consider and vote upon the merger and
the merger agreement.
Representatives of Arthur Andersen LLP are expected to be present at the
International Paper special shareholders' meeting, where they will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions. Representatives of PricewaterhouseCoopers LLP
are expected to be present at the Union Camp special shareholders' meeting,
where they will have the opportunity to make a statement, if they so desire, and
will be available to respond to appropriate questions.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
INTERNATIONAL PAPER. International Paper's board of directors has fixed the
close of business on March 18, 1999 as the record date for International Paper
shareholders entitled to notice of and to vote at the International Paper
special shareholders' meeting.
The only outstanding voting securities of International Paper are the
International Paper common shares. Only holders of record of International Paper
common shares on the International Paper record date are entitled to notice of
and to vote at the International Paper special shareholders' meeting. Each
holder of record, as of the International Paper record date, of International
Paper common shares is entitled to cast one vote per share on each of the
International Paper proposals.
On the International Paper record date, there were approximately 306,851,559
International Paper common shares outstanding and entitled to vote at the
International Paper special shareholders' meeting, held by approximately 30,570
International Paper shareholders of record.
The favorable vote of a majority of the International Paper common shares
present and voting is required to approve the share issuance proposal. The
favorable vote of a majority of all outstanding shares on the International
Paper record date entitled to vote at the International Paper special
shareholders' meeting is required to approve the certificate of incorporation
amendment proposal.
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<PAGE> 84
On the International Paper record date, the directors and executive officers of
International Paper and their affiliates beneficially owned and were entitled to
vote approximately 1,790,726 International Paper common shares, or less than one
percent of the International Paper common shares outstanding on the
International Paper record date.
UNION CAMP. Union Camp's board of directors has fixed the close of business on
February 23, 1999 as the record date for Union Camp shareholders entitled to
notice of and to vote at the Union Camp special shareholders' meeting.
Currently, the only outstanding voting securities of Union Camp are the Union
Camp common shares. Only holders of record of Union Camp common shares on the
Union Camp record date are entitled to vote at the Union Camp special
shareholders' meeting, and only holders of record of Union Camp common shares on
the Union Camp record date are entitled to notice of the Union Camp special
shareholders' meeting. Each holder of record, as of the Union Camp record date,
of Union Camp common shares is entitled to cast one vote per share on the merger
agreement proposal.
On the Union Camp record date, there were approximately 69,781,473 Union Camp
common shares outstanding and entitled to vote at the Union Camp special
shareholders' meeting, held by approximately 6,912 Union Camp shareholders of
record.
The favorable vote of more than two-thirds of the Union Camp common shares
outstanding on the Union Camp record date is required to approve the merger and
the merger agreement.
On the Union Camp record date, the directors and executive officers of Union
Camp and their affiliates beneficially owned and were entitled to vote 179,728
Union Camp common shares, or less than one percent of the Union Camp common
shares outstanding on the Union Camp record date.
VOTING OF PROXIES
All International Paper common shares and Union Camp common shares represented
by proxies properly received prior to or at the International Paper special
shareholders' meeting or Union Camp special shareholders' meeting, as the case
may be, and not revoked, will be voted in accordance with the instructions
indicated in such proxies. If shareholders do not indicate any instructions on a
properly executed and returned proxy, that proxy will be voted FOR the proposals
required for the approval of the merger.
If any other matters are properly presented at the International Paper special
shareholders' meeting, in the case of the International Paper shareholders for
consideration, the persons named in the enclosed form of proxy, and acting under
that proxy, will have discretion to vote on such matters in accordance with
their best judgment, unless authorization to use that discretion is withheld. If
a proposal to adjourn the International Paper special shareholders' meeting or
the Union Camp special shareholders' meeting is properly presented, the persons
named in the enclosed form of proxy will not have discretion to vote shares
voted against any of the proposals related to the approval of the merger in
favor of the adjournment proposal. Neither International Paper nor Union Camp is
aware of any matters expected to be presented at its respective shareholders'
meeting other than as described in its respective notice of special
shareholders' meeting.
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Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by:
1. filing, including by telegram or telecopy, with the Secretary of
International Paper or the Secretary of Union Camp, as the case may be,
before taking the vote at the relevant shareholders' meeting, a written
notice of revocation bearing a later date than the date of the proxy or
a later-dated proxy relating to the same shares;
2. voting by telephone before taking the vote at the International Paper
special shareholders' meeting or the Union Camp special shareholders'
meeting, as the case may be, which will serve to revoke any prior
telephone vote; or
3. attending the relevant shareholders' meeting and voting in person.
In order to vote in person at either the International Paper special
shareholders' meeting or the Union Camp special shareholders' meeting,
International Paper shareholders and Union Camp shareholders must attend the
relevant shareholders' meeting and cast their votes in accordance with the
voting procedures established for the shareholders' meeting. Attendance at a
shareholders' meeting will not in and of itself constitute a revocation of a
proxy. Any written notice of revocation or subsequent proxy must be sent so as
to be delivered at or before the taking of the vote at the applicable
shareholders' meeting as follows:
- in the case of International Paper shareholders, to International Paper
Company, Two Manhattanville Road, Purchase, New York 10577, Telecopy:
(914) 397-1505, Attention: Secretary; and
- in the case of Union Camp shareholders, to Union Camp Corporation, 1600
Valley Road, Wayne, New Jersey 07470, Telecopy: (973) 628-2640,
Attention: Secretary.
International Paper shareholders who require assistance in changing or revoking
a proxy should contact Georgeson & Co. Inc. at the address or phone number
provided in this document under the caption "Who Can Help Answer Your
Questions". Union Camp shareholders who require assistance in changing or
revoking a proxy should contact MacKenzie Partners, Inc. at the address or phone
number provided in this document under the caption "Who Can Help Answer Your
Questions".
Abstentions may be specified on each of the proposals required for approval of
the merger. Since the favorable vote of holders of more than two-thirds of the
Union Camp common shares on Union Camp's merger agreement proposal and the
majority of all shares of International Paper's capital stock entitled to vote
at the International Paper special shareholders' meeting on the proposal to
amend the International Paper certificate of incorporation is in each case
required to approve that proposal, a proxy marked "ABSTAIN" with respect to any
such proposal will have the effect of a vote against that proposal. In addition,
the failure of a Union Camp shareholder in connection with Union Camp's merger
agreement proposal, or an International Paper shareholder in connection with the
proposal to amend the International Paper certificate of incorporation, to
return a proxy will have the effect of a vote against that proposal. Further, as
the merger cannot occur unless the International Paper shareholders adopt both
of the International Paper merger proposals, any vote that counts as a vote
against the proposal to amend the International Paper certificate of
incorporation has the effect of a vote against the proposal to issue
International Paper common shares in the merger.
Under New York Stock Exchange rules, brokers who hold shares in street name for
customers have the authority to vote on some "routine" proposals when they have
not
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<PAGE> 86
received instructions from beneficial owners. Under New York Stock Exchange
rules, such brokers are precluded from exercising their voting discretion with
respect to the approval and adoption of non-routine matters such as
International Paper's and Union Camp's merger proposals and, thus, absent
specific instructions from the beneficial owner of such shares, brokers are not
empowered to vote such shares with respect to the approval and adoption of such
proposals (i.e., " broker non-votes"). Since the affirmative votes described
above are required for approval of the proposal to amend International Paper's
certificate of incorporation and Union Camp's merger agreement proposal, a
"broker non-vote" with respect to any such proposal will have the effect of a
vote against such proposal.
It is the policy of both International Paper and Union Camp to keep confidential
proxy cards, ballots and voting tabulations that identify individual
shareholders, except where disclosure is mandated by law and in other limited
circumstances.
The cost of solicitation of proxies will be paid by International Paper for
International Paper proxies and by Union Camp for Union Camp proxies. In
addition to solicitation by mail, arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to send the proxy
materials to beneficial owners, and International Paper or Union Camp, as the
case may be, will, upon request, reimburse those brokerage houses and custodians
for their reasonable expenses in so doing. International Paper has retained
Georgeson & Co. Inc. and Union Camp has retained MacKenzie Partners, Inc. to aid
in the solicitation of proxies and to verify records related to the
solicitations. Each such firm will receive customary fees and expense
reimbursement for such services. To the extent necessary in order to ensure
sufficient representation at its shareholders' meeting, International Paper or
Union Camp may request by telephone or telegram the return of proxy cards. The
extent to which this will be necessary depends entirely upon how promptly
proxies are received. We urge shareholders to vote proxies without delay.
Union Camp shareholders should not send in any stock certificates with their
proxy cards. A transmittal form with instructions for the surrender of
certificates representing Union Camp common shares will be mailed by
International Paper to former Union Camp shareholders as soon as practicable
after the consummation of the merger.
INTERNATIONAL PAPER CERTIFICATE OF INCORPORATION AMENDMENT PROPOSAL
At the International Paper special shareholders' meeting, International Paper
will ask its shareholders to approve the certificate of incorporation amendment
proposal, as required under the terms of the merger agreement.
International Paper's authorized capital stock includes 400,000,000
International Paper common shares. At March 18, 1999, there were outstanding:
- 306,851,559 International Paper common shares; and
- employee stock options to purchase an aggregate of approximately
12,837,150 International Paper common shares.
In addition, on that date, approximately 8,332,000 International Paper common
shares were reserved for issuance upon the conversion of the 5 1/4% convertible
preferred securities issued by International Paper Capital Trust. Additionally,
up to 120,817,082 International Paper common shares will be required to be
authorized for issuance in connection with the merger. The issuance of this
number of International Paper common shares would, absent an amendment, violate
the International Paper certificate of incorporation because the number of
International Paper common shares outstanding would exceed the number that
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<PAGE> 87
had been authorized. Therefore, in order to consummate the merger, the
International Paper shareholders must approve an amendment to the International
Paper certificate of incorporation, increasing the number of authorized
International Paper common shares.
In addition, International Paper's board of directors believes that it is
desirable to have available additional authorized International Paper common
shares for future stock dividends, employee benefit plans, financings,
acquisitions, stock splits or dividends or other corporate purposes.
International Paper's board of directors therefore requests that the
International Paper shareholders approve the certificate of incorporation
amendment proposal for a total number of 1,000,000,000 authorized International
Paper common shares after effectiveness of the amendment of the International
Paper certificate of incorporation. Other than as required by the merger
agreement or in connection with its employee benefit plans, International Paper
has no present plan to issue the additional International Paper common shares to
be authorized. International Paper's board of directors would have the sole
discretion to issue the additional International Paper common shares from time
to time for any corporate purpose without further action by International Paper
shareholders, except as may be required by New York Stock Exchange rules, and
without first offering such shares to International Paper shareholders.
If International Paper were to issue additional shares, it could have a dilutive
effect on International Paper's per share earnings and on each International
Paper shareholder's voting power in International Paper, unless the
International Paper shareholder were to purchase additional shares to keep the
same level of ownership. There are no preemptive rights available to
International Paper shareholders in connection with the issuance of
International Paper common shares.
Although the proposed increase in authorized International Paper common shares
is not prompted by a belief that additional takeover defenses are needed, the
additional authorized, but unissued, International Paper common shares could be
viewed as having an anti-takeover effect. Some provisions of the International
Paper certificate of incorporation, the International Paper bylaws and state law
also may be deemed to have an anti-takeover effect and may delay, deter or
prevent a tender offer or takeover attempt that an International Paper
shareholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
International Paper shareholders. Further details of relevant anti-takeover
measures can be found under the headings "Comparison of Shareholder
Rights -- Shareholder Rights Plan" and "Comparison of Shareholder
Rights -- State Anti-Takeover Laws" below.
If approved, the proposal to amend International Paper's certificate of
incorporation would become effective immediately prior to the consummation of
the merger. Approval of this proposal is a condition to the parties' obligation
to consummate the merger. We describe this in more detail under the heading
"Principal Provisions of The Merger Agreement -- Conditions to the Consummation
of the Merger -- Shareholder Approvals".
International Paper's board of directors unanimously recommends that the
International Paper shareholders vote FOR the proposal to amend International
Paper's certificate of incorporation.
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COMPARISON OF SHAREHOLDER RIGHTS
Set forth on the following pages is a summary comparison of material differences
between the rights of an International Paper shareholder under the current
International Paper certificate of incorporation and bylaws (left column) and
the rights of a Union Camp shareholder under the current Union Camp articles of
incorporation and bylaws (right column). A summary by its nature is not
complete. We encourage shareholders to refer to the relevant portions of the
International Paper certificate of incorporation and the bylaws, the Union Camp
articles of incorporation and bylaws, incorporated in this document by
reference, and the relevant provisions of New York and Virginia law.
INTERNATIONAL PAPER
UNION CAMP
GENERAL
<TABLE>
<S> <C>
- - International Paper is a New York corporation - Union Camp is a Virginia corporation subject
subject to the provisions of the New York to the provisions of the Virginia Stock
Business Corporation Law. Corporation Act.
- - The rights of International Paper shareholders - The rights of Union Camp shareholders are
are governed by International Paper's governed by Union Camp's articles of
certificate of incorporation and bylaws, in incorporation and bylaws, in addition to
addition to New York law. Virginia law.
- Union Camp shareholders will, upon
consummation of the merger, become
International Paper shareholders.
</TABLE>
AUTHORIZED CAPITAL
<TABLE>
<S> <C>
- - The authorized capital stock of International - The authorized capital stock of Union Camp
Paper consists of: consists of:
- 400,000,000 International Paper common - 125,000,000 Union Camp common shares, with a
shares; par value of $1.00 per share; and
- 400,000 shares of cumulative $1.00 preferred - 1,000,000 shares of preferred stock, with a
stock, without par value; and par value of $1.00 per share, of which 125,000
shares are designated as Series A Junior
- 8,750,000 shares of serial preferred stock, Participating Preferred Stock.
$1.00 par value per share.
</TABLE>
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AMENDMENT OF GOVERNING DOCUMENTS
CHARTER
<TABLE>
<S> <C>
- - Except for the matters specified in the next - The following is required to amend the Union
bullet point, to amend the International Paper Camp articles of incorporation:
certificate of incorporation, the following is
required: (1) an authorization by the board; - an authorization of the Union Camp board,
followed by (2) a vote of the majority of followed by the approval of at least
all outstanding voting shares. two-thirds of the Union Camp common shares
for an amendment to the article of the Union
- - An authorization by the board followed by the Camp articles of incorporation providing for
approval of at least 80% of the voting shares a classified Union Camp board of directors,
is required for an amendment to the establishing criteria for removing directors,
International Paper certificate of and granting the Union Camp board of directors
incorporation providing for any of the the powers to manage Union Camp and to make
following: and amend the Union Camp bylaws;
- the classification of the board of - an authorization of the Union Camp board,
directors; followed by the approval of more than
two-thirds of the Union Camp common shares
- the establishment of criteria for the for an amendment to the Union Camp articles
removal of directors; of incorporation that changes the more than
two-thirds vote required by Virginia law to
- an increase or decrease in the size of the approve a merger, statutory share exchange,
board of directors; or sale of substantially all of the assets of
Union Camp or the dissolution of Union Camp;
- the indemnification of directors. and
- an authorization by the Union Camp board of
directors, followed by the approval of a
majority of the Union Camp common shares, or a
greater vote if required by Virginia law or
the Union Camp articles of incorporation, for
all other amendments to the Union Camp
articles of incorporation.
</TABLE>
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BYLAWS
<TABLE>
<S> <C>
- - The International Paper bylaws may be amended, - The Union Camp bylaws may be amended by:
adopted or repealed by:
- a majority of the shareholders present and
- a majority vote of the shareholders present voting; or
and voting; or
- the board of directors if the amendment is
- a majority vote of the board of directors. approved by a majority of a quorum of the
directors, unless the bylaw was adopted by
- - Any bylaw adopted by the board of directors shareholders and the bylaw expressly stated
without shareholder approval may be amended or that it could not be amended, altered or
repealed by a majority vote of the repealed by the Union Camp board of directors.
shareholders.
</TABLE>
DIRECTORS
NUMBER
<TABLE>
<S> <C>
- - The number of directors must be no less than 9 - The number of directors must be no less than 3
and no more than 18, with the actual number to and no more than 15 directors, with the actual
be determined by the board of directors. number to be set forth in the bylaws.
- - The current number of directors is 12. - The current number of directors is 10,
although the bylaws provide for 11.
</TABLE>
CLASSIFICATION
<TABLE>
<S> <C>
- - The International Paper board of directors is - The Union Camp board of directors is divided
divided into three classes, with one class into three classes, each as nearly equal in
being elected annually to a three-year term. number as possible, with one class being
elected annually to a three-year term.
</TABLE>
NOMINATIONS
<TABLE>
<S> <C>
- - Any nomination for director made by a - Any nomination for director made by a
shareholder must be made in writing to the shareholder must be made in writing to the
secretary of International Paper at least 90 secretary of Union Camp at least 90 days prior
and not more than 120 days prior to any to the anniversary date of the immediately
shareholder meeting called for the purpose of preceding annual meeting, with the date of
electing directors. required notice being adjusted if the meeting
is not held within 30 days of the anniversary
- - A shareholder's nomination for director must date.
include:
- A shareholder's nomination for director must
- the name and address of the shareholder, the include:
number of shares beneficially owned by the
shareholder, and a representation that the - the name and address of the shareholder, the
shareholder intends to appear in person or number of shares owned of record and
by proxy at the annual meeting to make the beneficially by the shareholder and a
nomination; representation that the shareholder is a
holder of record of stock of Union Camp
- a description of all arrangements or entitled to vote at the annual meeting and
understandings between the shareholder intends to
</TABLE>
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<TABLE>
<S> <C>
and each nominee and any other persons appear and bring the nomination before the
relating to the nomination; and meeting;
- any other information about the shareholder - the name, age business and residence addresses
that would be required to be disclosed in a and principal occupation of the shareholder's
proxy statement or other filing required to be nominee;
made in connection with proxy solicitations
for election of directors. - the written consent of the nominee to serve as
director if elected;
- - as to any nominee who is not an incumbent
director; - the class and number of shares of Union Camp
stock owned of record and beneficially by the
- the name, age, principal occupation and the nominee;
business and residential addresses of the
nominee; - a description of any arrangement or
understanding between the nominee, the
- the number of shares of International Paper shareholder and any other persons relating to
stock beneficially owned by the nominee; the proposed nomination;
- the written consent of the nominee to serve - any material interest of the shareholder in
as director if elected; and the nomination; and
- any other information about the nominee that - any other information regarding the nominee
must be disclosed in proxy solicitations. that would be required to be included in a
proxy statement filed pursuant to the proxy
rules of the SEC, had the person been
nominated by the Union Camp board of
directors.
</TABLE>
REMOVAL
<TABLE>
<S> <C>
- - Directors may be removed for cause, and only - Any director may be removed for cause, and
for cause, with the approval of at least 80% only for cause, with the approval of a
of the outstanding shares entitled to vote. majority of the Union Camp common shares
entitled to be voted on the matter.
</TABLE>
VACANCIES
<TABLE>
<S> <C>
- - Any vacancy which occurs during the year or - A vacancy occurring on the Union Camp board of
which occurs as a result of an increase in the directors, including a vacancy resulting from
size of the International Paper board of an increase in the number of directors by not
directors may be filled by a vote of the board more than 30% of the number of directors last
of directors, provided that a quorum is elected by the shareholders, may be filled by
present. If there is less than a quorum in the affirmative vote of a majority of the
office, the vacancy may be filled by a remaining Union Camp directors, even if less
majority vote of the directors then in office, than a quorum. Directors chosen in this manner
or by a sole remaining director. shall remain
in office
until the next
annual meeting
of
shareholders
at which
directors are
elected. No
decrease in
the number of
directors
constituting
the Union Camp
board of
directors may
shorten the
term of any
incumbent
director.
</TABLE>
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FIDUCIARY DUTIES
<TABLE>
<S> <C>
- - Under New York law, a director must perform - Under Virginia law, a director shall discharge
his duties in good faith and with the degree his duties as a director in accordance with
of care that an ordinarily prudent person in a his good faith business judgment of the best
similar position would use under comparable interests of the corporation. A director is
circumstances. not liable for any action taken as a director,
or any failure to take any action, if he
- - A director may rely upon information, performed the duties of his office in
opinions, reports or statements, including compliance with the standards of conduct for
financial statements and other financial data, directors prescribed by Virginia law.
when they are prepared or presented by:
- Unless he has knowledge or information
- one or more officers or employees of the concerning the matter in question that makes
corporation or of any other corporation of reliance unwarranted, a director is entitled
which at least 50% of the outstanding shares to rely on information, opinions, reports or
of voting stock is directly or indirectly statements, including financial statements
owned by the corporation, so long as the and other financial data, if prepared or
director believes that the officers or presented by:
employees are reliable and competent in the
matters presented; - one or more officers or employees of the
corporation whom the director believes, in
- counsel, public accountants or other persons good faith, to be reliable and competent in
as to matters which the director believes to the matters presented;
be within such person's professional or
expert competence; or - legal counsel, public accountants, or other
persons as to matters the director believes,
- a committee of the board of directors upon in good faith, are within the person's
which he does not serve, duly designated in professional or expert competence; or
accordance with the certificate of
incorporation or the bylaws, as to matters - a committee of the board of directors of which
within its designated authority, so long as he he is not a member if the director believes,
relies in good faith and does not have in good faith, that the committee merits
knowledge that would cause his reliance to be confidence.
unwarranted.
- The duties of a director weighing a change of
- - In taking action that involves or relates to a control situation are not any different, nor
change or potential change of control of the is the standard of care any higher, than
corporation, a director may consider a number otherwise provided under Virginia law. In such
of factors, including the following: a situation, a director may consider the
possibility that the best interests of the
- both the long and short-term interests of corporation are best served by its continued
the corporation and its shareholders; independence.
- the potential effects upon the prospects for
potential growth, development, productivity
and profitability of the corporation;
- the potential effects upon the corporation's
current employees, retired employees and
other beneficiaries receiving or entitled to
receive retirement, welfare or similar
benefits;
- the potential effects upon the corporation's
customers and creditors; and
</TABLE>
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<TABLE>
<S> <C>
- the potential effects upon the corporation's
ability to provide goods, services,
employment opportunities and employment
benefits and otherwise contribute to the
communities in which it does business.
</TABLE>
LIMITATION ON LIABILITY
<TABLE>
<S> <C>
- - As permitted by New York law, the - Under Virginia law, the liability of a
International Paper certificate of director or an officer in a proceeding brought
incorporation contains a provision that by or in the right of the corporation or by or
eliminates the personal liability of directors on behalf of shareholders of the corporation
to the corporation or to its shareholders for may not in any event exceed the greater of
damages for breaches of duty, except where a $100,000 or the amount of cash compensation
judgment or other final adjudication received by the director from the corporation
establishes that the director's acts or during the twelve months preceding the act or
omissions: omission for which liability was imposed,
except when the director or officer engaged in
- were in bad faith; willful misconduct or a knowing violation of
the criminal law or any federal or state
- involved intentional misconduct or a knowing securities law, including, without
violation of the law; limitation, any claim of unlawful insider
trading or manipulation of the market for
- involved financial profit or some other any security. Although Virginia law allows a
advantage to which the director was not corporation to further limit or eliminate
legally entitled; or the liability of directors and officers in
the articles of incorporation or bylaws
- resulted in a violation of a statute adopted by shareholders, neither Union
prohibiting particular dividend Camp's articles of incorporation nor its
declarations, particular payments to bylaws includes such an exculpation
shareholders after dissolution, and provision.
particular types of loans.
- - This provision does not affect the liability
of a director for acts that occurred before
the provision was adopted.
