AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JAMES RIVER CORPORATION
OF VIRGINIA
(Exact name of Registrant as Specified in Its Charter)
VIRGINIA 2621 54-0848173
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
120 TREDEGAR STREET
RICHMOND, VIRGINIA 23219
(804) 644-5411
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------
CLIFFORD A. CUTCHINS, IV, ESQ.
JAMES RIVER CORPORATION OF VIRGINIA
120 TREDEGAR STREET
RICHMOND, VIRGINIA 23219
(804) 644-5411
(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of
Agent For Service)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
PATRICIA A. VLAHAKIS, ESQ. FAITH D. GROSSNICKLE, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ SHEARMAN & STERLING
51 WEST 52ND STREET 599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019-6150 NEW YORK, NEW YORK 10022
(212) 403-1000 (212) 848-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of the 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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED(2) PER SHARE(3) PRICE(4) REGISTRATION FEE(4)
<S> <C> <C> <C> <C>
Common Stock,
$.10 par value (1)........ 104,707,425 $34.82 $3,645,722,135 $1,104,765
</TABLE>
(1) Includes one attached preferred share purchase right per share of common
stock, par value $.10 per share, of James River Corporation of Virginia
("James River Common Stock").
(2) Based upon 76,150,854, the number of shares of common stock, par value $.01
per share, of Fort Howard ("Fort Howard Common Stock") outstanding on June
23, 1997, which shares will be exchanged for shares of James River Common
Stock pursuant to the Merger described herein, times 1.375, the exchange
ratio in the Merger.
(3) Calculated in accordance with Rule 457(f)(1) under the Securities Act of
1933, as amended (the "Securities Act"), based on the aggregate market value
on June 23, 1997 of the shares of Fort Howard Common Stock expected to be
canceled in connection with the Merger and computed by dividing (x) the
product of (A) the average of the high and low bid prices per share of Fort
Howard Common Stock as reported on the NASDAQ National Market on June 23,
1997 ($47 7/8) and (B) 76,150,854, representing the maximum number of shares
of Fort Howard Common Stock expected to be canceled in connection with the
Merger, by (y) 104,707,425, representing the maximum number of shares of
James River Common Stock to be issued in connection with the Merger.
(4) The registration fee of $1,104,765 and maximum aggregate offering price of
$3,645,722,135 have been calculated pursuant to Rule 457(f) under the
Securities Act as follows: 1/33 of 1% of the product of: (x) $47 7/8, the
average of the high and low bid prices per share of Fort Howard Common Stock
as reported on the NASDAQ National Market on June 23, 1997, and (y)
76,150,854, the maximum number of shares of Fort Howard Common Stock
expected to be canceled in the Merger. A fee of $721,538 was paid on June 6,
1997 pursuant to Section 14(g) of the Securities Exchange Act of 1934, as
amended, in connection with the filing of preliminary proxy materials by
James River and Fort Howard. Pursuant to Rule 457(b) under the Securities
Act, the registration fee payable herewith has been reduced by $721,538, the
amount previously paid upon filing of such preliminary proxy materials.
Accordingly, an additional fee of $383,227 is required to be and has been
paid with the initial filing of this Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO] JAMES RIVER CORPORATION OF VIRGINIA
, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
James River Corporation of Virginia which will be held on Tuesday, August 12,
1997, at The Chicago Club, 81 East Van Buren Street, Chicago, Illinois. The
meeting will start at 11:00 a.m., local time.
At this important meeting you will be asked to vote on certain matters
relating to the proposed "merger-of-equals" between James River and Fort Howard
Corporation. To accomplish the merger, James River has agreed to issue 1.375
James River common shares (and the corresponding percentage of a related
preferred share purchase right) in exchange for each Fort Howard common share
outstanding immediately before the merger. Based on the capitalization of James
River and Fort Howard as of the date of the merger agreement, the common
stockholders of Fort Howard would have received approximately 50% of the total
voting power of the combined company if the merger had been consummated on that
date.
The matters relating to the merger that you are being asked to vote on
include approving the issuance of James River common shares in the merger with
Fort Howard, an amendment to James River's articles of incorporation to increase
the number of authorized James River common shares and to change James River's
corporate name to "Fort James Corporation" following the merger, an amendment to
James River's bylaws to increase the number of directors on the Board of
Directors to fifteen and certain amendments to James River's 1996 Stock
Incentive Plan to increase the number of common shares that are issuable under
the plan and to allow James River to preserve its maximum tax deduction for
certain incentive compensation paid to senior executives.
Your Board of Directors believes that the merger with Fort Howard will
create a preeminent worldwide consumer products company and will provide
significant benefits to James River's shareholders, customers and employees. By
combining Fort Howard's low-cost manufacturing capabilities and world-class
technology with James River's strong marketing capabilities, brands and global
reach, the combined company will be better positioned to capitalize on growth
opportunities in the worldwide tissue industry. Fort James Corporation (the new
name of the combined company after the merger) intends to reduce expenses and
increase efficiency by combining complementary technologies, optimizing product
manufacturing and logistics across combined systems, increasing purchasing
efficiencies, eliminating redundant overhead costs, consolidating work forces
where duplication exists and improving product quality and productivity. Fort
James is expected to recognize cost savings of at least $150 million in 1998,
increasing to more than $200 million per year over time. Your Board of Directors
unanimously approved the merger and believes that the merger is in your best
interest.
Regardless of the number of shares you own or whether you plan to attend,
it is important that your shares be represented and voted at the meeting. We ask
that you take the time to vote by completing and mailing the enclosed proxy card
promptly. Your Board of Directors recommends that you vote FOR the issuance of
shares in the merger, FOR the amendments to James River's articles of
incorporation and bylaws and FOR the amendments to the stock incentive plan.
This document provides detailed information about the merger with Fort
Howard and the related matters on which you are voting. I encourage you to read
this document thoroughly. In addition, you can find more information about James
River and Fort Howard in the documents we and they have filed with the
Securities and Exchange Commission. Instructions on how to obtain these
documents are included in the enclosed materials. If you have any questions or
comments about the matters discussed in this document or the operation of your
company, please call our Investor Relations Department, toll free, at (888)
649-4362. We look forward to seeing you at the meeting.
Sincerely,
/s/ MILES L. MARSH
Miles L. Marsh
Chairman and Chief Executive
Officer
<PAGE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THE JAMES RIVER COMMON SHARES TO BE ISSUED IN THE MERGER
OR DETERMINED IF THIS DOCUMENT IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Joint Proxy Statement-Prospectus dated June 26, 1997, and first mailed to
shareholders on or about , 1997.
<PAGE>
JAMES RIVER CORPORATION OF VIRGINIA
120 TREDEGAR STREET
RICHMOND, VIRGINIA 23219
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
JAMES RIVER CORPORATION OF VIRGINIA:
James River Corporation of Virginia ("James River") will hold a special
meeting of its shareholders on Tuesday, August 12, 1997, at 11:00 a.m., local
time, at The Chicago Club, 81 East Van Buren Street, Chicago, Illinois, for the
following purposes:
(1) To consider and act upon a proposal to approve the issuance of shares
of common stock, par value $.10 per share, of James River ("James River Common
Shares") in accordance with the Agreement and Plan of Merger, dated as of May 4,
1997, by and among James River, James River Delaware, Inc., a wholly owned
subsidiary of James River ("Merger Sub"), and Fort Howard Corporation ("Fort
Howard") pursuant to which Merger Sub will be merged with and into Fort Howard
(the "Merger"), with Fort Howard as the surviving corporation in the Merger.
(2) To consider and act upon a proposal to amend the articles of
incorporation of James River to (a) increase to 500 million the total number of
James River Common Shares that James River is authorized to issue and (b) change
James River's corporate name to "Fort James Corporation," effective as of the
effective time of the proposed Merger.
(3) To consider and act upon a proposal to amend the bylaws of James River
to increase to fifteen the number of members on the Board of Directors of James
River.
(4) To consider and act upon a proposal to amend the James River 1996 Stock
Incentive Plan to increase by eight million the number of James River Common
Shares available for issuance under such plan and to provide for
performance-based awards under such plan.
(5) To transact such other business as may properly come before the
meeting.
Each proposal will be voted upon separately by shareholders; however, the
Merger will not be completed and the other actions contemplated in the proposals
will not be effected unless all of the proposals are approved by the required
vote of James River shareholders.
The record date for determining the holders of James River Common Shares
and holders of depositary shares representing James River's Series P 9%
Cumulative Convertible Preferred Stock entitled to vote at the special meeting
or any adjournment is the close of business on June 30, 1997. A list of
shareholders entitled to vote at the special meeting will be available for
inspection by any shareholder during regular business hours at James River's
offices, 120 Tredegar Street, Richmond, Virginia, for ten days prior to the date
of the meeting and will also be available at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE TO
APPROVE THE PROPOSALS LISTED ABOVE, WHICH ARE DESCRIBED IN DETAIL IN THE
ACCOMPANYING JOINT PROXY STATEMENT-PROSPECTUS. Please sign and promptly return
the proxy card in the enclosed envelope, whether or not you expect to attend the
meeting.
By Order of the Board of Directors,
/s/ Clifford A. Cutchins, IV
Clifford A. Cutchins, IV
CORPORATE SECRETARY
Richmond, Virginia
, 1997
<PAGE>
[FORT HOWARD LOGO]
, 1997
Dear Fort Howard Corporation Stockholder,
You are cordially invited to attend our special meeting of stockholders on
Tuesday, August 12, 1997, at The Metropolitan Club, 66th Floor, Sears Tower, 233
South Wacker Drive, Chicago, Illinois, at 11:00 a.m., local time.
At the special meeting, you will vote on a proposal to approve the
"merger-of-equals" between Fort Howard and James River Corporation of Virginia.
As a result of the proposed merger, you and the shareholders of James River will
become the owners of a combined company, renamed Fort James Corporation. I will
be the President and Chief Operating Officer of Fort James, and the directors
and management will come from both companies.
In the merger, each outstanding share of Fort Howard common stock will be
converted into the right to receive 1.375 shares of James River common stock and
the corresponding percentage of a related preferred share purchase right. Based
on the capitalization of Fort Howard and James River as of the date of the
merger agreement, Fort Howard stockholders would have received approximately 50%
of the total voting power of the combined company if the merger had been
consummated on that date. This document provides detailed information about the
merger. I encourage you to read it thoroughly.
Your Board of Directors believes that the merger with James River will
create a preeminent worldwide consumer products company and will provide
significant benefits to Fort Howard's stockholders, customers and employees. By
combining Fort Howard's low-cost manufacturing capabilities and world-class
technology with James River's strong marketing capabilities, brands and global
reach, the combined company will be better positioned to capitalize on growth
opportunities in the worldwide tissue industry. Fort James intends to reduce
expenses and increase efficiency by combining complementary technologies,
optimizing product manufacturing and logistics across combined systems,
increasing purchasing efficiencies, eliminating redundant overhead costs,
consolidating work forces where duplication exists and improving product quality
and productivity. Fort James is expected to recognize cost savings of at least
$150 million in 1998, increasing to more than $200 million per year over time.
FORT HOWARD'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO
YOU AND IN YOUR BEST INTERESTS. THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER, AND RECOMMENDS THAT YOU VOTE TO APPROVE THE MERGER
AGREEMENT.
Because of the significance of the merger, your participation in the
special meeting, in person or by proxy, is especially important. We urge you to
mark, sign and return the enclosed proxy card promptly in the enclosed
postage-paid envelope to ensure that your shares of common stock will be
represented at the special meeting.
Thank you and we look forward to seeing you at the special meeting.
Sincerely,
/s/ MICHAEL T. RIORDAN
Michael T. Riordan
Chairman, President and
Chief Executive Officer
NEITHER THE SECURITIES EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORS
HAVE APPROVED THE MERGER DESCRIBED IN THIS JOINT PROXY STATEMENT-PROSPECTUS OR
THE JAMES RIVER COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER, NOR
HAVE THEY DETERMINED IF THIS JOINT PROXY STATEMENT-PROSPECTUS IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Joint Proxy Statement-Prospectus is dated June 26, 1997 and
is first being mailed to stockholders on or about , 1997
<PAGE>
FORT HOWARD CORPORATION
1919 SOUTH BROADWAY
GREEN BAY, WISCONSIN 54304
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of Fort Howard Corporation:
A Special Meeting of Stockholders of Fort Howard Corporation, a Delaware
corporation ("Fort Howard"), will be held on Tuesday, August 12, 1997, at 11:00
a.m., local time, at The Metropolitan Club, 66th Floor, Sears Tower, 233 South
Wacker Drive, Chicago, Illinois (the "Fort Howard Special Meeting"), to consider
and vote upon a proposal to adopt the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of May 4, 1997, by and among Fort Howard, James River
Corporation of Virginia, a Virginia corporation ("James River"), and James River
Delaware, Inc., a Delaware corporation and a wholly owned subsidiary of James
River ("Merger Sub"), a copy of which is attached as Appendix A to the Joint
Proxy Statement-Prospectus that accompanies this notice. The Merger Agreement
provides for the merger of Merger Sub with and into Fort Howard (the "Merger").
If the Merger Agreement is adopted and the Merger is consummated, (i) each
issued and outstanding share of Fort Howard common stock, par value $.01 per
share ("Fort Howard Common Shares"), other than certain shares owned by Fort
Howard and James River, will be converted into the right to receive 1.375 shares
of James River common stock, par value $.10 per share ("James River Common
Shares") and the corresponding percentage of a preferred share purchase right,
and (ii) at the effective time of the Merger, James River's name will be changed
to Fort James Corporation.
Holders of record of Fort Howard Common Shares at the close of business on
June 30, 1997 (the "Record Date") will be entitled to vote at the Fort Howard
Special Meeting or any adjournments or postponements thereof. On the Record
Date, there were Fort Howard Common Shares outstanding (excluding treasury
shares), each of which is entitled to one vote with respect to each matter to be
voted on at the Fort Howard Special Meeting.
THE BOARD OF DIRECTORS OF FORT HOWARD HAS DETERMINED THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF FORT HOWARD, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER, AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE TO ADOPT THE MERGER AGREEMENT AT THE FORT
HOWARD SPECIAL MEETING.
The affirmative vote of a majority of the shares of Fort Howard Common
Shares outstanding on the Fort Howard Special Meeting Record Date is required to
adopt the Merger Agreement. Detailed information concerning the Merger Agreement
and the Merger is contained in the attached Joint Proxy Statement-Prospectus
which you are urged to read carefully.
WHETHER OR NOT YOU EXPECT TO ATTEND THE FORT HOWARD SPECIAL MEETING IN
PERSON, PLEASE COMPLETE, SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. A STOCKHOLDER WHO EXECUTES A PROXY MAY REVOKE IT AT ANY
TIME BEFORE IT IS EXERCISED BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
CORPORATE SECRETARY OF FORT HOWARD, BY SUBSEQUENTLY FILING ANOTHER PROXY OR BY
ATTENDING THE FORT HOWARD SPECIAL MEETING AND VOTING IN PERSON. STOCKHOLDERS
SHOULD NOT SEND IN THEIR STOCK CERTIFICATES WHEN RETURNING THEIR PROXIES. IF THE
MERGER AGREEMENT IS ADOPTED AND THE MERGER IS CONSUMMATED, STOCKHOLDERS WILL BE
NOTIFIED AND FURNISHED INSTRUCTIONS ON HOW AND WHEN TO SURRENDER THEIR STOCK
CERTIFICATES.
<PAGE>
THE BOARD OF DIRECTORS OF FORT HOWARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO ADOPT THE MERGER AGREEMENT AT THE FORT HOWARD SPECIAL MEETING.