</TABLE>
INDEMNIFICATION
<TABLE>
<S> <C>
- - The International Paper bylaws provide that - Union Camp is required by its bylaws to
the corporation shall indemnify its officers indemnify a director or officer of Union Camp
and directors for any liability incurred in who is or was made a party to any proceeding
their official capacity to the maximum extent by reason of the fact that he is or was such a
permissible under New York law. director or officer or is or was serving any
other corporation, partnership, joint venture,
- - Under New York law, a corporation may trust, employee benefit plan or other
indemnify any person made, or threatened to be enterprise, at the request of Union Camp if:
made, a party to any action or proceeding by
reason of his position in the corporation. - he believed, in the case of conduct in his
This excludes shareholder derivative suits. official capacity, that his conduct was in
In order to be indemnified, the director or the best interests of the corporation, and
officer must have acted: in all other cases that his conduct was at
least not opposed to the corporation's best
interests and, in
</TABLE>
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<TABLE>
<S> <C>
- in good faith; the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was
- for a purpose which he reasonably believed unlawful;
to be in the best interests of the
corporation; and - in connection with a proceeding by or in the
right of Union Camp, he was not adjudged
- with no reasonable cause to believe that his liable to Union Camp; and
conduct was unlawful.
- in connection with any proceeding charging
- - In the case of shareholder derivative suits, improper benefit to him, whether or not
the corporation may also indemnify if the involving action in his official capacity, he
director or officer acted pursuant to the was not adjudged liable on the basis that
requirements above. Unless a court finds that personal benefit was improperly received by
an individual is fairly and reasonably him.
entitled to indemnity for his portion of the
settlement amount and expenses, the - Furthermore, the Union Camp bylaws provide
corporation cannot indemnify in the case of that each director and officer of Union Camp
shareholder derivative suits when there is: shall be indemnified against all costs and
expenses reasonably incurred by or imposed
- a threatened action, or a pending action upon him in connection with or resulting
which is settled or otherwise disposed of; from any action, suit or proceeding to which
or he may be made a party by reason of his
being or having been a director or officer
- any claim, issue or matter as to which the of Union Camp, whether or not he continues
individual has been found liable to the to be a director or officer at the time of
corporation. incurring such cost or expense, except in
relation to matters as to which a recovery
- - The indemnification under New York law shall be had against him by reason of his
described above is not exclusive of other having been finally adjudged in such action,
rights of indemnification which a director or suit or proceeding to have been derelict in
officer may be granted by a corporation in its the performance of his duty as a director or
certificate of incorporation or bylaws, or by officer.
a shareholder or director resolution, or by an
agreement. Such rights are valid so long as
indemnification is not granted where a
judgment or other final adjudication adverse
to the director or officer establishes that
his acts:
- were committed in bad faith and were
material to the cause of action;
- were the result of active and deliberate
dishonesty and were material to the cause of
action; or
- resulted in a gain of financial profit or
other advantage to which he was not legally
entitled.
- - Under the International Paper certificate of
incorporation, any indemnification made
pursuant to New York law may be made only if
authorized in the specific case and only after
a finding that the director or officer met the
requisite standard of conduct. The finding is
to be made by:
- the disinterested directors if a quorum is
available; or
</TABLE>
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<TABLE>
<S> <C>
- if a quorum of disinterested directors is
not available, by the shareholders or by the
board of directors upon the written opinion
of legal counsel.
The International Paper certificate of
incorporation makes an exception for an
individual who successfully defends against a
civil or criminal action or proceeding and who
fulfills the relevant requirements stated above
will be entitled to indemnification.
</TABLE>
INTERESTED TRANSACTIONS
<TABLE>
<S> <C>
- - Under New York law, no contract or transaction - Virginia law provides that a transaction in
that is: which the director has a direct or indirect
personal interest is not voidable by the
- between a corporation and one or more of its corporation solely because of the director's
directors; interest in the transaction if:
- between a corporation and another entity in (1) the material facts of the transaction and
which one or more of the corporation's the director's interest were disclosed or
directors are directors or officers; or known to the board of directors, or any
board committee, and the board, or the
- between a corporation and another entity in committee, authorized, approved or ratified
which one or more of the corporation's the transaction;
directors has a material financial interest
(2) the material facts of the transaction and
is void or voidable because of the relationship the director's interest were disclosed to
or interest if one or more of the following is the shareholders entitled to vote and they
true: authorized, approved or ratified the
transaction; or
- if the material facts of the transaction and
the director's interest are disclosed to or (3) the transaction was fair to the corporation.
known by the board of directors or a - For purposes of clause (1) above, a conflict
committee of the board and the board or the of interests transaction is authorized,
committee authorizes, approves or ratifies the approved or ratified if it receives the
transaction by an affirmative vote of the affirmative vote of a majority of, but not
majority of the disinterested directors; less than two, directors or committee members
who have no direct or indirect personal
- if the material facts of the transaction and interest in the transaction and a quorum is
the director's interest are disclosed or deemed present solely for this purpose. The
known to the voting shareholders and they presence of, or a vote cast by, a director
authorize, approve or ratify the with a direct or indirect personal interest
transaction; or does not affect the validity of any action
taken under clause (1) above if the
- if the transaction is fair to the transaction is otherwise authorized,
corporation. approved or ratified pursuant to that clause.
- - The International Paper certificate of - For purposes of clause (2) above, a conflict
incorporation provides that no contract or of interests transaction is authorized,
transaction entered into by the corporation is approved, or ratified if it receives the
affected by the fact that a director of affirmative vote of a majority of the shares,
International Paper is himself a party, or is other than shares owned by or voted under the
in any way interested in or connected to any control of the conflicted director or an
party to the transaction. This is true so long entity through which the director's conflict
as the contract or transaction is approved by of interest exists,
a majority of the directors present at the entitled to vote on the
meeting, without counting the vote of any transaction.
interested director.
</TABLE>
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SHAREHOLDERS
ANNUAL MEETINGS OF SHAREHOLDERS
<TABLE>
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- - The annual meeting of stockholders must be - The annual meeting of shareholders must be
held on a date and at a place fixed by the held on the last Tuesday of each April, or the
International Paper board of directors. next business day if a legal holiday, or on
some other date as determined in advance by
the Union Camp board of directors.
</TABLE>
SPECIAL MEETINGS OF SHAREHOLDERS
<TABLE>
<S> <C>
- - Special meetings may be called at any time and - Special meetings of the Union Camp
for any purpose by: shareholders for any purpose(s) may be called
at any time by:
- the chairman of the International Paper
board of directors; - the chairman of the Union Camp board of
directors;
- International Paper's president; or
- Union Camp's president; or
- a majority of the International Paper board
of directors. - a majority of the Union Camp board of
directors.
</TABLE>
SHAREHOLDER INSPECTION RIGHTS AND SHAREHOLDER LISTS
<TABLE>
<S> <C>
- - Under New York law, a shareholder has the - Under Virginia law, a shareholder is entitled
right to examine and/or copy minutes from to inspect and copy specified books and
shareholder meetings and shareholder records, records, including the articles of
so long as the shareholder: incorporation and bylaws of the corporation,
if he gives the corporation written notice of
- has been an International Paper shareholder his demand at least five business days before
of record for at least six months; the date on which he wishes to inspect and
copy.
- is a holder of at least five percent of any
class of outstanding shares; or - Additionally, Virginia law entitles a
shareholder to inspect and copy specified
- has been authorized in writing by the other books and records, including a list of
holders of at least five percent of any shareholders, minutes of any meeting of the
class of outstanding shares. board of directors, or any committee of the
board, and accounting records of the
- - The requesting shareholder must: corporation, if:
- submit a written demand at least five days - the shareholder has been a shareholder of
prior to the proposed date of examination; record for at least six months immediately
and preceding his written demand or is the
holder of at least 5% of the corporation's
- furnish an affidavit stating that the outstanding shares;
purpose of the inspection is not in the
interest of an entity other than the business - the shareholder's demand is made in good faith
of the corporation, and stating that the and for a proper purpose;
shareholder has not sold, offered to sell or
aided another in the sale of any corporation's - the shareholder describes with reasonable
shareholder list. particularity the purpose of the request and
the records desired to be inspected;
</TABLE>
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<TABLE>
<S> <C>
- - The materials must be examined during business - the records are directly connected with the
hours, and the examination may be done in stated purpose; and
person or by an agent or attorney.
- he gives the corporation written notice of his
demand at least five business days before the
date on which he wishes to inspect and copy.
- Virginia law also provides that a corporation
shall make available for inspection by any
shareholder during usual business hours, at
least 10 days before each meeting of
shareholders, a complete list of the
shareholders entitled to vote at that meeting.
</TABLE>
SHAREHOLDER PROPOSALS
<TABLE>
<S> <C>
- - A shareholder wishing to bring business before - At any meeting of Union Camp shareholders, in
the annual shareholder meeting must provide order to properly bring business before the
written notice by first class United States meeting so that it may be presented to and
mail, postage pre-paid, to the corporation acted upon by the shareholders, business must
secretary at the principal executive offices be brought:
of the corporation. The notice must be - by or at the direction of the Union Camp
received between 90 and 120 days prior to board of directors; or
the annual meeting.
- by a shareholder who has given written notice
- - The shareholder's written notice must include: of business he expects to bring before the
meeting to the secretary of Union Camp at
- the name and record address of the least 90 days prior to the anniversary date of
shareholder; the immediately preceding annual meeting,
with the date of required notice being
- the number of shares of stock owned adjusted in some circumstances. A
beneficially or of record by the shareholder's notice to the secretary shall
shareholder; set forth as to each matter the shareholder
proposes to bring before the meeting:
- a brief description of the business to be
discussed as well as the reasons why it - a brief description of the business to be
should be discussed at the annual meeting; brought before the meeting, including the text
of any resolution to be presented, and the
- a description of all arrangements or reasons for conducting such business at the
understandings between the shareholder and meeting;
any other person or persons, including
names, in connection with the proposal; - the name and address of the shareholder
proposing such business and a representation
- disclosure of any material interest that the that the shareholder is a record holder of
shareholder has in the subject matter of the Union Camp stock entitled to vote at the
proposal; and meeting and intends to appear in person or
by proxy to bring the business specified in
- a representation that the shareholder the notice before the meeting;
intends to appear in person or by proxy at
the shareholders' meeting to present the - any material interest of the shareholder
proposal.
</TABLE>
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<TABLE>
<S> <C>
in such business; and
- the class and number of shares of Union Camp
stock owned of record and beneficially by the
shareholder. The Union Camp bylaws provide
that no business shall be conducted except in
accordance with these procedures.
</TABLE>
PREEMPTIVE RIGHTS
<TABLE>
<S> <C>
In general, preemptive rights allow shareholders whose unlimited dividend rights or voting rights
would be adversely affected by the issuance of new stock to purchase, on terms and conditions set
by the board of directors, that proportion of the new issue that would preserve the relative
dividend or voting rights of those shareholders.
- - As permitted by New York law, the - The Union Camp articles of incorporation
International Paper certificate of provide that its shareholders do not possess
incorporation does not grant its shareholders such preemptive or preferential rights.
preemptive rights.
</TABLE>
SHAREHOLDER ACTION WITHOUT MEETING
<TABLE>
<S> <C>
- - Under New York law, any shareholder action - Under Virginia law, any shareholder action
required or permitted to be taken by required or permitted to be taken by
shareholder vote may be taken with the shareholder vote may be taken with the
unanimous written consent of shareholders. unanimous written consent of shareholders.
</TABLE>
DIVIDENDS AND DISTRIBUTIONS
<TABLE>
<S> <C>
- - Under New York law, a corporation may - Virginia law generally provides that a
generally pay dividends out of surplus. A corporation may make a distribution to its
board of directors must make the required shareholders unless, after giving effect to
disclosures when paying dividends out of any the distribution:
account other than earned surplus.
- the corporation would not be able to pay its
- - Dividends on the International Paper common debts as they become due in the usual course
stock are limited by the terms of the of business; or
International Paper $4.00 Preferred Stock to
the amount of International Paper's retained - the corporation's total assets would be less
earnings. No dividends may be declared, paid than the sum of its total liabilities plus the
or set aside for payment on the corporation's amount that would be needed, if the
common shares unless full cumulative dividends corporation were to be dissolved at the time
are paid on the International Paper Preferred of the distribution, to satisfy the
Stock and any issued and outstanding Serial preferential rights upon dissolution of
Preferred Stock. shareholders whose preferential rights are
superior to those receiving the distribution.
</TABLE>
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APPRAISAL AND DISSENTERS' RIGHTS
<TABLE>
<S> <C>
Shareholders of a corporation that is proposing to merge or consolidate with another entity are
sometimes entitled to appraisal or dissenters' rights in connection with the proposed transaction
depending on the circumstances. Most commonly, these rights confer on shareholders who are opposed
to the merger or consolidation the right to receive the fair value for their shares as determined
in a judicial appraisal proceeding, in lieu of the consideration being offered in the merger.
- - New York law allows shareholders to dissent - Virginia law provides shareholders of a
from particular corporate reorganizations by Virginia corporation the right to dissent from
demanding payment in cash for their shares mergers, statutory share exchanges and
equal to the fair value of the shares. The specified other corporate transactions, and to
fair value is determined by agreement with the obtain payment of the fair value of their
corporation or by an independent court- shares in the event of those transactions.
appointed appraiser and excludes any However, Virginia law also provides that
appreciation or depreciation caused by the shareholders of a Virginia corporation, like
transaction. Union Camp, that has shares listed on a
national securities exchange or that has at
- - New York law allows dissenters' rights of least 2,000 record shareholders, are not
appraisal upon particular mergers, entitled to dissenters' rights except in
consolidations, sales and other dispositions particular circumstances, none of which are
of assets that require shareholder approval applicable to the merger. Therefore, Union
and share exchanges. The merger will not give Camp shareholders do not have the right to
any right to International Paper shareholders dissent from the merger.
to dissent from the merger.
</TABLE>
APPROVAL OF, AND SPECIAL RIGHTS WITH RESPECT TO,
MERGERS OR CONSOLIDATIONS AND OTHER TRANSACTIONS
<TABLE>
<S> <C>
- - Under New York law, the holders of two-thirds - Virginia law generally provides that a
of the outstanding voting common shares must majority of the board of directors, and the
approve a plan adopted by the board of holders of more than two-thirds of all the
directors in order to authorize mergers, votes entitled to be cast on the matter in
consolidations, share exchanges or the sale, question by each voting group entitled to
lease or disposition of all or substantially vote, must approve any plan of merger, plan of
all of the corporation's assets. share exchange, sale of substantially all of
the assets of the corporation not in the
ordinary course of business or the dissolution
of the corporation.
- Virginia law also specifies additional voting
requirements for some types of transactions.
For more information on these additional
voting requirements, see "State Anti-Takeover
Laws -- Union Camp".
</TABLE>
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STATE LAWS GOVERNING DISSOLUTION AND LIQUIDATION
VOLUNTARY DISSOLUTION
<TABLE>
<S> <C>
- - New York law generally provides that the - Virginia law generally provides that the
dissolution of a New York corporation must be dissolution of a Virginia corporation must be
approved by the holders of more than recommended by the board of directors to the
two-thirds of all votes entitled to be cast by shareholders and approved by the holders of
each voting group entitled to vote on the more than two-thirds of all votes entitled to
matter in question, unless the articles of be cast by each voting group entitled to vote
incorporation of the corporation require a on the matter in question, unless the articles
greater or lesser vote. There are no of incorporation of the corporation require a
provisions in the International Paper greater or lesser vote. There are no
certificate of incorporation that modify New provisions in the Union Camp articles of
York law requirements for dissolution. incorporation that modify Virginia law
requirements for dissolution.
</TABLE>
LIQUIDATION RIGHTS
<TABLE>
<S> <C>
- - Holders of shares of International Paper's - In the event of the liquidation, dissolution
$4.00 Preferred Stock are entitled to a or winding-up of the affairs of Union Camp,
liquidation preference of: holders of outstanding Union Camp common
shares are entitled to share, in proportion to
- $105.00 per share, in the event of a their respective interests, in Union Camp's
voluntary liquidation, dissolution or assets and funds remaining after payment, or
winding-up; or provision for payment, of all debts and
other liabilities of Union Camp.
- $100.00 per share, if the liquidation,
dissolution or winding-up is involuntary.
- - In either case, holders are additionally
entitled to any amount equal to all dividends
accrued and unpaid up to and including the
date fixed for distribution, whether or not
earned or declared.
</TABLE>
STATE ANTI-TAKEOVER LAWS
INTERNATIONAL PAPER
There are provisions of New York law, the International Paper certificate of
incorporation and the International Paper bylaws that may be deemed to have an
anti-takeover effect. These provisions are designed to protect shareholders
against coercive, unfair or inadequate tender offers and other abusive tactics
and to encourage any person contemplating a business combination with
International Paper to negotiate with the board of directors for the fair and
equitable treatment of all shareholders.
Under New York law, the affirmative vote of the holders of two-thirds of all
outstanding shares of voting stock is required to approve mergers and
consolidations. The affirmative vote of the holders of two-thirds of all
outstanding shares of voting stock is also required for sales, leases, exchanges
or other dispositions of all or substantially all of the assets of a
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corporation, if not made in the usual or regular course of the business actually
conducted by the corporation.
Additionally, New York law prohibits any business combination with, involving or
proposed by any interested shareholder for a period of five years after the
interested shareholder became such. The definition of a "business combination"
includes a variety of transactions, including mergers, consolidations, sales or
dispositions of assets, issuances of stock, liquidations, reclassifications and
the receipt of specific benefits from the corporation, including loans or
guarantees. The definition of an "interested shareholder" is any person who
directly or indirectly beneficially owns 20% or more of the outstanding voting
stock of a resident domestic New York corporation or any person who is an
affiliate or associate of the corporation and who at any time within the
preceding five years was the beneficial owner of 20% or more of the
corporation's stock.
After the requisite five-year period, a business combination between a resident
domestic New York corporation and an interested shareholder is prohibited unless
either the "fair price" provisions are complied with or the business combination
is approved by a majority of the outstanding voting stock that is not owned by
the interested shareholder or its affiliates or associates.
If the business combination, or the stock purchase that would cause a
shareholder to become an interested shareholder, was granted prior approval by
the board of directors, it is exempt from the prohibition.
Provided that at least 10% of the voting stock of International Paper is owned
beneficially by residents of New York, or by organizations having their
principal offices in New York, International Paper is a resident New York
corporation.
A resident domestic New York corporation may adopt an amendment to its bylaws
expressly electing not to be governed by the provisions described above. The
amendment must be adopted by a majority vote of the outstanding voting stock,
excluding the voting stock of any interested shareholder and its affiliates. The
amendment, however, will not be effective until 18 months after the vote and
will not apply to any business combination with an interested shareholder who
was such on or prior to the effective date of the amendment. International Paper
has not adopted such an amendment.
UNION CAMP
AFFILIATED TRANSACTIONS. Virginia law contains provisions governing affiliated
transactions. These provisions generally require the approval of material
acquisition transactions between a Virginia corporation and any interested
shareholder, which is generally defined as a shareholder holding more than 10%
of the voting shares, by the holders of at least two-thirds of the remaining
voting shares, after excluding shares beneficially owned by the interested
shareholder. Such affiliated transactions include:
- mergers and statutory share exchanges;
- material dispositions of corporate assets not in the ordinary course of
business;
- any dissolution of the corporation proposed by or on behalf of an
interested shareholder; or
- any reclassification, including a reverse stock split, recapitalization
or merger of the corporation with its subsidiaries that increases the
percentage of voting shares beneficially owned by an interested
shareholder by more than 5%.
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For three years following the time that an interested shareholder becomes an
interested shareholder, a Virginia corporation cannot engage in an affiliated
transaction with the interested shareholder without approval of two-thirds of
the voting shares other than those shares beneficially owned by the interested
shareholder and majority approval of the disinterested directors. A
"disinterested director" for this purpose means, with respect to a particular
interested shareholder,
1. any member of a corporation's board of directors who was a member before
the later of January 1, 1988 and the date on which the interested
shareholder became an interested shareholder, and
2. any member of a corporation's board of directors who was recommended for
election by, or was elected to fill a vacancy and received the
affirmative vote of, a majority of the disinterested directors then on
the board of directors.
At the expiration of the three-year period, the statute requires approval of
affiliated transactions by two-thirds of the voting shares other than those
beneficially owned by the interested shareholder unless the transaction was
approved by a majority of the corporation's disinterested directors or the
transaction satisfies the fair-price requirement of Virginia law. In general,
the fair-price requirement provides that in a two-step acquisition transaction,
the interested shareholder must pay the shareholders in the second step at least
the same amount and type of consideration paid to acquire the Virginia
corporation's shares in the first step.
None of the foregoing limitations and special voting requirements apply to a
transaction, such as the merger, with an interested shareholder whose
acquisition of shares making such person an interested shareholder was approved
in advance by a majority of the Virginia corporation's disinterested directors.
CONTROL SHARES. Virginia law also provides that shares acquired in a
transaction, known as "control shares," which would cause the acquiring person's
voting rights to meet or exceed any of three thresholds (namely, 20%, 33 1/3% or
a majority) have no voting rights unless granted by a majority vote of shares
not owned by the acquiring person or any officer or employee-director of the
Virginia corporation. This provision empowers an acquiring person, at its own
expense, to require the Virginia corporation to hold a special meeting of
shareholders to consider the matter within 50 days of the receipt of the
request. This Virginia law provides that, in the event control shares are
accorded voting rights and, as a result, the holder of the control shares has a
majority of all voting power for the election of directors, the shareholders,
other than such holder, may cause the corporation to redeem their shares at a
price that meets specified fair value criteria in accordance with Virginia law.
As authorized by Virginia law, Union Camp has elected, by adopting an amendment
to its bylaws, not to be governed by this control share provision.
SHAREHOLDER RIGHTS PLAN
UNION CAMP. On November 28, 1995, the Union Camp board of directors declared a
dividend distribution of one right for each outstanding Union Camp common share
to shareholders of record at the close of business on February 26, 1996. Each
such right entitles the registered holder to purchase from Union Camp one
one-thousandth of a share, designated as a unit, of Union Camp Series A Junior
Participating Preferred Stock. Each such unit was initially structured to be the
economic equivalent of one Union Camp common share. The initial exercise price
of each Union Camp right is $175, subject to adjustment in some circumstances.
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Union Camp rights also attach to all Union Camp common shares issued after
February 26, 1996, but prior to the date on which the rights separate from the
Union Camp common shares with which they are associated, as described below,
unless the Union Camp board of directors determines otherwise at the time of
issuance. The description and terms of the Union Camp rights are set forth in
the Union Camp Rights Agreement.
The Union Camp rights are attached to all Union Camp common share certificates
currently outstanding, and no separate certificates evidencing the Union Camp
rights have been distributed. The Union Camp rights will separate from the Union
Camp common shares upon the earlier of:
1. 10 days following a public announcement that a person or group of
affiliated or associated persons, but excluding particular persons and
entities, such as Union Camp, has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding Union
Camp common shares; or
2. 10 business days, or such later date as the Union Camp board of
directors may determine prior to the event described in paragraph 1.
above, following the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 15% or more
of such outstanding Union Camp common shares.
Until the Union Camp rights separate from the Union Camp common shares with
which they are associated:
1. the Union Camp rights will be evidenced by the Union Camp common share
certificates and will be transferred only with such Union Camp common
share certificates,
2. new Union Camp common share certificates issued after February 26, 1996,
will contain a notation incorporating the Union Camp Rights Agreement by
reference, and
3. the surrender for transfer of any certificates for Union Camp common
shares outstanding also will constitute the transfer of the Union Camp
rights associated with the Union Camp common shares represented by such
certificates.
The Union Camp rights are not exercisable until after they have separated from
the Union Camp common shares with which they are associated and will expire at
the close of business on February 26, 2006, unless earlier redeemed by the Union
Camp board of directors as described below.
If a third party acquires 15% of more of the Union Camp common shares, as
described above, thus triggering a separation of the Union Camp rights from the
Union Camp common shares, each holder of a Union Camp right will thereafter have
the right to receive, upon exercise and payment of the exercise price, Union
Camp common shares or, in some circumstances, cash, property or other securities
of Union Camp, having a value equal to two times the exercise price.
Alternatively, if the Union Camp rights separate from the Union Camp common
shares and become exerciseable, Union Camp may provide that each Union Camp
right shall be exchanged for one Union Camp common share and without other
payment of the exercise price; provided that the Union Camp board of directors
may not effect such exchange at any time after any person, other than Union Camp
or specified other related parties, together with all affiliates and associates
of such
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person, beneficially owns 50% or more of the Union Camp common shares then
outstanding.