By Order of the Board of Directors
Green Bay, Wisconsin
, 1997 /s/ JAMES W. NELLEN II
James W. Nellen II
Vice President and Secretary
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
HOLDERS OF FORT HOWARD COMMON STOCK SHOULD
NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................................................. 1
THE PROPOSED MERGER..................................................................................... 12
Background of the Merger.............................................................................. 12
Reasons for the Merger; Recommendations of the Boards of Directors.................................... 15
Opinions of James River's Financial Advisors.......................................................... 17
Opinion of Fort Howard's Financial Advisor............................................................ 22
Agreements with Certain Fort Howard Stockholders...................................................... 25
Material Federal Income Tax Consequences.............................................................. 26
Accounting Treatment.................................................................................. 27
HSR Act and Other Regulatory Approvals................................................................ 28
No Appraisal Rights................................................................................... 29
Cautionary Statement Concerning Forward-Looking Statements............................................ 29
Restrictions on Resales by Affiliates................................................................. 30
Fort James Financing.................................................................................. 30
MARKET PRICES AND DIVIDENDS............................................................................. 31
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION............................................ 32
INTERESTS OF CERTAIN PERSONS IN THE MERGER.............................................................. 42
Interests of Certain Fort Howard Stockholders......................................................... 42
The Stockholders Agreement......................................................................... 42
The Registration Rights Agreement.................................................................. 42
Relationships with MS&Co. and its Affiliates....................................................... 43
Outstanding Equity-Based Compensation Awards.......................................................... 43
Employment Agreement of James River Chairman and Chief Executive Officer.............................. 43
Employment Agreement of Fort Howard Chairman and Chief Executive Officer.............................. 44
Arrangements with Other Executive Officers............................................................ 45
Indemnification and Insurance......................................................................... 46
DIRECTORS AND MANAGEMENT OF FORT JAMES FOLLOWING THE MERGER............................................. 47
Directors............................................................................................. 47
Senior Executives of Fort James Following the Merger.................................................. 47
DIRECTORS AND EXECUTIVE OFFICERS; EXECUTIVE COMPENSATION; STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE
OFFICERS AND PRINCIPAL SHAREHOLDERS................................................................... 48
THE FORT HOWARD SPECIAL MEETING......................................................................... 48
General............................................................................................... 48
Matters to be Considered and Acted Upon............................................................... 49
Date, Place and Time.................................................................................. 49
Record Date........................................................................................... 49
Votes Required for Approval........................................................................... 49
Voting and Revocation of Proxies...................................................................... 49
Solicitation of Proxies............................................................................... 50
THE JAMES RIVER SPECIAL MEETING......................................................................... 50
General............................................................................................... 50
Matters to be Considered and Acted Upon............................................................... 50
Date, Place and Time.................................................................................. 52
Record Date........................................................................................... 52
Votes Required for Approval........................................................................... 52
Voting and Revocation of Proxies...................................................................... 52
Solicitation of Proxies............................................................................... 53
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
THE MERGER AGREEMENT.................................................................................... 53
<S> <C>
Terms of the Merger................................................................................... 53
Effective Time........................................................................................ 54
Exchange of Shares.................................................................................... 55
Fort James Following the Merger....................................................................... 56
Representations and Warranties........................................................................ 56
Certain Covenants..................................................................................... 56
Conditions to the Merger.............................................................................. 58
Governmental Approvals................................................................................ 59
Limitation on Negotiations............................................................................ 59
Amendment; Waiver..................................................................................... 60
Termination of the Merger Agreement; Termination Fees................................................. 60
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS OF FORT HOWARD AND JAMES RIVER............................ 61
Authorized Capital Stock.............................................................................. 61
Shareholder Voting Requirements....................................................................... 61
Directors............................................................................................. 62
Shareholder Proposals and Nominations................................................................. 62
Amendment of Bylaws................................................................................... 63
Business Combination Statutes......................................................................... 63
Limitation on Director Liability...................................................................... 63
Indemnification....................................................................................... 64
Rights Agreement...................................................................................... 64
EXPERTS................................................................................................. 66
LEGAL MATTERS........................................................................................... 66
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS.............................................................. 66
WHERE YOU CAN FIND MORE INFORMATION..................................................................... 68
INDEX OF DEFINED TERMS.................................................................................. 70
Appendix A: Agreement and Plan of Merger, dated as of May 4, 1997, by and
among James River Corporation of Virginia, James River Delaware, Inc. and
Fort Howard Corporation.................................................................... A-1
Appendix B: Proposed Amendments to James River Corporation of Virginia Amended and Restated Articles of
Incorporation.............................................................................. B-1
Appendix C: Proposed Amendments to James River Corporation of Virginia Bylaws.......................... C-1
Appendix D: Proposed Amendments to James River Corporation of Virginia 1996 Stock Incentive Plan....... D-1
Appendix E: Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated.............................. E-1
Appendix F: Opinion of Salomon Brothers Inc............................................................ F-1
Appendix G: Opinion of Morgan Stanley & Co. Incorporated............................................... G-1
</TABLE>
ii
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER UNDERSTAND
THE MERGER, AND FOR A MORE COMPLETE UNDERSTANDING OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD READ THIS ENTIRE DOCUMENT CAREFULLY, AS WELL AS THOSE
ADDITIONAL DOCUMENTS TO WHICH WE REFER YOU. SEE "WHERE YOU CAN FIND MORE
INFORMATION." (PAGE 68).
Q: WHY IS FORT HOWARD MERGING WITH JAMES RIVER?
A: James River's and Fort Howard's Boards believe that the merger will create a
preeminent worldwide consumer products company and will provide significant
benefits to the two companies' shareholders, customers and employees. By
combining Fort Howard's low-cost manufacturing capabilities and proprietary
technology with James River's strong marketing capabilities, brands and global
reach, Fort James Corporation (the new name of the combined company after the
merger) will be better positioned to capitalize on growth opportunities in the
worldwide tissue industry. Fort James intends to reduce expenses and increase
efficiency by combining complementary technologies, optimizing product
manufacturing and logistics across combined systems, increasing purchasing
efficiencies, eliminating redundant overhead costs, consolidating work forces
where duplication exists and improving product quality and productivity. Fort
James is expected to recognize cost savings of at least $150 million in 1998,
increasing to more than $200 million per year over time.
Q: WHAT WILL FORT HOWARD STOCKHOLDERS RECEIVE FOR THEIR FORT HOWARD SHARES?
A: Fort Howard stockholders will receive 1.375 James River common shares
(including the corresponding percentage of a preferred share purchase right) in
exchange for each of their Fort Howard common shares. This exchange ratio will
not change, even if the market price of James River or Fort Howard shares
increases or decreases between now and the date the merger is completed.
James River will not issue fractional shares in the merger. As a result,
the total number of James River common shares that you will receive in the
merger if you are a Fort Howard stockholder will be rounded down to the nearest
whole number, and you will receive a cash payment for the value of the remaining
fraction of a James River common share based on the market value on a date close
to the date the merger occurs.
EXAMPLES:
(BULLET) IF YOU CURRENTLY OWN 1,000 FORT HOWARD COMMON SHARES, THEN AFTER
THE MERGER YOU WILL RECEIVE 1,375 JAMES RIVER COMMON SHARES.
(BULLET) IF YOU CURRENTLY OWN 1 FORT HOWARD COMMON SHARE, THEN AFTER THE
MERGER YOU WILL RECEIVE 1 JAMES RIVER COMMON SHARE AND A CHECK FOR
THE MARKET VALUE OF THE .375 FRACTIONAL SHARE.
Q: WILL JAMES RIVER SHAREHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A: No. James River shareholders will continue to hold the James River shares
they currently own. After the merger, these shares will represent an ownership
interest in the combined businesses of James River and Fort Howard.
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 return envelope as soon as possible so that your shares can be
voted at the August 12, 1997 James River shareholder meeting (if you are a James
River shareholder) or at the August 12, 1997 Fort Howard stockholder meeting (if
you are a Fort Howard stockholder).
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker to vote your shares following the
directions received by your broker. Your broker will not be able to vote your
shares without instructions from you.
<PAGE>
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
applicable shareholder meeting. You can do this in one of three ways. First, you
can send a written notice stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy card. If you choose either of
these two methods, you must submit your notice of revocation or your new proxy
card to the appropriate Corporate Secretary (to James River at the address on
page 53 if you are a James River shareholder, or to Fort Howard at the address
on page 49 if you are a Fort Howard stockholder). Third, you can attend your
shareholder meeting and vote in person. Simply attending the meeting, however,
will not revoke your proxy. If you have instructed a broker to vote your shares,
you must follow directions received from your broker to change those
instructions.
Q: SHOULD FORT HOWARD STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A: No. If you are a Fort Howard stockholder, after the merger is completed you
will receive written instructions for exchanging your Fort Howard common shares
for James River common shares (and your cash payment in lieu of any fraction of
a James River common share).
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as soon as possible. In addition to
shareholder approvals, we must also obtain certain regulatory approvals. We hope
to complete the merger as soon as possible following the James River and Fort
Howard shareholder meetings.
Q: WHAT HAPPENS TO MY DIVIDENDS?
A: We expect no changes in our dividend policies before the merger. After the
merger, we expect Fort James' initial annualized dividend rate to be $.60 per
Fort James common share, the same dividend rate that James River has paid since
1989.
WHO CAN HELP ANSWER QUESTIONS?
If you have more questions about the merger you should contact:
JAMES RIVER SHAREHOLDERS
James River Corporation of Virginia
Investor Relations Department
120 Tredegar Street
Richmond, Virginia 23219
Telephone: (888) 649-4362 (toll free)
Fax: (804) 649-4317
FORT HOWARD STOCKHOLDERS
Fort Howard Corporation
Stockholder Relations
1919 South Broadway
Green Bay, Wisconsin 54304
Telephone: (800) 558-3564
(414) 435-8821 ext. 2249
Fax: (414) 498-3225
2
<PAGE>
THE COMPANIES
JAMES RIVER CORPORATION OF VIRGINIA
120 Tredegar Street
Richmond, Virginia 23219
Tel.: (804) 644-5411
James River Corporation of Virginia ("James River") was founded in 1969 and
is incorporated in the Commonwealth of Virginia. James River is a marketer and
manufacturer of consumer products, including towel and tissue and disposable
food and beverage service products, as well as packaging, including folding
cartons and foodservice products. James River also manufactures and markets
communications papers, including business papers and specialty papers. James
River's principal brands include Quilted Northern bathroom tissue, Brawny paper
towels, Vanity Fair napkins, Dixie cups and plates in North America, and Lotus
bathroom tissue, towels and facial tissue in Europe. James River is one of the
industry leaders in sales of tissue products within the United States and
Europe. James River is also an industry leader in sales of disposable
foodservice items. During its twenty-eight year history, James River has pursued
a strategy of internal growth and acquisition which has allowed the Company to
significantly expand its business and broaden its product lines.
FORT HOWARD CORPORATION
1919 South Broadway
Green Bay, Wisconsin 54304
Tel.: (414) 435-8821
Founded in 1919, Fort Howard Corporation ("Fort Howard") is a leading
manufacturer, converter and marketer of sanitary tissue products, including
specialty dryform products, in the United States and the United Kingdom. Its
principal products, which are sold in the commercial (away-from-home) and
consumer (at-home) marketplace, include paper towels, bath tissue, table
napkins, wipers and facial tissue manufactured from virtually 100% recycled
fibers. Fort Howard is a leading supplier of tissue products for domestic
commercial customers and has focused approximately 60% of its domestic capacity
in this area. For domestic consumer applications, Fort Howard's principal brands
include Mardi Gras printed napkins and paper towels, Soft'n Gentle bath and
facial tissue, So-Dri paper towels, and Green Forest, a leading domestic line of
environmentally positioned, recycled tissue paper products. Fort Howard also
manufactures and distributes its products in the United Kingdom.
REASONS FOR THE MERGER (SEE PAGE 15)
The James River Board and the Fort Howard Board believe that by combining
Fort Howard's low cost manufacturing capabilities and proprietary technology
with James River's strong marketing capabilities, brands and global reach, the
combined company will be better positioned to capitalize on growth opportunities
in the worldwide tissue industry than either company would be alone. The
combined company, which will be renamed "Fort James Corporation" ("Fort James"),
intends to reduce expenses and increase efficiency by combining complementary
technologies, optimizing product manufacturing and logistics across combined
systems, increasing purchasing efficiencies, eliminating redundant overhead
costs, consolidating work forces where duplication exists and increasing product
quality and productivity. Fort James is expected to recognize cost savings of at
least $150 million in 1998, increasing to more than $200 million per year over
time.
While each company has an inherently strong growth base, we expect the
combination to provide enhanced growth opportunities. A portion of the expected
savings resulting from the merger will be reinvested in Fort James' brands in
order to accelerate revenue growth. The combined company will have an improved
geographic balance in North America, facilitating acceleration of Fort Howard's
efforts with recycled tissue products in the western part of North America. The
financial strength of the combined company should also permit more rapid
expansion in selected European and other international markets.
In approving the merger, the James River Board and the Fort Howard Board
recognized that there are risks relating to the merger. In considering whether
to approve the proposals submitted to them, the shareholders of James River and
Fort Howard should consider that:
(Bullet) the exchange ratio of 1.375 James River common shares for each
Fort Howard common share will not be adjusted in the event of any
increase or decrease in the price of either company's shares;
3
<PAGE>
(Bullet) there is a risk that the operations of James River and Fort Howard
will not be integrated successfully or in a timely manner and that
the desired level of cost savings and efficiencies will not be
achieved (see "THE PROPOSED MERGER -- Reasons for the Merger;
Recommendations of the Boards of Directors");
(Bullet) Fort James will have an increased leverage ratio and less
shareholders' equity than James River on a stand-alone basis (see
"THE PROPOSED MERGER -- Reasons for the Merger; Recommendations of
the Boards of Directors" and "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION");
(Bullet) the amount of the restructuring charge to be taken by James River
in connection with the merger is not estimable at this time; such
charge will reduce net income for the period in which it is taken
and will also reduce shareholders' equity (see "UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL INFORMATION"); and
(Bullet) the consummation of the merger is conditioned upon the receipt of
approvals from certain governmental entities that could seek,
among other things, divestiture of certain product lines or assets
by the combined company (see "THE PROPOSED MERGER -- HSR Act and
Other Regulatory Approvals").
Our Boards of Directors believe that the merger is in the best interests of
their respective company's shareholders and that the strong management team
drawn from both companies will work quickly to achieve the targeted cost
savings, realize growth opportunities and continue to reduce debt.
RECOMMENDATIONS TO SHAREHOLDERS (SEE PAGE 16)
FORT HOWARD: Fort Howard's Board has unanimously approved the merger and
the merger agreement. The Fort Howard Board unanimously recommends that Fort
Howard stockholders vote FOR the proposal to approve the merger agreement, under
which a wholly owned subsidiary of James River will be merged with Fort Howard.
JAMES RIVER: James River's Board has unanimously approved the merger and
the merger agreement. The James River Board unanimously recommends that James
River shareholders vote FOR the proposals submitted for James River shareholder
approval in connection with the merger.
THE MERGER (SEE PAGE 12)
The merger agreement, which is the legal document that governs the merger,
is attached as Appendix A to this Joint Proxy Statement-Prospectus. We encourage
you to read the merger agreement carefully.
AGREEMENTS WITH CERTAIN FORT HOWARD STOCKHOLDERS (SEE PAGE 25)
Several Fort Howard stockholders have entered into separate agreements with
James River under which they have agreed to vote all of the Fort Howard common
shares beneficially owned by them on the record date for the Fort Howard special
meeting in favor of the merger and the merger agreement.
As of the record date for the Fort Howard special meeting, these supporting
stockholders beneficially owned 20,055,299 Fort Howard common shares that are
subject to the support agreements, or approximately 26% of the Fort Howard
common shares entitled to vote at the meeting. At least a majority of the votes
entitled to be cast at the Fort Howard special meeting is required to approve
the merger agreement.
CONDITIONS TO THE MERGER (SEE PAGE 58)
The completion of the merger depends upon the satisfaction of a number of
conditions, including:
(Bullet) the continued accuracy of each party's representations and
warranties;
(Bullet) the performance by each party of its obligations under the merger
agreement;
(Bullet) Fort Howard stockholder approval of the merger agreement;
(Bullet) James River shareholder approval of the issuance of James River
common shares in the merger, the proposed amendments to James
River's articles of incorporation and bylaws, and a proposal to
amend James River's stock incentive plan;
(Bullet) clearance under certain antitrust laws;
(Bullet) receipt of legal opinions as to the tax-free nature of the merger;
and
(Bullet) receipt of opinions from James River's and Fort Howard's
independent accountants that the merger will qualify for pooling
of interests accounting treatment.
4
<PAGE>
Some of the conditions to the merger may be waived by the appropriate
party. Conditions that cannot be waived include the required Fort Howard and
James River shareholder approvals and clearance under certain antitrust laws.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 60)
We can agree to terminate the merger agreement without completing the
merger, and either of us can unilaterally terminate the merger agreement under
various circumstances, including if (1) the merger is not completed by December
31, 1997 (which date may be extended under specified circumstances for up to
sixty days), for instance because the conditions summarized above are not met,
(2) the required Fort Howard and James River shareholder approvals are not
received or (3) a court or other governmental authority prohibits the merger.
TERMINATION FEES (SEE PAGE 60)
Fort Howard has agreed to pay James River a $95 million termination fee if
Fort Howard terminates the merger agreement because the merger has not occurred
by December 31, 1997, or because the Fort Howard stockholders failed to approve
the merger agreement, and if (1) prior to the Fort Howard stockholder vote, a
third party had proposed to enter into a "competing transaction" with Fort
Howard and (2) within one year of terminating the merger agreement, Fort Howard
enters into a merger agreement or similar agreement with a third party (for the
sale of Fort Howard or a majority of its assets or voting securities or a merger
resulting in the Fort Howard stockholders owning less than 60% of the surviving
entity's voting securities) or a third party acquires more than 50% of the Fort
Howard voting securities.
James River has agreed to pay Fort Howard a $95 million termination fee if
James River terminates the merger agreement under similar circumstances relating
to James River.
DIRECTORS AND MANAGEMENT OF FORT JAMES FOLLOWING THE MERGER (SEE PAGE 47)
Upon completion of the merger, the Fort James Board will include the eleven
individuals currently serving on James River's Board of Directors. In addition,
Fort Howard's current Chairman and Chief Executive Officer, two individuals
designated by Morgan Stanley Group Inc. who are currently directors on Fort
Howard's Board and an outside director of Fort Howard will join the Fort James
Board.
James River's Chairman and Chief Executive Officer will hold the same
positions with Fort James following the merger, and Fort Howard's Chairman and
Chief Executive Officer will become Fort James' President and Chief Operating
Officer. The remainder of the senior management team of Fort James will be made
up of individuals who currently hold senior executive positions in James River
or Fort Howard.
FINANCING (SEE PAGE 30)
In connection with the merger, James River will arrange a new $2.5 billion
bank credit facility to replace certain existing James River and Fort Howard
bank credit facilities. See "THE PROPOSED MERGER -- Fort James Financing."
REGULATORY APPROVALS (SEE PAGE 28)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits James River and Fort Howard from completing the merger until we have
furnished certain information to the Antitrust Division of the U.S. Department
of Justice and the U.S. Federal Trade Commission, and a required waiting period
has expired or been terminated. On May 9, 1997, James River and Fort Howard
filed Premerger Notification and Report Forms with these agencies. On June 6,
1997, James River and Fort Howard received a request for additional information
and other documentary material from the Antitrust Division. James River and Fort
Howard intend to submit their responses to the second request in early July.