If, at any time after a third party acquires, or obtains the right to acquire
beneficial ownership of, 15% of more of the outstanding Union Camp common
shares, as described above,
1. Union Camp is acquired in a merger, statutory share exchange, or other
business combination in which Union Camp is not the surviving
corporation, or
2. 50% or more of Union Camp's assets or earning power is sold or
transferred,
each holder of a Union Camp right, except as set forth below, shall thereafter
have the right to receive, upon exercise and payment of the exercise price,
common stock of the acquiring company having a value equal to twice the exercise
price.
At any time prior to the earlier of the date upon which a third party acquires,
or obtains the right to acquire beneficial ownership of, 15% of the outstanding
Union Camp common shares, as described above, or February 26, 2006, the Union
Camp board of directors may redeem the Union Camp rights in whole, but not in
part, at a redemption price of $.001 per Union Camp right. Immediately upon the
action of the Union Camp board of directors ordering redemption of the Union
Camp rights, the Union Camp rights will terminate and the only right of the
holders of Union Camp rights will be to receive the redemption price.
The Union Camp rights may have anti-takeover effects. The Union Camp rights will
cause substantial dilution to a person or group that acquires more than 15% of
the outstanding Union Camp common shares without the Union Camp rights having
been redeemed. However, the Union Camp rights should not interfere with any
merger or other business combination approved by the Union Camp board of
directors and the Union Camp shareholders because the Union Camp rights may be
redeemed by the board of directors.
In connection with the execution of the merger agreement, the Union Camp board
of directors amended the Union Camp Rights Agreement to render the Union Camp
rights inapplicable to the transactions contemplated by the merger agreement.
INTERNATIONAL PAPER. The International Paper Rights Agreement expired on April
29, 1997. Upon consummation of the merger, Union Camp shareholders who become
shareholders of International Paper will not have any such rights as described
above under the heading "Shareholder Rights Plan -- Union Camp".
DESCRIPTION OF INTERNATIONAL PAPER CAPITAL STOCK
The statements set forth under this heading are brief summaries of various
provisions of New York law, the International Paper certificate of incorporation
and the International Paper bylaws and do not purport to be complete. They are
qualified in their entirety by reference to the relevant provisions of New York
law, the International Paper certificate of incorporation and the International
Paper bylaws, as appropriate.
The authorized capital stock of International Paper consists of:
- 400,000,000 International Paper common shares;
- 400,000 shares of cumulative $4.00 preferred stock, without par value;
and
- 8,750,000 shares of serial preferred stock, $1.00 par value per share.
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At March 18, 1999, there were outstanding:
- 306,851,559 International Paper common shares;
- employee stock options to purchase an aggregate of approximately
12,837,150 International Paper common shares; and
- 15,696 shares of International Paper $4.00 preferred stock.
In addition, at such date, approximately 8,332,000 International Paper common
shares were reserved for issuance upon the conversion of the 5 1/4% convertible
preferred securities issued by International Paper Capital Trust.
INTERNATIONAL PAPER COMMON SHARES
Subject to the rights of the holders of any shares of International Paper
preferred stock which may at the time be outstanding, holders of International
Paper common shares are entitled to receive dividends as may be declared from
time to time by International Paper's board of directors out of funds legally
available therefor. Dividends on the International Paper common shares are, in
effect, limited by the terms of the International Paper $4.00 preferred stock to
the amount of International Paper's retained earnings, which at September 30,
1998, were $5.1 billion. In addition, under the International Paper certificate
of incorporation, no dividends may be declared, paid, or set aside for payment
on the International Paper common shares unless full cumulative dividends are
paid on the issued and outstanding International Paper preferred stock.
The holders of International Paper common shares are entitled to one vote per
share on all matters submitted to a vote of shareholders and do not have
cumulative voting rights. If International Paper fails to pay dividends on the
International Paper $4.00 preferred stock, holders of International Paper $4.00
preferred stock will have the right to elect one-third, or the nearest whole
number thereto, of the total number of directors to be elected at the next
annual meeting of shareholders and at each subsequent annual shareholders'
meeting until all such dividends have been paid in full.
Holders of International Paper common shares are entitled to share pro rata,
upon any liquidation or dissolution of International Paper, in all remaining
assets available for distribution to shareholders after satisfaction of
International Paper's liabilities and payment to the holders of the
International Paper $4.00 preferred stock of $100 per share upon involuntary
liquidation and $105 per share upon voluntary liquidation. The outstanding
International Paper common shares are, and any shares which may be acquired upon
conversion of the 5 1/4% convertible preferred securities issued by
International Paper Capital Trust will be, fully paid and nonassessable. The
holders of International Paper common shares have no preferential, preemptive,
conversion or redemption rights. The International Paper common shares are
listed on the New York Stock Exchange. The registrar and transfer agent for the
International Paper common shares is Chase Mellon Shareholder Services L.L.C.
INTERNATIONAL PAPER PREFERRED STOCK
The following summary contains a description of some of the principal terms of
the International Paper preferred stock. The description of the principal
provisions of the International Paper preferred stock does not purport to be
complete and is subject to and qualified in its entirety by reference to the
applicable provisions of the International Paper certificate of incorporation
relating to each particular series of International Paper preferred stock.
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INTERNATIONAL PAPER SERIAL PREFERRED STOCK. Under the International Paper
certificate of incorporation, without further shareholder action, International
Paper's board of directors is authorized to provide for the issuance of up to
8,750,000 shares of International Paper serial preferred stock. The
International Paper serial preferred stock may be issued in one or more series,
with such designations of titles, dividend rates, any redemption provisions,
special or relative rights in the event of liquidation, dissolution,
distribution or winding-up of International Paper, any sinking fund provisions,
any conversion provisions, any voting rights, and any other preferences,
privileges, powers, rights, qualifications, limitations and restrictions as
shall be set forth as and when established by International Paper's board of
directors.
The shares of any series of International Paper serial preferred stock will be,
when issued, fully paid and nonassessable and the holders will have no
preemptive rights in connection with the preferred stock.
INTERNATIONAL PAPER $4.00 PREFERRED STOCK. The International Paper certificate
of incorporation authorizes the issuance of up to 400,000 shares of
International Paper $4.00 preferred stock without par value. Pursuant to the
applicable provisions of the International Paper certificate of incorporation,
the holders of the International Paper $4.00 preferred stock are entitled to
receive when, as and if declared by International Paper's board of directors,
out of funds legally available for payment, cash dividends at the rate per annum
of $4.00 per share. Dividends are cumulative without interest. If dividends in
full on all outstanding shares of the International Paper $4.00 preferred stock
for all past quarterly dividend periods and the then current quarterly dividend
period shall not have been paid, no cash dividends may be paid or distributions
made to the holders of any class of stock ranking junior to the International
Paper $4.00 preferred stock.
Except as expressly provided by law or in the International Paper certificate of
incorporation, the holders of shares of International Paper $4.00 preferred
stock have no voting rights. If dividends payable on the International Paper
$4.00 preferred stock are in arrears in an amount equal to four full quarterly
dividends, the holders of the International Paper $4.00 preferred stock will
have the right to elect one-third, or the nearest whole number thereto, of the
total number of directors to be elected at the next annual meeting of
shareholders and at each subsequent annual shareholders' meeting until all such
dividends have been paid in full. International Paper must obtain the approval
of holders of two-thirds of the shares of the International Paper $4.00
preferred stock in order to:
- authorize, create or issue stock of any class ranking prior to the
International Paper $4.00 preferred stock; or
- amend the certificate of authorization of new shares relating to the
International Paper $4.00 preferred stock or any provisions of the
International Paper certificate of incorporation in a manner materially
prejudicial to such holders.
International Paper must obtain the affirmative vote of holders of a majority of
the shares of the International Paper $4.00 preferred stock in order to:
- increase the number of authorized shares of International Paper $4.00
preferred stock;
- authorize, create or issue stock of any class ranking on a parity with
the International Paper $4.00 preferred stock; or
- sell, lease or dispose of all or substantially all of the assets of
International Paper, other than by merger or consolidation.
98
<PAGE> 107
In the event of a merger or consolidation of International Paper in which the
holders of the International Paper $4.00 preferred stock do not have appraisal
rights under New York law, those holders are entitled to receive $105.00 per
share of International Paper $4.00 preferred stock, unless by the terms of the
merger or consolidation such holders are entitled to shares or securities which
have the relative ranking, rights and preferences of the International Paper
$4.00 preferred stock prior to such merger or consolidation. Under some
circumstances relating to aggregate net earnings of International Paper,
approval of holders of a majority of the International Paper $4.00 preferred
stock may be required to purchase or redeem or pay cash dividends in respect of
stock which is junior to the International Paper $4.00 preferred stock,
including International Paper common shares.
Shares of International Paper $4.00 preferred stock may be redeemed at the
option of International Paper, in whole or in part, at any time or from time to
time, out of funds legally available therefor, at $105.00 per share plus an
amount equal to accrued and unpaid dividends, if any, to the redemption date,
whether or not earned or declared.
Holders of shares of International Paper $4.00 preferred stock are entitled to a
liquidation preference of $105.00 per share, in the event of a voluntary
liquidation, dissolution or winding-up or $100.00 per share, if such
liquidation, dissolution or winding-up is involuntary, plus in each case any
amount equal to all dividends accrued and unpaid up to and including the date
fixed for distribution, whether or not earned or declared.
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Services L.L.C. will be the transfer agent and
registrar for the International Paper common shares.
LISTING OR QUOTATION OF INTERNATIONAL PAPER COMMON SHARES; DELISTING OF UNION
CAMP COMMON SHARES
It is a condition to the merger that the International Paper common shares
issuable in the merger be approved for listing on the New York Stock Exchange on
or prior to the effective time of the merger, subject to official notice of
issuance. If the merger is consummated, Union Camp common shares will cease to
be listed on the New York Stock Exchange.
LEGAL MATTERS
Davis Polk & Wardwell, special counsel to International Paper, will pass on the
validity of the International Paper common shares to be issued to Union Camp
shareholders in the merger. It is a condition to the consummation of the merger
that Union Camp receive an opinion from Sullivan & Cromwell, special counsel to
Union Camp, to the effect that, among other things, the merger will be a
reorganization for federal income tax purposes. We describe the conditions for
consummation of the merger under the heading "The Merger Agreement -- Conditions
to the Merger" and we provide details of the tax opinion under the heading "The
Merger -- Material Federal Income Tax Consequences".
EXPERTS
The consolidated financial statements and schedule of International Paper
incorporated by reference herein and included in International Paper's Annual
Report on Form 10-K for the year ended December 31, 1997, as amended, and
incorporated by reference in this
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<PAGE> 108
document, 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 giving said reports.
The historical consolidated financial statements of Union Camp incorporated in
this document by reference to the Union Camp's Annual Report on Form 10-K for
the year ended December 31, 1997, as amended, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
FUTURE SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2000 Annual Meeting of
Shareholders of International Paper must be received by the Secretary of
International Paper not later than:
- December 28, 1999 for inclusion in the proxy materials for that meeting
pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, or
- February 8, 2000 in order to be brought before that meeting pursuant to
the bylaws of International Paper.
The Union Camp board of directors has set July 27, 1999 as the date for the 1999
Annual Meeting of Shareholders. The deadline for submission of shareholder
proposals intended to be presented at the 1999 Annual Meeting of Shareholders of
Union Camp is April 28, 1999. If proxy materials are required to be delivered
and completion of the merger does not occur, shareholder proposals intended to
be presented at the 2000 Annual Meeting of Shareholders of Union Camp must be
received by the Secretary of Union Camp for inclusion in the proxy materials for
such meeting on or before the date specified in the proxy materials delivered in
connection with the 1999 Annual Meeting of Shareholders.
WHERE YOU CAN FIND MORE INFORMATION
International Paper and Union Camp file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information we 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 and Union Camp's SEC filings are also available to the
public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov".
International Paper filed a Registration Statement on Form S-4 to register with
the SEC the International Paper common shares to be issued to Union Camp
shareholders in the merger. This document is a part of that Registration
Statement and constitutes a prospectus of International Paper in addition to
being a proxy statement of International Paper and Union Camp for each company's
special meeting. As permitted by SEC rules, this document does not contain all
the information that you can find in the Registration Statement or the exhibits
to the Registration Statement.
The SEC allows International Paper and Union Camp to "incorporate by reference"
information into this document. This means that International Paper and Union
Camp can disclose important information to you by referring you to another
document filed separately
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<PAGE> 109
with the SEC. The information incorporated by reference is deemed to be part of
this document, except for any information superseded by information in this
document. This document incorporates by reference the documents set forth below
that International Paper and Union Camp have previously filed with the SEC.
These documents contain important information about International Paper and
Union Camp and their financial performance.
<TABLE>
<CAPTION>
INTERNATIONAL PAPER SEC FILINGS
(FILE NO. 1-3157) PERIOD
------------------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1997
Amended Annual Report on Form 10-K/A Filed on March 29, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998, June
30, 1998, and September 30, 1998
Amended Quarterly Reports on Form Filed on March 29, 1999, February 10,
10-Q/A 1999 and August 31, 1998
Current Reports on Form 8-K Filed on March 11, 1999, January 5,
1999, November 30, 1998, October 20,
1998, September 29, 1998, September
10, 1998, June 11, 1998, April 14,
1998, January 20, 1998 and January
14, 1998
Report on Form 8-A Filed on September 29, 1998
Registration Statement on Form S-3 Filed on September 1, 1998
Registration Statement on Form S-4 Filed on March 9, 1998
</TABLE>
International Paper is also incorporating by reference additional documents that
International Paper files with the SEC between the date of this document and the
date of the International Paper special shareholders' meeting.
<TABLE>
<CAPTION>
UNION CAMP'S SEC FILINGS
(FILE NO. 1-4001) PERIOD
------------------------ ------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1997
Amended Annual Reports on Form 10-K/A Filed on March 29, 1999 and May 13,
1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998, June
30, 1998, and September 30, 1998
Amended Quarterly Reports on Form Filed on March 29, 1999 and September
10-Q/A 1, 1998
Current Report on Form 8-K Filed on November 27, 1998
Amended and Restated Current Report Filed on November 30, 1998
on Form 8-K/A
Amendment to Report on Form 8-A/A Filed on November 27, 1998
</TABLE>
Union Camp is also incorporating by reference additional documents that Union
Camp files with the SEC between the date of this document and the date of the
Union Camp special shareholders' meeting.
International Paper has supplied all information contained or incorporated by
reference in this document relating to International Paper, and Union Camp has
supplied all such
101
<PAGE> 110
information contained or incorporated by reference in this document relating to
Union Camp.
You may already have been sent some of the documents incorporated by reference,
but you can obtain any of them from International Paper or Union Camp, as
appropriate, or the SEC. Documents incorporated by reference are available from
International Paper or Union Camp, as appropriate, without charge, excluding all
exhibits unless an exhibit has been specifically incorporated by reference in
this document. Shareholders may obtain documents incorporated by reference in
this document by International Paper by requesting them in writing or by
telephone at the following address:
International Paper Company
Two Manhattanville Road
Purchase, NY 10577
Tel: (914) 397-1625
Shareholders may obtain documents incorporated by reference in this document by
Union Camp by requesting them in writing or by telephone at the following
address:
Union Camp Corporation
1600 Valley Road
Wayne, NJ 07470
Tel: (973) 628-2273
If you would like to request documents from International Paper or Union Camp,
please do so by April 23, 1999 to receive them before the shareholders'
meetings. International Paper or Union Camp will send such documents by
first-class mail within one business day of receiving your request.
You should rely only on the information contained or incorporated by reference
in this document to vote on the International Paper certificate amendment
proposal and share issuance proposal and the Union Camp merger agreement
proposal. We have not authorized anyone to provide you with information that is
different from what is contained in this document. This document is dated March
30, 1999. You should not assume that the information contained in this document
is accurate as of any date other than that date, and neither the mailing of this
document to shareholders nor the issuance of International Paper common shares
in the merger shall create any implication to the contrary.
102
<PAGE> 111
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
November 24, 1998
among
UNION CAMP CORPORATION,
INTERNATIONAL PAPER COMPANY
and
MAPLE ACQUISITION, INC.
<PAGE> 112
TABLE OF CONTENTS
--------------
Page
----
ARTICLE 1
Definitions
Section 1.1. Definitions.......................................1
ARTICLE 2
The Merger
Section 2.1. The Merger........................................6
Section 2.2. Organizational Documents..........................7
Section 2.3. Directors and Officers............................7
ARTICLE 3
Conversion of Securities and Related Matters
Section 3.1. Conversion of Capital Stock.......................8
Section 3.2. Exchange Ratio; Fractional Shares; Adjustments....8
Section 3.3. Exchange of Certificates..........................9
Section 3.4. UCC Stock Options................................12
ARTICLE 4
Representations and Warranties of UCC
Section 4.1. Corporate Existence and Power....................13
Section 4.2. Corporate Authorization..........................13
Section 4.3. Governmental Authorization.......................14
Section 4.4. Non-Contravention................................14
Section 4.5. Capitalization...................................15
Section 4.6. Subsidiaries.....................................15
Section 4.7. UCC SEC Documents................................16
Section 4.8. Financial Statements; No Material Undisclosed
Liabilities......................................17
Section 4.9. Information to Be Supplied.......................17
Section 4.10. Absence of Certain Changes.......................18
Section 4.11. Litigation.......................................18
Section 4.12. Taxes............................................18
Section 4.13. Employee Benefits................................19
Section 4.14. Compliance with Laws; Licenses, Permits and
Registrations....................................20
Section 4.15. Title to Properties..............................20
<PAGE> 113
Section 4.16. Intellectual Property............................21
Section 4.17. Environmental Matters............................21
Section 4.18. Finders' Fees; Opinions of Financial Advisor.....22
Section 4.19. Required Vote; Board Approval....................22
Section 4.20. State Takeover Statutes; Rights Agreement........22
Section 4.21. Pooling Matters; Tax Treatment...................23
ARTICLE 5
Representations and Warranties of IP
Section 5.1. Corporate Existence and Power....................23
Section 5.2. Corporate Authorization..........................24
Section 5.3. Governmental Authorization.......................24
Section 5.4. Non-Contravention................................24
Section 5.5. Capitalization of IP and MergerSub...............25
Section 5.6. IP SEC Documents.................................26
Section 5.7. Financial Statements; No Material Undisclosed
Liabilities......................................26
Section 5.8. Information to Be Supplied.......................27
Section 5.9. Absence of Certain Changes.......................27
Section 5.10. Litigation.......................................27
Section 5.11. Taxes............................................27
Section 5.12. Compliance with Laws; Licenses, Permits and
Registrations....................................28
Section 5.13. Title to Properties..............................28
Section 5.14. Intellectual Property............................29
Section 5.15. Environmental Matters............................29
Section 5.16. Finders' Fees....................................29
Section 5.17. Required Vote; Board Recommendation..............29
Section 5.18. Pooling Matters..................................30
ARTICLE 6
Covenants of UCC
Section 6.1. UCC Interim Operations...........................30
Section 6.2. Shareholder Meeting..............................33
Section 6.3. Acquisition Proposals; Board Recommendation......34
Section 6.4. Transfer Taxes...................................35
ii
<PAGE> 114
ARTICLE 7
Covenants of IP
Section 7.1. IP Interim Operations............................36
Section 7.2. Shareholder Meeting; Board Recommendation........37
Section 7.3. Director and Officer Liability...................37
Section 7.4. Employee Benefits................................39
Section 7.5. Stock Exchange Listing...........................40
Section 7.6. Conduct of MergerSub.............................40
ARTICLE 8
Covenants of IP and UCC
Section 8.1. Reasonable Best Efforts..........................41
Section 8.2. Certain Filings; Cooperation in Receipt of
Consents.........................................41
Section 8.3. Public Announcements.............................42
Section 8.4. Access to Information; Notification of Certain
Matters..........................................43
Section 8.5. Further Assurances...............................43
Section 8.6. Tax and Accounting Treatment.....................44
Section 8.7. Affiliate Letters................................44
Section 8.8. Confidentiality..................................44
Section 8.9. IP Standstill....................................45
Section 8.10. ASR 135..........................................47
Section 8.11. Integration Committee............................47
ARTICLE 9
Conditions to the Merger
Section 9.1. Conditions to the Obligations of Each Party......47
Section 9.2. Conditions to the Obligations of UCC.............48
Section 9.3. Conditions to the Obligations of IP and
MergerSub........................................49
ARTICLE 10
Termination
Section 10.1. Termination.....................................50
Section 10.2. Effect of Termination...........................51
Section 10.3. Fees and Expenses...............................51
iii
<PAGE> 115
ARTICLE 11
Miscellaneous
Section 11.1. Notices.........................................53
Section 11.2. Survival of Representations, Warranties and
Covenants after the Effective Time.............54
Section 11.3. Amendments; No Waivers..........................54
Section 11.4. Successors and Assigns..........................55
Section 11.5. Governing Law...................................55
Section 11.6. Counterparts; Effectiveness; Third Party
Beneficiaries..................................55
Section 11.7. Jurisdiction....................................55
Section 11.8. Waiver of Jury Trial............................56
Section 11.9. Enforcement.....................................56
Section 11.10. Entire Agreement................................56
EXHIBITS
Exhibit A-1 -- Affiliate's Letter Relating to Pooling (UCC)
Exhibit A-2 -- Affiliate's Letter Relating to Pooling (IP)
Exhibit A-3 -- Affiliate's Letter Relating to the Securities Act (UCC)
Exhibit B -- Tax Representations of UCC
Exhibit C -- Tax Representations of IP and MergerSub
SCHEDULES
UCC Disclosure Schedule
<PAGE> 116
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 24, 1998
among Union Camp Corporation, a Virginia corporation ("UCC"), International
Paper Company, a New York corporation ("IP"), and Maple Acquisition, Inc., a
Delaware corporation and a wholly owned IP Subsidiary ("MergerSub").
RECITALS
WHEREAS, the Boards of Directors of UCC and IP each have
determined that a business combination between UCC and IP is advisable and in
the best interests of their respective companies and shareholders and presents
an opportunity for their respective companies to achieve long-term strategic
and financial benefits, and accordingly have agreed to effect the merger
provided for herein upon the terms and subject to the conditions set forth
herein;
WHEREAS, the parties hereto intend that the merger provided for
herein shall qualify for U.S. federal income tax purposes as a reorganization
(a "368 Reorganization") within the meaning of Section 368(a) of the U.S.
Internal Revenue Code of 1986, as amended (together with the rules and
regulations promulgated thereunder, the "Code");
WHEREAS, the parties hereto intend that the merger provided for
herein be accounted for as a "pooling-of-interests" for financial reporting
purposes; and
WHEREAS, by resolutions duly adopted, the respective Boards of
Directors of UCC, IP and MergerSub have approved and adopted this Agreement
and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1. Definitions. (a) As used herein, the following
terms have the following meanings:
<PAGE> 117
"Acquisition Proposal" means any offer or proposal for, or
indication of interest in, a merger, consolidation, share exchange, business
combination, reorganization, recapitalization, liquidation, dissolution or
other similar transaction involving, or any purchase of 15% or more of the
assets or any class of equity securities of, UCC or any Significant Subsidiary
of UCC, other than the transactions contemplated by this Agreement.
"Affiliate" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including the correlative terms "controlling", "controlled by" and "under
common control with") means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Business Day" means any day other than a Saturday, Sunday or
one on which banks are authorized by law to close in New York, New York.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Entity" means any federal, state or local
governmental authority, any transgovernmental authority or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign.
"IP Balance Sheet" means IP's consolidated balance sheet
included in the IP 10-K relating to its fiscal year ended on December 31, 1997.
"IP Common Share" means one share of common stock of IP, par
value $1.00 per share.