The merger is also subject to the competition laws of the United Kingdom,
which has pre-closing notification and review procedures. On June 3, 1997, the
parties filed a notification with the U.K. Office of Fair Trading. On May 30,
1997, James River and Fort Howard sought confirmation from the Irish Minister
for Enterprise and Employment that the merger is not subject to certain
approvals by Irish authorities.
SHAREHOLDER MEETINGS AND APPROVALS (SEE PAGES 48 AND 50)
FORT HOWARD. The special meeting of Fort Howard stockholders called in
connection with the merger will be held at 11:00 a.m., local time, on Tuesday,
August 12, 1997, at The Metropolitan Club, 66th Floor, Sears Tower, 233 South
Wacker Drive, Chicago, Illinois (the "Fort Howard Special Meeting"). The record
date for determining the holders of Fort Howard common shares who are entitled
to vote at the Fort Howard Special Meeting is the
5
<PAGE>
close of business on June 30, 1997. At the Fort Howard Special Meeting,
stockholders will be asked to consider and vote upon a proposal to approve the
merger agreement.
JAMES RIVER. The special meeting of James River shareholders called in
connection with the merger will be held at 11:00 a.m., local time, on Tuesday,
August 12, 1997, at The Chicago Club, 81 East Van Buren Street, Chicago,
Illinois (the "James River Special Meeting"). The record date for determining
the holders of James River common shares and depositary shares representing
interests in James River's Series P 9% Convertible Preferred Stock who are
entitled to vote at the James River Special Meeting is the close of business on
June 30, 1997. At the James River Special Meeting, shareholders will be asked to
consider and vote upon four proposals:
(Bullet) to approve the issuance of James River common shares in the
merger;
(Bullet) to amend James River's articles of incorporation to increase to
500 million the total number of common shares that James River is
authorized to issue and to change James River's corporate name to
"Fort James Corporation" upon completion of the merger;
(Bullet) to amend James River's bylaws to increase the number of directors
on the James River Board to fifteen; and
(Bullet) to amend James River's stock incentive plan, subject to the merger
being completed, so that an additional eight million common shares
are available for issuance under the plan and to provide for
performance-based awards under such plan.
Each proposal will be voted upon separately by shareholders; however, the
merger will not be completed and the other actions contemplated in the proposals
will not be effected unless all of the proposals are approved by the required
vote of James River shareholders.
SECURITY OWNERSHIP OF MANAGEMENT AND THEIR AFFILIATES
As of June 18, 1997, the directors and executive officers of James River
and their affiliates beneficially owned approximately 1.8% of the outstanding
voting shares of James River entitled to vote at the James River Special
Meeting. The proposed amendments to James River's articles of incorporation must
be approved by the holders of a majority of the votes entitled to be cast at the
James River Special Meeting. The issuance of shares in the merger with Fort
Howard, and the proposed amendments to the James River bylaws and James River's
stock incentive plan must be approved by a majority of the votes cast at the
James River Special Meeting.
As of June 24, 1997, the directors and executive officers of Fort Howard
beneficially owned approximately 1.9% of the outstanding voting shares of Fort
Howard entitled to vote at the Fort Howard Special Meeting. In addition, certain
supporting stockholders beneficially own approximately 26% of the outstanding
voting shares of Fort Howard entitled to vote at the Fort Howard Special
Meeting, and have agreed to vote these shares in favor of the merger and the
merger agreement. The proposal to approve the merger agreement must be approved
by the holders of a majority of the votes entitled to be cast at the Fort Howard
Special Meeting.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 17 AND 22)
In deciding to approve the merger, among the factors that the James River
Board considered were the opinions of its financial advisors, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc, that as of May 4,
1997, the exchange ratio of 1.375 shares of common stock, par value $.10 per
share ("James River Common Shares"), of James River for each share of common
stock, par value $.01 per share ("Fort Howard Common Shares"), of Fort Howard
(the "Exchange Ratio") was fair, from a financial point of view, to James River.
The full texts of Merrill Lynch's written opinion and Salomon Brothers' written
opinion, each dated May 4, 1997, describe the bases on which these firms
rendered their opinions and are attached to this document as Appendices E and F,
respectively. We encourage you to read these opinions in their entirety and to
consider them carefully.
Similarly, in deciding to approve the merger, one of the factors that the
Fort Howard Board considered was the opinion of its financial advisor, Morgan
Stanley & Co. Incorporated, that the Exchange Ratio was fair, from a financial
point of view, to the holders of Fort Howard common shares. The full text of
Morgan Stanley and Co. Incorporated's written opinion, dated May 4, 1997,
describes the basis on which Morgan Stanley and Co. Incorporated's rendered its
opinion and is attached to this document as Appendix G. We encourage you to read
Morgan Stanley and Co. Incorporated's opinion in its entirety and to consider it
carefully.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 26)
The merger is expected to be tax free to James River and Fort Howard for
federal income tax purposes. The merger is also expected to be tax free for Fort
Howard stockholders who exchange Fort Howard common shares
6
<PAGE>
for James River common shares (except for taxes on the cash that they receive in
lieu of a fractional James River common share).
Our receipt of opinions from our legal counsel that the merger will be tax
free to Fort Howard and James River is a condition to completion of the merger.
INTERESTS OF OFFICERS, DIRECTORS AND CERTAIN FORT HOWARD STOCKHOLDERS (SEE PAGE
42)
The officers and directors of James River and Fort Howard, as well as
certain stockholders of Fort Howard, may have interests in the merger that are
different from, or in addition to, the interests of shareholders generally. For
example, two directors of Fort Howard are also officers of Morgan Stanley, which
acted as Fort Howard's financial advisor in connection with the merger. In
addition, these two individuals and a third director of Fort Howard who is also
a Morgan Stanley employee are officers of the general partners of certain Morgan
Stanley investment funds which owned Fort Howard common shares on the date of
the merger agreement. These individuals will receive personal compensation based
on the success of the funds' investments in Fort Howard, and two of them will be
directors of Fort James after the merger.
James River has entered into a new employment agreement with its Chairman
and Chief Executive Officer and an employment agreement with Fort Howard's
Chairman and Chief Executive Officer. Both new agreements will become effective
when the merger is completed and will replace these executives' current
employment agreements at that time. James River has also entered into similar
employment agreements with certain other senior executives of James River and
Fort Howard.
NO APPRAISAL RIGHTS (SEE PAGE 29)
Holders of Fort Howard common shares are not entitled to appraisal rights
in connection with the merger.
MARKETS AND MARKET PRICES (SEE PAGE 31)
The James River common shares are currently listed on the New York Stock
Exchange. Fort Howard's common shares are traded on the NASDAQ National Market.
An application will be made to list the James River common shares to be issued
in the merger on the New York Stock Exchange. After the merger, shares of the
combined company will be traded on the New York Stock Exchange under the symbol
"FJ".
On May 2, 1997, the last trading date prior to the public announcement of
the proposed merger, James River common shares on the New York Stock Exchange
closed at $30 7/8, and Fort Howard common shares on the NASDAQ National Market
closed at $36 1/2. On June 25, 1997, James River common shares on the New York
Stock Exchange closed at $37 and Fort Howard common shares on the NASDAQ
National Market closed at $49 3/8.
7
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
JAMES RIVER
The following table sets forth selected historical consolidated financial
and other data for James River as of, and for each of the five 52- or 53- week
fiscal years ending on, the last Sunday in December in the period ended December
29, 1996, and as of, and for the 13-week periods ended, March 30, 1997, and
March 31, 1996. Such data have been derived from, and should be read in
conjunction with, the audited consolidated financial statements and other
financial information contained in James River's Annual Report on Form 10-K for
the year ended December 29, 1996, and the unaudited consolidated interim
financial statements contained in James River's Quarterly Report on Form 10-Q
for the 13-week period ended March 30, 1997, including the notes thereto,
incorporated by reference into this document. See "WHERE YOU CAN FIND MORE
INFORMATION."
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER FISCAL YEAR (A)
--------------------- ------------------------------------------------------------
1997 1996(A) 1996(B) 1995(C) 1994(D) 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $1,381.9 $1,555.4 $5,971.9 $7,141.2 $5,706.4 $4,867.7 $4,937.9
Income (loss) from operations....... 112.5 76.4(e) 432.9(e) 423.3(e) 147.0(e) 114.0 (62.4)(e)
Income (loss) before extraordinary
item and accounting changes....... 47.5 20.5 157.3 126.4 (13.0) (.3) (122.1)
Net income (loss)................... 47.5 20.5 157.3 126.4 (13.0) (.3) (427.3)(f)
PER SHARE DATA:
Income (loss) before extraordinary
item and accounting changes....... $ .38 $ .07(e) $ 1.15(e) $ .81(e) $ (.72)(e) $ (.40) $ (1.82)(e)
Net income (loss)................... .38 .07 1.15 .81 (.72) (.40) (5.55)(f)
Cash dividends...................... .15 .15 .60 .60 .60 .60 .60
Book value.......................... 17.40 17.48 18.19 17.84 17.40 18.55 20.34
BALANCE SHEET DATA:
Total assets........................ $6,361.8 $7,070.9 $6,541.5 $7,258.9 $7,924.3 $5,851.3 $6,336.3
Long-term debt...................... 1,848.7 2,413.9 1,853.9 2,503.0 2,668.0 1,942.8 2,153.9
Common shareholders' equity......... 1,502.3 1,485.3 1,568.0 1,513.9 1,421.3 1,514.1 1,659.3
OTHER DATA:
EBITDA (g).......................... $ 222.2 $ 189.9 $ 885.7 $ 949.2 $ 591.0 $ 522.0 $ 326.8
Capital spending.................... 60.4 81.7 426.1 441.2 351.7 331.1 469.7
Depreciation and amortization....... 102.2 108.6 435.8 487.0 414.0 365.8 364.5
</TABLE>
- ---------------
(a) Certain amounts have been reclassified to conform to the 1997 presentation.
(b) In 1996, James River completed the sale of its Flexible Packaging group
which had annual net sales of approximately $450 million.
(c) In 1995, James River completed the spin-off of Crown Vantage Inc. which had
annual net sales of approximately $1 billion.
(d) In 1994, James River increased its ownership interest in its European
Consumer Products Business from 43% to 86%. The European Consumer Products
Business, which had annual net sales of approximately $1.6 billion in 1995, was
consolidated beginning in July 1994; prior to that time, it was accounted for
using the equity method of accounting.
(e) Includes pretax restructure, severance and other charges of $10.7 million in
1996, including $23.4 million in the first quarter, $51.9 million in 1995, $9.6
million in 1994, and $111.7 million in 1992. The after tax impact of these
charges on earnings per share was $.15 in 1996, including $.16 in the first
quarter, $.38 in 1995, $.08 in 1994, and $.87 in 1992.
(f) Includes a net after tax charge of $273.8 million ($3.35 per share) for the
cumulative effect of adopting the required standards of accounting for
postretirement health care and life insurance benefits and for income taxes.
Also includes an extraordinary loss of $31.4 million after taxes ($.38 per
share) related to the early retirement of debt.
(g) EBITDA is defined as earnings before extraordinary item, cumulative effect
of accounting changes, interest, income taxes, depreciation and amortization.
James River believes that EBITDA is a measure commonly used by analysts and
investors. Accordingly, this information has been disclosed herein to permit a
more complete analysis of operating performance. EBITDA should not be considered
in isolation or as a substitute for net income or other consolidated statement
of operations or cash flow data prepared in accordance with generally accepted
accounting principles as a measure of profitability or liquidity. EBITDA does
not take into account debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be available for
discretionary uses.
8
<PAGE>
FORT HOWARD
The following table sets forth selected historical consolidated financial
and other data for Fort Howard as of, and for each of the five years in the
period ended, December 31, 1996, and as of, and for the three-month periods
ended, March 31, 1997 and 1996. Such data have been derived from, and should be
read in conjunction with, the audited consolidated financial statements and
other financial information contained in Fort Howard's Annual Report on Form
10-K for the year ended December 31, 1996, and the unaudited consolidated
interim financial statements contained in Fort Howard's Quarterly Report on Form
10-Q for the three months ended March 31, 1997, including the notes thereto,
incorporated by reference into this document. See "WHERE YOU CAN FIND MORE
INFORMATION."
FORT HOWARD AND CONSOLIDATED SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER FISCAL YEAR
--------------------- -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $ 400.8 $ 385.7 $1,580.8 $1,620.9 $1,274.4 $1,187.4 $1,151.4
Income (loss) from
operations.................. 138.3 114.2 476.4 360.1 276.8 (1,716.6)(a) 270.7
Income (loss) before
extraordinary item and
accounting changes.......... 49.7 26.9 170.7(b) 33.5 (42.1) (2,040.1) (69.4)
Net income (loss)............. 48.4(c) 26.9 162.6(c) 14.7(c) (70.3)(c) (2,052.1)(c) (80.0)(d)
PER SHARE DATA:
Income (loss) before
extraordinary item and
accounting changes.......... $ .67 $ .43 $ 2.44(b)(e) $ .57(e) $ (1.11) $ (53.54)(a) $ (1.82)
Net income (loss)............. .65(c) .43 2.32(c)(e) .25(c)(e) (1.85)(c) (53.85)(c) (2.10)(d)
Book value.................... (18.80) (28.59) (19.56)(e) (29.01)(e) (56.39) (54.61) (.76)
BALANCE SHEET DATA:
Total assets.................. $1,581.0 $1,621.8 $1,615.4 $1,652.4 $1,680.9 $1,649.8 $3,574.6
Long-term debt................ 2,441.5 2,877.6 2,451.4(e) 2,903.3(e) 3,189.6 3,109.8 2,953.0
Common shareholders'
deficit..................... (1,403.5) (1,812.3) (1,454.8)(e) (1,838.4)(e) (2,148.4) (2,080.9) (29.1)
OTHER DATA:
EBITDA (f).................... $ 163.4 $ 138.7 $ 575.1 $ 460.7 $ 372.4 $ 397.5 $ 406.6
Capital spending.............. 14.9 8.9 73.4 47.3 83.6 165.5 232.8
Depreciation and
amortization................ 25.9 25.1 101.6 98.9 95.7 130.7(g) 138.0(g)
</TABLE>
- ---------------
(a) Includes a charge of $1.98 billion related to the write-off of goodwill.
(b) Includes a credit of $36 million for the reversal of previously accrued
income taxes related to 1988 financing transactions.
(c) Includes after tax extraordinary losses related to the early retirement of
debt.
(d) Includes an after tax charge of $10.6 million for the cumulative effect of
adopting the required standards of accounting for postretirement health care and
life insurance benefits.
(e) In 1996 and 1995, Fort Howard issued 10 million and 25 million shares of
common stock, respectively. Net proceeds of the offerings of $194 million in
1996 and $284 million in 1995 were used to reduce debt.
(f) EBITDA is defined as earnings before goodwill write-off, extraordinary item,
cumulative effect of accounting changes, interest, income taxes, depreciation
and amortization. Fort Howard believes that EBITDA is a measure commonly used by
analysts and investors. Accordingly, this information has been disclosed herein
to permit a more complete analysis of operating performance. EBITDA should not
be considered in isolation or as a substitute for net income or other
consolidated statement of operations or cash flow data prepared in accordance
with generally accepted accounting principles as a measure of profitability or
liquidity. EBITDA does not take into account debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that may
be available for discretionary uses.
(g) Includes $43 million and $57 million of goodwill amortization in 1993 and
1992, respectively.
9
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL AND OTHER DATA
The following table sets forth selected unaudited pro forma combined
financial and other data (the "Selected Pro Forma Data") for James River as of,
and for each of the five 52- or 53- week fiscal years ended on, the last Sunday
in December in the period ended December 29, 1996, and as of, and for the
13-week periods ended, March 30, 1997, and March 31, 1996. The Selected Pro
Forma Data are presented to reflect the estimated impact on the historical
consolidated financial statements of James River of the merger, which will be
accounted for as a pooling of interests, and the issuance of approximately 102.6
million James River Common Shares. The statement of operations data assume that
the merger had been consummated as of the beginning of each period presented and
the balance sheet data assume that the merger had been consummated on March 30,
1997. See "THE PROPOSED MERGER -- Accounting Treatment."
The Selected Pro Forma Data have been derived from or prepared consistently
with the unaudited pro forma condensed combined financial statements included
elsewhere in this document. The Selected Pro Forma Data are presented for
illustrative purposes only and are not necessarily indicative of the financial
position or operating results that would have occurred or that will occur upon
consummation of the merger. The following Selected Pro Forma Data should be read
in conjunction with the historical and unaudited pro forma condensed combined
financial statements and notes thereto incorporated by reference into this
document. See "WHERE YOU CAN FIND MORE INFORMATION" and "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION."