"IP SEC Documents" means (i) IP's annual reports on Form 10-K
for its fiscal years ended December 31, 1996 and December 31, 1997 (the "IP
10-Ks"), (ii) IP's quarterly reports on Form 10-Q (the "IP 10-Qs") for its
fiscal quarters ended September 30, June 30 and March 31, of fiscal years 1997
and 1998, (iii) IP's proxy or information statements relating to meetings of,
or actions taken without a meeting by, IP's shareholders held since December
31, 1996, and (iv) all other reports filings, registration statements and other
documents filed by it with the SEC since December 31, 1996.
2
<PAGE> 118
"knowledge" means, with respect to the matter in question, if
any of the executive officers of UCC or IP, as the case may be, has actual
knowledge of such matter.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, provided, however, that the term "Lien" shall not include (i)
liens for water and sewer charges and current taxes not yet due and payable or
being contested in good faith and (ii) mechanics', carriers', workers',
repairers', materialmen's, warehousemen's and other similar liens arising or
incurred in the ordinary course of business.
"Material Adverse Effect" means a material adverse effect on the
financial condition, business or results of operations of a Person and its
Subsidiaries, taken as a whole, but shall exclude any material adverse effect
arising out of any change or development relating to (i) U.S. or global
economic or industry conditions, (ii) changes in U.S. or global financial
markets or conditions, (iii) any generally applicable change in law, rule or
regulation or GAAP or interpretation of any thereof and/or (iv) the
announcement of this Agreement or the transactions contemplated hereby. "IP
Material Adverse Effect" means a Material Adverse Effect in respect of IP and
"UCC Material Adverse Effect" means a Material Adverse Effect in respect of
UCC.
"NYSE" means The New York Stock Exchange.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including any Governmental Entity.
"Proxy Statement/Prospectus" means the joint proxy statement/
prospectus included in the Registration Statement relating to the UCC
Shareholder Meeting and the IP Shareholder Meeting, together with any
amendments or supplements thereto.
"Registration Statement" means the Registration Statement on
Form S-4 registering under the Securities Act the IP Common Shares issuable in
connection with the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
3
<PAGE> 119
"Significant Subsidiary" means any Subsidiary that constitutes a
"significant subsidiary" of such Person within the meaning of Rule 1-02 of
Regulation S-X of the Exchange Act.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are directly or indirectly owned by such
Person. "IP Subsidiary" means a Subsidiary of IP and "UCC Subsidiary" means a
Subsidiary of UCC.
"Superior Proposal" means a bona fide, written Acquisition
Proposal for at least a majority of the outstanding UCC Common Shares that is
on terms that a majority of UCC's Board of Directors determines in good faith
(after consultation with an investment bank of nationally recognized reputation
and UCC's outside counsel) (i) would result in a transaction, if consummated,
that is more favorable to UCC's shareholders (in their capacities as
shareholders), from a financial point of view (taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal and
the identity of the offeror) than the transactions contemplated hereby (after
giving effect to any revised proposal made by or on behalf of IP prior to the
end of the five-Business-Day-period referred to in Section 6.3(d)) and (ii) is
reasonably capable of being consummated.
"UCC Balance Sheet" means UCC's consolidated balance sheet
included in the UCC 10-K relating to its fiscal year ended on December 31,
1997.
"UCC Common Share" means one share of common stock of UCC,
$1.00 par value per share.
"UCC SEC Documents" means (i) the annual reports on Form 10-K of
UCC (the "UCC 10shall not be-Ks") and Bush Boake Allen Inc., a Virginia
corporation ("BBA"), for their respective fiscal years ended December 31, 1996
and December 31, 1997, (ii) the quarterly reports on Form 10-Q of UCC (the "UCC
10-Qs") and BBA for their respective fiscal quarters ended September 30, June
30 and March 31 of fiscal years 1997 and 1998, (iii) UCC's and BBA's proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the UCC shareholders and the BBA shareholders, respectively, held
since December 31, 1996, and (iv) all other reports filings, registration
statements and other documents filed by UCC and BBA with the SEC since December
31, 1996; provided that, for the purposes of the representations and warranties
made by UCC in Section 4.7 only, the term "UCC SEC Documents" shall not be
deemed
4
<PAGE> 120
to include any reports, statements, filings or documents filed with the SEC by
BBA.
"Virginia Code" means the Virginia Stock Corporation Act, as
amended.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Terms Section
----- -------
Advance Notice 7.4(b)
Articles of Merger 2.1(b)
Average IP Share Price 3.1(a)
BBA 1.1(a)
Certificates 3.3(a)
Closing 2.1(d)
Code Recitals
Commission 2.1(b)
Effective Time 2.1(b)
End Date 10.1(b)(i)
Environmental Laws 4.17(b)
ERISA 4.13(a)
ERISA Affiliate 4.13(a)
Escrow Account 3.3(h)
Escrow Agent 3.3(h)
Escrow Agreement 3.3(h)
Exchange Agent 3.3(a)
Exchange Fund 3.3(a)
Exchange Ratio 3.2(a)
GAAP 4.8(a)
HSR Act 4.3(b)
Indemnified Parties 7.3(b)
IP Preamble
IP Cumulative Preferred 5.5(a)
IP Intellectual Property 5.14
IP Material Adverse Effect 1.1(a)
IP Recommendation 7.2
IP Returns 5.11
IP Securities 5.5(b)
IP Serial Preferred 5.5(a)
IP Shareholder Approval 5.17(a)
IP Shareholder Meeting 7.2
IP Subsidiary 1.1(a)
IP 10-Ks 1.1(a)
IP 10-Qs 1.1(a)
5
<PAGE> 121
Merger 2.1(a)
MergerSub Common Share 3.1(a)
Merger Consideration 3.1(b)
MergerSub Preamble
Multiemployer Plan 4.13(b)
Random Trading Days 3.1(a)
Retirement Plan 4.13(b)
Rights 3.1(b)
Rights Agreement 3.1(b)
RSPP 7.4(c)
Stock Unit Plan 7.4(c)
Surviving Corporation 2.1(a)
Termination Fee 10.3(b)
Third Party Acquisition Event 10.3(c)
368 Reorganization Recitals
Transfer Taxes 6.4
UCC Preamble
UCC Employee Plans 4.13(a)
UCC Intellectual Property 4.16
UCC Material Adverse Effect 1.1(a)
UCC Option 3.4(a)
UCC Recommendation 6.2
UCC Returns 4.12
UCC Securities 4.5(b)
UCC Shareholder Approval 4.19(a)
UCC Shareholder Meeting 6.2
UCC Subsidiary 1.1(a)
UCC 10-Ks 1.1(a)
UCC 10-Qs 1.1(a)
ARTICLE 2
The Merger
Section 2.1. The Merger. (a) At the Effective Time,
MergerSub shall be merged (the "Merger") with and into UCC in accordance
with the terms and conditions of this Agreement and of the Virginia Code,
at which time the separate existence of MergerSub shall cease and UCC shall
continue its existence. In its capacity as the corporation surviving the
Merger, this Agreement sometimes refers to UCC as the "Surviving
Corporation".
6
<PAGE> 122
(b) As soon as practicable after satisfaction or, to the extent
permitted hereby, waiver of all conditions to the Merger set forth herein, UCC
and MergerSub will file articles of merger (the "Articles of Merger") with the
State Corporation Commission of the Commonwealth of Virginia (the
"Commission") and make all other filings or recordings required by the
Virginia Code in connection with the Merger. The "Effective Time" shall be the
date and time that the Certificate of Merger is issued by the Commission in
respect of the Merger (unless otherwise agreed upon by the parties and
specified in the Articles of Merger, in which case, subject to Section 13.1-606
of the Virginia Code, the Effective Time shall be the date and time so
specified).
(c) From and after the Effective Time, the Merger shall have the
effects set forth in Section 13.1-721 of the Virginia Code.
(d) The closing of the Merger (the "Closing") shall be held at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY (or such
other place as agreed by the parties) on a date to be specified by the
parties, which shall be no later than the second Business Day after
satisfaction or, to the extent permitted hereby, waiver of the conditions set
forth in Article 9, unless the parties hereto agree to another date.
Section 2.2. Organizational Documents. The Articles of Merger
shall provide that at the Effective Time (i) MergerSub's articles of
incorporation in effect immediately prior to the Effective Time shall be the
Surviving Corporation's articles of incorporation, provided that the Surviving
Corporation shall retain its current name and (ii) MergerSub's bylaws in effect
immediately prior to the Effective Time shall be the Surviving Corporation's
bylaws, in each case until amended in accordance with applicable law.
Section 2.3. Directors and Officers. (a) IP agrees to take all
necessary actions so that, on the second Business Day after the Effective Time,
IP's Board of Directors shall include W. Craig McClelland and two individuals
who are serving on UCC's Board of Directors as of the date hereof. The
parties hereto understand and agree that such two individuals must be
reasonably acceptable to the nominating committee of IP's Board of Directors,
in its sole discretion. The three individuals elected to IP's Board of
Directors as contemplated by this Section 2.3 shall be apportioned equally
among the three classes of IP's Board of Directors.
(b) From and after the Effective Time (until successors are duly
elected or appointed and qualified), (i) MergerSub's directors at the Effective
Time shall be the Surviving Corporation's directors and (ii) UCC's officers
immediately prior to the Effective Time shall be the Surviving Corporation's
officers.
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ARTICLE 3
Conversion of Securities and Related Matters
Section 3.1. Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger:
(a) Each share of common stock of MergerSub (each, a "MergerSub
Common Share") outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the Surviving
Corporation.
(b) Except as otherwise provided in Section 3.2(b), each UCC
Common Share outstanding immediately prior to the Effective Time, together
with the rights ("Rights") attached thereto and issued pursuant to the Amended
and Restated Rights Agreement dated as of June 25, 1996, between UCC and The
Bank of New York, as Rights Agent (the "Rights Agreement"), shall be converted
into the right to receive a number of IP Common Shares equal to the Exchange
Ratio. This Agreement shall refer to the IP Common Shares required to be
issued pursuant to this Section 3.1(b), together with any cash payments
required to be made in lieu of fractional IP Common Shares, collectively as
the "Merger Consideration."
(c) Each UCC Common Share held by UCC as treasury stock or owned
by IP or any IP Subsidiary immediately prior to the Effective Time shall be
canceled, and no payment shall be made in respect thereof.
Section 3.2. Exchange Ratio; Fractional Shares; Adjustments.
(a) The "Exchange Ratio" (as the same may be adjusted pursuant to Section
3.2(c)) shall be determined by dividing 71.00 by the Average IP Share Price,
provided that, (i) if the Average IP Share Price is less than $43.70, the
Exchange Ratio shall be 1.6247 and (ii) if the Average IP Share Price is
greater than $48.30, the Exchange Ratio shall be 1.4700.
For purposes of this Agreement, (i) "Average IP Share Price"
means the average last sales price per IP Common Share on the NYSE Composite
Tape for the Random Trading Days and (ii) "Random Trading Days" means the ten
trading days selected by lot out of the twenty trading days ending on and
including the fifth trading day preceding the Effective Time. The Random
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Trading Days shall be selected by lot by IP and UCC at 5:00 p.m. New York time
on the second trading day preceding the Effective Time.
(b) No fractional IP Common Shares shall be issued in the Merger.
All fractional IP Common Shares that a holder of any UCC Common Shares would
otherwise be entitled to receive as a result of the Merger shall be
aggregated. If a fractional IP Common Share results from such aggregation,
the holder shall be entitled to receive, in lieu thereof, a cash amount,
without interest, determined by multiplying the Average IP Share Price by the
fraction of an IP Common Share to which such holder would otherwise have been
entitled. As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional share interests, the Exchange
Agent (as hereinafter defined) shall so notify IP, and IP shall deposit such
amount with the Exchange Agent and shall cause the Exchange Agent to forward
payments to such holders of fractional share interests, subject to and in
accordance with the terms of Section 3.3.
(c) If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of IP or securities convertible or exchangeable into capital
stock of IP shall occur, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any dividend or distribution thereon (other than regular quarterly
cash dividends) or a record date with respect to any of the foregoing shall
occur during such period, the number of IP Common Shares constituting part of
the Merger Consideration shall be appropriately adjusted to provide to the
holders of the IP Common Shares and the UCC Common Shares the same economic
effect as contemplated by this Agreement prior to the consummation of such
event.
Section 3.3. Exchange of Certificates.
(a) Exchange Agent. Promptly after the date hereof, IP shall
appoint a bank or trust company reasonably acceptable to UCC as an agent (the
"Exchange Agent") for the benefit of holders of UCC Common Shares for the
purpose of exchanging, pursuant to this Article 3, certificates
("Certificates") that immediately prior to the Effective Time represented
outstanding UCC Common Shares which were converted into the right to receive
the Merger Consideration. IP will make available to the Exchange Agent, as
needed, the Merger Consideration, together with any dividends or distributions
with respect thereto, if any, to be paid in respect of UCC Common Shares
pursuant to this Article 3 (the "Exchange Fund"), and except as contemplated by
Section 3.3(f) or Section 3.3(g) hereof, the Exchange Fund shall not be used
for any other purpose.
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(b) Exchange Procedures. As promptly as practicable after the
Effective Time, IP shall send, or will cause the Exchange Agent to send, to
each holder of record of a Certificate or Certificates a letter of transmittal
and instructions (which shall be in customary form and specify that delivery
shall be effected, and risk of loss and title shall pass, only upon delivery
of the Certificates to the Exchange Agent), for use in the exchange
contemplated by this Section 3.3. Upon surrender of a Certificate to the
Exchange Agent, together with a duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration and unpaid dividends and distributions thereon, if
any, as provided in this Article 3 in respect of the UCC Common Shares
represented by such Certificate (after giving effect to any required
withholding tax). Until surrendered as contemplated by this Section 3.3, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration and unpaid dividends and
distributions thereon, if any, as provided in this Article 3. If any portion
of the Merger Consideration is to be paid to a Person other than the Person in
whose name the Certificate is registered, it shall be a condition to such
payment that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Exchange Agent any transfer or other taxes required
as a result of such payment to a Person other than the registered holder of
such Certificate or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable. 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 IP, the posting by such Person of a bond, in such reasonable
amount as IP may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will deliver
in exchange for such lost, stolen or destroyed Certificate, the proper amount
of the Merger Consideration, together with any unpaid dividends and
distributions on any such IP Common Shares, as contemplated by this Article 3.
(c) Distributions with Respect to Unexchanged Shares. Whenever a
dividend or other distribution is declared by IP in respect of the IP Common
Shares, the record date for which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all IP
Common Shares issuable pursuant to this Agreement. No dividends or other
distributions declared or made after the Effective Time with respect to IP
Common Shares constituting part of the Merger Consideration shall be paid to
the holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any such holder, until such Certificate is
surrendered as provided in this Section 3.3. Following such surrender, there
shall be paid, without interest, to the Person in whose name the IP Common
Shares have been registered (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after
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the Effective Time previously paid or payable on the date of such surrender
with respect to such whole IP Common Shares, less the amount of any withholding
taxes that may be required thereon, and (ii) at the appropriate payment date
subsequent to surrender, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole IP Common Shares,
less the amount of any withholding taxes which may be required thereon.
(d) No Further Ownership Rights in UCC Common Shares. All IP
Common Shares issued upon surrender of Certificates in accordance with the
terms hereof (including any cash paid pursuant to this Article 3) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such UCC Common Shares represented thereby, and, as of the Effective Time, the
stock transfer books of UCC shall be closed and there shall be no further
registration of transfers on UCC's stock transfer books of UCC Common Shares
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 3.3.
(e) Return of Merger Consideration. Upon demand by IP, the
Exchange Agent shall deliver to IP any portion of the Merger Consideration
made available to the Exchange Agent pursuant to this Section 3.3 that remains
undistributed to holders of UCC Common Shares one year after the Effective
Time. Holders of Certificates who have not complied with this Section 3.3
prior to such demand shall thereafter look only to IP for payment of any claim
to the Merger Consideration and dividends or distributions, if any, in respect
thereof.
(f) No Liability. None of IP, the Surviving Corporation or the
Exchange Agent shall be liable to any Person in respect of any UCC Common
Shares (or dividends or distributions with respect thereto) for any amounts
paid to a public official pursuant to any applicable abandoned property,
escheat or similar law. Any amounts remaining unclaimed by any holder of UCC
Common Shares immediately prior to such time when such amounts would otherwise
escheat to or become the property of any Governmental Entity, shall, to the
extent permitted by applicable laws, become the property of IP, free and clear
of all claims or interest of any Person previously entitled thereto.
(g) Withholding Rights. Each of the Surviving Corporation and IP
shall be entitled to deduct and withhold from the Merger Consideration (and
any dividends or distributions thereon) otherwise payable hereunder to any
Person such amounts as it is required to deduct and withhold with respect to
the making of such payment under any provision of federal, state, local or
foreign income tax law. To the extent that the Surviving Corporation or IP so
withholds those
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amounts, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of UCC Common Shares in respect of
which such deduction and withholding was made by the Surviving Corporation or
IP, as the case may be.
(h) Tax Escrow. Pursuant to an escrow agreement (the "Escrow
Agreement") to be entered into by UCC with an escrow agent (the "Escrow
Agent") selected mutually by UCC and IP, UCC shall, immediately prior to the
Effective Time, deposit in an account (the "Escrow Account") with the Escrow
Agent funds sufficient in the aggregate to pay any Transfer Taxes (as defined
herein) attributable to the Merger. Upon certification by UCC, these funds
will be released from the Escrow Account, (i) to pay any Transfer Taxes that
become payable under any applicable state, local, foreign or provincial law,
or (ii) to UCC, upon UCC's reasonable determination and certification that
UCC's obligations in respect of the amounts specified above in this Section
3.03(h) have at such time been fully satisfied. The Escrow Agreement shall
permit the Escrow Agent to invest the funds in the Escrow Account as directed
by UCC. The Escrow Agreement shall be, in form and substance, reasonably
acceptable to IP.
Section 3.4. UCC Stock Options. (a) At the Effective Time, each
option to purchase UCC Common Shares (each, a "UCC Option") outstanding under
any stock option or compensation plan or arrangement of UCC, whether or not
vested or exercisable, shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such UCC Option, the
same number of IP Common Shares as the holder of such UCC Option would have
been entitled to receive pursuant to this Agreement had such holder exercised
such UCC Option in full immediately prior to the Effective Time (rounded up to
the nearest whole number), at a price per share (rounded down to the nearest
whole cent) equal to (x) the aggregate exercise price for the UCC Common
Shares otherwise purchasable pursuant to such UCC Option divided by (y) the
number of full IP Common Shares deemed purchasable pursuant to such UCC Option
in accordance with the foregoing. The parties hereto agree that this Section
3.4 shall be interpreted in a manner that is consistent with the Merger being
treated as a "pooling of interests" as described in the first sentence of
Section 4.21(a).
(b) Prior to the Effective Time, UCC shall take all actions
(including, if appropriate, amending the terms of UCC's stock option or
compensation plans or arrangements) that are necessary to give effect to the
transactions contemplated by Sections 3.4(a).
(c) Effective at the Effective Time, IP shall assume each UCC
Option in accordance with the terms of the relevant stock option plan or
compensation arrangement under which it was issued and the stock option
agreement by which
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it is evidenced. At or prior to the Effective Time, IP shall take all
corporate action necessary to reserve for issuance a sufficient number of IP
Common Shares for delivery upon exercise of the UCC Options assumed by it in
accordance with this Section 3.4(c). As soon as practicable after the
Effective Time, IP shall file a registration statement on Form S-3 or Form S-8,
as the case may be (or any successor or other appropriate forms), or another
appropriate form (or shall cause such UCC Option to be deemed to be an option
issued pursuant to an IP stock option or compensation plan for which a
sufficient number of IP Common Shares have previously been registered pursuant
to an appropriate registration form) with respect to the IP Common Shares
subject to such UCC Options, and shall use its reasonable best efforts to
maintain the effectiveness of such registration statement(s) (and maintain the
current status of the prospectus(es) contained therein) for so long as such UCC
Options remain outstanding.
ARTICLE 4
Representations and Warranties of UCC
Except as disclosed in (i) the UCC Disclosure Schedule attached
hereto (which disclosure schedule shall make a specific reference to the
particular Section or subsection of this Agreement to which exception is being
taken but once made shall be deemed made for all purposes of the UCC Disclosure
Schedule) or (ii) the UCC SEC Documents filed or made prior to the date
hereof, UCC represents and warrants to IP that:
Section 4.1. Corporate Existence and Power. UCC is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Virginia, and has all corporate powers required to
carry on its business as now conducted. UCC is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except where the failure to be so
qualified, individually or in the aggregate, would not be reasonably likely to
have a UCC Material Adverse Effect. UCC has heretofore made available to IP
true and complete copies of UCC's articles of incorporation and bylaws as
currently in effect.
Section 4.2. Corporate Authorization. The execution, delivery
and performance by UCC of this Agreement and the consummation by UCC of the
transactions contemplated hereby are within UCC's corporate powers and, except
for the UCC Shareholder Approval (as defined herein), have been duly
authorized by all necessary corporate action. Assuming that this Agreement
constitutes the
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valid and binding obligation of IP and MergerSub, this Agreement constitutes a
valid and binding agreement of UCC, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws,
now or hereafter in effect, relating to or affecting creditors' rights and
remedies and to general principles of equity.
Section 4.3. Governmental Authorization. The execution,
delivery and performance by UCC of this Agreement and the consummation by UCC
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any Governmental Entity other than (a) the filing of (i) an
articles of merger in accordance with the Virginia Code, (ii) a certificate of
merger in accordance with the Delaware General Corporation Law, and (iii)
appropriate documents with the relevant authorities of other states or
jurisdictions in which UCC or any UCC Subsidiary is qualified to do business;
(b) compliance with any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"); (c) compliance with, and
the filing (if necessary) of a notification with the European Commission
under, Council Regulation (EEC) No. 4064/89 and any other foreign filings or
approvals; (d) compliance with any applicable requirements of the Securities
Act and the Exchange Act; (e) such as may be required under any applicable
state securities or blue sky laws; (f) such as may be required under the New
Jersey Industrial Site Recovery Act and the regulations promulgated
thereunder; (g) such as may be required under the Connecticut Hazardous Waste
Establishment Transfer Act and the rules and regulations promulgated
thereunder; and (h) such other consents, approvals, actions, orders,
authorizations, registrations, declarations and filings which, if not obtained
or made, would not, individually or in the aggregate, (x) be reasonably
likely to have a UCC Material Adverse Effect or (assuming for this purpose
that the Effective Time had occurred) an IP Material Adverse Effect, or (y)
prevent or materially impair the ability of UCC to consummate the transactions
contemplated by this Agreement.
Section 4.4. Non-Contravention. The execution, delivery and
performance by UCC of this Agreement and the consummation by UCC of the
transactions contemplated hereby do not and will not (a) contravene or conflict
with UCC's articles of incorporation or bylaws, (b) assuming compliance with
the matters referred to in Section 4.3, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to UCC or any UCC
Subsidiary, (c) constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of UCC or
any UCC Subsidiary or to a loss of any benefit or status to which UCC or any
UCC Subsidiary is entitled under any provision of any agreement, contract or
other instrument binding upon UCC or any UCC Subsidiary or any license,
franchise, permit or other similar authorization held by
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UCC or any UCC Subsidiary, or (d) result in the creation or imposition of any
Lien on any asset of UCC or any UCC Subsidiary other than, in the case of each
of (b), (c) and (d), any such items that would not, individually or in the
aggregate (x) be reasonably likely to have a UCC Material Adverse Effect or (y)
prevent or materially impair the ability of UCC to consummate the transactions
contemplated by this Agreement.
Section 4.5. Capitalization. (a) The authorized capital stock
of UCC consists of 125,000,000 UCC Common Shares and 1,000,000 shares of
preferred stock, par value $1.00 per share (of which 125,000 have been
designated Series A Junior Participating Preferred Stock and reserved for
issuance upon exercise of the Rights). As of November 20, 1998, there were
outstanding (x) 69,196,486 UCC Common Shares, (y) no shares of UCC preferred
stock and (z) (as of November 23, 1998) stock options to purchase an aggregate
of 5,151,216 UCC Common Shares (of which options to purchase an aggregate of
3,272,911 UCC Common Shares were exercisable) and approximately 15,000 stock
units outstanding under the Stock Unit Plan (as defined in Section 7.4(c)).
All outstanding shares of capital stock of UCC have been duly authorized and
validly issued and are fully paid and nonassessable.
(b) As of the date hereof, except (i) as set forth in this
Section 4.5, (ii) the Rights and (iii) for changes since November 20, 1998
resulting from the exercise of stock options or the conversion of stock units
and dividend equivalents thereon outstanding on such date, there are no
outstanding (x) shares of capital stock or other voting securities of UCC, (y)
securities of UCC convertible into or exchangeable for shares of capital stock
or voting securities of UCC, and (z) options or other rights to acquire from
UCC, and no obligation of UCC to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of UCC (the items in clauses (x), (y) and (z) being referred to
collectively as the "UCC Securities"). There are no outstanding obligations
of UCC or any UCC Subsidiary to repurchase, redeem or otherwise acquire any UCC
Securities.
Section 4.6. Subsidiaries. (a) Each Significant Subsidiary of
UCC is a corporation duly incorporated or an entity duly organized, and is
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all powers and authority and all material
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted and is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, in each case with such
exceptions as, individually or in the aggregate, would not be reasonably
likely to have, a UCC Material Adverse Effect. The UCC Disclosure
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Schedule sets forth a list of all Significant Subsidiaries of UCC and their
respective jurisdictions of incorporation or organization and identifies UCC's
(direct or indirect) percentage equity ownership interest therein.
(b) All of the outstanding shares of capital stock of, or other
ownership interest in, each Significant Subsidiary of UCC has been validly
issued and is fully paid and nonassessable. All of the outstanding capital
stock of, or other ownership interest, which is owned, directly or indirectly,
by UCC in, each of its Significant Subsidiaries is owned free and clear of any
Lien and free of any other limitation or restriction (including any limitation
or restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests) with such exceptions as, individually or
in the aggregate, would not be reasonably likely to have, a UCC Material
Adverse Effect. There are no outstanding (i) securities of UCC or any of its
Significant Subsidiaries convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or ownership interests in
any of its Significant Subsidiaries, (ii) options, warrants or other rights to
acquire from UCC or any of its Significant Subsidiaries, and no other
obligation of UCC or any of its Significant Subsidiaries 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 of its Significant Subsidiaries or
(iii) obligations of UCC or any of its Significant Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding securities of any of its
Significant Subsidiaries or any capital stock of, or other ownership interests
in, any of its Significant Subsidiaries.
Section 4.7. UCC SEC Documents. (a) UCC has made available to
IP the UCC SEC Documents. UCC has filed all reports, filings, registration
statements and other documents required to be filed by it with the SEC since
December 31, 1996. No UCC Subsidiary is required to file any form, report,
registration statement or prospectus or other document with the SEC.
(b) As of its filing date, each UCC SEC Document complied as to
form in all material respects with the applicable requirements of the
Securities Act and/or the Exchange Act, as the case may be.
(c) No UCC SEC Document filed pursuant to the Exchange Act
contained, as of its filing date, any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading. No UCC SEC Document, as amended or supplemented, if
applicable, filed pursuant to the Securities Act contained, as of the date such
document or amendment became effective, any untrue statement of a material
fact or omitted to state any
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material fact required to be stated therein or necessary to make the statements
therein not misleading.
Section 4.8. Financial Statements; No Material Undisclosed
Liabilities. (a) The audited consolidated financial statements and unaudited
consolidated interim financial statements of UCC included in the UCC 10-Ks and
the UCC 10-Qs fairly present in all material respects, in conformity with
generally accepted accounting principles applied on a consistent basis
("GAAP") (except as may be indicated in the notes thereto), the consolidated
financial position of UCC and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and changes in financial
position for the periods then ended (subject to normal year-end adjustments in
the case of any unaudited interim financial statements).
(b) There are no liabilities of UCC or any UCC Subsidiary of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, in each case, that are required by GAAP to be set
forth on a consolidated balance sheet of UCC, other than:
(i) liabilities or obligations disclosed or provided for in
the UCC Balance Sheet or disclosed in the notes thereto;
(ii) liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby; and
(iii) other liabilities or obligations, which, individually or
in the aggregate, would not be reasonably likely to have a UCC Material
Adverse Effect.
Section 4.9. Information to Be Supplied. (a) The information
to be supplied by UCC expressly for inclusion or incorporation by reference in
the Proxy Statement/Prospectus will (i) in the case of the Registration
Statement, at the time it becomes effective, not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading
and (ii) in the case of the remainder of the Proxy Statement/Prospectus, at
the time of the mailing thereof, at the time of the UCC Shareholder Meeting
and at the time of the IP Shareholder Meeting, not 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. The Proxy
Statement/Prospectus will comply (with respect to information relating to UCC)
as to form in all material respects with the provisions of the Securities Act
and the Exchange Act.
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(b) Notwithstanding the foregoing, UCC makes no representation or
warranty with respect to any statements made or incorporated by reference in
the Proxy Statement/Prospectus based on information supplied by IP or
MergerSub.
Section 4.10. Absence of Certain Changes. Since December 31,
1997, except as otherwise expressly contemplated by this Agreement, UCC and
the UCC Subsidiaries have conducted their business in the ordinary course
consistent with past practice and there has not been (a) any damage,
destruction or other casualty loss (whether or not covered by insurance)
affecting the business or assets of UCC or any UCC Subsidiary that,
individually or in the aggregate, has had or would be reasonably likely to have
a UCC Material Adverse Effect or (b) any action, event, occurrence,
development or state of circumstances or facts that, individually or in the
aggregate, has had or would be reasonably likely to have a UCC Material
Adverse Effect.
Section 4.11. Litigation. There is no action, suit,
investigation, arbitration or proceeding pending against, or to the knowledge
of UCC threatened against, UCC or any UCC Subsidiary or any of their respective
assets or properties before any arbitrator or Governmental Entity that,
individually or in the aggregate, would be reasonably likely to have, a UCC
Material Adverse Effect.
Section 4.12. Taxes. Except as set forth in the UCC Balance
Sheet (including the notes thereto), (i) all tax returns, statements, reports
and forms (collectively, the "UCC Returns") required to be filed with any
taxing authority by, or with respect to, UCC and the UCC Subsidiaries have been
filed in accordance with all applicable laws; (ii) UCC and the UCC
Subsidiaries have timely paid all taxes shown as due and payable on the UCC
Returns that have been so filed, and, as of the time of filing, the UCC Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities and the status of UCC and the UCC Subsidiaries (other
than taxes which are being contested in good faith and for which adequate
reserves are reflected on the UCC Balance Sheet); (iii) UCC and the UCC
Subsidiaries have made provision for all taxes payable by them for which no
UCC Return has yet been filed; (iv) the charges, accruals and reserves for
taxes with respect to UCC and its Subsidiaries reflected on the UCC Balance
Sheet are adequate under GAAP to cover the tax liabilities accruing through
the date thereof; (v) there is no action, suit, proceeding, audit or claim now
proposed or pending against or with respect to UCC or any of the UCC
Subsidiaries in respect of any tax where there is a reasonable possibility of
a materially adverse determination; and (vi) neither UCC nor any of the UCC
Subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which UCC was the common parent.
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Section 4.13. Employee Benefits. (a) Schedule 4.13(a) of the
UCC Disclosure Schedule contains a correct and complete list identifying each
material "employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), each employment, severance
or similar contract, plan, arrangement or policy and each other plan or
arrangement (written or oral) providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance benefits)
which is maintained, administered or contributed to by UCC or any ERISA
Affiliate (as defined below) and covers any employee or former employee of UCC
or any UCC Subsidiary. Copies of such plans (and, if applicable, related
trust agreements) and all amendments thereto and written interpretations
thereof have been furnished, or will be made available upon request, to IP
together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with any such plan.
Such plans are referred to collectively herein as the "UCC Employee Plans".
For purposes of this Section 4.13, "ERISA Affiliate" of any Person means any
other Person which, together with such Person, would be treated as a single
employer under Section 414 of the Code.
(b) Schedule 4.13(b) of the UCC Disclosure Schedule separately
identifies each UCC Employee Plan that constitutes a "multiemployer plan", as
defined in Section 3(37) of ERISA (a "Multiemployer Plan"), or any other plan
subject to Title IV of ERISA (a "Retirement Plan"). No "accumulated funding
deficiency", as defined in Section 412 of the Code, has been incurred with
respect to any UCC Employee Plan which is a Retirement Plan, whether or not
waived. To the knowledge of UCC, no condition exists and no event has
occurred that would be reasonably likely to constitute grounds for termination
of any UCC Employee Plan which is a Retirement Plan or, with respect to any
UCC Employee Plan which is a Multiemployer Plan, presents a material risk of a
complete or partial withdrawal under Title IV of ERISA and neither UCC nor any
of its ERISA Affiliates has incurred any liability under Title IV of ERISA
arising in connection with the termination of, or complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA
that would be reasonably likely to have a UCC Material Adverse Effect. To the
knowledge of UCC, nothing has been done or omitted to be done and no
transaction or holding of any asset under or in connection with any UCC
Employee Plan has occurred that will make UCC or any UCC Subsidiary, or any
officer or director of UCC or any UCC Subsidiary, subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section 4975 of the
Code (assuming the taxable period of any
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such transaction expired as of the date hereof) that would be reasonably likely
to have a UCC Material Adverse Effect.
(c) Each UCC Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. UCC has furnished, or
will make available upon request, to IP copies of the most recent Internal
Revenue Service determination letters with respect to each such UCC Employee
Plan. Each UCC Employee Plan has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the
Code, which are applicable to such UCC Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering
any employee or former employee of UCC that, individually or collectively,
would be reasonably likely to give rise to the payment of any amount that
would not be deductible pursuant to the terms of Sections 162(m) or 280G of
the Code.
(e) Except as disclosed in writing to IP prior to the date hereof,
there has been no amendment to, written interpretation or announcement
(whether or not written) relating to, or change in employee participation or
coverage under, any UCC Employee Plan which would increase materially the
expense of maintaining such UCC Employee Plan above the level of the expense
incurred in respect thereof for the fiscal year ended December 31, 1997.
Section 4.14. Compliance with Laws; Licenses, Permits and
Registrations. (a) To the knowledge of UCC, neither UCC nor any UCC
Subsidiary is in violation of, or has violated, any applicable provisions of
any laws, statutes, ordinances, regulations, judgments, injunctions, orders or
consent decrees, except for any such violations which, individually or in the
aggregate, would not be reasonably likely to have a UCC Material Adverse
Effect.
(b) Each of UCC and the UCC Subsidiaries has all permits,
licenses, approvals, authorizations of and registrations with and under all
federal, state, local and foreign laws, and from all Governmental Entities
required by UCC and the UCC Subsidiaries to carry on their respective
businesses as currently conducted, except where the failure to have any such
permits, licenses, approvals, authorizations or registrations, individually or
in the aggregate, would not be reasonably likely to have a UCC Material
Adverse Effect.
Section 4.15. Title to Properties. (a) UCC and each UCC
Subsidiary have good and marketable title to, or valid leasehold interests in,
all their
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properties and assets except for such as are no longer used or
useful in the conduct of their businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar Liens, encumbrances or impediments that, in
the aggregate, do not materially interfere with the ability of UCC and its
Subsidiaries to conduct their business, taken as a whole, as currently
conducted. All such assets and properties, other than assets and properties
in which UCC or any UCC Subsidiary has leasehold interests, are free and clear
of all Liens, except for Liens that, in the aggregate, do not and will not
materially interfere with the ability of UCC and the UCC Subsidiaries to
conduct their business, taken as a whole, as currently conducted.
(b) Except as would not be reasonably likely, individually or in
the aggregate, to have a UCC Material Adverse Effect, (i) UCC and each UCC
Subsidiary are in compliance with the terms of all leases to which they are a
party and under which they are in occupancy, and all such leases are in full
force and effect and (ii) UCC and each UCC Subsidiary enjoy peaceful and
undisturbed possession under all such leases.
Section 4.16. Intellectual Property. Except as would not be
reasonably likely to have a UCC Material Adverse Effect, individually or in
the aggregate, UCC and the UCC Subsidiaries own or have a valid license to use
each trademark, service mark, trade name, mask work, invention, patent, trade
secret, copyright, know-how (including any registrations or applications for
registration of any of the foregoing) or any other similar type of proprietary
intellectual property right (collectively, the "UCC Intellectual Property")
necessary to carry on the business of UCC and the UCC Subsidiaries, taken as a
whole, as currently conducted. To the knowledge of UCC, neither UCC nor any
UCC Subsidiary has received any written notice of infringement of or challenge
to, and, to UCC's knowledge, there are no claims pending with respect to the
rights of others to the use of, any UCC Intellectual Property that, in any
such case, individually or in the aggregate, would be reasonably likely to
have a UCC Material Adverse Effect.
Section 4.17. Environmental Matters. (a) With such exceptions
as, individually or in the aggregate, would not be reasonably likely to have a
UCC Material Adverse Effect, to the knowledge of UCC, (i) no written notice,
notification, demand, request for information, citations, summons, complaint
or order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or threatened by any Person against, UCC or
any UCC Subsidiary, with respect to any applicable Environmental Law and (ii)
UCC and the UCC Subsidiaries are and have been in compliance with all
applicable Environmental Laws.
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(b) For purposes of this Section 4.17 and Section 5.15, the term
"Environmental Laws" means any federal, state, local and foreign statutes,
laws (including, without limitation, common law), judicial decisions,
regulations, ordinances, rules, judgments, orders, codes, injunctions, permits
or governmental agreements relating to human health and safety, the
environment or to pollutants, contaminants, wastes, or chemicals.
Section 4.18. Finders' Fees; Opinions of Financial Advisor.
(a) Except for Goldman, Sachs & Co., there is no investment banker, broker,
finder or other intermediary which has been retained by, or is authorized to
act on behalf of, UCC or any UCC Subsidiary who might be entitled to any fee or
commission from IP or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
(b) UCC has received the opinion of Goldman, Sachs & Co., dated as
of the date hereof, to the effect that, as of such date, the Exchange Ratio is
fair to the holders of UCC Common Shares (other than IP and any IP Subsidiary)
from a financial point of view.
Section 4.19. Required Vote; Board Approval. (a) The only
vote of the holders of any class or series of capital stock of UCC required by
law, rule or regulation to approve this Agreement, the Merger and/or any of the
other transactions contemplated hereby is the affirmative vote (the "UCC
Shareholder Approval") of the holders of more than two-thirds of the
outstanding UCC Common Shares in favor of the adoption of this Agreement and
the Merger.
(b) UCC's Board of Directors has unanimously (a) determined that
this Agreement and the transactions contemplated hereby, including the Merger,
are in the best interests of UCC and its shareholders, (b) approved this
Agreement and the transactions contemplated hereby and (c) resolved to
recommend to such shareholders that they vote in favor of adopting and
approving this Agreement and the Merger in accordance with the terms hereof.
Section 4.20. State Takeover Statutes; Rights Agreement. (a)
UCC has taken all actions required to be taken by it in order to exempt this
Agreement and the transactions contemplated hereby from the provisions of
Sections 13.1-725 through 13.1-728 and 13.1-728.1 through 13.1-728.9 of the
Virginia Code, and accordingly, such Sections do not apply to the Merger or
any of such transactions. No other "control share acquisition", "fair price"
or other anti-takeover laws or regulations enacted under state or federal laws
in the United States apply to this Agreement or any of the transactions
contemplated hereby.
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(b) UCC has taken all action necessary to (i) render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement and (ii) ensure that (A) neither IP, MergerSub nor any of their
Affiliates will become an Acquiring Person (as defined in the Rights
Agreement) as a result of the transactions contemplated hereby and (B) neither
a Distribution Date nor an Acquisition Date (each as defined in the Rights
Agreement) shall occur by reason of the approval or execution of this
Agreement, the announcement or consummation of the Merger or the announcement
or consummation of any of the other transactions contemplated by this
Agreement.
Section 4.21. Pooling Matters; Tax Treatment. (a) UCC intends
that the Merger be accounted for under the "pooling of interests" method under
the requirements of Opinion No. 16 (Business Combinations) of the Accounting
Principles Board of the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and the rules and regulations of the
SEC. UCC will request a letter addressed to it from PricewaterhouseCoopers
LLP dated as of a date prior to the Effective Time, and (if and when obtained)
a copy of it will be delivered to IP. Such letter shall state that
PricewaterhouseCoopers LLP believes that UCC is a pooling candidate for
purposes of the transactions contemplated hereby.
(b) Neither UCC nor any of its Affiliates has taken or agreed to
take any action or is aware of any fact or circumstance that would prevent the
Merger from qualifying (i) for "pooling of interests" accounting treatment as
described in Section 4.21(a) above or (ii) as a 368 Reorganization.
ARTICLE 5
Representations and Warranties of IP
Except as disclosed in the IP SEC Documents filed or made prior
to the date hereof, IP represents and warrants to UCC that:
Section 5.1. Corporate Existence and Power. Each of IP and
MergerSub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers required to carry on its business as now conducted. IP is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, be reasonably likely to have
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an IP Material Adverse Effect. IP has heretofore made available to UCC true
and complete copies of IP's restated certificate of incorporation and bylaws as
currently in effect. Since the date of its incorporation, MergerSub has not
engaged in any activities other than in connection with or as contemplated by
this Agreement.
Section 5.2. Corporate Authorization. The execution, delivery
and performance by IP and MergerSub of this Agreement and the consummation by
IP and MergerSub of the transactions contemplated hereby are within the
corporate powers of IP and MergerSub and, except for the IP Shareholder
Approval, have been duly authorized by all necessary corporate action.
Assuming that this Agreement constitutes the valid and binding obligation of
UCC, this Agreement constitutes a valid and binding agreement of each of IP
and MergerSub, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws, now or
hereafter in effect, relating to or affecting creditors' rights and remedies
and to general principles of equity.
Section 5.3. Governmental Authorization. The execution,
delivery and performance by IP and MergerSub of this Agreement and the
consummation by IP and MergerSub of the transactions contemplated hereby
require no action by or in respect of, or filing with, any Governmental Entity
other than (a) those set forth in clauses (a) through (g) of Section 4.3 and
(b) such other consents, approvals, actions, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not, individually or in the aggregate, (i) be reasonably likely to have an IP
Material Adverse Effect or (assuming for this purpose that the Effective Time
had occurred) a UCC Material Adverse Effect, or (ii) prevent or materially
impair the ability of IP and MergerSub to consummate the transactions
contemplated by this Agreement.
Section 5.4. Non-Contravention. The execution, delivery and
performance by IP and MergerSub of this Agreement and the consummation by IP
and MergerSub of the transactions contemplated hereby do not and will not (a)
contravene or conflict with the restated certificate of incorporation or
bylaws of IP or the articles of incorporation or bylaws of MergerSub, (b)
assuming compliance with the matters referred to in Section 5.3, contravene or
conflict with any provision of law, regulation, judgment, injunction, order or
decree binding upon or applicable to IP or any IP Subsidiary, (c) constitute a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of IP or any IP Subsidiary or to a
loss of any benefit or status to which IP or any IP Subsidiary is entitled
under any provision of any agreement, contract or other instrument binding
upon IP or any IP Subsidiary or any license, franchise, permit or other
similar authorization held by IP or any IP Subsidiary, or (d) result in the
creation or imposition of any Lien on any asset of IP or any IP Subsidiary
other
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than, in the case of each of (b), (c) and (d), any such items that would
not, individually or in the aggregate, (x) be reasonably likely to have an IP
Material Adverse Effect or (y) prevent or materially impair the ability of IP
or MergerSub to consummate the transactions contemplated by this Agreement.
Section 5.5. Capitalization of IP and MergerSub. (a) The
authorized capital stock of IP consists of 400,000,000 IP Common Shares,
400,000 shares of Cumulative $1.00 Preferred Stock, no par value per share
("IP Cumulative Preferred") and 8,750,000 shares of Serial Preferred Stock,
$1.00 par value per share (the "IP Serial Preferred"). As of September 30,
1998, there were outstanding (i) 307,306,313 IP Common Shares and 15,696
shares of the IP Cumulative Preferred and (ii) stock options to purchase an
aggregate of 12,097,455 IP Common Shares (of which options to purchase an
aggregate of 5,777,178 IP Common Shares were vested and exercisable). In
addition, approximately 8,332,000 IP Common Shares were reserved for issuance
upon the conversion of the IP-Obligated-Mandatory-Redeemable-Preferred
securities of a Subsidiary trust of IP. All outstanding shares of capital
stock of IP have been duly authorized and validly issued and are fully paid
and nonassessable.
(b) As of the date hereof, except as set forth in this Section 5.5
and except for changes since September 30, 1998 resulting from the exercise of
stock options outstanding on such date, there are no outstanding (i) shares of
capital stock or other voting securities of IP, (ii) securities of IP
convertible into or exchangeable for shares of capital stock or voting
securities of IP, and (iii) options or other rights to acquire from IP, and no
obligation of IP to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of IP
(the items in clauses (i), (ii) and (iii) being referred to collectively as
the "IP Securities"). There are no outstanding obligations of IP or any IP
Subsidiary to repurchase, redeem or otherwise acquire any IP Securities.
(c) The IP Common Shares to be issued as part of the Merger
Consideration have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued,
fully paid and nonassessable and free of any preemptive or other similar
right.
(d) The authorized capital stock of MergerSub consists solely of
100 MergerSub Common Shares, of which, as of the date hereof, 100 were issued
and outstanding. All outstanding MergerSub Common Shares have been duly
authorized and validly issued and are fully paid and nonassessable, free of any
preemptive or other similar right.
Section 5.6. IP SEC Documents. (a) IP has made available to
UCC the IP SEC Documents. IP has filed all reports, filings, registration
statements and
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other documents required to be filed by it with the SEC since December 31,
1996. No IP Subsidiary is at present required to file any form, report,
registration statement or prospectus or other document with the SEC.
(b) As of its filing date, each IP SEC Document complied as to form
in all material respects with the applicable requirements of the Securities Act
and/or the Exchange Act, as the case may be.
(c) No IP SEC Document filed pursuant to the Exchange Act
contained, as of its filing date, any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading. No IP SEC Document, as amended or supplemented, if
applicable, filed pursuant to the Securities Act as of the date such document
or amendment became effective contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
Section 5.7. Financial Statements; No Material Undisclosed
Liabilities. (a) The audited consolidated financial statements and unaudited
consolidated interim financial statements of IP included in the IP 10-Ks and
the IP 10-Qs fairly present in all material respects, in conformity with GAAP
(except as may be indicated in the notes thereto), the consolidated financial
position of IP and its consolidated Subsidiaries as of the dates thereof and
their consolidated results of operations and changes in financial position for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements).
(b) There are no liabilities of IP or any IP Subsidiary of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise that are required by GAAP to be set forth on a
consolidated balance sheet of IP, other than:
(i) liabilities or obligations disclosed or provided for in
the IP Balance Sheet (including the notes thereto);
(ii) liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby; and
(iii) other liabilities or obligations, which, individually or
in the aggregate, would not be reasonably likely to have an IP Material
Adverse Effect.
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Section 5.8. Information to Be Supplied. (a) The information
to be supplied by IP expressly for inclusion or incorporation by reference in
the Proxy Statement/Prospectus will (i) in the case of the Registration
Statement, at the time it becomes effective, not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading
and (ii) in the case of the remainder of the Proxy Statement/Prospectus, at
the time of the mailing thereof, at the time of the UCC Shareholder Meeting
and at the time of the IP Shareholder Meeting, not 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. The Proxy
Statement/Prospectus will comply (with respect to information relating to IP)
as to form in all material respects with the provisions of the Securities Act
and the Exchange Act.
(b) Notwithstanding the foregoing, IP makes no representation or
warranty with respect to any statements made or incorporated by reference in
the Proxy Statement/Prospectus with respect to information supplied by UCC.