10
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST FISCAL YEAR
QUARTER ---------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $1,817.8 $7,707.1 $8,887.9 $7,103.7 $6,166.6 $ 6,194.7
Income (loss) from operations........ 250.8 909.3 783.4 423.8 (1,602.6) 208.3
Income (loss) before
extraordinary item and
accounting changes................ 97.2 328.0 159.9 (55.1) (2,040.4) (191.5)
Net income (loss).................... 95.9 319.9 141.1 (83.3) (2,052.4) (507.3)
PER SHARE DATA:
Income (loss) before extraordinary
item and accounting changes....... $ .43 $ 1.40 $ .53 $ (.54) $ (11.03) $ (1.16)
Net income (loss).................... .42 1.36 .43 (.69) (11.09) (2.84)
Cash dividends (a)................... .15 .60 .60 .60 .60 .60
Book value........................... .26 .60
BALANCE SHEET DATA:
Total assets......................... $7,942.8 $8,156.9 $8,911.3 $9,605.2 $7,501.1 $ 9,910.9
Long-term debt....................... 4,290.2 4,305.3 5,406.3 5,857.6 5,052.6 5,106.9
Common shareholders' equity.......... 48.8 113.2 (324.5) (727.1) (566.8) 1,630.2
OTHER DATA:
EBITDA (b)........................... $ 385.6 $1,460.8 $1,409.9 $ 963.4 $ 919.5 $ 733.4
Capital spending..................... 75.3 499.5 488.5 435.3 496.6 702.5
Depreciation and amortization........ 128.1 537.4 585.9 509.7 496.5 502.5
FORT HOWARD EQUIVALENT
PER SHARE DATA(c):
Income (loss) before extraordinary
item and accounting changes....... $ .59 $ 1.93 $ .73 $ (.74) $ (15.17) $ (1.60)
Net income (loss).................... .58 1.87 .59 (.95) (15.25) (3.91)
Cash dividends....................... .21 .83 .83 .83 .83 .83
Book value........................... .36 .83
</TABLE>
- ---------------
(a) The pro forma combined cash dividends per common share are assumed to be the
same as the cash dividends per common share paid by James River on a historical
basis. Fort Howard has not paid dividends since 1988. James River presently
intends to maintain its current dividend after the merger. However, there can be
no assurance that its dividend will remain unchanged, and James River reserves
the right to increase or decrease its dividend as may be required by law or
contract or as may be determined by the James River Board of Directors in its
discretion.
(b) EBITDA is defined as earnings before goodwill write-off, extraordinary item,
cumulative effect of accounting changes, interest, income taxes, depreciation
and amortization. James River believes that EBITDA is a measure commonly used by
analysts and investors. Accordingly, this information has been disclosed herein
to permit a more complete analysis of operating performance. EBITDA should not
be considered in isolation or as a substitute for net income or other
consolidated statement of operations or cash flow data prepared in accordance
with generally accepted accounting principles as a measure of profitability or
liquidity. EBITDA does not take into account debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that may
be available for discretionary uses.
(c) Fort Howard Equivalent Per Share Data represent the unaudited pro forma
combined per share data multiplied by the Exchange Ratio of 1.375 James River
Common Shares for each Fort Howard Common Share.
11
<PAGE>
THE PROPOSED MERGER
BACKGROUND OF THE MERGER
Since 1995, when a new management team led by Miles L. Marsh, Chairman and
Chief Executive Officer of James River, was installed, James River has engaged
in a restructuring program designed to improve the company's focus on its core
businesses. The program's four principal goals have been to reduce costs,
intensify marketing and new product development to further strengthen brands,
redirect underperforming businesses to enhance performance and divest
non-strategic businesses. In December 1996, having made significant progress
toward these goals, management and the Board of Directors of James River (the
"James River Board") began to focus on strategic growth opportunities. As part
of that effort, James River management reviewed publicly available information
concerning Fort Howard and other strategic alternatives. In January 1997, James
River engaged Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and Salomon Brothers Inc ("Salomon Brothers") as financial advisors.
Management briefed the James River Board with respect to its preliminary views
concerning Fort Howard at a regularly scheduled meeting on February 20, 1997.
Based upon such information and management's knowledge of the industry, James
River perceived that a merger with Fort Howard would be an opportunity for
accelerating strategic growth.
Fort Howard, which was founded in 1919, is a leading manufacturer,
converter and marketer of tissue products in the United States and the United
Kingdom. In October 1988, The Morgan Stanley Leveraged Equity Fund II, L.P.
("MSLEF"), Morgan Stanley Group Inc. (from and after June 1, 1997, Morgan
Stanley, Dean Witter, Discover & Co., the successor by merger to Morgan Stanley
Group Inc.) ("Morgan Stanley") and certain other investors acquired Fort Howard.
In March and April of 1995, Fort Howard completed an initial public offering as
part of a recapitalization plan implemented to repay or redeem a substantial
portion of its indebtedness in order to reduce the level and overall cost of its
debt, extend certain debt maturities, increase stockholders' equity and enhance
Fort Howard's access to capital markets. In May 1996, Fort Howard issued
additional Fort Howard Common Shares. As of May 4, 1997, Morgan Stanley and
certain of its affiliates including MSLEF, Fort Howard Equity Investors II, L.P.
and Fort Howard Equity Investors, L.P. (together, the "Morgan Stanley Group")
beneficially held 19,354,905 Fort Howard Common Shares, representing
approximately 26% of the then outstanding Fort Howard Common Shares.
Prior to 1997, senior management of Fort Howard and the Board of Directors
of Fort Howard (the "Fort Howard Board") periodically reviewed Fort Howard's
general strategic alternatives in light of existing conditions and developments
in the tissue products business. At a meeting on December 9, 1996, the Fort
Howard Board determined that it was in the best interest of the Fort Howard
stockholders to evaluate options for maximizing stockholder value. The Fort
Howard Board approved the engagement of Morgan Stanley & Co. Incorporated
("MS&Co.") as financial advisor to Fort Howard to identify and evaluate the
various actions Fort Howard could take to maximize stockholder value, including
internal growth through expansion into new products or markets, acquisitions of
other businesses or divestitures of selected assets, restructuring of Fort
Howard's major businesses into separate entities, entering into strategic
alliances, joint ventures or other strategic business combination transactions,
and capital transactions, such as public offerings, stock repurchases,
recapitalizations or debt restructurings.
MS&Co. analyzed and reviewed potential strategic alternatives for
maximizing stockholder value, and at a meeting of the Fort Howard Board on
February 28, 1997, MS&Co. presented to the Fort Howard Board MS&Co.'s analysis
of the available strategic alternatives as well as its valuation analysis of
Fort Howard. The Fort Howard Board directed MS&Co. to explore further the
strategic alternatives discussed in MS&Co.'s analysis and directed James L.
Burke, Dudley J. Godfrey and David I. Margolis, as directors unaffiliated with
MS&Co., to negotiate the terms of an engagement letter between Fort Howard and
MS&Co. with respect to any possible transaction that could occur as a result of
the Fort Howard Board's review of strategic alternatives.
In mid-March, MS&Co. contacted eight companies in the consumer products and
paper industries to determine whether any of them were interested in exploring,
on a preliminary basis, a possible combination with Fort Howard. Certain
publicly available information concerning Fort Howard was sent to each of these
companies and proposed confidentiality agreements were sent to three of these
companies, including James River.
On March 14, 1997, Mr. Marsh and Michael T. Riordan, the Chairman,
President and Chief Executive Officer of Fort Howard, met to discuss the
possibility of a business combination between James River and Fort
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<PAGE>
Howard. At that meeting, Mr. Marsh outlined the concept of a strategic "merger
of equals" between the companies, with ongoing board representation and
management from each company. Mr. Riordan expressed a willingness to explore
such a transaction.
On March 24, 1997, James River and Fort Howard executed mutual
confidentiality agreements under which certain confidential business, financial
and accounting information was exchanged between the two companies. On March 25
and 26, 1997, teams from each of James River and Fort Howard began a preliminary
evaluation of the potential benefits of a merger between the two companies. The
teams included members of management from each company. Financial advisors for
each company were also present. At those meetings, each company's management
presented information concerning their company's businesses and financial
performance. Messrs. Marsh and Riordan continued their preliminary discussions
concerning a possible business combination between the two companies.
Also during the week of March 24, 1997, Fort Howard entered into
confidentiality agreements with two other interested companies, one of which is
referred to herein as "Company X." Each of these companies was provided with
certain publicly available information concerning Fort Howard as well as certain
confidential business and financial information. Each interested company was
also given the opportunity to meet with the senior management of Fort Howard as
part of such party's review of Fort Howard.
On March 27, 1997, the James River Board held a telephonic meeting at which
management updated the James River Board on the status of the discussions with
Fort Howard.
The mutual due diligence process between James River and Fort Howard
continued during late March and early April 1997. Members of the management
teams, financial advisors and counsel continued to discuss the ways in which a
possible business combination could be structured.
On April 7, 1997, at a meeting in Chicago, Illinois, the management of Fort
Howard made a presentation concerning the Fort Howard businesses to the
management and financial advisors of Company X.
On April 7, 1997, MS&Co. and James River entered into a supplemental
confidentiality agreement to allow MS&Co. to receive additional non-public
information and business plans of James River. On April 8, members of senior
management of James River, including Ernst A. Haberli, William A. Paterson and
Joseph W. McGarr, made a presentation to representatives of MS&Co., including
Francis J. Oelerich, T. Sands Thompson, Frank V. Sica and Robert H. Niehaus,
concerning James River's strategic plans.
During the weeks of April 7 and 14, 1997, telephonically and at a meeting
on April 15, 1997, Messrs. Marsh and Riordan continued their discussions
concerning the possibility of a strategic merger of Fort Howard and James River.
Each concluded on a preliminary basis that substantial synergies could result
from the combination of the two companies, taking advantage of James River's
brands and marketing skills and Fort Howard's exceptional, low-cost
manufacturing base, as well as the complementary product offerings of the two
companies. The potential for increased market base overseas, particularly in
Europe, was also considered.
On April 13, 1997, Fort Howard's counsel provided a draft merger agreement
to each of the interested companies, including James River and Company X.
Messrs. Riordan and Marsh discussed the possible business combination of
Fort Howard and James River telephonically several times during the week of
April 21, 1997, exploring in detail how the businesses, assets and employees of
the companies would fit together in a possible combination.
On April 24, 1997, Company X submitted a preliminary indication of interest
with respect to a business combination with Fort Howard.
Mr. Marsh reviewed the status of the Fort Howard discussions with the James
River Board at a regularly scheduled meeting on April 24, 1997.
During the week of April 28, 1997, MS&Co. informed each of the interested
companies, including James River and Company X, that the Fort Howard Board would
meet on May 2, 1997, to consider its strategic alternatives and requested that
each interested company confirm its proposal for a business combination or other
strategic transaction with Fort Howard.
13
<PAGE>
On April 30, 1997, the Fort Howard Board ratified and approved the terms of
the engagement letter pursuant to which MS&Co. was retained as financial advisor
to Fort Howard in connection with a possible strategic transaction.
Discussions continued among James River and Fort Howard representatives and
advisors. On April 29 and April 30, 1997, the companies' management teams and
advisors met again to refine their analyses of the benefits of a proposed
merger. On April 29, 1997, the James River Board held a telephonic meeting at
which the status of the discussions was reviewed.
On April 30, at a meeting among James River's and Fort Howard's financial
and legal advisors, the James River representatives outlined the key terms of
James River's proposal for a business combination with Fort Howard. The terms
included a proposed exchange ratio, transaction structure, governance
arrangements, proposed employee benefit and organizational plans, headquarters
locations, corporate name, arrangements to secure the vote of certain Fort
Howard stockholders and post-transaction registration rights. Following that
meeting, members of the management teams from each company joined the group and
Mr. Marsh made a detailed presentation concerning James River's business
rationale for a strategic merger of the two companies.
The financial advisors for James River and Fort Howard continued to discuss
James River's proposal over the course of the next two days.
At a meeting of the Fort Howard Board on May 2, 1997, MS&Co. reviewed its
financial analysis of Fort Howard and the companies that MS&Co. had initially
approached on behalf of Fort Howard, including an analysis of the financial
terms of the indication of interest from Company X and the James River proposal.
Senior management of Fort Howard and MS&Co. made presentations to the Fort
Howard Board regarding the business of James River, the current state of the
tissue industry, the strategic rationale for the proposed merger, other
strategic alternatives and the proposed terms and conditions of the James River
proposal. Fort Howard's legal advisors also reviewed certain legal matters,
including a further detailed review of the terms of the James River proposal and
discussed the Fort Howard Board's fiduciary duties and other relevant aspects of
applicable law. Mr. Niehaus, a director of Fort Howard and an officer of MS&Co.,
reviewed the terms of the restrictions on share transfers and voting
arrangements that the Morgan Stanley Group and certain other large stockholders
of Fort Howard would agree to in connection with any such transaction. The Fort
Howard Board directed the company's legal and financial advisors to pursue
further a strategic merger with James River.
In the evening on May 2, 1997, following the meeting of the Fort Howard
Board, representatives of MS&Co. met with representatives of Merrill Lynch and
Salomon Brothers, James River's financial advisors, to discuss the principal
business terms of the proposed merger agreement, including the exchange ratio.
The James River Board held a telephonic meeting in the evening on May 2,
1997. On May 3, the James River Board held a meeting to review in detail the
terms of, and documents relating to, the proposed merger. The James River Board
received presentations from James River's management, legal counsel and
financial advisors concerning the terms of the proposed merger agreement,
including the exchange ratio, the business and prospects of James River and the
potential combination of James River and Fort Howard. The James River Board also
received the oral opinions of Merrill Lynch and Salomon Brothers (subsequently
confirmed in writing) that, as of such date, the Exchange Ratio was fair from a
financial point of view. See "-- Opinions of James River's Financial Advisors."
After considering such reports and opinions, the James River Board unanimously
determined that the merger, upon the terms and conditions discussed at the
meeting and set forth in the merger agreement, was fair to, and is in the best
interests of, the shareholders of James River, unanimously adopted the merger
agreement and unanimously resolved to recommend that the holders of James River
voting shares vote to approve the issuance of James River Common Shares in the
merger and the other matters submitted for approval in connection with the
merger at the James River Special Meeting. Following those meetings, James
River's financial advisors had further negotiations with Fort Howard's financial
advisors concerning the proposed exchange ratio and the other terms of the
proposed merger agreement and related agreements.
On May 4, 1997, the Fort Howard Board met to review the proposed
transaction. At the meeting, MS&Co. reviewed the financial terms of the proposed
merger agreement with James River and updated the Fort Howard Board on recent
contacts with other interested companies, including Company X. Fort Howard's
legal advisors reviewed certain legal matters, including a detailed review of
the terms and conditions of the proposed merger agreement and stockholder
agreements and discussed the Fort Howard Board's fiduciary duties and other
relevant
14
<PAGE>
aspects of applicable law. Following the presentations, the Fort Howard Board
received the oral opinion of MS&Co. (subsequently confirmed in writing) that, as
of that date, the Exchange Ratio was fair, from a financial point of view, to
the holders of Fort Howard Common Shares. See " -- Opinion of Fort Howard's
Financial Advisor." After considering such reports from Fort Howard's senior
management and its legal and financial advisors and after receiving and
considering MS&Co.'s oral opinion, the Fort Howard Board unanimously determined
that the merger, upon the terms and conditions set forth in the merger
agreement, was fair to, and in the best interests of, the stockholders of Fort
Howard, unanimously adopted the merger agreement and unanimously resolved to
recommend that the holders of outstanding Fort Howard Common Shares vote for
approval of the merger agreement.
Later that day, James River and Fort Howard executed the Agreement and Plan
of Merger, dated as of May 4, 1997, by and among James River, James River
Delaware, Inc., a wholly owned subsidiary of James River ("Merger Sub"), and
Fort Howard (the "Merger Agreement"), pursuant to which Merger Sub will be
merged with and into Fort Howard (the "Merger"). In addition, James River and
certain Fort Howard stockholders executed the agreements regarding the
restrictions on share transfers and voting arrangements. James River and Fort
Howard announced the proposed Merger on May 5, 1997.
Prior to the discussions leading to the execution of the Merger Agreement,
Fort Howard and James River had no material contracts, arrangements,
understandings or relationships with each other and had not engaged in any
material negotiations or transactions.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The James River Board and the Fort Howard Board believe that the Merger
will create a preeminent worldwide consumer products company that will provide
significant benefits to their respective shareholders, customers and employees
that might not otherwise be available. Fort James, with the combined
complementary strengths of two significant companies in the worldwide tissue
industry, will be better positioned to capitalize on growth opportunities in the
tissue industry both domestically and internationally than either company would
be alone. The Merger is expected to allow Fort James to derive significant
immediate cost savings and to realize improved efficiencies.
The James River Board and the Fort Howard Board believe the Merger will
provide the following benefits:
(Bullet) COMBINING COMPLEMENTARY STRENGTHS
The Merger will combine two strong companies which have complementary
strengths. Fort Howard has demonstrated leadership in commercial products
and produces primarily recycled fiber-based products. One of the lowest
cost producers in the tissue industry, Fort Howard has strong manufacturing
skills, a proprietary deinking technology and facilities and distribution
focussed primarily on the mid-western and eastern regions of the United
States. James River, a leader in consumer products, produces primarily
virgin fiber-based products, has strong marketing skills and demonstrated
strength in new product development, and has facilities and distribution
focussed primarily on the western and eastern regions of the United States
and in Europe.
James River and Fort Howard believe that the combination of Fort Howard's
low-cost manufacturing capabilities and proprietary technology with James
River's strong marketing capabilities, brands, product innovation and
global reach will result in a stronger competitive position for the
combined company.
(Bullet) SIGNIFICANT GROWTH IN EARNINGS AND STRONG CASH FLOW
James River expects that, excluding special transaction and integration
charges, the Merger will be accretive to 1998 earnings by approximately
10%. Fort James intends to reduce expenses and increase efficiency by
combining complementary technologies, optimizing product manufacturing and
logistics across combined systems, increasing purchasing efficiencies,
eliminating redundant overhead costs, consolidating work forces where
duplication exists and improving product quality and productivity. Fort
James is expected to recognize cost savings of at least $150 million in
1998, increasing to more than $200 million per year over time.