Section 5.9. Absence of Certain Changes. Since December 31,
1997, except as otherwise expressly contemplated by this Agreement, IP and the
IP Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been (a) any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of IP or any IP Subsidiary that, individually or in the aggregate, has
had or would be reasonably likely to have an IP Material Adverse Effect or (b)
any action, event, occurrence, development or state of circumstances or facts
that, individually or in the aggregate, has had or would be reasonably likely
to have an IP Material Adverse Effect.
Section 5.10. Litigation. There is no action, suit,
investigation, arbitration or proceeding pending against, or to the knowledge
of IP threatened against, IP or any IP Subsidiary or any of their respective
assets or properties before any arbitrator or Governmental Entity that,
individually or in the aggregate, would be reasonably likely to have an IP
Material Adverse Effect.
Section 5.11. Taxes. Except as set forth in the IP Balance
Sheet (including the notes thereto), (i) all tax returns, statements, reports
and forms (collectively, the "IP Returns") required to be filed with any
taxing authority by, or with respect to, IP and the IP Subsidiaries have been
filed in accordance with all applicable laws; (ii) IP and the IP Subsidiaries
have timely paid all taxes shown as due and payable on the IP Returns that
have been so filed, and, as of the time of filing, the IP Returns correctly
reflected the facts regarding the income,
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business, assets, operations, activities and the status of IP and the IP
Subsidiaries (other than taxes which are being contested in good faith and for
which adequate reserves are reflected on the IP Balance Sheet); (iii) IP and
the IP Subsidiaries have made provision for all taxes payable by them for which
no IP Return has yet been filed; (iv) the charges, accruals and reserves for
taxes with respect to IP and its Subsidiaries reflected on the IP Balance Sheet
are adequate under GAAP to cover the tax liabilities accruing through the date
thereof; (v) there is no action, suit, proceeding, audit or claim now proposed
or pending against or with respect to IP or any of the IP Subsidiaries in
respect of any tax where there is a reasonable possibility of a materially
adverse determination; and (vi) neither IP nor any of the IP Subsidiaries has
been a member of an affiliated, consolidated, combined or unitary group other
than one of which IP was the common parent.
Section 5.12. Compliance with Laws; Licenses, Permits and
Registrations. (a) To the knowledge of IP, neither IP nor any IP Subsidiary is
in violation of, or has violated, any applicable provisions of any laws,
statutes, ordinances, regulations, judgments, injunctions, orders or consent
decrees, except for any such violations which, individually or in the
aggregate, would not be reasonably likely to have, an IP Material Adverse
Effect.
(b) Each of IP and the IP Subsidiaries has all permits,
licenses, approvals, authorizations of and registrations with and under all
federal, state, local and foreign laws, and from all Governmental Entities
required by IP and the IP Subsidiaries to carry on their respective businesses
as currently conducted, except where the failure to have any such permits,
licenses, approvals, authorizations or registrations, individually or in the
aggregate, would not be reasonably likely to have an IP Material Adverse
Effect.
Section 5.13. Title to Properties. (a) IP and each IP
Subsidiary have good and marketable title to, or valid leasehold interests in,
all their properties and assets except for such as are no longer used or
useful in the conduct of their businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar Liens, encumbrances or impediments that, in
the aggregate, do not materially interfere with the ability of IP and the IP
Subsidiaries to conduct their business, taken as a whole, as currently
conducted. All such assets and properties, other than assets and properties
in which IP or any IP Subsidiary has leasehold interests, are free and clear
of all Liens, except for Liens that, in the aggregate, do not and will not
materially interfere with the ability of IP and the IP Subsidiaries to conduct
their business, taken as a whole, as currently conducted.
(b) Except as would not be reasonably likely, individually or in
the aggregate, to have an IP Material Adverse Effect, (i) IP and each IP
Subsidiary are
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in compliance with the terms of all leases to which they are a party and under
which they are in occupancy, and all such leases are in full force and effect
and (ii) IP and each IP Subsidiary enjoy peaceful and undisturbed possession
under all such leases.
Section 5.14. Intellectual Property. Except as would not be
reasonably likely to have an IP Material Adverse Effect, individually or in the
aggregate, IP and the IP Subsidiaries own or have a valid license to use each
trademark, service mark, trade name, mask work, invention, patent, trade
secret, copyright, know-how (including any registrations or applications for
registration of any of the foregoing) or any other similar type of proprietary
intellectual property right (collectively, the "IP Intellectual Property")
necessary to carry on the business of IP and the IP Subsidiaries, taken as a
whole, as currently conducted. To the knowledge of IP, neither IP nor any IP
Subsidiary has received any written notice of infringement of or challenge to,
and, to IP's knowledge, there are no claims pending with respect to the rights
of others to the use of, any IP Intellectual Property that, in either case,
individually or in the aggregate, would be reasonably likely to have an IP
Material Adverse Effect.
Section 5.15. Environmental Matters. With such exceptions as,
individually or in the aggregate, would not be reasonably likely to have an IP
Material Adverse Effect, to the knowledge of IP, (i) no written notice,
notification, demand, request for information, citations, summons, complaint
or order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or threatened by any Person against, IP or any
IP Subsidiary, with respect to any applicable Environmental Law and (ii) IP
and the IP Subsidiaries are and have been in compliance with all applicable
Environmental Laws.
Section 5.16. Finders' Fees. Except for Credit Suisse First
Boston, whose fees will be paid by IP, there is no investment banker, broker,
finder or other intermediary who might be entitled to any fee or commission
from IP or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
Section 5.17. Required Vote; Board Recommendation. (a) The
only votes of the holders of any class or series of capital stock of IP
required by law, rule or regulation to approve this Agreement, the Merger
and/or any of the other transactions contemplated hereby are the affirmative
vote of the holders of a majority of (i) the IP Common Shares present and
voting at the IP Shareholder Meeting (as defined in Section 7.2) in favor of
the issuance of the IP Common Shares pursuant to the Merger and (ii) all
outstanding shares entitled to vote thereon at the IP Shareholder Meeting in
favor of an amendment to IP's restated
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certificate of incorporation to increase the number of authorized IP Common
Shares (the approvals described in clauses (i) and (ii) are collectively
referred to herein as the "IP Shareholder Approval").
(b) IP's Board of Directors has unanimously (i) determined that
this Agreement and the transactions contemplated hereby, including the Merger
and the issuance of the IP Common Shares pursuant to the Merger, are in the
best interests of IP and its shareholders, (ii) approved this Agreement, and
the transactions contemplated hereby and (iii) resolved to recommend to such
shareholders that they vote in favor of (x) the issuance of the IP Common
Shares pursuant to the Merger and (y) an amendment to IP's restated
certificate of incorporation to increase the number of authorized IP Common
Shares, in accordance with the terms hereof.
Section 5.18. Pooling Matters. Neither IP nor any of its
Affiliates has taken or agreed to take any action or is aware of any fact or
circumstance that would prevent the Merger from qualifying (i) for "pooling of
interests" accounting treatment as described in the first sentence of Section
4.21(a) or (ii) as a 368 Reorganization. IP will request a letter addressed
to it from Arthur Andersen LLP dated as of a date prior to the Effective Time,
and (if and when such letter is obtained) a copy will be delivered to UCC.
Such letter shall state that Arthur Andersen LLP believes that the Merger
should be accounted for as a "pooling of interests" as described in the first
sentence of Section 4.21(a).
ARTICLE 6
Covenants of UCC
UCC agrees that:
Section 6.1. UCC Interim Operations. Except as set forth in
the UCC Disclosure Schedule or as otherwise expressly contemplated hereby,
without the prior consent of IP (which consent shall not be unreasonably
withheld or delayed), from the date hereof until the Effective Time, UCC
shall, and shall cause each of the UCC Subsidiaries to, conduct their business
in all material respects in the ordinary course consistent with past practice
and shall use commercially reasonable efforts to (i) preserve intact its
present business organization, (ii) maintain in effect all material foreign,
federal, state and local licenses, approvals and authorizations, including,
without limitation, all material licenses and permits that are required for
UCC or any UCC Subsidiary to carry on its business and (iii) preserve existing
relationships with its material customers, lenders, suppliers and
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others having material business relationships with it. Without limiting the
generality of the foregoing, except as set forth in the UCC Disclosure Schedule
or as otherwise expressly contemplated by this Agreement, from the date hereof
until the Effective Time, without the prior consent of IP (which consent shall
not be unreasonably withheld or delayed), UCC shall not, nor shall it permit
any UCC Subsidiary to:
(a) amend UCC's articles of incorporation or by-laws;
(b) split, combine or reclassify any shares of capital stock of
UCC or any less-than-wholly-owned UCC Subsidiary or declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or redeem, repurchase or
otherwise acquire or offer to redeem, repurchase, or otherwise acquire any of
its securities or any securities of any UCC Subsidiary, except (i) for regular
quarterly cash dividends (having customary record and payment dates, not in
excess of $0.45 per UCC Common Share, and (ii) for regular dividends by
less-than-wholly-owned UCC Subsidiaries on a pro rata basis to the equity
owners thereof or (iii) pursuant to the existing terms of any UCC Employee
Plan;
(c) (i) issue, deliver or sell, or authorize the issuance,
delivery or sale of, any shares of its capital stock of any class or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such capital stock or any such convertible securities,
other than in connection with the UCC Employee Plans or benefit plans or
arrangements existing on the date hereof and covering the members of UCC's
Board of Directors, (A) the issuance of UCC Common Shares upon the exercise of
stock options in accordance with their present terms and (B) the granting of
options to acquire UCC Common Shares in the ordinary course of business
consistent with past practice or (ii) amend in any material respect any
material term of any outstanding security of UCC or any UCC Subsidiary;
(d) other than in connection with transactions permitted by
Section 6.1(e), incur any capital expenditures or any obligations or
liabilities in respect thereof, except for those (i) contemplated by the
capital expenditure budgets for UCC and the UCC Subsidiaries made available
to IP, (ii) incurred in the ordinary course of business of UCC and the UCC
Subsidiaries or (iii) not otherwise described in clauses (i) and/or (ii)
which, in the aggregate, do not exceed $10 million;
(e) acquire (whether pursuant to merger, stock or asset purchase
or otherwise) in one transaction or series of related transactions (i) any
assets (including any equity interests) having a fair market value in
excess of $10
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million, or (ii) all or substantially all of the equity interests of any Person
or any business or division of any Person having a fair market value in excess
of $5 million;
(f) sell, lease, encumber or otherwise dispose of any assets,
other than (i) sales in the ordinary course of business consistent with
past practice, (ii) equipment and property no longer used in the operation
of UCC's business and (iii) assets related to discontinued operations of
UCC or any UCC Subsidiary;
(g) incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until UCC or any
UCC Subsidiary becomes liable with respect to any indebtedness for borrowed
money or guarantees thereof under such arrangements) any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of UCC or
any UCC Subsidiary or guarantee any debt securities of others, except in
the ordinary course of business consistent with past practice (which shall
include, without limitation, borrowings under UCC's existing credit
agreements and overnight borrowings);
(h) (i) enter into any agreement or arrangement that limits or
otherwise restricts UCC, any UCC Subsidiary or any of their respective
Affiliates or any successor thereto or that would, after the Effective
Time, limit or restrict UCC, any UCC Subsidiary, the Surviving Corporation,
IP, any IP Subsidiary or any of their respective Affiliates, from engaging
or competing in any line of business or in any location, which agreement or
arrangement would be material to the business of UCC and the UCC
Subsidiaries or the business of IP and the IP Subsidiaries (assuming the
Merger had taken place), in either case taken as a whole or (ii) except in
the ordinary course of business, amend, modify or terminate any material
contract, agreement or arrangement of UCC or any UCC Subsidiary or
otherwise waive, release or assign any material rights, claims or benefits
of UCC or any UCC Subsidiary thereunder;
(i) (i) except in the ordinary course of business consistent
with past practice or as required by law or an existing agreement, increase
the amount of compensation of any director or executive officer or make any
increase in or commitment to increase any employee benefits, (ii) except as
required by law, an agreement existing on the date hereof or UCC severance
policy as of the date hereof, grant any severance or termination pay to any
director, officer or employee of UCC or any UCC Subsidiary, (iii) adopt any
additional employee benefit plan or, except in the ordinary course of
business, make any contribution to any existing such plan or (iv) except as
may be required by law, amend in any material respect any UCC Employee
Plan;
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(j) change UCC's (x) methods of accounting in effect at
September 30, 1998, except as required by changes in GAAP or by Regulation
S-X of the Exchange Act, as concurred in by its independent public
accountants or (y) fiscal year;
(k) (i) settle, or propose to settle, any litigation,
investigation, arbitration, proceeding or other claim that is material to
the business of UCC and the UCC Subsidiaries, taken as a whole, other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice of liabilities (x) recognized or disclosed in
the most recent consolidated financial statements (or the notes thereto) of
UCC included in the UCC SEC Documents or (y) incurred since the date of
such financial statements in the ordinary course of business consistent
with past practice, or (ii) other than in the ordinary course of business
consistent with past practice, make any tax election or enter into any
settlement or compromise of any tax liability that in either case is
material to the business of UCC and the UCC Subsidiaries, taken as a whole;
or
(l) agree, resolve or commit to do any of the foregoing;
provided that the limitations set forth in clauses 6.1(a) through 6.1(l)
shall not apply to any action, transaction or event occurring exclusively
between UCC and any wholly-owned UCC Subsidiary or between any wholly-owned
UCC Subsidiaries.
Section 6.2. Shareholder Meeting. UCC shall cause a meeting
of its shareholders (the "UCC Shareholder Meeting") to be duly called and held
as soon as reasonably practicable for the purpose of obtaining the UCC
Shareholder Approval. Unless otherwise required by its fiduciary duties (as
determined in good faith by a majority of its members on the basis of the
written advice of its outside legal counsel), (i) UCC's Board of Directors
shall recommend approval and adoption by its shareholders of this Agreement
(the "UCC Recommendation"), (ii) neither UCC's Board of Directors nor any
committee thereof shall amend, modify, withdraw, condition or qualify the UCC
Recommendation in a manner adverse to IP or take any action or make any
statement inconsistent with the UCC Recommendation and (iii) UCC shall take
all lawful action to solicit the UCC Shareholder Approval.
Section 6.3. Acquisition Proposals; Board Recommendation. (a)
UCC agrees that it shall not, nor shall it permit any UCC Subsidiary to, nor
shall it authorize or knowingly permit any officer, director, employee,
investment banker, attorney, accountant, agent or other advisor or
representative of UCC or any UCC Subsidiary, directly or indirectly, to (i)
solicit, initiate or knowingly facilitate or encourage the submission of any
Acquisition Proposal, (ii) participate in any
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discussions or negotiations regarding, or furnish to any Person any information
with respect to, or take any other action knowingly to facilitate any inquiries
or the making of any proposal that constitutes, or may be reasonably expected
to lead to, any Acquisition Proposal, (iii) grant any waiver or release under
any standstill or similar agreement with respect to any class of UCC's equity
securities or (iv) enter into any agreement with respect to any Acquisition
Proposal, other than in the manner contemplated by Section 6.3(d); provided,
however, that UCC may take any action(s) described in the foregoing clauses
(i), (ii), (iii), or (iv) in respect of any Person, but only if (A) such Person
delivers a bona fide written Acquisition Proposal that, in the reasonable
judgment of UCC's Board of Directors (after consultation with an investment
bank of nationally recognized reputation) could be reasonably likely to lead to
the delivery to UCC of a Superior Proposal and (B) UCC's Board of Directors
determines in good faith, on the basis of written advice from its outside legal
counsel, that it is required to take such action(s) in order to comply with its
fiduciary duties under applicable law; provided, further, that, (x) prior to
UCC taking any such action(s) in respect of such Person, such Person shall have
entered into a confidentiality agreement with UCC on customary terms, and UCC
shall provide the notice contemplated by Section 6.3(c) and (y) UCC shall not
enter into any agreement with respect to any Acquisition Proposal without first
complying with Section 6.3(d). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director, investment banker, attorney, accountant,
agent or other advisor or representative of UCC or any UCC Subsidiary, whether
or not such individual is purporting to act on behalf of UCC or any UCC
Subsidiary or otherwise, shall be deemed to be a breach of this Section 6.3 by
UCC. UCC shall cease and cause to be terminated immediately all existing
discussions or negotiations with any Persons conducted heretofore with respect
to, or that could be reasonably expected to lead to, any Acquisition Proposal.
(b) Unless UCC's Board of Directors has previously withdrawn, or is
concurrently therewith withdrawing, the UCC Recommendation in accordance with
Section 6.2, neither UCC's Board of Directors nor any committee thereof shall
recommend any Acquisition Proposal to UCC shareholders. Notwithstanding the
foregoing, nothing contained in this Section 6.3(b) or elsewhere in this
Agreement shall prevent UCC's Board of Directors from complying with Rule
14e-2 under the 1934 Act with respect to any Acquisition Proposal or making
any disclosure required by applicable law.
(c) UCC shall notify IP promptly (but in no event later than 24
hours) after receipt by UCC or any UCC Subsidiary (or any of their respective
directors, officers, agents or advisors), of any Acquisition Proposal or any
negotiations, discussions or contacts concerning, or any request for nonpublic
information or for access to the properties, books or records of UCC or any
UCC Subsidiary or
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any request for a waiver or release under any standstill or similar agreement,
by any Person that has made an Acquisition Proposal. Such notice to IP shall
be made orally and in writing and shall indicate the identity of the offeror
and the terms and conditions of such proposal, inquiry, contact or request.
UCC shall keep IP informed, on a reasonably current basis, of the status and
details (including amendments or proposed amendments) of any such Acquisition
Proposal or request and the status of any negotiations or discussions.
(d) Pursuant to the terms of Section 10.1, either IP or UCC may
terminate this Agreement if UCC's Board of Directors shall have determined,
pursuant to the terms of this Section 6.3, (i) to approve or recommend an
Acquisition Proposal after concluding that such Acquisition Proposal
constitutes a Superior Proposal and (ii) to enter into a binding agreement
concerning such Acquisition Proposal; provided that UCC may not exercise its
right to terminate under this Section 6.3(d) and Section 10.1(c)(iii) (and may
not enter into a binding written agreement with respect to such an Acquisition
Proposal) unless (1) UCC shall have provided to IP at least five Business
Days' prior written notice that its Board of Directors has authorized and
intends to terminate this Agreement pursuant to this Section 6.3(d) and Section
10.1(c)(iii), specifying the material terms and conditions of such Acquisition
Proposal and providing the most current version of the agreement relating
thereto, if any, (2) IP does not make, within five Business Days of receiving
such notice, an offer such that a majority of UCC's Board of Directors
determines that (A) the foregoing Acquisition Proposal no longer constitutes a
Superior Proposal or (B) its fiduciary duties no longer require it to take such
action(s), and (3) on or prior to such termination, UCC shall have paid to IP
the Termination Fee (as defined in Section 10.3(b)); provided, further, that IP
may exercise its right to terminate under this Section 6.3(d) and Section
10.1(d)(iii) five Business Days after receiving the notice contemplated by this
Section 6.3(d). In connection with the foregoing, UCC agrees that it will (x)
not enter into a binding agreement with respect to such an Acquisition
Proposal until at least the sixth Business Day after it has provided the
notice to IP required hereby, (y) negotiate in good faith with IP, and
consider in good faith any offer made by IP, during that period and (z) notify
IP promptly if its intention to enter into such an agreement shall change at
any time after such notification.
Section 6.4. Transfer Taxes. All state, local, foreign or
provincial sales, use, real property transfer, stock transfer or similar taxes
(including any interest or penalties with respect thereto) attributable to the
Merger (collectively, the "Transfer Taxes") shall be timely paid by UCC, which
payments, if any, shall be made from the Escrow Account as and if required by
3.3(h).
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ARTICLE 7
Covenants of IP
IP agrees that:
Section 7.1. IP Interim Operations. Except as set forth in the
IP Disclosure Schedule or as otherwise expressly contemplated hereby, without
the prior consent of UCC (which consent shall not be unreasonably withheld or
delayed), from the date hereof until the Effective Time, IP shall and shall
cause each of the IP Subsidiaries to, conduct their business in all material
respects in the ordinary course consistent with past practice and shall use
commercially reasonable efforts to (i) preserve intact its present business
organization, (ii) maintain in effect all material foreign, federal, state and
local licenses, approvals and authorizations, including, without limitation,
all material licenses and permits that are required for IP or any IP
Subsidiary to carry on its business and (iii) preserve existing relationships
with its material customers, lenders, suppliers and others having material
business relationships with it. Without limiting the generality of the
foregoing, except as otherwise expressly contemplated by this Agreement, from
the date hereof until the Effective Time, without the prior consent of UCC
(which consent shall not be unreasonably withheld or delayed), IP shall not,
not shall it permit any IP Subsidiary to:
(a) make any amendment to IP's restated certificate of
incorporation that changes any material term or provision of the IP Common
Shares;
(b) make any material changes to MergerSub's certificate of
incorporation;
(c) engage in any material repurchase at a premium,
recapitalization, restructuring or reorganization with respect to IP's capital
stock, including, without limitation, by way of any extraordinary dividend on,
or other extraordinary distributions with respect to, IP's capital stock;
(d) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
Person or any business or division thereof, or otherwise acquire any assets,
unless IP concludes in good faith that such acquisition or the entering into
of a definitive agreement relating to or the consummation of such transaction
would not (i) impose any material delay in the obtaining of, or significantly
increase the risk of not obtaining, any authorizations, consents, orders,
declarations or approvals of any Governmental Entity necessary to consummate
the Merger or the expiration or termination of any applicable waiting period,
(ii) significantly increase the risk
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of any Governmental Entity entering an order prohibiting the consummation of
the Merger or (iii) significantly increase the risk of not being able to remove
any such order on appeal or otherwise; or
(e) agree, resolve or otherwise commit to do any of the foregoing.
Section 7.2. Shareholder Meeting; Board Recommendation. IP
shall cause a meeting of its shareholders (the "IP Shareholder Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of
obtaining the IP Shareholder Approval. Unless otherwise required by its
fiduciary duties (as determined in good faith by a majority of its members on
the basis of the written advice of its outside legal counsel), (i) IP's Board
of Directors shall recommend (the "IP Recommendation") approval and adoption
by its shareholders of (x) the issuance of IP Common Shares pursuant to the
Merger and (y) an amendment to IP's restated certificate of incorporation to
increase the number of authorized IP Common Shares, (ii) neither IP's Board of
Directors nor any committee thereof shall amend, modify, withdraw, condition
or qualify the IP Recommendation in a manner adverse to UCC or take any action
or make any statement inconsistent with the IP Recommendation and (iii) IP
shall take all lawful action to solicit the IP Shareholder Approval.
Section 7.3. Director and Officer Liability. (a) IP and the
Surviving Corporation agree that the indemnification obligations set forth in
UCC's articles of incorporation, as amended, and UCC's bylaws, in each case
as of the date of this Agreement, shall survive the Merger and shall not be
amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of the individuals who on or prior to the Effective Time were directors,
officers, employees or agents of UCC or the UCC Subsidiaries.
(b) To the fullest extent permitted under applicable law and
regardless of whether the Merger becomes effective, UCC shall indemnify and
hold harmless, and, after the Effective Time, IP shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless, to the fullest extent
permitted under applicable law, each present and former director or officer of
UCC and each UCC Subsidiary and each such person who served at the request of
UCC or any UCC Subsidiary as a director, officer, trustee, partner or
fiduciary of another Person, pension or other employee benefit plan or
enterprise (collectively, the "Indemnified Parties") against all costs and
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with
any claim, action, suit, proceeding or investigation (whether arising before
or after the Effective Time), whether civil, administrative or investigative,
arising out of or pertaining to any action or omission in their
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capacity as an officer or director, in each case occurring before the Effective
Time (including the transactions contemplated by this Agreement). Without
limiting the foregoing, in the event of any such claim, action, suit,
proceeding or investigation, (i) UCC or IP and the Surviving Corporation, as
the case may be, shall pay the reasonable fees and expenses of one counsel
selected by each Indemnified Party, which one counsel shall be reasonably
satisfactory to UCC or to IP and the Surviving Corporation, as the case may be,
promptly after statements therefor are received (unless the Surviving
Corporation shall elect to defend such action) and (ii) UCC or IP and the
Surviving Corporation, as applicable, shall cooperate in the defense of any
such matter; provided, however, that neither UCC nor IP or the Surviving
Corporation shall be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld).
(c) For six years from the Effective Time, the Surviving
Corporation shall provide to UCC's current directors and officers liability
insurance protection of the same kind and scope as that provided by UCC's
directors' and officers' liability insurance policies as of the date hereof;
provided, however, that in no event shall the Surviving Corporation be
required to expend in any one year an amount in excess of 200% of the annual
premiums currently paid by UCC for such insurance; and, provided, further,
that if the annual premiums of such insurance coverage exceed such amount, the
Surviving Corporation shall be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(d) If UCC or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person or
shall not be the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all its
properties and assets to any Person, then, and in each case, proper provision
shall be made so that the successors and assigns of UCC or the Surviving
Corporation, as the case may be, honor the indemnification obligations set
forth in this Section 7.3.
(e) The obligations of UCC, the Surviving Corporation, and IP under
this Section 7.3 shall not be terminated or modified in such a manner as to
adversely affect any director, officer, employee, agent or other person to
whom this Section 7.3 applies without the consent of such affected director,
officer, employees, agents or other persons (it being expressly agreed that
each such director, officer, employee, agent or other person to whom this
Section 7.3 applies shall be third-party beneficiaries of this Section 7.3).
Section 7.4. Employee Benefits. (a) During the period
commencing on the Effective Time and ending on the first anniversary thereof,
IP shall provide (or
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shall cause the Surviving Corporation to provide) employees of UCC and the UCC
Subsidiaries with salary and benefits under employee benefit plans that are no
less favorable in the aggregate than those currently provided by UCC and the
UCC Subsidiaries to such employees (including, without limitation, benefits
pursuant to qualified and nonqualified retirement plans, savings plans,
medical, dental, disability and life insurance plans and programs, deferred
compensation arrangements, bonus and incentive compensation plans, and retiree
benefit plans, policies and arrangements). For purposes of any employee
benefit plan or arrangement maintained by IP, the Surviving Corporation or any
IP Subsidiary, IP shall recognize (or cause to be recognized) service with UCC
and the UCC Subsidiaries and any predecessor entities (and any other service
credited by UCC under similar benefit plans) for all purposes (including,
without limitation, for vesting, eligibility to participate, severance, and
benefit accrual, provided, however, that solely to the extent necessary to
avoid duplication of benefits, amounts payable under employee benefit plans
provided by IP, the Surviving Corporation or an IP Subsidiary may be reduced by
amounts payable under similar UCC Employee Plans with respect to the same
periods of service). Any benefits accrued by employees of UCC or any UCC
Subsidiary prior to the Effective Time under any defined benefit pension plan
of UCC or any UCC Subsidiary that employ a final average pay formula shall be
calculated based on such employees' final average pay with IP, the Surviving
Corporation or any IP Subsidiary or other Affiliate employing such employees.
From and after the Effective Time, IP shall, and shall cause the IP
Subsidiaries to, waive any pre-existing condition limitations and credit any
deductibles and out-of-pocket expenses that are applicable and/or covered under
the UCC Employee Plans, and are incurred by the employees and their
beneficiaries during the portion of the calendar year prior to participation in
the benefit plans provided by IP, the Surviving Corporations and the IP
Subsidiaries. The provisions of this Section 7.4 shall not create in any
employee or former employee of UCC or any UCC Subsidiary any rights to
employment or continued employment with IP or UCC or any of their respective
Subsidiaries or Affiliates.
(b) IP shall, and shall cause the Surviving Corporation and the IP
Subsidiaries to, provide at least 30 days' advance written notice of
termination of employment ("Advance Notice") of any employees or former
employees of UCC or any UCC Subsidiary.
(c) (i) Notwithstanding anything to the contrary in UCC's Deferred
Stock Unit Plan for Outside Directors (the "Stock Unit Plan"), the amounts
payable to participants pursuant to Section 9(c) of the Stock Unit Plan shall
be paid in IP Common Shares. The number of IP Common Shares payable to any
participant in the Stock Unit Plan shall be an amount equal to (i) the number
of
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stock units credited to such participant's account under the Stock Unit Plan
immediately prior to the Closing Date multiplied by (ii) the Exchange
Ratio; and
(ii) Notwithstanding anything to the contrary in UCC's
Restricted Stock Performance Plan (the "RSPP"), any amounts payable to
participants pursuant to Article X of the RSPP shall be paid in IP
Common Shares. The number of IP Common Shares payable to any
participant in the RSPP shall be an amount equal to (i) the amount
payable to such participant determined in accordance with Article X of
the RSPP, divided by (ii) the Average IP Share Price;
provided that, in the case of each of clauses (c)(i) and (c)(ii) of this
Section 7.4, UCC shall take any necessary steps to obtain the consent of
each participant under both the Stock Unit Plan and the RSPP to the matters
contemplated by such respective clauses.
(d) From and after the Effective Time, subject to Section 7.4(c),
IP shall honor, and shall cause the Surviving Corporation and the IP
Subsidiaries to honor, in accordance with its terms, UCC's severance programs
in effect as of the Closing Date (including, without limitation, the Severance
Policy for Key Employees, the Severance Policy for Certain Bonus Eligible
Employees and the Severance Policy for Salaried Employees), and each existing
UCC employment, change of control, severance and termination agreement between
UCC or any UCC Subsidiary, and any officer, director or employee of UCC or any
UCC Subsidiary, including without limitation all legal and contractual
obligations pursuant to existing benefit compensation plans of UCC in effect as
of the Effective Time (including any UCC employee benefit plan providing for
payments or other obligations as a result of a change in control of UCC).
Section 7.5. Stock Exchange Listing. IP shall use its best
efforts to cause the IP Common Shares to be issued in connection with the
Merger to be listed on the NYSE, subject to official notice of issuance.
Section 7.6. Conduct of MergerSub. IP will take all action
necessary to cause MergerSub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
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ARTICLE 8
Covenants of IP and UCC
The parties hereto agree that:
Section 8.1. Reasonable Best Efforts. Subject to the terms and
conditions hereof, each party will use 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 the transactions contemplated by this Agreement as promptly as
practicable; provided that, for these purposes, reasonable best efforts of
UCC, the Surviving Corporation, IP and/or MergerSub shall be deemed to include
(i) offering to enter into, and entering into, any settlement, undertaking,
consent decree, stipulation or agreement or agreeing to any order regarding
antitrust matters in connection with any objections of any Governmental Entity
to the transactions contemplated hereby and (ii) offering to divest to others
and/or hold separate, and divesting or otherwise holding separate (including by
establishing a trust or otherwise), or taking any other action (or otherwise
agreeing to do any of the foregoing) with respect to, any portion of its and/or
its Subsidiaries' business, assets or properties, other than any such action
pursuant to clause(s) (i) and/or (ii) requiring any divestiture, holding
separate (including by establishing a trust or otherwise) or sale (by whatever
means) of (or any agreement to do any of the foregoing) any of the facilities
described in Section 8.01 of the UCC Disclosure Schedule.
Section 8.2. Certain Filings; Cooperation in Receipt of
Consents. (a) Promptly after the date hereof, IP and UCC shall prepare and IP
shall file with the SEC the Registration Statement, in which the Proxy
Statement/Prospectus will be included as IP's prospectus. Each of UCC and IP
shall use all reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing
and to keep the Registration Statement effective as long as is necessary to
consummate the Merger. Each of UCC and IP shall mail the Proxy
Statement/Prospectus to their respective shareholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act and, if necessary, after the Proxy Statement/Prospectus shall
have been so mailed, promptly circulate amended, supplemental or supplemented
proxy material, and, if required in connection therewith, resolicit proxies.
IP shall also take any action required to be taken under any applicable state
securities or blue sky laws in connection with the issuance of IP Common
Shares in the Merger.
(b) No amendment or supplement to the Proxy Statement/Prospectus
will be made by UCC or IP without the approval of the other party, which will
not
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be unreasonably withheld or delayed. Each party will advise the other party,
promptly after it receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualification of the IP
Common Shares issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the Effective
Time, UCC or IP discovers any information relating to either party, or any of
their respective Affiliates, officers or directors, that should be set forth in
an amendment or supplement to the Proxy Statement/Prospectus, so that such
document 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 that
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 or regulation,
disseminated to the shareholders of UCC and IP.
(c) UCC and IP shall cooperate with one another in (i) determining
whether any other action by or in respect of, or filing with, any Governmental
Entity is required, or any actions, consents, approvals or waivers are required
to be obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated hereby, (ii) seeking any such
other actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith and seeking promptly
to obtain any such actions, consents, approvals or waivers and (iii) setting a
mutually acceptable date for the UCC Shareholder Meeting and the IP
Shareholder Meeting, so as to enable them to occur, to the extent practicable,
on the same date. Each party shall permit the other party to review any
communication given by it to, and consult with each other in advance of any
meeting or conference with, any Governmental Entity or, in connection with any
proceeding by a private party, with any other Person, and to the extent
permitted by the applicable Governmental Entity or other Person, give the
other party the opportunity to attend and participate in such meetings and
conferences, in each case in connection with the transactions contemplated
hereby.
Section 8.3. Public Announcements. The parties shall consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
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Section 8.4. Access to Information; Notification of Certain
Matters. (a) From the date hereof until the Effective Time and subject to
applicable law, UCC and IP shall (i) give to the other party, its counsel,
financial advisors, auditors and other authorized representatives reasonable
access to the offices, properties, books and records of such party, (ii)
furnish or make available to the other party, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating
data and other information as such Persons may reasonably request and (iii)
instruct its employees, counsel, financial advisors, auditors and other
authorized representatives to cooperate with the reasonable requests of the
other party in its investigation. Any investigation pursuant to this Section
shall be conducted in such manner as not to interfere unreasonably with the
conduct of the business of the other party. Unless otherwise required by law,
each of UCC and IP will hold, and will cause its respective officers,
employees, counsel, financial advisors, auditors and other authorized
representatives to hold, any nonpublic information obtained in any such
investigation in confidence in accordance with Section 8.8. No information or
knowledge obtained in any investigation pursuant to this Section 8.4 shall
affect or be deemed to modify any representation or warranty made by any party
hereunder.
(b) Each party hereto shall give prompt notice to each other party
hereto of:
(i) any communication received by such party from, or given
by such party to, any Governmental Entity in connection with any of the
transactions contemplated hereby; and
(ii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against,
relating to or involving or otherwise affecting such party or any of
its Subsidiaries that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.11,
4.12, 4.13, 4.14, 4.18 or 5.10, as the case may be, or that relate to
the consummation of the transactions contemplated by this Agreement
provided, however, that the delivery of any notice pursuant to this Section
8.4(b) shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 8.5. Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of UCC or
MergerSub, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of UCC or MergerSub, any other actions and
things to vest, perfect or confirm of
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record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of UCC
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
Section 8.6. Tax and Accounting Treatment. (a) Prior to the
Effective Time, each party shall use its best efforts to cause the Merger to
qualify as a 368 Reorganization, and will not take any action reasonably likely
to cause the Merger not so to qualify. IP shall not take, or cause the
Surviving Corporation to take, any action after the Effective Time reasonably
likely to cause the Merger not to qualify as a 368 Reorganization.
(b) Each party will use its best efforts to cause the Merger to
qualify for "pooling of interest" accounting treatment as described in Section
4.21(a), and will not take any action reasonably likely to cause the Merger
not so to qualify.
(c) Each party shall use its best efforts to obtain the opinions
referred to in Sections 9.1(f) and 9.02(b).
Section 8.7. Affiliate Letters. (a) UCC shall use its best
efforts to deliver to IP, within 45 days of the date hereof, a letter agreement
substantially in the form of Exhibit A-1 hereto executed by each Person who
may be deemed to be an "affiliate" of UCC under the Securities Act.
(b) IP shall use its best efforts to obtain, within 45 days of the
date hereof, a letter agreement substantially in the form of Exhibit A-2 hereto
executed by each Person who may be deemed to be an "affiliate" of IP under the
Securities Act.
(c) Within 30 days following the date hereof, UCC shall cause to be
delivered to IP a letter identifying, to the best of UCC's knowledge, all
Persons who may be deemed to be "affiliates" of UCC for purposes of Rule
145(c) under the Securities Act. UCC shall use commercially reasonable efforts
to cause each such Person who is so identified to deliver to IP on or prior to
the Effective Time a letter agreement substantially in the form of Exhibit A-3
to this Agreement.
Section 8.8. Confidentiality. Prior to the Effective Time and
after any termination of this Agreement each party hereto will hold, and will
use its best efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties hereto and the Subsidiaries furnished to such party in
connection with the transactions
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contemplated by this Agreement, except to the extent that such information can
be shown to have been (a) previously known on a nonconfidential basis by such
party, (b) in the public domain through no fault of such party or (c) later
lawfully acquired by such party from sources other than any of the other
parties hereto; provided that such party may disclose such information to its
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by this Agreement so
long as such Persons are informed by such party of the confidential nature of
such information and are directed by such party to treat such information
confidentially. Each party hereto's obligation to hold any such information in
confidence shall be satisfied if it exercises the same care with respect to
such information as it would take to preserve the confidentiality of its own
similar information. If this Agreement is terminated, each party hereto will,
and will use its best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver
to the party from whom such material was obtained, upon request, all documents
and other materials, and all copies thereof, obtained by such party or on its
behalf from any such other parties in connection with this Agreement that are
subject to such confidence.
Section 8.9. IP Standstill. If this Agreement is terminated,
then, for two years after the date of such termination, IP and each of its
successors or assigns will not, and will cause its Affiliates not to:
(i) acquire, offer or propose or otherwise seek to acquire,
or agree to acquire, directly or indirectly, by merger, purchase or
otherwise, beneficial ownership of any assets or in excess of 1% of
any class of securities of UCC or its Affiliates or any direct rights
or options to acquire (through purchase, exchange, conversion or
otherwise) any assets or in excess of 1% of any class of securities of
UCC or its Affiliates;
(ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are defined
in Rule 14a-1 of Regulation 14A promulgated by the SEC as of the date
hereof, disregarding clause (iv) of Rule 14a-1(1)(2), but including
any solicitation exempted pursuant to Rule 14a-2(b)(1) to vote
(including by the execution of actions by written consent), or seek to
advise, encourage or influence any person or entity with respect to
the voting of, any voting securities of UCC;
(iii) call, or in any way participate in a call for, any
meeting of shareholders of UCC (or take any action with respect to
shareholders acting by written consent);
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(iv) form, join or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to
any voting securities of UCC; or
(v) otherwise act to control or influence, or seek to
control or influence, UCC or the management, Board of Directors,
policies or affairs of UCC, including without limitation, (A) making
any offer or proposal to acquire any securities or assets of UCC or
any of its Affiliates or soliciting or proposing to effect or
negotiate any form of business combination, restructuring,
recapitalization or other extraordinary transaction involving UCC, its
Affiliates or any of their respective securities or assets, (B)
seeking board representation or the removal of any directors or a
change in the composition or size of the Board of Directors of UCC,
(C) making any request to amend or waive any provision of this Section
8.9, (D) disclosing any intent, purpose, plan or proposal with respect
to matters covered by this Section 8.9 or UCC, its Affiliates or the
boards of directors, management, policies or affairs or securities or
assets of UCC or its Affiliates that is inconsistent with this Section
8.9, including an intent, purpose, plan or proposal that is
conditioned on, or would require, waiver, amendment, nullification or
invalidation of any provision of this Section 8.9, or take any action
that could require UCC or any of its Affiliates to make any public
disclosure relating to any such intent, purpose, plan, proposal or
condition, or (E) assisting, advising or encouraging any person with
respect to, or seeking to do, any of the foregoing;
provided, however, that this Section 8.9 shall not apply if UCC does not
pay any portion of the Termination Fee when due or if IP terminates this
Agreement as a result of a willful breach of this Agreement by UCC;
provided, further, that, if this Section 8.9 is effective against IP (and
each of its successors and their respective Affiliates) during any such
two-year period after the date of any such termination, and either (x) UCC
shall have entered into an agreement with respect to any transaction that
constitutes an Acquisition Proposal (assuming for this purpose that this
Agreement had been effective at such time) for at least a majority of
either the voting securities of UCC then outstanding or the assets of UCC
and the UCC Subsidiaries, taken as a whole or (y) any Person or "group" (as
defined in Section 13(d)(3) of the Exchange Act) (other than UCC or any of
its Affiliates (excluding, for this purpose, UCC's management acting
independently of UCC)) shall have commenced any tender or exchange offer
that constitutes an Acquisition Proposal (assuming for this purpose that
this Agreement had been effective at such time) for at least a majority of
the voting securities of UCC then outstanding which offer is recommended by
UCC's Board of Directors to its shareholders, then at the time of the
public announcement of such agreement or of the commencement of such offer,
as applicable, this Section 8.9 shall terminate
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and have no further force or effect and there shall be no rights, liabilities
or obligations under this Section 8.09 on the part of IP, UCC, MergerSub, or
any of their respective officers, directors, shareholders, agents or
Affiliates.
Section 8.10. ASR 135. IP shall use its best efforts to
publish as promptly as reasonably practical, but in no event later than 90
days after the end of the first month after the Effective Time in which there
are at least 30 days of post-Merger combined operations (which month may be
the month in which the Effective Time occurs), combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
Section 8.11. Integration Committee. IP recognizes that UCC
has a talented group of officers and employees that will be important to the
future growth of the combined companies. In recognition of the foregoing,
promptly after the date hereof, IP will establish an Integration Committee
composed of senior executive officers of both IP and UCC, as selected by IP's
Chairman, who will have direct access to him and will be responsible for
proposing alternatives and recommendations to him regarding the matters and
issues arising in connection with the integration of the two companies and
their respective businesses, assets and organizations (including, without
limitation, matters arising in connection with the matters contemplated by
Section 7.4).
ARTICLE 9
Conditions to the Merger
Section 9.1. Conditions to the Obligations of Each Party. The
obligations of UCC, IP and MergerSub to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) each of the UCC Shareholder Approval and the IP Shareholder
Approval shall have been obtained.
(b) the IP Common Shares to be issued in the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
(c) (i) the Proxy Statement/Prospectus shall have become effective
in accordance with the provisions of the Securities Act, no stop order
suspending the effectiveness of the Proxy Statement/Prospectus shall have been
issued by the SEC and no proceedings for that purpose shall have been
initiated by the SEC and not concluded or withdrawn and (ii) all state
securities or blue sky authorizations
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necessary to carry out the transactions contemplated hereby shall have been
obtained and be in effect;
(d) (i) any applicable waiting period under the HSR Act relating to
the Merger shall have expired or been earlier terminated and (ii) if required
by applicable law, the parties shall have received a decision from the European
Commission under Regulation 4064/89 that the proposed Merger and any matters
arising therefrom fall within either Article 6.1(a) or Article 6.1(b) of such
Regulation and that, in any event, the Merger will not be referred to any
competent authority or dealt with by the European Commission pursuant to
Article 9.3 of such Regulation;
(e) no Governmental Entity of competent authority or jurisdiction
shall have issued any order, injunction or decree, or taken any other action,
which permanently restrains, enjoins or otherwise prohibits the consummation
of the Merger;
(f) (i) IP shall have received a letter from Arthur Andersen LLP
dated as of the Closing Date and addressed to IP, stating that Arthur Andersen
LLP believes that the acquisition of UCC by IP should be treated as a "pooling
of interests" in conformity with GAAP as described in Accounting Principles
Board Opinion No. 16 and applicable rules and regulations of the SEC and such
letter shall not have been withdrawn or modified in any material respect and
(ii) UCC shall have received a letter from PricewaterhouseCoopers LLP dated as
of the Closing Date and addressed to UCC, stating that PricewaterhouseCoopers
LLP believes that UCC is a pooling candidate for purposes of the transactions
contemplated in conformity with GAAP as described in Accounting Principles
Board Opinion No. 16 and applicable rules and regulations of the SEC and such
letter shall not have been withdrawn or modified in any material respect.
Section 9.2. Conditions to the Obligations of UCC. The
obligations of UCC to consummate the Merger are subject to the satisfaction of
the following further conditions:
(a) (i) IP and MergerSub each shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the time of the filing of the Articles of Merger, (ii) (A) the
representations and warranties of IP contained in this Agreement that are
qualified by reference to an IP Material Adverse Effect shall be true and
correct when made and at and as of the time of filing the Articles of Merger,
as if made at and as of such time and (B) all other representations and
warranties of IP shall have been true and correct when made and at and as of
the time of the filing of the Articles of Merger as if made at and as of such
time, except for such inaccuracies as are not reasonably
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likely, individually or in the aggregate, to have an IP Material Adverse
Effect, and (iii) UCC shall have received a certificate signed by the Chief
Executive Officer or Chief Financial Officer of IP to the foregoing effect;
(b) UCC shall have received an opinion of Sullivan & Cromwell in
form and substance reasonably satisfactory to UCC, on the basis of certain
facts, representations and assumptions set forth in such opinion, dated as of
the date of the filing of the Articles of Merger, to the effect that the
Merger will be treated for federal income tax purposes as a 368 Reorganization
and that each of IP, MergerSub and UCC will be a party to the reorganization
within the meaning of Section 368(b) of the Code. In rendering such opinion,
such counsel shall be entitled to rely upon representations of officers of UCC
and IP substantially to the effect of Exhibits B and C hereto respectively,
with such modifications as shall be reasonably necessary; and
(c) The parties shall have obtained or made all consents,
approvals, actions, orders, authorizations, registrations, declarations,
announcements and filings contemplated by Sections 4.3 and 5.3 which if not
obtained or made (i) would render consummation of the Merger illegal or (ii)
(assuming the Effective Time had occurred) would be reasonably likely to have
an IP Material Adverse Effect.
Section 9.3. Conditions to the Obligations of IP and
MergerSub. The obligations of IP and MergerSub to consummate the Merger are
subject to the satisfaction of the following further conditions:
(a) (i) UCC shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) (A) the representations and warranties of UCC contained
in this Agreement that are qualified by reference to a UCC Material Adverse
Effect shall be true and correct when made and at and as of the time of the
filing of the Articles of Merger, as if made at and as of such time and (B) all
other representations and warranties of UCC shall have been true and correct
when made and at and as of the time of filing of the Articles of Merger, as if
made as of such time, except for such inaccuracies as are not reasonably
likely, individually or in the aggregate, to have a UCC Material Adverse
Effect, and (iii) IP shall have received a certificate signed by the Chief
Executive Officer, President or Chief Financial Officer of UCC to the
foregoing effect; and
(b) The parties shall have obtained or made all consents,
approvals, actions, orders, authorizations, registrations, declarations,
announcements and filings contemplated by Sections 4.3 and 5.3 which if not
obtained or made (i) would render consummation of the Merger illegal or (ii)
(assuming the Effective
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Time had occurred) would be reasonably likely to have an IP Material Adverse
Effect or a UCC Material Adverse Effect.
ARTICLE 10
Termination
Section 10.1. Termination. This Agreement may be
terminated at any time prior to the Effective Time by written notice by the
terminating party to the other party (except if such termination is
pursuant to Section 10.1(a)), whether before or after the UCC Shareholder
Approval and/or the IP Shareholder Approval shall have been obtained:
(a) by mutual written agreement of IP and UCC.
(b) by either IP or UCC, if
(i) the Merger shall not have been consummated by
September 30, 1999 (the "End Date"); provided, however, that the right
to terminate this Agreement under this Section 10.1(b)(i) shall not be
available to any party whose breach of any provision of this Agreement
has resulted in the failure of the Merger to occur on or before the
End Date;
(ii) there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any Governmental Entity
having competent jurisdiction enjoining UCC, IP or MergerSub from
consummating the Merger is entered and such judgment, injunction,
judgment or order shall have become final and nonappealable and, prior
to such termination, the parties shall have used reasonable best
efforts to resist, resolve or lift, as applicable, such law,
regulation, judgment, injunction, order or decree;
(iii) at the IP Shareholder Meeting (including any adjournment
or postponement thereof), the IP Shareholder Approval shall not have
been obtained; or
(iv) at the UCC Shareholder Meeting (including any
adjournment or postponement thereof), the UCC Shareholder Approval
shall not have been obtained.