To cover the cost of implementing these plans, Fort James expects to take a
restructuring charge after the Merger is completed. The aggregate amount of
the charge, which will reduce net income for the period in
15
<PAGE>
which it is taken and will also reduce shareholders' equity, is not
estimable at this time. The portion of the charge relating to transaction
costs has been estimated at $50 million to $60 million.
In addition to the cost savings resulting from the combination of James
River and Fort Howard operations, Fort James plans to continue the cost
reduction program begun by James River in 1995. This program is expected to
deliver enhanced savings as it matures.
While Fort James will have an increased leverage ratio and less
shareholders' equity than James River on a stand-alone basis, the combined
companies had operating cash flow in excess of $1 billion on a pro forma
basis for 1996. Both James River and Fort Howard have made significant
progress in reducing debt, and Fort James will continue to use a large
portion of excess cash flow for that purpose.
(Bullet) POTENTIAL FOR REVENUE GROWTH
While each company has an inherently strong growth base, James River and
Fort Howard expect the combination to provide enhanced growth
opportunities. A portion of the expected savings resulting from the Merger
will be reinvested in Fort James' brands in order to increase sales and
accelerate revenue growth. Fort James' ability to offer a full line of
commercial products is also expected to have a positive impact on revenues.
The combined company will have improved geographic coverage in North
America, enhancing Fort Howard's efforts to distribute recycled tissue
products in the western part of North America. The financial strength of
the combined company is also expected to permit more rapid expansion in
selected European and other international markets. Finally, more effective
usage of the companies' existing manufacturing capacity should result in
additional revenue growth.
(Bullet) STRONG MANAGEMENT TEAM
A strong management team drawn from both companies will manage Fort James.
Mr. Marsh will serve as Chairman and Chief Executive Officer, while Mr.
Riordan will be President and Chief Operating Officer. The remaining senior
management will include key James River and Fort Howard executives. A new
executive headquarters for Fort James senior management will be established
in the Chicago, Illinois area. James River and Fort Howard believe there
has been a high level of mutual respect in the discussions among the senior
management teams and that the combined company's management will work
quickly to achieve the targeted cost savings and realize growth
opportunities.
At special meetings of the James River Board held on May 2 and 3, 1997, the
James River Board received presentations concerning, and reviewed the terms of,
the Merger Agreement with members of James River's management and its legal and
financial advisors. The James River Board also received presentations from James
River's management and representatives of Merrill Lynch and Salomon Brothers
concerning the business and prospects of James River, the potential combination
of James River and Fort Howard and the fairness of the proposed Exchange Ratio.
At the meeting on May 3, 1997, the James River Board unanimously determined that
the Merger, upon the terms and conditions set forth in the Merger Agreement, is
fair to, and in the best interests of, the shareholders of James River.
Accordingly, the James River Board has unanimously adopted the Merger Agreement
and unanimously recommends that the holders of James River Voting Shares (as
defined herein) vote for approval of the matters submitted for approval in
connection with the Merger at the James River Special Meeting.
At special meetings of the Fort Howard Board held on May 2 and 4, 1997, the
Fort Howard Board received presentations concerning, and reviewed the terms of,
the Merger Agreement with members of Fort Howard's management and its legal
counsel and financial advisors and also received presentations from Fort
Howard's management and representatives of MS&Co. concerning the business and
prospects of Fort Howard and the potential combination of Fort Howard and James
River. At the meeting on May 4, 1997, the Fort Howard Board unanimously
determined that the Merger, upon the terms and conditions set forth in the
Merger Agreement, is fair to, and in the best interests of, the stockholders of
Fort Howard. Accordingly, the Fort Howard Board has unanimously adopted the
Merger Agreement and unanimously recommends that the holders of outstanding Fort
Howard Common Shares vote for approval of the Merger Agreement at the Fort
Howard Special Meeting. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER --
Interests of Certain Fort Howard Stockholders."
In reaching their conclusions, the James River Board and the Fort Howard
Board each independently considered, among other things, (1) information
concerning the financial performance and condition, business operations, capital
levels, asset quality and prospects of each company, and its projected future
financial performance
16
<PAGE>
as a separate entity and on a combined basis; (2) current industry, economic and
market conditions and trends; (3) the importance of significant scale and scope
and financial resources to a company's ability to compete effectively as a
global consumer products company; (4) the Merger's structure as a tax-free
merger of equals; (5) the possibility that achieving cost savings, operating
efficiencies and synergies as a result of consummating the Merger at this time
might not be available to the same degree to either company on its own; (6) the
terms of the Merger Agreement including the limited conditions to closing of the
Merger, the ability of each of James River and Fort Howard to consider
alternative business combination proposals and the termination fee of $95
million payable by either company in certain circumstances (see "THE MERGER
AGREEMENT -- Conditions to the Merger" and " -- Termination of the Merger
Agreement; Termination Fees"); (7) the current and historical market prices of
the common shares of each company; (8) the opinions of their respective
financial advisors described below as to the fairness, from a financial point of
view, of the Exchange Ratio (which was determined through arms'-length
negotiations between the companies); (9) Fort Howard's and James River's
respective businesses, assets, product mixes, manufacturing facilities,
liabilities, managements, strategic objectives, competitive positions and
prospects; (10) the challenges of combining the businesses of two major
corporations the size of James River and Fort Howard and the attendant risk of
diverting management resources from other strategic opportunities and from
operational matters for an extended period of time; (11) the Merger's structure
as a pooling of interests transaction in accordance with U.S. generally accepted
accounting principles ("GAAP"); and (12) the impact of the Merger on the
customers and employees of each company. In reaching their decisions to approve
the Merger and to recommend the matters submitted for approval in connection
with the Merger to shareholders, neither the James River Board nor the Fort
Howard Board assigned any relative or specific weights to the various factors
considered, and individual directors may have given differing weights to
different factors.
The Fort Howard Board also considered its review of other strategic
alternatives, including possible business combinations with other companies and
the indications of interest received from other interested parties. See
" -- Background of the Merger." Based upon the Fort Howard Board's review of
other strategic alternatives, such indications of interest and the advantages
that could be achieved from Fort Howard's combination with James River, the Fort
Howard Board did not believe that a transaction (whether in the form of a
business combination or otherwise) with any of the other interested companies
could reasonably be expected to offer advantages comparable to those presented
by a business combination with James River.
OPINIONS OF JAMES RIVER'S FINANCIAL ADVISORS
Merrill Lynch and Salomon Brothers have acted as financial advisors to
James River in connection with the proposed Merger. On May 3, 1997, each of
Merrill Lynch and Salomon Brothers rendered its oral opinion, confirmed in
writing on May 4, 1997 (such written opinions dated May 4, 1997, the "Merrill
Lynch Opinion" and the "Salomon Opinion," respectively), to the James River
Board to the effect that, as of such dates, and based upon the assumptions made,
matters considered and limits of the reviews undertaken by Merrill Lynch and
Salomon Brothers, respectively, set forth in each such opinion, the Exchange
Ratio was fair, from a financial point of view, to James River.
COPIES OF THE MERRILL LYNCH OPINION AND THE SALOMON OPINION, WHICH SET
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEWS
UNDERTAKEN BY MERRILL LYNCH AND SALOMON BROTHERS, RESPECTIVELY, ARE ATTACHED AS
APPENDICES E AND F, RESPECTIVELY, TO THIS JOINT PROXY STATEMENT-PROSPECTUS. THE
MERRILL LYNCH OPINION AND THE SALOMON OPINION WERE FOR THE USE AND BENEFIT OF
THE JAMES RIVER BOARD. THE MERRILL LYNCH OPINION AND THE SALOMON OPINION WERE
LIMITED TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO JAMES RIVER OF THE
EXCHANGE RATIO, AND DID NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY
JAMES RIVER TO ENGAGE IN THE MERGER. THE MERRILL LYNCH OPINION AND THE SALOMON
OPINION DO NOT CONSTITUTE RECOMMENDATIONS TO ANY SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE ON THE PROPOSED MERGER. NO LIMITATIONS WERE IMPOSED BY
THE JAMES RIVER BOARD UPON MERRILL LYNCH OR SALOMON BROTHERS WITH RESPECT TO THE
INVESTIGATION MADE OR THE PROCEDURES FOLLOWED BY IT IN RENDERING THE MERRILL
LYNCH OPINION OR THE SALOMON OPINION, RESPECTIVELY. THE SUMMARIES OF THE MERRILL
LYNCH OPINION AND THE SALOMON OPINION SET FORTH IN THIS JOINT PROXY
STATEMENT-PROSPECTUS ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FULL
TEXTS OF SUCH OPINIONS. HOLDERS OF JAMES RIVER VOTING SHARES ARE URGED TO, AND
SHOULD, READ EACH OF THE OPINIONS CAREFULLY AND IN ITS ENTIRETY.
In arriving at the Merrill Lynch Opinion and the Salomon Opinion,
respectively, Merrill Lynch and Salomon Brothers, among other things (1)
reviewed certain publicly available business and financial information relating
17
<PAGE>
to James River and Fort Howard which they deemed to be relevant; (2) reviewed
certain information furnished to them by James River and Fort Howard, including
financial forecasts and projections, relating to the business, earnings, cash
flow, assets, liabilities and prospects of James River and Fort Howard, as well
as the amount and timing of the cost savings and related expenses and synergies
expected to result from the Merger (the "Expected Synergies"); (3) conducted
discussions with members of senior management and representatives of James River
and Fort Howard concerning the matters described in clauses (1) and (2) above,
as well as their respective businesses and prospects before and after giving
effect to the Merger and the Expected Synergies; (4) reviewed the market prices
and valuation multiples for the James River Common Shares and the Fort Howard
Common Shares and compared them with those of certain publicly traded companies
which they deemed to be relevant and with those relating to certain other
transactions which Merrill Lynch and Salomon Brothers deemed to be relevant; (5)
reviewed certain publicly available and other information concerning the trading
of, and the trading market for, the James River Common Shares and the Fort
Howard Common Shares; (6) reviewed the results of operations of James River and
Fort Howard and compared them with those of certain publicly traded companies
which they deemed to be relevant; (7) compared the proposed financial terms of
the Merger with the financial terms of certain other transactions which they
deemed to be relevant; (8) reviewed the potential pro forma impact of the
Merger; (9) reviewed a draft dated May 4, 1997, of the Merger Agreement,
including the exhibits thereto; and (10) reviewed and considered such other
financial studies and analyses and took into account such other matters as
Merrill Lynch and Salomon Brothers deemed relevant, including their respective
assessments of general economic, market and monetary conditions.
In preparing the Merrill Lynch Opinion and the Salomon Opinion, Merrill
Lynch and Salomon Brothers, respectively, assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to them,
discussed with or reviewed by or for them, or publicly available, and assumed no
responsibility for independently verifying such information. Neither Merrill
Lynch nor Salomon Brothers undertook an independent evaluation or appraisal of
any of the assets or liabilities of James River or Fort Howard or was furnished
with any such evaluation or appraisal. In addition, neither Merrill Lynch nor
Salomon Brothers assumed any obligation to conduct any physical inspection of
the properties or facilities of James River or Fort Howard. Merrill Lynch and
Salomon Brothers each assumed that the financial forecasts and projections and
the information regarding the Expected Synergies furnished to, discussed with or
reviewed by them were reasonably prepared and reflected the best currently
available estimates and judgment of James River's management or Fort Howard's
management, as the case may be, as to the expected future financial performance
of James River or Fort Howard, as the case may be, and reflected the best
current estimate of the Expected Synergies. Merrill Lynch and Salomon Brothers
expressed no view as to the accuracy of such information or the assumptions on
which it was based. Merrill Lynch and Salomon Brothers further assumed that the
Merger will be accounted for as a pooling of interests under GAAP and that it
will qualify as a tax-free reorganization for U.S. federal income tax purposes.
Merrill Lynch and Salomon Brothers also assumed that the representations and
warranties of each party contained in the Merger Agreement were true and
correct, that each party will perform all of the covenants and agreements
required to be performed by it under the Merger Agreement and that all
conditions to the consummation of the Merger will be satisfied without waiver
thereof, in each case to the extent material to Merrill Lynch's and Salomon
Brothers' respective analyses. Merrill Lynch and Salomon Brothers also assumed
that the final form of the Merger Agreement, including the exhibits thereto, as
and when executed, would be substantially similar to the drafts thereof reviewed
by them dated May 4, 1997.
The Merrill Lynch Opinion and the Salomon Opinion were necessarily based
upon market, economic and other conditions as they existed and could be
evaluated on, and on the information made available to them as of, May 4, 1997,
and Merrill Lynch and Salomon Brothers assumed no responsibility to update or
revise their opinions based upon circumstances or events occurring after May 4,
1997. Merrill Lynch and Salomon Brothers assumed that in the course of obtaining
the necessary regulatory or other consents or approvals (contractual or
otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that would have a
material adverse effect on the contemplated benefits to James River of the
Merger.
Neither Merrill Lynch nor Salomon Brothers expressed any opinion in the
Merrill Lynch Opinion or the Salomon Opinion, respectively, as to the prices at
which the James River Common Shares would trade following the announcement or
consummation of the Merger, which prices may vary depending upon, among other
factors,
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changes in interest rates, currency exchange rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities.
The following is a summary of certain financial and comparative analyses
performed by Merrill Lynch and Salomon Brothers in arriving at the Merrill Lynch
Opinion and the Salomon Opinion, respectively.
FINANCIAL OVERVIEW AND TRADING ANALYSIS. Merrill Lynch and Salomon Brothers
reviewed historical financial information of each of James River and Fort Howard
for the 1994, 1995 and 1996 fiscal years, and certain "base case" and "upside
case" estimates of projected financial information for each of James River and
Fort Howard provided to Merrill Lynch and Salomon Brothers.
Merrill Lynch and Salomon Brothers reviewed the daily closing market price
per share and trading volume of the James River Common Shares and the Fort
Howard Common Shares for the period beginning March 10, 1995 (the date Fort
Howard became a publicly traded company) and ending April 30, 1997.
COMPARABLE PUBLIC COMPANY TRADING ANALYSIS. Merrill Lynch and Salomon
Brothers performed an analysis of the implied transaction price for Fort Howard
(based on the 1.375 Exchange Ratio and the pre-announcement price per James
River Common Share of $30.88) as a multiple of five different measures of
historical and projected financial performance (including the "base case" and
"upside case projections"). Merrill Lynch and Salomon Brothers also analyzed the
market prices (as of May 2, 1997) as multiples of the same measures of financial
performance for a group of public companies that Merrill Lynch and Salomon
Brothers deemed to be comparable. The companies included Chesapeake Corporation,
James River, Kimberly-Clark Corporation and Procter & Gamble Company
(collectively, the "Fort Howard Comparables"). To calculate the trading
multiples for the Fort Howard Comparables, Merrill Lynch and Salomon Brothers
used publicly available information concerning historical and projected
financial performance for the Fort Howard Comparables, including published
historical information, earnings estimates by First Call Research Network
("First Call") and estimates of earnings before interest, income taxes,
depreciation and amortization ("EBITDA") based on analyst research reports.
Merrill Lynch and Salomon Brothers then compared the trading multiples for
the Fort Howard Comparables to the implied transaction multiples for Fort
Howard. The market values of the Fort Howard Comparables as multiples of (1)
estimated 1997 earnings per share ("EPS") of the Fort Howard Comparables ranged
from 16.8x to 35.1x, with a median of 18.9x, as compared to an implied
transaction multiple of 16.3x for Fort Howard and (2) estimated 1998 EPS of the
Fort Howard Comparables ranged from 12.5x to 23.3x, with a median of 16.6x, as
compared to an implied transaction multiple of 14.6x for Fort Howard. The market
capitalizations (defined as market value plus preferred stock interest, debt and
minority interest, less cash and marketable securities) of the Fort Howard
Comparables as multiples of (1) latest twelve months ("LTM") EBITDA of the Fort
Howard Comparables ranged from 6.2x to 14.1x, with a median of 7.6x, as compared
to an implied transaction multiple of 9.7x for Fort Howard, (2) estimated 1997
EBITDA of the Fort Howard Comparables ranged from 6.1x to 11.3x, with a median
of 7.3x, as compared to an implied transaction multiple of 8.8x for Fort Howard,
and (3) LTM earnings before interest and income taxes ("EBIT") of the Fort
Howard Comparables ranged from 12.0x to 18.0x, with a median of 14.5x, as
compared to an implied transaction multiple of 11.7x for Fort Howard.
SELECTED ACQUISITION TRANSACTIONS ANALYSIS. Using publicly available
information, Merrill Lynch and Salomon Brothers reviewed six transactions that
have closed or are currently pending involving the acquisition of tissue and
paper based consumer products companies (the "Selected Acquisition
Transactions"). The Selected Acquisition Transactions and the date each such
transaction was announced are as follows: Tambrands Inc./Procter & Gamble
Company (April 9, 1997); Industries San Cristobal/Kimberly-Clark de Mexico S.A.
de C.V. (October 9, 1995); Scott Paper Co./Kimberly Clark Corporation (June 23,
1995) (the "Scott Paper Acquisition"); Papierwerke Waldhof -- Aschaffenburg AG
(Germany)/Svenska Cellulosa AB (Sweden) (January 15, 1995); Bowater PLC/Carter
Holt Harvey Limited (November 4, 1994); and Jamont Holding NV/James River (April
24, 1994). For each of the Selected Acquisition Transactions (with several data
points unavailable), Merrill Lynch and Salomon Brothers determined the
"Transaction Value" (defined as the market value of equity at the transaction
price plus the debt assumed) as a multiple of (1) LTM EBITDA, and observed a
range of 7.8x to 12.9x as compared to an implied transaction multiple of 9.7x
for Fort Howard and (2) LTM EBIT, and observed a range of 10.4x to 27.1x, as
compared to an implied transaction multiple of 11.7x for Fort Howard. Merrill
Lynch and Salomon Brothers also noted that, for the Scott Paper Transaction, the
Transaction Value as a multiple of (1) LTM EBITDA was 10.7x and (2) LTM EBIT was
15.0x.