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(c) by UCC, (i) if IP's Board of Directors shall have amended,
modified, withdrawn, conditioned or qualified the IP Recommendation in a
manner adverse to UCC; (ii) if a breach of any representation, warranty,
covenant or agreement on the part of IP or MergerSub set forth in this
Agreement shall have occurred which would cause the condition set forth in
Section 9.2(a) not to be satisfied, and such condition shall be incapable of
being satisfied by the End Date; or (iii) as contemplated by Section 6.3(d).
(d) by IP, (i) if UCC's Board of Directors shall have (A) amended,
modified, withdrawn, conditioned or qualified the UCC Recommendation in a
manner adverse to IP and/or (B) recommended any Acquisition Proposal to UCC's
shareholders; (ii) if there shall have occurred a willful and material breach
of Section 6.3 by UCC, any UCC Subsidiary or any of their respective officers,
directors, employees, advisors or other agents; (iii) pursuant to the terms of
Section 6.3(d); or (iv) if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of UCC set forth
in this Agreement shall have occurred which would cause the condition set
forth in Section 9.3(a) not to be satisfied, and such condition is incapable of
being satisfied by the End Date.
Section 10.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 10.1 (including any such termination by way of
Section 6.3(d)), there shall be no liability or obligation on the part of IP,
UCC, MergerSub, or any of their respective officers, directors, shareholders,
agents or Affiliates, except as set forth in Section 10.3 which (without
limiting in any respect the respective rights and obligations of the parties
set forth in Section 11.9 prior to any termination in accordance with the
terms of this Agreement) shall be the sole and exclusive remedy of the parties
hereto in the event of such termination; provided that the provisions of
Sections 8.8, 8.9 (except as noted therein and, solely in connection with
Section 8.9, Section 11.9), 10.2, 10.3, 11.1, 11.4, 11.5, 11.7, 11.8 and 11.10
of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
Section 10.3. Fees and Expenses. (a) Except as set forth in
this Section 10.3, all fees and expenses incurred in connection herewith and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
(b) If this Agreement is terminated pursuant to Section
10.1(c)(iii), Section 10.1(d)(i)(B), Section 10.1(d)(ii) or Section
10.01(d)(iv) (but only if the failure to satisfy the condition specified
therein results from a willful breach by UCC of any of its representations,
warranties, covenants or agreements contained
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herein), UCC shall (i) pay to IP a termination fee equal to $150 million (the
"Termination Fee") and (ii) reimburse IP for its actual, documented
out-of-pocket expenses incurred to third parties in connection with the
transactions contemplated hereby not to exceed $10 million.
(c) If this Agreement is terminated by either party pursuant to
Section 10.1(b)(iv) and (x) prior to the UCC Shareholder Meeting, any Person or
"group" (as defined in Section 13(d)(3) of the Securities Act) shall have
publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal and (y) concurrently with or within 12 months after such
termination, a Third Party Acquisition Event occurs with the party that had
publicly announced such Acquisition Proposal or any Affiliate thereof, UCC
shall (i) (A) pay to IP 50% of the Termination Fee within one Business Day of
the entering into of any agreement constituting such a Third Party Acquisition
Event and (B) reimburse IP at such time for IP's actual, documented
out-of-pocket expenses incurred to third parties in connection with the
transactions contemplated hereby not to exceed $10 million and (ii) within one
Business Day of any consummation of the transaction contemplated by such Third
Party Acquisition Event (including any revisions or amendments thereto) pay to
IP 50% of the Termination Fee.
A "Third Party Acquisition Event" means (i) the consummation of
an Acquisition Proposal involving the purchase of a majority of either the
equity securities of UCC or of the consolidated assets of UCC and the UCC
Subsidiaries, taken as a whole, or any such transaction that, if it had been
proposed prior to the termination of this Agreement would have constituted an
Acquisition Proposal or (ii) the entering into by UCC or any of the UCC
Subsidiaries of a definitive agreement with respect to any such transaction.
(d) If this Agreement is terminated pursuant to Section
10.01(d)(i)(A), (i) UCC shall (A) pay to IP 50% of the Termination Fee and (B)
reimburse IP for IP's actual, documented out-of-pocket expenses incurred to
third parties in connection with the transaction contemplated by this
Agreement not to exceed $10 million and (ii) if concurrently with or within 12
months after such termination a Third Party Acquisition Event occurs, then UCC
shall pay to IP 50% of the Termination Fee within one Business Day of the
consummation of the transaction contemplated by such Third Party Acquisition
Event.
(e) If this Agreement is terminated pursuant to Section
10.1(b)(iii) or 10.01(c)(ii) (but only if the failure to satisfy the condition
specified therein results from a willful breach by IP or MergerSub of any of
its representations, warranties, covenants or agreements contained herein), IP
shall (i) pay to UCC the Termination Fee and (ii) reimburse UCC for its
actual, documented out-of-pocket
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expenses incurred to third parties in connection with the transactions
contemplated hereby not to exceed $10 million.
(f) If this Agreement is terminated pursuant to Section
10.01(c)(i), then IP shall (i) pay to UCC 50% of the Termination Fee and (ii)
reimburse UCC for UCC's actual, documented out-of-pocket expenses incurred to
third parties in connection with the transactions contemplated by this
Agreement not to exceed $10 million.
(g) Any payment of the Termination Fee (and reimbursement of
expenses) pursuant to this Section 10.3 shall be made within one Business Day
after termination of this Agreement (or as otherwise expressly set forth in
this Agreement). If one party fails to pay to (or reimburse) the other
promptly any fee or expense due hereunder (including the Termination Fee), the
defaulting party shall pay the costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee and/or expense at the publicly announced prime rate
of Citibank, N.A. from the date such fee was required to be paid to the date
it is paid.
ARTICLE 11
Miscellaneous
Section 11.1. Notices. Except as otherwise expressly set
forth in Section 6.3(c), all notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
if to IP or MergerSub, to:
International Paper Company
Two Manhattanville Road
Purchase, NY 10577
Attention: William B. Lytton
Facsimile: (914) 397-1909
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with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Dennis S. Hersch
Facsimile: (212) 450-4800
if to UCC, to:
Union Camp Corporation
1600 Valley Road
Wayne, NJ 07470
Attention: Dirk R. Soutendijk
Facsimile: (973) 628-2640
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: James C. Morphy
Facsimile: (212) 558-3588
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (a) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section and the appropriate facsimile confirmation is received or (b) if given
by any other means, when delivered at the address specified in this Section.
Section 11.2. Survival of Representations, Warranties and
Covenants after the Effective Time. The representations and warranties
contained herein and in any certificate or other writing delivered pursuant
hereto shall not survive the Effective Time or the termination of this
Agreement. The covenants contained in Articles 2 and 3 and Sections 6.04,
7.03, 7.04, 8.10, 8.11, 11.02, 11.04, 11.05, 11.06, 11.07 and 11.10 shall
survive the Effective Time.
Section 11.3. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Effective Time if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by UCC, IP and MergerSub or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that (i) after the UCC
Shareholder
54
<PAGE> 170
Approval, no such amendment or waiver shall, without the further approval of
such shareholders, be made that would require such approval under any
applicable law, rule or regulation and (ii) after the IP Shareholder Approval,
no such amendment or waiver shall, without the further approval of such
shareholders, be made that would require such approval under any applicable
law, rule or regulation.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
Section 11.4. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto, except that IP or
MergerSub may transfer or assign to any wholly owned IP Subsidiary the right
to enter into the transactions contemplated by this Agreement, provided that no
such assignment shall be permitted if it would delay or impede the Merger or
any of the other transactions contemplated by this Agreement, and any such
transfer or assignment will not relieve IP or MergerSub of its obligations
hereunder. Any purported assignment in violation hereof shall be null and
void.
Section 11.5. Governing Law. Except to the extent that the
laws of the State of New York, the Commonwealth of Virginia, the State of
Delaware or any other jurisdiction are mandatorily applicable to the matters
arising under or in connection with this Agreement, this Agreement shall be
construed in accordance with and governed by the internal laws of the State of
New York.
Section 11.6. Counterparts; Effectiveness; Third Party
Beneficiaries. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received counterparts hereof
signed by all of the other parties hereto. Except as set forth in Sections
3.4, 7.3 and 7.4(b), no provision of this Agreement is intended to confer upon
any Person other than the parties hereto any rights or remedies hereunder.
Section 11.7. Jurisdiction. Except as otherwise expressly
provided in this Agreement, the parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in
55
<PAGE> 171
connection with, this Agreement or the transactions contemplated hereby shall
be brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of
the parties hereby consents to the exclusive jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 11.1 shall
be deemed effective service of process on such party.
Section 11.8. Waiver of Jury Trial. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.9. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms. It is accordingly
agreed that the parties shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they are entitled
at law or in equity.
Section 11.10. Entire Agreement. This Agreement (together
with the exhibits and schedules hereto) constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersede
all prior agreements and understandings, both oral and written, between the
parties with respect to the subject matter hereof.
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<PAGE> 172
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
UNION CAMP CORPORATION
By: /s/ W. Craig McClelland
--------------------------------
Name: W. Craig McClelland
Title: Chief Executive Officer
INTERNATIONAL PAPER COMPANY
By: /s/ James P. Melican
--------------------------------
Name: James P. Melican
Title: Executive Vice President
MAPLE ACQUISITION, INC.
By: /s/ James P.Melican
--------------------------------
Name: James P. Melican
Title: President
57
<PAGE> 173
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL & CONFIDENTIAL ANNEX B
November 24, 1998
Board of Directors
Union Camp Corporation
1600 Valley Road
Wayne, NJ 07470
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial
point of view to the holders (other than International Paper Company ("IP") or
any of its subsidiaries) ("Holders") of the outstanding shares of Common Stock,
par value $1.00 per share (the "Shares"), of Union Camp Corporation (the
"Company") of the Exchange Ratio (as defined below) pursuant to the Agreement
and Plan of Merger, dated as of November 24, 1998 (the "Agreement"), among IP,
Maple Acquisition, Inc., a wholly-owned subsidiary of IP ("MergerSub"), and the
Company. Pursuant to the Agreement, the Company will be merged with MergerSub
and each outstanding Share will be converted into the right to receive a certain
number (the "Exchange Ratio") of shares of Common Stock, par value $1.00 per
share (the "IP Shares"), of IP. The Exchange Ratio shall be determined by
dividing $71.00 by the Average IP Share Price (as defined in the Agreement),
provided that, (i) if the Average IP Share Price is less than $43.70, the
Exchange Ratio shall be 1.6247 and (ii) if the Average IP Share Price is greater
that $48.30, the Exchange Ratio shall be 1.4700.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged 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, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as lead manager of a
public offering of $150 million of 6.50% Notes due November 15, 2007 in November
1997 and as lead manager of a public offering of $150 million of 7% Notes due
August 15, 2006 in August 1996; having acted as co-dealer on the Company's
commercial paper program; and having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Agreement. We also have provided certain investment
<PAGE> 174
banking services to IP from time to time, including acting as sole dealer for
IP's commercial paper program, and may provide investment banking services to IP
in the future. Goldman Sachs provides a full range of financial advisory and
securities services and, in the course of its normal trading activities may from
time to time effect transactions and hold securities, including derivative
securities, of the Company or IP for its own account and for the accounts of
customers.
In connection with this opinion, we have reviewed, among other things,
the Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company and IP for the five years ended December 31, 1997; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
IP; certain other communications from the Company and IP to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management, including certain cost savings and operating
synergies projected by the management of the Company to result from the
transaction contemplated by the Agreement (the "Synergies"). We also have held
discussions with members of the senior management of the Company and IP
regarding the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Shares and IP Shares, compared certain financial and stock market
information for the Company and IP with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the paper and forest products
industry specifically and in other industries generally, and performed such
other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the
financial and other information reviewed by us and have assumed such accuracy
and completeness for purposes of rendering this opinion. In that regard, we have
assumed with your consent that the Synergies prepared by the management of the
Company have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the Company. As you are aware, we were
informed by the senior management of IP that internal financial projections for
IP were not available. Accordingly, our review of IP's future financial
performance for purposes of rendering our opinion was limited to discussions
with the management of IP of certain research analysts' estimates of IP's future
financial performance. In addition, we have not made an independent evaluation
or appraisal of the assets and liabilities of the Company or IP or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We also have assumed with your consent that the transaction
contemplated by the Agreement will be accounted for as a pooling-of-interests
under generally accepted accounting principles. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
<PAGE> 175
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Shares should vote with respect to such
transaction.
Based upon and subject to the foregoing and based upon such other
matters as we consider relevant, it is our opinion that as of the date hereof
the Exchange Ratio pursuant to the Agreement is fair from a financial point of
view to the Holders of Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
<PAGE> 176
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Annex C
November 24, 1998
Board of Directors
International Paper Company
Two Manhattanville Road
Purchase, NY 10577
Members of the Board:
You have asked us to advise you with respect to the fairness to International
Paper Company ("IP") from a financial point of view of the Exchange Ratio (as
defined below) set forth in the Agreement and Plan of Merger, dated as of
November 24, 1998 (the "Merger Agreement"), by and among Union Camp Corporation
(the "Company"), IP and Maple Acquisition, Inc., a wholly owned subsidiary of IP
("Sub"). The Merger Agreement provides for, among other things, the merger (the
"Merger") of Sub with and into the Company pursuant to which each outstanding
share of common stock, par value $1.00 per share, of the Company (the "Company
Common Shares") will be converted into the right to receive that number of
shares of the common stock, par value $1.00 per share, of IP (the "IP Common
Shares") equal to a fraction, (x) the numerator of which will be $71.00 and (y)
the denominator of which will be the Average IP Share Price (as defined below)
(the aggregate number of shares of IP Common Shares into which the Company
Common Shares will be so converted, the "Exchange Ratio"), provided, that (i) if
the Average IP Share Price is less than $43.70, the Exchange Ratio shall be
1.6247 and (ii) if the Average IP Share Price is greater than $48.30, the
Exchange Ratio shall be 1.4700. As defined in the Merger Agreement, (i) "Average
IP Share Price" means the average closing price per IP Common Share on the New
York Stock Exchange, Inc. (the "NYSE") Composite Tape for the Random Trading
Days and (ii) "Random Trading Days" means the ten trading days selected by lot
out of the twenty trading days ending on and including the fifth trading day
preceding the effective time of the Merger.
In arriving at our opinion, we have reviewed the Merger Agreement and certain
publicly available business and financial information relating to IP and the
Company. We have also reviewed certain other information relating to IP and the
Company, including financial forecasts from publicly available sources, and have
met with management of IP and the Company to discuss the businesses and
prospects of IP and the Company.
We have also considered certain financial and stock market data of IP and the
Company, and we have compared those data with similar data for other publicly
held companies in businesses similar to IP and the Company and we have
considered, to the extent publicly available, the financial terms of certain
other business combinations and other transactions which have recently been
effected. We also considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
it being complete and accurate in all material respects. With respect to the
publicly available financial forecasts, IP management has reviewed such
forecasts and has
<PAGE> 177
informed us that it believes that such forecasts represent reasonable estimates
and judgements of the future financial performance of IP and the Company. With
respect to the cost savings and other potential synergies (including the amount,
timing and achievability thereof) anticipated to result from the Merger IP
management has informed us, and we have assumed, that such estimates represent
the best currently available estimates of the management of IP and the Company.
IP management has informed us, and we have assumed, that the Merger will be
treated as a tax-free reorganization for federal income tax purposes and
accounted for as a pooling of interests in accordance with generally accepted
accounting principles. In addition, we have not been requested to make, and have
not made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of IP or the Company, nor have we been furnished with
any such evaluations or appraisals. Our opinion is necessarily based upon
information available to us and financial, economic, market and other conditions
as they exist and can be evaluated on the date hereof. We are not expressing any
opinion as to what the value of the IP Common Shares actually will be when
issued pursuant to the Merger or the prices at which the IP Common Shares will
trade subsequent to Merger.
We have acted as financial advisor to IP in connection with the Merger and will
receive a fee for our services, a significant portion of which is contingent
upon the consummation of the Merger. We have provided in the past, and are
currently providing, financial services to IP and its affiliates unrelated to
the proposed Merger, for which services we have received compensation. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the debt and equity securities of IP and the Company for their
own accounts and for the accounts of customers and, accordingly, may at any time
hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of IP in connection with its evaluation of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to any matter relating to the Merger, and is not to be quoted
or referred to, in whole or in part, in any registration statement, prospectus
or proxy statement, or in any other document used in connection with the
offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair to IP from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Jeffrey Salzman
-------------------
<PAGE> 178
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
INDEMNIFICATION. Section 721 of the New York Business Corporation Law ("NYBCL")
provides that, in addition to indemnification provided in Article 7 of the
NYBCL, 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 NYBCL 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 reasonably 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 NYBCL 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 reasonably 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 NYBCL in respect
of a threatened or pending action which is settled or otherwise disposed of or
any claim 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 NYBCL specifies the manner in which payment of
indemnification under Section 722 of the NYBCL or indemnification permitted
under Section 721 of the NYBCL 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 NYBCL provides, that, upon application by a director or
officer, indemnification may be awarded by a court to the extent authorized
under Section 722 and Section 723 of the NYBCL contains certain other
miscellaneous provisions affecting the indemnification of directors and
officers.
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<PAGE> 179
Section 726 of the NYBCL 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 section, (2)
directors and officers in instances in which they may be indemnified by a
corporation under such section, and (3) directors and officers in instances in
which they may not otherwise be indemnified by a corporation under such section,
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
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 International Paper 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."
INSURANCE. International Paper has purchased certain liability insurance for
its officers and directors as permitted by Section 727 of the NYBCL and has
entered into indemnity agreements with its directors and certain officers
providing indemnification in addition to that provided under the NYBCL as
permitted by Section 721 of the NYBCL.
UNION CAMP DIRECTORS AND OFFICERS. The merger agreement provides that Union
Camp's indemnification provisions shall survive the merger and shall not be
modified for at least six years after the Effective Time in any manner that
would adversely affect the rights of persons indemnified thereunder.
The Union Camp bylaws provide that Union Camp shall indemnify a director or
officer of Union Camp who is or was made a party to any proceeding by reason of
the fact that he is or was such a director or officer or is or was serving any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, at the request of Union Camp if:
- he believed, in the case of conduct in his official capacity, that his
conduct was in the best interests of the corporation, and in all other
cases that his conduct was at least not opposed to the corporation's best
interests and, in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful;
- in connection with a proceeding by or in the right of Union Camp, he was
not adjudged liable to Union Camp; and
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<PAGE> 180
- in connection with any proceeding charging improper benefit to him,
whether or not involving action in his official capacity, he was not
adjudged liable on the basis that personal benefit was improperly
received by him.
Furthermore, the Union Camp bylaws provide that each director and officer of
Union Camp shall be indemnified against all costs and expenses reasonably
incurred by or imposed upon him in connection with or resulting from any action,
suit or proceeding to which he may be made a party by reason of his being or
having been a director or officer of Union Camp, whether or not he continues to
be a director or officer at the time of incurring such cost or expense, except
in relation to matters as to which a recovery shall be had against him by reason
of his having been finally adjudged in such action, suit or proceeding to have
been derelict in the performance of his duty as a director or officer.
The merger agreement also provides that Union Camp shall indemnify and hold
harmless, and, after the effective time of the merger, International Paper
shall, and shall cause the surviving corporation to, indemnify and hold
harmless, to the fullest extent permitted under applicable law, each present and
former director or officer of Union Camp and each Union Camp subsidiary against
all liabilities and expenses, including reasonable attorneys' fees, arising out
of or pertaining to any action or omission in their capacity as an officer or
director, in each case occurring before the Effective Time (including the
transactions contemplated by the merger agreement).
For six years from the effective time of the merger, the surviving corporation
shall provide to Union Camp's current directors and officers liability insurance
protection of the same kind and scope as that provided by Union Camp's
directors' and officers' liability insurance policies as of the date hereof;
provided, however, that in no event shall the surviving corporation be required
to expend in any one year an amount in excess of 200% of the annual premiums
currently paid by Union Camp for such insurance; and, provided, further, that if
the annual premiums of such insurance coverage exceed such amount, the surviving
corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2 Agreement and Plan of Merger dated as of November 24, 1998
among International Paper Company, Union Camp Corporation
and Maple Acquisition, Inc. (included as Annex A to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
3(a) Form of Restated Certificate of Incorporation of
International Paper (incorporated by reference to
International Paper's registration statement on Form 8-K
dated November 20, 1990).
3(b) Form of Restated Bylaws of International Paper (incorporated
by reference to International Paper's registration statement
on Form 8-K dated September 10, 1998).
4 Specimen Common Stock Certificate (incorporated by reference
to Exhibit 2-A to the International Paper's registration
statement on Form S-7, no. 2-56588, dated June 10, 1976).
</TABLE>
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<PAGE> 181
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
5 Opinion of Davis Polk & Wardwell regarding the validity of
the securities being registered.*
8 Opinion of Sullivan & Cromwell regarding certain federal
income tax consequences relating to the merger.*
8(a) Opinion of Hunton & Williams regarding the validity of the
merger under Virginia law.*
23(a) Consent of Arthur Andersen LLP.*
23(b) Consent of PricewaterhouseCoopers LLP.*
23(c) Consent of Davis Polk & Wardwell (included in the opinion
filed as Exhibit 5 to this Registration Statement).
23(d) Consent of Sullivan & Cromwell (included in the opinion
filed as Exhibit 8 to this Registration Statement).
24 Power of Attorney.*
99(a) Consent of Goldman, Sachs & Co.*
99(b) Consent of Credit Suisse First Boston Corporation.*
99(c) Form of International Paper Proxy Card and related
materials.*
99(d) Form of Union Camp Proxy Card and related materials.*
99(e) Consent of W. Craig McClelland to Become a Director of
International Paper Company.*
</TABLE>
* Filed previously with Registration Statement on Form S-4 (No. 333-75235) on
March 30, 1999.
(b) Not applicable.
(c) The opinions of Goldman, Sachs & Co. and Credit Suisse First Boston
Corporation are included as Annex B and Annex C, respectively, to the Joint
Proxy Statement/Prospectus contained in this Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) 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 of 1993;
(ii) To reflect in the 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. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than
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<PAGE> 182
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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.
(b) The undersigned registrant hereby undertakes:
(1) 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), 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.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Securities Act of 1933 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 of 1933, 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) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) 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.
(4) To respond to requests for information that is incorporated by
reference into the Joint Proxy Statement/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.
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<PAGE> 183
(5) 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.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, 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 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 Act and will be governed by the final
adjudication of such issue.
II-6
<PAGE> 184
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 1 to Registration Statement Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the County of
Westchester, State of New York, on March 30, 1999.
INTERNATIONAL PAPER COMPANY
(Registrant)
Date: March 30, 1999 By: /s/ JAMES W. GUEDRY
---------------------------------------
James W. Guedry, Vice President and
Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints James
W. Guedry and Barbara 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, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
and supplements to this Registration Statement, 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, 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 their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, Chief Executive March 30, 1999
- --------------------------------------------------- Officer and Director (Principal
(John T. Dillon) Executive Officer)
* Executive Vice President and March 30, 1999
- --------------------------------------------------- Director
(C. Wesley Smith)
* Senior Vice President and Chief March 30, 1999
- --------------------------------------------------- Financial Officer (Principal
(Marianne M. Parrs) Financial Officer)
* Vice President and Controller March 30, 1999
- --------------------------------------------------- (Principal Accounting Officer)
(Andrew R. Lessin)
* Director March 30, 1999
- ---------------------------------------------------
(Peter I. Bijur)
</TABLE>
II-7