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PRO FORMA CONTRIBUTION ANALYSIS. Merrill Lynch and Salomon Brothers
analyzed the relative pro forma contributions made by each of James River and
Fort Howard to a combined entity. Under these analyses, net income, excluding
non-recurring and extraordinary charges, was analyzed both including and
excluding the impact of stabilized pre-tax Expected Synergies of $150 million in
1997 and 1998. These analyses indicated that Fort Howard would contribute
between (1) 45.3% and 57.7% of combined net income in 1997 and 1998,
respectively, using the "base case" projections, and (2) 44.2% and 57.0% of
combined net income in 1997 and 1998, respectively, using the "upside case"
projections.
Merrill Lynch and Salomon Brothers contrasted these contributions to
projected combined net income with the resulting pro forma relative equity
ownership of the shareholders of Fort Howard in the combined company of 48.6%,
(based upon the Exchange Ratio and assuming the conversion of all of James
River's convertible preferred securities).
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch and Salomon Brothers performed
a discounted cash flow ("DCF") analysis of Fort Howard using the "base case" and
"upside case" projections for Fort Howard for the fiscal years ending December
31, 1997 through December 31, 2001. The DCF analysis is a method of estimating
the present value of the stand-alone unlevered cash flows that Fort Howard would
be expected to generate if Fort Howard performed in accordance with certain
projections. The DCF value was calculated assuming discount rates ranging from
9% to 11% and was comprised of the sum of the net present values of (1) the
projected unlevered free cash flows for Fort Howard for the years 1997 through
2001 plus (2) terminal value in the year 2001 based upon multiples of projected
EBITDA in such year ranging from 8.0x to 9.5x. The DCF value was calculated both
including and excluding the value of the Expected Synergies, where the value of
the Expected Synergies was calculated assuming discount rates ranging from 9% to
11% and was comprised of the sum of the net present value of (1) the annual
amounts of Expected Synergies plus (2) a terminal value of the Expected
Synergies in the year 2001 based upon a terminal multiple of 7.0x.
Utilizing the DCF method, Merrill Lynch and Salomon Brothers calculated a
valuation range for Fort Howard Common Shares (1) using the "base case"
projections of $32.00 to $41.00 per share (excluding Expected Synergies) or up
to $55.00 per share (including Expected Synergies), and (2) using the "upside
case" projections, of $46.00 to $56.00 per share (excluding Expected Synergies)
or up to $70.00 per share (including Expected Synergies).
Merrill Lynch and Salomon Brothers also analyzed the relative DCF
contribution to a combined entity of James River and Fort Howard using the "base
case" projections and the "upside case" projections for each company (and
excluding Expected Synergies in each case). For Fort Howard, the DCF was
calculated as described under " -- Discounted Cash Flow Analysis." For James
River, the DCF was calculated assuming discount rates ranging from 9% to 11% and
was comprised of the sum of the net present values of (1) the projected
unlevered free cash flow for the years 1997 through 2001 plus (2) the year 2001
terminal value based upon multiples of projected EBITDA for such year ranging
from 6.0x to 7.0x. The results of that analysis are described under
" -- Exchange Ratio Analysis."
EXCHANGE RATIO ANALYSIS. Using the four types of analysis described above,
and assuming the pre-announcement price per James River Common Share of $30.88,
Merrill Lynch and Salomon Brothers derived four ranges of exchange ratios for a
transaction involving the issuance of James River Common Shares for Fort Howard
Common Shares and compared these exchange ratio ranges with the proposed
Exchange Ratio of 1.375. The ranges summarized below are based on both the "base
case" and "upside case" projections. As a result, the low end of the ranges
presented represents the low end of the "base case" and the high end of the
ranges presented represents the high end of the "upside case".
The range of implied exchange ratios based on the analysis described under
" -- Comparable Public Company Trading Analysis" was from 1.00 to 1.46 James
River Common Shares for each Fort Howard Common Share. The range of implied
exchange ratios based on the analysis described under " -- Selected Acquisition
Transactions Analysis" was from 1.20 to 1.46 James River Common Shares for each
Fort Howard Common Share. The range of implied exchange ratios based on the
analysis described under " -- Pro Forma Contribution Analysis" was from 1.12 to
1.93 James River Common Shares for each Fort Howard Common Share. Finally, the
range of implied exchange ratios based on the analysis described under
" -- Discounted Cash Flow Analysis," including 50% and 100% of the Expected
Synergies, was from 1.24 to 1.53 James River Common Shares for each Fort Howard
Common Share.
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PRO FORMA FINANCIAL ANALYSIS. Merrill Lynch and Salomon Brothers reviewed
the pro forma synergies and cost savings projected by the managements of James
River and Fort Howard and the one-time integration expenditures and charges
projected by the managements of James River and Fort Howard. Merrill Lynch and
Salomon Brothers also analyzed the impact of the Merger for James River
shareholders on the pro forma fully diluted projected EPS for 1997, 1998 and
1999. Based upon the projections prepared by the respective managements, the
analysis indicated that, for the James River shareholders, excluding one-time
integration charges, the Merger would be accretive to earnings in 1997, 1998 and
1999.
The summary set forth above does not purport to be a complete description
of the analyses performed by Merrill Lynch and Salomon Brothers. Arriving at a
fairness opinion is a complex process not necessarily susceptible to partial
analysis or summary description. Merrill Lynch and Salomon Brothers believe that
their analyses must be considered as a whole and that selecting portions of
their analyses and of the factors considered by them, without considering all
such factors and analyses, could create a misleading view of the processes
underlying the Merrill Lynch Opinion and the Salomon Opinion. Merrill Lynch and
Salomon Brothers did not assign relative weights to any of their analyses in
preparing their opinions. The matters considered by Merrill Lynch and Salomon
Brothers in their analyses were based on numerous macroeconomic, operating and
financial assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond James River's or
Fort Howard's control and involve the application of complex methodologies and
educated judgment. Any estimates incorporated in the analyses performed by
Merrill Lynch and Salomon Brothers are not necessarily indicative of actual past
or future results or values, which may be significantly more or less favorable
than such estimates. Estimated values do not purport to be appraisals and do not
necessarily reflect the prices at which businesses or companies may be sold in
the future, and such estimates are inherently subject to uncertainty. No public
company utilized as a comparison is identical to James River or Fort Howard, and
none of the Selected Acquisition Transactions or other business combinations
utilized as a comparison is identical to the proposed Merger. Accordingly, an
analysis of publicly traded comparable companies or comparable business
combinations is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies involved and other factors that could affect the public trading
value of the companies or company to which they are being compared.
Pursuant to separate letter agreements with Merrill Lynch and Salomon
Brothers dated January 10, 1997, and January 20, 1997, respectively, James River
has agreed to pay each of Merrill Lynch and Salomon Brothers (1) a retainer fee
of $60,000 per month, payable on execution of their respective letter agreements
and monthly thereafter, and (2) an additional fee of $9,000,000, payable upon
the closing of the proposed Merger, against which the fee described in clause
(1) will be credited. In addition, James River has agreed to reimburse each of
Merrill Lynch and Salomon Brothers for any fees paid by Merrill Lynch and
Salomon Brothers, respectively, for the retention of third-party advisors,
consultants or counsel at the specific written request of James River and to
indemnify Merrill Lynch and Salomon Brothers and certain related parties from
and against certain liabilities, including liabilities under the federal
securities laws, arising out of their respective engagements.
James River retained Merrill Lynch based upon its experience and expertise.
Merrill Lynch is an internationally recognized investment banking and advisory
firm. Merrill Lynch, as part of its investment banking business, is continuously
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Salomon Brothers is an internationally recognized investment banking firm
that regularly engages in the valuation of companies and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities and for
corporate, estate and other purposes. James River retained Salomon Brothers as a
financial advisor because of its reputation, expertise in the valuation of
companies and substantial experience in transactions such as the proposed
Merger.
Merrill Lynch and Salomon Brothers have, in the past, provided financial
advisory and financing services to James River and Fort Howard and/or their
affiliates and may continue to do so and have received fees for the rendering of
such services. In addition, in the ordinary course of their businesses, Merrill
Lynch and Salomon Brothers may actively trade the James River Common Shares and
other securities of James River, as well as the Fort Howard Common Shares and
other securities of Fort Howard, for their own accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
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OPINION OF FORT HOWARD'S FINANCIAL ADVISOR
In April 1997, Fort Howard retained MS&Co. to act as its financial advisor
in connection with the potential combination with James River. At the May 4,
1997 meeting of the Fort Howard Board, MS&Co. rendered to the Fort Howard Board
an oral opinion that, as of such date and based upon and subject to the various
considerations set forth in its opinion, the Exchange Ratio was fair, from a
financial point of view, to the holders of Fort Howard Common Shares. MS&Co.
subsequently confirmed its oral opinion by delivering to the Fort Howard Board
its written opinion dated as of May 4, 1997.
THE FULL TEXT OF THE WRITTEN OPINION OF MS&CO. DATED MAY 4, 1997, WHICH
SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED, AND LIMITATIONS ON THE SCOPE OF REVIEW BY MS&CO. IN RENDERING ITS
OPINION, IS ATTACHED AS APPENDIX G TO THIS JOINT PROXY STATEMENT-PROSPECTUS.
MS&CO.'S OPINION IS DIRECTED TO THE FORT HOWARD BOARD AND THE FAIRNESS OF THE
EXCHANGE RATIO TO THE HOLDERS OF FORT HOWARD COMMON SHARES FROM A FINANCIAL
POINT OF VIEW. THE MS&CO. OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE
MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION AS TO HOW THE STOCKHOLDERS OF
FORT HOWARD SHOULD VOTE AT THE FORT HOWARD SPECIAL MEETING. THE SUMMARY OF THE
OPINION OF MS&CO. SET FORTH IN THIS JOINT PROXY STATEMENT-PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. HOLDERS
OF FORT HOWARD COMMON SHARES ARE URGED TO, AND SHOULD, READ MS&CO.'S OPINION
CAREFULLY AND IN ITS ENTIRETY.
In rendering its opinion, MS&Co., among other things, (1) reviewed certain
publicly available financial statements and other information concerning Fort
Howard and James River; (2) reviewed certain internal financial statements and
other financial and operating data concerning Fort Howard and James River
prepared by the managements of Fort Howard and James River, respectively; (3)
analyzed certain financial projections of Fort Howard and James River prepared
by their respective managements; (4) discussed the past and current operations
and financial condition and the prospects of Fort Howard and James River with
senior executives of Fort Howard and James River, respectively; (5) analyzed the
pro forma impact of the Merger on the combined company's earnings per share,
consolidated capitalization and financial ratios; (6) reviewed the reported
prices and trading activity for the Fort Howard Common Shares and the James
River Common Shares; (7) compared the financial performance of Fort Howard and
James River and the prices and trading activity of the Fort Howard Common Shares
and the James River Common Shares with that of certain other comparable publicly
traded companies and their securities; (8) discussed the strategic objectives of
the Merger and the plan for the combined company, including estimates of
potential synergies and other benefits, with senior executives of Fort Howard
and James River; (9) reviewed the financial terms, to the extent publicly
available, of certain comparable precedent merger transactions; (10)
participated in discussions and negotiations among representatives of Fort
Howard and James River and their financial and legal advisors; (11) reviewed the
Merger Agreement and certain related documents; and (12) performed such analyses
and considered such other factors as MS&Co. deemed appropriate.
In rendering its May 4, 1997 opinion, MS&Co. assumed and relied, without
independent verification, upon the accuracy and completeness of the information
supplied or otherwise made available to MS&Co. by Fort Howard and James River
for the purposes of its opinion. MS&Co. assumed that the financial projections,
including synergies and other benefits expected to be derived from the Merger,
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of Fort Howard and
James River. MS&Co. did not make any independent valuation or appraisal of the
assets or liabilities of either Fort Howard or James River, nor was MS&Co.
furnished with any such appraisals. In addition, MS&Co. assumed the Merger will
be consummated in accordance with the terms set forth in the Merger Agreement.
MS&Co.'s opinion is necessarily based on economic, market and other conditions
as they existed on, and the information made available to it as of, May 4, 1997.
The following is a summary of certain analyses performed by MS&Co. in
connection with its May 4, 1997 opinion.
FORT HOWARD COMMON SHARE PERFORMANCE. MS&Co.'s analysis of the Fort Howard
Common Share performance consisted of an historical analysis of closing prices
and trading volumes from March 10, 1995, to May 1, 1997. During this period,
based on closing prices on the NASDAQ National Market, the Fort Howard Common
Shares achieved a high of $36.00 per share and a low of $12.19 per share. The
Fort Howard Common Shares closed at $36.00 per share on May 1, 1997.
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JAMES RIVER COMMON SHARE PERFORMANCE. MS&Co.'s analysis of the James River
Common Share performance consisted of an analysis of closing prices and trading
volumes from March 10, 1995 to May 1, 1997. During this period, based on closing
prices on the New York Stock Exchange ("NYSE"), James River Common Shares
achieved a high of $36.50 and a low of $24.25 per share. James River Common
Shares closed at $30.00 per share on May 1, 1997.
COMPARABLE COMPANY ANALYSIS. MS&Co. performed an analysis (referred to as a
"comparable public company trading analysis") examining Fort Howard's
performance relative to a group of publicly traded peers. MS&Co. compared
certain publicly available financial and operating data, projections of future
financial performance and market statistics (based upon closing stock prices on
May 1, 1997) of Chesapeake Corporation, James River, Kimberly-Clark Corporation,
Georgia-Pacific Corporation, International Paper Company, Union Camp Corporation
and Weyerhaeuser Company (collectively, the "Selected Comparable Companies").
Historical financial information used in connection with the ratios provided
below with respect to the Selected Comparable Companies was as of the date of
the most recent financial statements publicly available for each company. MS&Co.
compared (1) the closing stock prices as a multiple of estimated 1997 and 1998
EPS based on estimates by Institutional Brokers Estimates System ("IBES") and
First Call and (2) the aggregate value (consisting of market capitalization plus
total debt less cash and marketable securities) as a multiple of estimated 1997
EBITDA (based on estimates from analysts' research, The Value Line Investment
Survey ("Value Line"), MS&Co. research and management of Fort Howard) and EBIT
(based on estimates from analysts' research, Value Line, MS&Co. research and
management of Fort Howard).
For the Selected Comparable Companies, such analysis indicated (1) a median
price to estimated 1997 EPS multiple of 18.5x, (2) a median price to estimated
1998 EPS multiple of 15.9x, (3) a median aggregate value to estimated 1997
EBITDA multiple of 6.2x and (4) a median aggregate value to estimated 1997 EBIT
multiple of 10.4x. Using the financial information and forecasts provided by
management of James River and Fort Howard, MS&Co. derived an implied equity
value range per Fort Howard Common Share upon application of the financial
multiples from the Selected Comparable Companies. This analysis indicated that
the implied equity value of Fort Howard ranged from $32.00 to $40.00 per fully
diluted Fort Howard Common Share.
No company utilized as a comparison in the comparable companies analysis is
identical to Fort Howard. In evaluating the Selected Comparable Companies,
MS&Co. made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Fort Howard, such as the impact of
competition on Fort Howard and the industry generally, industry growth and the
absence of any material adverse change in the financial condition and prospects
of Fort Howard or the industry, or in the financial markets in general.
COMPARABLE TRANSACTION ANALYSIS. Using publicly available information,
MS&Co. performed an analysis of selected business combination transactions
(collectively, the "Fort Howard Comparable Transactions") from 1982 to 1996. For
each transaction, MS&Co. calculated (1) the aggregate value of the consideration
paid in the transaction as a multiple of EBITDA and EBIT for the preceding
twelve months and (2) the equity value as a multiple of earnings for the
preceding twelve months. Such analysis indicated that the aggregate value of the
consideration paid in the transaction as a multiple of EBITDA and EBIT for the
preceding twelve months and the equity value as a multiple of earnings for the
preceding twelve months, respectively, ranged from (a) 8.0x to 9.5x, (b) 10.0x
to 12.0x and (c) 16.0x to 18.0x. Using the financial information and forecasts
provided by management of Fort Howard and James River, MS&Co. derived an implied
equity value range for Fort Howard upon application of the financial multiples
from the Fort Howard Comparable Transactions. This analysis indicated that the
implied equity value of Fort Howard ranged from $33.50 to $43.00 per fully
diluted Fort Howard Common Share.
No transaction utilized as a comparison in the comparable transaction
analysis is identical to the Merger. In evaluating the precedent transactions,
MS&Co. made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Fort Howard, such as the impact of
competition on Fort Howard and the industry generally, industry growth and the
absence of any material adverse change in the financial condition and prospects
of Fort Howard or the industry, or in the financial markets in general.
DISCOUNTED CASH FLOW ANALYSIS. MS&Co. performed a discounted cash flow
analysis of Fort Howard for the fiscal years ended 1997 through 2006 to estimate
the present value of the stand-alone unlevered free cash flows
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that Fort Howard would be expected to generate if Fort Howard performed in
accordance with certain financial forecasts. The discounted cash flow analysis
for Fort Howard was based upon certain discussions with management of Fort
Howard as well as upon certain financial forecasts prepared by management of
Fort Howard. Unlevered free cash flows of Fort Howard were calculated as net
income plus depreciation and amortization, deferred tax, minority interest,
other noncash expenses and after-tax net interest expense, less investment in
working capital, capital expenditures and other noncash income. MS&Co.
calculated terminal values for Fort Howard by applying a range of EBITDA
multiples of 6.0x to 8.0x, EBIT multiples of 7.0x to 9.0x and perpetual growth
rates of 1.0% to 3.0% representing estimated long-term growth rates of free cash
flow to the free cash flow in fiscal year 2006. The unlevered free cash flow
amounts and terminal values were then discounted to the present using a range of
discount rates from 10.0% to 11.0%. The discount rate ranges were selected based
upon an analysis of the weighted average cost of capital of Fort Howard. Using
the financial information and forecasts provided by management of Fort Howard,
MS&Co. derived an implied equity value range for Fort Howard. This analysis,
which does not consider any benefits derived from combining Fort Howard and
James River, indicated that the implied equity value of Fort Howard ranged from
$33.50 to $42.00 per fully diluted Fort Howard Common Share.
HISTORICAL MARKET PRICE RATIO ANALYSIS. MS&Co. analyzed the historical
ratios between the market prices per Fort Howard Common Share and per James
River Common Share ("Historical Exchange Ratios"). The Historical Exchange
Ratios were analyzed from March 10, 1995 to May 1, 1997. During this period, the
Historical Exchange Ratios ranged from 120.0% to 40.3%. On May 1, 1997, the
ratio of the market price for Fort Howard Common Shares to the market price for
James River Common Shares was 120.0%.
PRO FORMA ANALYSIS OF THE MERGER. MS&Co. analyzed certain pro forma effects
of the Merger based upon the Exchange Ratio, including the impact of the Merger
on the EPS of Fort James in fiscal years 1997 through 1999. Such analysis was
based on First Call earnings estimates and base synergy projections provided by
the management of James River and Fort Howard for the fiscal years ended 1997
though 1999. MS&Co. observed that, if the Merger were treated as a pooling of
interests for accounting purposes, and if the estimated synergies were realized,
the issuance of the James River Common Shares in the Merger would have an
accretive effect on pro forma EPS excluding one-time integration charges of Fort
James of approximately 7.3% in fiscal year 1997 and 11.2% in fiscal year 1998.
SUMMARY CONTRIBUTION ANALYSIS. MS&Co. analyzed and compared the respective
historical and projected contribution by Fort Howard and James River to the
total revenues, EBITDA and EBIT of Fort James in 1996, 1997 and 1998. The
analysis indicated that in 1996, 1997 and 1998, Fort Howard would contribute
21.7%, 22.1% and 21.9%, respectively, to combined revenues, 41.1%, 43.2% and
40.4%, respectively, to combined EBITDA and 53.3%, 52.7% and 47.1%,
respectively, to combined EBIT.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, MS&Co. considered the results of all of its analyses as
a whole and did not attribute any particular weight to any particular analysis
or factor considered by it. Furthermore, selecting any portions of MS&Co.'s
analyses, without considering all analyses, would create an incomplete view of
the process underlying MS&Co.'s opinion. In addition, MS&Co. may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting for any particular analysis described above
should not be taken to be MS&Co.'s view of the actual value of Fort Howard.
In performing its analyses, MS&Co. made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Fort Howard or James River. The
analyses performed by MS&Co. are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of MS&Co.'s analysis of the
fairness of the Exchange Ratio from a financial point of view to the holders of
Fort Howard Common Shares and were provided to the Fort Howard Board in
connection with the delivery of the MS&Co. written opinion. The analyses do not
purport to be appraisals or to reflect the prices at which Fort Howard Common
Shares might actually be sold. In addition, as described above, the MS&Co.
opinion and presentation to the Fort Howard Board were among the many factors
taken into consideration by the Fort Howard Board in making its determination to
approve the Merger.
Fort Howard retained MS&Co. based upon its experience and expertise. MS&Co.
is an internationally recognized investment banking and financial advisory firm.
MS&Co., as part of its investment banking business, is
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continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwriting, competitive bidding,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. MS&Co. is a full-service
securities firm engaged in trading and brokerage activities, as well as
providing investment banking and financial advisory services. In the ordinary
course of its trading and brokerage activities, MS&Co. or its affiliates may at
any time hold long or short positions, and may trade or otherwise effect
transactions, for its own account or the account of customers, in securities of
Fort Howard or James River. In the past, MS&Co. and its affiliates have provided
financial advisory and financial services to Fort Howard and James River and
have received customary fees for the rendering of these services. As of May 4,
1997, certain affiliates of MS&Co. beneficially held approximately 26% of the
then outstanding Fort Howard Common Shares. As of the date of this Joint Proxy
Statement-Prospectus, certain affiliates of MS&Co. beneficially hold
approximately 9.2% of the equity of Fort Howard on a fully diluted basis. MS&Co.
expects that such affiliates will be significant stockholders of Fort James. In
addition, three employees of MS&Co. are directors of Fort Howard, two of whom
will become directors of Fort James. See "INTERESTS OF CERTAIN PERSONS IN THE
MERGER" and "DIRECTORS AND MANAGEMENT OF FORT JAMES FOLLOWING THE MERGER."
FINANCIAL ADVISOR FEES. Pursuant to a letter agreement dated as of April
30, 1997, Fort Howard has agreed to pay MS&Co. (1) an advisory fee estimated to
be between $250,000 and $500,000 and (2) upon consummation of the Merger, a
transaction fee estimated to be approximately $18 million. In addition to the
foregoing compensation, Fort Howard has agreed to reimburse MS&Co. for its
expenses, including reasonable fees and expenses of its counsel, and to
indemnify MS&Co. for liabilities and expenses arising out of the engagement and
the transactions in connection therewith, including liabilities under federal
securities laws.
AGREEMENTS WITH CERTAIN FORT HOWARD STOCKHOLDERS
Concurrently with the execution of the Merger Agreement, the Morgan Stanley
Group, Leeway and Co., as nominee for the Long-Term Investment Trust of AT&T
Investment Management Organization ("Leeway"), and Mellon Bank, N.A., as Trustee
for First Plaza Group Trust ("First Plaza" and, together with the Morgan Stanley
Group and Leeway, the "Supporting Stockholders") entered into separate
agreements with James River (the "Stockholder Support Agreements") under which
each Supporting Stockholder agreed, among other things, to vote all of the Fort
Howard Common Shares that are beneficially owned by it (limited, in the case of
Leeway, to shares over which the AT&T Investment Management Organization
exercises investment discretion) as of the record date for the Fort Howard
Special Meeting in favor of the Merger and the Merger Agreement.
The Stockholder Support Agreements limit the ability of the Supporting
Stockholders to sell, transfer or otherwise dispose of any of the Fort Howard
Common Shares held by them as of May 4, 1997, or any interests, including voting
rights, in such shares, except that each Supporting Stockholder may transfer its
shares under certain circumstances. These exceptions include a transfer (1) with
the consent of James River, (2) for those members of the Morgan Stanley Group
that are limited partnerships, in a pro rata distribution or transfer to the
partners of such limited partnership or otherwise in accordance with its
agreement of limited partnership (which distribution occurred at the close of
business on May 5, 1997) or, with respect to Leeway and First Plaza, pursuant to
the MSLEF Agreement of Limited Partnership, (3) to a party that agrees to be
bound by the terms of the transferor's Stockholder Support Agreement, (4) to
Fort Howard in connection with the exercise of certain stock options and (5)
with respect to Leeway only, in a transfer to a successor trust or the trust for
a successor plan in connection with or following the reorganization of the
pension plans or trusts of AT&T Corp. and Lucent Technologies Inc.
As of May 5, 1997, after the distribution by members of the Morgan Stanley
Group described in clause (2) in the preceding paragraph, the Morgan Stanley
Group held 6,910,834 Fort Howard Common Shares; Leeway held 4,672,114 Fort
Howard Common Shares over which the AT&T Investment Management Organization
exercised investment discretion as of that date; and First Plaza held 8,472,351
Fort Howard Common Shares. The number of shares owned by Leeway which are
subject to the restrictions contained in Leeway's Stockholder Support Agreement
is subject to reduction upon the agreement of James River and Fort Howard that
the transfer of such shares by Leeway would not jeopardize pooling of interests
accounting treatment of the Merger.
On the record date for the Fort Howard Special Meeting, the Supporting
Stockholders owned, in the aggregate, 20,055,299 Fort Howard Common Shares which
are subject to the voting agreements contained in the
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Stockholder Support Agreements and which, pursuant to such agreements, will be
voted to approve the Merger and the Merger Agreement at the Fort Howard Special
Meeting. These shares represent approximately 26% of the shares entitled to vote
at the Fort Howard Special Meeting.
The Stockholder Support Agreements also prohibit the Supporting
Stockholders from initiating, soliciting or encouraging any discussions,
inquiries or proposals with any third party that constitute or would reasonably
be expected to lead to a Competing Transaction (as defined herein) or providing
any information or assistance to any third party relating to a Competing
Transaction or negotiating with a third party regarding such a transaction
except that, with regard to the Morgan Stanley Group, its Stockholder Support
Agreement would not prohibit any member or affiliate of the Morgan Stanley Group
that is an officer, director or representative of Fort Howard from exercising
his or her fiduciary duties in accordance with the terms of the Merger
Agreement. See "THE MERGER AGREEMENT -- Limitation on Negotiations."
Each Stockholder Support Agreement terminates at the option of any party
thereto after the earlier of the termination of the Merger Agreement in
accordance with its terms or the day following the closing of the Merger, or in
the case of Leeway, if earlier, after March 31, 1998.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following discussion describes the material federal income tax
consequences of the Merger. The discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), U.S. Treasury regulations promulgated
thereunder, and judicial and administrative interpretations thereof, all as in
effect on the date of this Joint Proxy Statement-Prospectus, and is subject to
any changes in these or other laws occurring after such date. The discussion
does not address the effects of any state, local or foreign tax laws.
The tax consequences of the Merger to an individual shareholder may vary
depending upon such shareholder's particular situation, and certain shareholders
(particularly any shareholder which, at the effective time of the Merger (the
"Effective Time"), is not a U.S. Person, is a tax-exempt entity, securities
dealer, broker-dealer, insurance company or financial institution or is an
individual who acquired his or her Fort Howard Common Shares pursuant to an
employee stock option or otherwise as compensation) may be subject to special
rules not discussed below. For these purposes, a U.S. Person is (1) a citizen or
resident of the United States for U.S. federal income tax purposes, (2) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (3) an estate, the income of
which is subject to U.S. federal income tax regardless of the source or (4) a
trust with respect to which a court within the United States is able to exercise
primary supervision over its administration and one or more U.S. fiduciaries
have the authority to control all its substantial decisions.
EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES
IN ANY APPLICABLE TAX LAWS.
The obligations of the parties to consummate the Merger are conditioned on
James River's receipt of an opinion of Wachtell, Lipton, Rosen & Katz, counsel
to James River, and Fort Howard's receipt of an opinion of Shearman & Sterling,
counsel to Fort Howard, that (1) the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code, (2) no gain or loss will be recognized by James River,
Merger Sub or Fort Howard as a result of the Merger and (3) no gain or loss will
be recognized by the stockholders of Fort Howard who exchange their Fort Howard
Common Shares solely for James River Common Shares as a result of the Merger
(except with respect to cash received in lieu of a fractional share interest).
Shareholders should be aware that an opinion of counsel is not binding on the
Internal Revenue Service ("IRS") or the courts. Shareholders should also be
aware that the opinions of Wachtell, Lipton, Rosen & Katz and Shearman &
Sterling will be based on current law and on certain representations regarding
factual matters and certain covenants as to future actions made by James River
and Fort Howard. If these representations are incorrect in certain material
respects or the covenants are not complied with, the conclusions reached by
counsel in its opinion might be jeopardized.
Assuming that the Merger will qualify as a reorganization within Section
368(a) of the Code, the Merger will have the federal income tax consequences
discussed below.
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TAX IMPLICATIONS TO FORT HOWARD STOCKHOLDERS. Except to the extent Fort
Howard stockholders receive cash in lieu of a fractional share interest, Fort
Howard stockholders who exchange Fort Howard Common Shares in the Merger for
James River Common Shares will not recognize gain or loss for federal income tax
purposes upon the receipt of James River Common Shares in exchange for their
Fort Howard Common Shares. The aggregate tax basis of James River Common Shares
received as a result of the Merger will be the same as the stockholder's
aggregate tax basis in the Fort Howard Common Shares surrendered in the
exchange, reduced by the portion of the stockholder's tax basis properly
allocated to the fractional share interest, if any, for which the stockholder
receives cash. The holding period of the James River Common Shares received by
Fort Howard stockholders as a result of the Merger will include the period
during which the stockholder held the Fort Howard Common Shares exchanged in the
Merger, provided that the Fort Howard Common Shares so exchanged were held as
capital assets at the Effective Time. A Fort Howard stockholder that receives
cash in lieu of a fractional share interest in James River Common Shares in the
Merger will be treated as having received the fractional share interest in James
River Common Shares in the Merger and as having received the cash in redemption
of the fractional share interest. The cash payment will be treated as a
distribution in payment of the fractional interest deemed redeemed under Code
Section 302, with the result that the Fort Howard stockholder should generally
recognize gain or loss on the deemed redemption in an amount equal to the
difference between the amount of cash received and the stockholder's adjusted
tax basis allocable to such fractional share. Such gain or loss will be capital
gain or loss if such stockholder's Fort Howard Common Shares are held as a
capital asset at the Effective Time. The capital gain or loss so recognized
generally will be long-term capital gain or loss if the holding period for the
fractional share interest exceeds one year.
TAX IMPLICATIONS TO JAMES RIVER, MERGER SUB AND FORT HOWARD. James River,
Merger Sub and Fort Howard will not recognize any gain or loss for federal
income tax purposes as a result of the Merger.
BACKUP WITHHOLDING. Under the U.S. backup withholding rules, a holder of
Fort Howard Common Shares may be subject to backup withholding at the rate of
31%, unless the stockholder (1) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (2) provides a
correct taxpayer identification number, certifies that such stockholder is not
subject to backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. Any amount withheld under these
rules will be credited against the stockholder's federal income tax liability.
James River may require holders of Fort Howard Common Shares to establish an
exemption from backup withholding or to make arrangements which are satisfactory
to James River to provide for the payment of backup withholding. A stockholder
that does not provide James River with its current taxpayer identification
number may be subject to penalties imposed by the IRS.
ACCOUNTING TREATMENT
James River and Fort Howard anticipate that the Merger will be accounted
for using the pooling of interests method of accounting. Under this method of
accounting, holders of Fort Howard Common Shares will be deemed to have combined
their existing voting common stock interest with that of holders of James River
Common Shares by exchanging their shares for James River Common Shares.
Accordingly, the book value of the assets, liabilities and stockholders' equity
of Fort Howard, as reported on its consolidated balance sheet, will be carried
over to the consolidated balance sheet of James River and no goodwill will be
created. Results of operations of James River will include the results of both
James River and Fort Howard for the entire fiscal year in which the Merger
occurs; however, expenses incurred to effect the Merger must be treated by the
combined company as current charges against income in the period in which the
Merger occurs.
James River has received the opinion of Coopers and Lybrand, L.L.P., its
independent accountants, and Fort Howard has received the opinion of Arthur
Andersen LLP, its independent accountants, each opinion dated the date of this
Joint Proxy Statement-Prospectus, that the Merger qualifies for pooling of
interests accounting treatment if consummated in accordance with the Merger
Agreement.
The unaudited pro forma financial information contained in this Joint Proxy
Statement-Prospectus has been prepared using the pooling of interests accounting
method to account for the Merger. See "SUMMARY -- Selected Historical Financial
and Other Data" and " -- Selected Unaudited Pro Forma Combined Financial and
Other Data," and "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
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HSR ACT AND OTHER REGULATORY APPROVALS
U.S. ANTITRUST FILING. Under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the rules and regulations
promulgated thereunder, certain transactions, including the Merger, may not be
consummated unless certain waiting period requirements have expired or been
terminated. On May 9, 1997, James River and Fort Howard filed their Premerger
Notification and Report Forms pursuant to the HSR Act with the United States
Department of Justice (the "DOJ") and the United States Federal Trade Commission
(the "FTC"). Under the HSR Act, the Merger may not be consummated until thirty
days (unless early termination of this waiting period is granted) after the
initial filing or, if the FTC or DOJ issues a Request for Additional Information
and Other Documentary Material (a "second request"), twenty days after James
River and Fort Howard have substantially complied with such a second request. On
June 6, 1997, James River and Fort Howard each received a second request from
the DOJ. James River and Fort Howard intend to submit their responses to the
second request in early July. Twenty days following such substantial compliance,
the Merger may be consummated unless the DOJ or FTC seeks to prevent
consummation of the Merger by obtaining an injunction from a court, or the
parties agree to delay expiration of the waiting period.
The FTC and DOJ frequently scrutinize the legality under the antitrust laws
of transactions such as the proposed Merger. At any time before or after the
Effective Time, the FTC, the DOJ or others could take action under the antitrust
laws with respect to the Merger, including seeking to enjoin the consummation of
the Merger, to rescind the Merger or to require the divestiture of substantial
assets of James River or Fort Howard. While the companies believe that the
Merger is legal under the 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.
Under the Merger Agreement, James River and Fort Howard have agreed to use
their best efforts to obtain any governmental clearance required for the Merger
and to contest any action or order that seeks to restrict or prevents
consummation of the Merger. The FTC, the DOJ or other governmental entities
could seek, among other things, divestiture of certain product lines or assets
by the combined company. Pursuant to the Merger Agreement, neither party is
required to take any such action if it would materially adversely affect the
financial condition or results of operations of James River and Fort Howard.
On May 13, 1997, the State of Florida filed a civil complaint in the
Northern District of Florida against ten manufacturers of commercial sanitary
paper products, including James River and Fort Howard, alleging a conspiracy to
fix prices starting at least as early as 1993. In addition, on May 13, 1997, a
private class action suit was filed in the Northern District of Florida against
the same defendants, also alleging a conspiracy to fix prices. Similar class
action suits have been filed in federal district courts in at least four states
and in two superior courts in the State of California. The defendants have filed
a motion in the California state court proceedings to remove the cases to
federal court. The defendants in the private class action suits have filed a
motion to transfer and consolidate the suits with the multidistrict litigation
panel. While the parties do not believe these suits should affect the Merger,
there can be no assurance that the suits will not affect the Merger.
EUROPEAN COMPETITION FILINGS. The Merger is subject to the competition laws
of certain European countries, which provide for pre-closing notification and
review of mergers, acquisitions and similar concentrative transactions when
certain statutorily defined criteria are met.
Certain mergers involving United Kingdom operations or assets that are not
subject to the EC Merger Regulation are subject to administrative review by the
Office of Fair Trading ("OFT") under the Fair Trading Act of 1973, as amended
(the "1973 Act"). While not mandatory, it is sometimes advisable to prenotify
the OFT of a merger under either the statutory clearance or informal clearance
procedures specified in the 1973 Act. James River and Fort Howard have decided
to utilize the informal clearance procedure with respect to the Merger. Under
the informal prenotification procedure, the OFT will consider the notification
and consult with the relevant parties, and where deemed appropriate, the
Director General of the United Kingdom (the "Director General") will submit his
advice to the Secretary of State of the United Kingdom (the "Secretary of
State"). The Secretary of State thereafter will announce whether or not she has
decided to refer a merger to the Monopolies and Mergers Commission ("MMC") for
investigation. If the MMC recommends that a merger not be allowed to proceed,
then the Secretary of State, acting on the advice of the Director General, has
the power to seek to block the merger or to permit the merger to proceed,
subject to appropriate conditions. On June 3, 1997, the parties filed a
notification with the OFT. Absent a decision by the Secretary of State to seek
to block the Merger, James River and Fort Howard intend to proceed with the
Merger if all other conditions to the Merger are met.
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In Ireland, mergers satisfying the criteria specified in the Mergers,
Take-Overs and Monopolies (Control) Act of 1978, as amended (the "Mergers Act")
must be notified, in writing, to the Minister for Enterprise and Employment (the
"Minister"). On May 30, 1997, James River and Fort Howard sought confirmation
from the Minister that the Merger is not subject to the Mergers Act.
The parties may determine to make certain other European premerger filings.
The parties do not believe that any of these filings would affect the timing of
the Merger.
If the approval of the Merger by the competition authorities of one or more
European countries is subject to compliance with certain conditions, there can
be no assurance that the parties will be able to satisfy or comply with such
conditions or be able to cause their respective subsidiaries to satisfy or
comply with any such conditions or that compliance or non-compliance will not
have adverse consequences for Fort James after consummation of the Merger. The
parties believe that the proposed Merger is compatible with the competition laws
of the European countries to which it is subject. Nevertheless, there can be no
assurance that a challenge to the proposed transaction on the grounds that the
proposed Merger is not compatible with such competition laws will not be made
or, if a challenge is made, what the result will be.
NO APPRAISAL RIGHTS
Holders of Fort Howard Common Shares are not entitled to appraisal rights
which would give them the right to obtain the payment of cash in exchange for
their Fort Howard Common Shares as a result of the Merger.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
James River and Fort Howard have made forward-looking statements in this
document and the documents incorporated by reference herein that are subject to
risks and uncertainties. These statements are based on management's beliefs and
assumptions, based on information currently available to management.
Forward-looking statements include the information concerning possible or
assumed future results of operations of James River and Fort Howard set forth
(1) under "SUMMARY," "THE PROPOSED MERGER -- Background of the Merger,"
" -- Reasons for the Merger; Recommendations of the Boards of Directors,"
" -- Opinions of James River's Financial Advisors" and " -- Opinion of Fort
Howard's Financial Advisor," and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION," (2) under "Business" and "Management's Discussion and
Analysis" in each company's Annual Report on Form 10-K and Quarterly Report on
Form 10-Q incorporated by reference into this document and (3) in this document
and the documents incorporated herein by reference preceded by, followed by or
that include the words "believes," "expects," "anticipates," "intends," "plans,"
"estimates" or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of James River, Fort Howard and Fort James may differ materially from those
expressed in these forward-looking statements. Many of the factors that will
determine these results and values are beyond James River's and Fort Howard's
ability to control or predict. Shareholders are cautioned not to put undue
reliance on any forward-looking statements. In addition, James River and Fort
Howard do not have any intention or obligation to update forward-looking
statements after they distribute this Joint Proxy Statement-Prospectus, even if
new information, future events or other circumstances have made them incorrect
or misleading. For those statements, James River and Fort Howard claim the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Shareholders of James River and Fort Howard should understand that the
following important factors, in addition to those discussed elsewhere in the
documents which are incorporated by reference into this Joint Proxy
Statement-Prospectus, could affect the future results of Fort James and could
cause results to differ materially from those expressed in such forward-looking
statements: (1) the effect of economic conditions; (2) the ability of James
River and Fort Howard to successfully integrate their operations; (3) the impact
of competitive products and pricing; (4) product development; (5) changes in
laws and regulations, including changes in accounting standards and
environmental regulations affecting the paper and pulp industry; (6) customer
demand; (7) changes in raw material, energy and other costs; and (8)
opportunities that may be presented to and pursued by Fort James.
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RESTRICTIONS ON RESALES BY AFFILIATES
The James River Common Shares to be issued to Fort Howard stockholders in
the Merger will have been registered under the Securities Act of 1933, as
amended (the "Securities Act"). Upon issuance, these shares may be traded freely
and without restriction by those shareholders not deemed to be affiliates of
Fort Howard as that term is defined under the Securities Act. An "affiliate" of
Fort Howard, as defined by the rules promulgated under the Securities Act, is a
person who directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, Fort Howard. Any subsequent
transfer by an affiliate of Fort Howard must be one permitted by the resale
provisions of Rule 145 promulgated under the Securities Act (or Rule 144
promulgated under the Securities Act, in the case of such persons who become
affiliates of Fort James) or as otherwise permitted under the Securities Act.
These restrictions are expected to apply to the directors, executive officers
and holders of 10% or more of the Fort Howard Common Shares (as well as to
certain other related individuals or entities).
Securities and Exchange Commission ("SEC") guidelines regarding qualifying
for pooling of interests method of accounting also limit sales of shares of the
acquiring company and acquired company by affiliates of either company in a
business combination such as the Merger. These guidelines indicate that the
pooling of interests method of accounting will generally not be challenged on
the basis of sales by such affiliates if these persons do not dispose of any of
the shares of the corporation they own or any shares of the corporation they
receive in connection with a merger during the period beginning thirty days
prior to the merger and ending when financial results covering at least 30 days
of post-merger operations of the combined entity have been published (the
"Pooling Restriction Period").
The obligations of each of James River and Fort Howard to consummate the
Merger are conditioned upon the other party's having caused each of its
affiliates to deliver to James River or Fort Howard, as applicable, a written
agreement that such person will not dispose of (1) any James River Common Shares
in violation of the Securities Act or the rules and regulations promulgated
thereunder or (2) any James River Common Shares or Fort Howard Common Shares
during the Pooling Restriction Period.
James River has agreed in the Merger Agreement to publish financial results
covering the first full month of post-Merger combined operations within 90 days
after the Effective Time.
FORT JAMES FINANCING
In connection with the Merger, James River is arranging a new $2.5 billion
bank credit facility (the "New Credit Facility") to replace certain of the
existing James River and Fort Howard bank credit facilities. The proceeds of
borrowings under the New Credit Facility will be used for general corporate
purposes by Fort James following the Merger, including to refinance certain
outstanding debt.
The New Credit Facility will provide for a five-year senior unsecured
revolving credit facility under which borrowings can be made up to a maximum of
$2.5 billion outstanding at any time.
Two borrowing options will be available under the New Credit Facility, a
competitive advance facility and a revolving credit facility. The competitive
advance facility will be provided on an uncommitted basis through an auction
mechanism. The revolving credit facility will be provided on a committed basis.
Up to $500 million of the New Credit Facility will be available in the form of
revolving credit loans denominated in certain offshore currencies.
The interest rate applicable to borrowings under the New Credit Facility
will be, at Fort James' option, indexed to (1) the Base Rate (as defined in the
New Credit Facility), or (2) the adjusted London Interbank Offering Rate, plus
an applicable spread over such rate during the period of the New Credit
Facility. The New Credit Facility will also provide for a facility fee on the
$2.5 billion commitment. Such spread and fee will change moderately should Fort
James' debt ratings change. There will also be an annual administration fee.
The New Credit Facility will contain certain restrictive covenants
applicable to Fort James that will limit its ability to create liens and will
limit the ability of its subsidiaries to incur debt and create liens. The New
Credit Facility will also contain covenants that restrict the ability of Fort
James to merge or consolidate, or convey, transfer, lease or otherwise dispose
of all or substantially all of its assets, unless, among other conditions, in
the case of a merger or consolidation, Fort James is the surviving entity or the
surviving entity assumes all of Fort James' obligations under the New Credit
Facility. The covenants under the New Credit Facility will also require Fort
James to limit debt such that a specified ratio of total debt to EBITDA is not
exceeded.
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MARKET PRICES AND DIVIDENDS
The James River Common Shares are currently listed on the NYSE under the
symbol "JR." The Fort Howard Common Shares are traded on the NASDAQ National
Market under the symbol "FORT." An application will be made to list the James
River Common Shares to be issued in the Merger on the NYSE. In the Merger, James
River will be renamed "Fort James Corporation." After the Merger, the shares of
common stock of Fort James ("Fort James Common Shares") will be traded on the
NYSE under the symbol "FJ."
James River's Series P 9% Cumulative Convertible Preferred Stock (the
"Series P Preferred Stock"), which is publicly traded, is held in the form of
depositary shares (the "Series P Depositary Shares"), with each Series P
Depositary Share representing a one one-hundredth interest in a share of Series
P Preferred Stock. The James River Common Shares and Series P Depositary Shares
together make up the voting securities of James River (the "James River Voting
Shares").
On June 30, 1997, there were [ ] holders of record of James River Common
Shares and [ ] James River Common Shares were outstanding. As of that
date, there were [ ] holders of record of Series P Depositary Shares and
Series P Depositary Shares were outstanding. On June 30, 1997, there
were [ ] holders of record of Fort Howard Common Shares and [ ] Fort Howard
Common Shares were outstanding.
On May 2, 1997, the last full trading day prior to the public announcement
of the signing of the Merger Agreement, the closing price of the James River
Common Shares on the NYSE Composite Transaction Tape was $30 7/8, and the
closing price of the Fort Howard Common Shares on the NASDAQ National Market was
$36 1/2. On June 25, 1997, the most recent practicable date prior to the
printing of this Joint Proxy Statement-Prospectus, the closing price of the
James River Common Shares on the NYSE Composite Transaction Tape was $37 and the
closing price of the Fort Howard Common Shares on the NASDAQ National Market was
$49 3/8.
The following table sets forth the range of high and low sales prices of
James River Common Shares as reported on the NYSE Composite Transaction Tape and
the high and low bid information for the Fort Howard Common Shares as reported
on the NASDAQ National Market, and the dividends declared on the James River
Common Shares, for the quarterly periods indicated, which correspond to the
companies' respective quarterly fiscal periods for financial reporting purposes.
Fort Howard did not declare any dividends during such periods.
<TABLE>
<CAPTION>
JAMES RIVER FORT HOWARD
COMMON SHARES COMMON SHARES
--------------------------------- ---------------------------
MARKET PRICE CASH BID PRICE
--------------------------- DIVIDEND ---------------------------
HIGH LOW DECLARED HIGH LOW
----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995
First Quarter $ 25 5/8 $ 20 $.15 $ 12 7/8 $ 12
Second Quarter 28 5/8 23 1/4 .15 15 12
Third Quarter 37 3/8 25 3/8 .15 16 1/4 13 3/8
Fourth Quarter 33 3/4 22 1/4 .15 23 1/4 14 3/8
1996
First Quarter 28 1/8 22 3/8 .15 25 1/2 19
Second Quarter 27 3/8 24 3/4 .15 23 1/4 19 1/2
Third Quarter 27 1/4 24 5/8 .15 26 19 1/4
Fourth Quarter 34 1/4 27 5/8 .15 29 1/2 23 1/2
1997
First Quarter 36 1/4 29 1/4 .15 35 1/4 26 5/8
Second Quarter (through June 25, 1997) 38 7/8 27 1/4 .15 51 1/8 27 1/2
</TABLE>
No assurances can be given as to the market prices of James River Common
Shares or Fort Howard Common Shares at, or, in the case of James River Common
Shares, after, the Effective Time. SHAREHOLDERS ARE ADVISED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR JAMES RIVER COMMON SHARES AND FORT HOWARD COMMON SHARES.
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
(the "Unaudited Pro Forma Information") gives effect to the Merger under the
pooling of interests method of accounting. The Unaudited Pro Forma Information
is presented to reflect the estimated impact of the Merger and the issuance of
1.375 James River Common Shares for each Fort Howard Common Share issued and
outstanding. As of March 31, 1997, there were approximately 74.6 million Fort
Howard Common Shares issued and outstanding. See "THE PROPOSED
MERGER -- Accounting Treatment."
The Unaudited Pro Forma Information is presented as if the Merger had been
consummated as of the beginning of each period presented for the unaudited pro
forma condensed combined statements of operations and as of March 30, 1997, for
the unaudited pro forma condensed combined balance sheet. James River financial
statements are prepared on a 52- or 53-week basis for year end reporting. Fort
Howard is on a calendar year end basis of reporting. For ease of reference, all
column headings used in the Unaudited Pro Forma Information refer to the
period-end date of James River.
The Unaudited Pro Forma Information gives effect to the reclassifications
and adjustments set forth in the accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements and does not reflect anticipated cost
savings and other synergies anticipated as a result of the Merger. For a
discussion of anticipated cost savings and other synergies, see "THE PROPOSED
MERGER -- Reasons for the Merger; Recommendations of the Boards of Directors."
The Unaudited Pro Forma Information is not necessarily indicative of the
operating results and financial position that might have been achieved had the
Merger been consummated on the dates or as of the beginning of each period
indicated, nor is it necessarily indicative of operating results and financial
position which may occur in the future.
The Unaudited Pro Forma Information should be read in conjunction with the
historical consolidated financial statements of James River and Fort Howard as
contained in their respective Annual Reports on Form 10-K and the unaudited
consolidated interim financial statements contained in their respective
Quarterly Reports on Form 10-Q for the three months ended March 30, 1997, and
March 31, 1997. See "WHERE YOU CAN FIND MORE INFORMATION."
32
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 30, 1997
------------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
Net sales................................................ $ 1,381.9 $ 400.8 $ 9.8(a) $1,817.8
25.3(b)
Cost of goods sold....................................... 1,019.2 229.0 25.3(b) 1,278.1
4.6(c)
Selling and administrative expenses...................... 250.2 33.5 9.8(a) 288.9
(4.6)(c)
----------- ----------- ------- ---------
Income (loss) from operations............................ 112.5 138.3 -- 250.8
Interest expense......................................... 37.9 57.9 95.8
Other income (expense), net.............................. 7.8 (.8) 7.0
----------- ----------- ------- ---------
Income (loss) before income taxes, minority interests,
and extraordinary item................................. 82.4 79.6 -- 162.0
Income tax expense (benefit)............................. 34.6 29.9 64.5
----------- ----------- ------- ---------
Income (loss) before minority interests and extraordinary
item................................................... 47.8 49.7 -- 97.5
Minority interests....................................... (.3) (.3)
----------- ----------- ------- ---------
Income (loss) before extraordinary item.................. $ 47.5 $ 49.7 $ -- $ 97.2
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Preferred dividend requirements.......................... (14.6) (14.6)
----------- ----------- ------- ---------
Income (loss) before extraordinary item applicable to
common shares.......................................... $ 32.9 $ 49.7 $ -- $ 82.6
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Income (loss) per share before extraordinary item........ $ .38 $ .43
----------- ---------
----------- ---------
Weighted average number of common shares and common share
equivalents............................................ 87.2 106.4(d) 193.6
----------- ------- ---------
----------- ------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
33
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31, 1996
------------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
Net sales................................................ $ 1,555.4 $ 385.7 $ 16.5(a) $1,981.0
23.4(b)
Cost of goods sold....................................... 1,182.0 238.3 23.4(b) 1,448.1
4.4(c)
Selling and administrative expenses...................... 273.6 33.2 16.5(a) 318.9
(4.4)(c)
Severance and other items................................ 23.4 23.4
----------- ----------- ------- ---------
Income (loss) from operations............................ 76.4 114.2 -- 190.6
Interest expense......................................... 45.4 70.8 116.2
Other income (expense), net.............................. 4.0 (.5) 3.5
----------- ----------- ------- ---------
Income (loss) before income taxes, minority interests,
and extraordinary item................................. 35.0 42.9 -- 77.9
Income tax expense (benefit)............................. 15.4 16.0 31.4
----------- ----------- ------- ---------
Income (loss) before minority interests and extraordinary
item................................................... 19.6 26.9 -- 46.5
Minority interests....................................... .9 .9
----------- ----------- ------- ---------
Income (loss) before extraordinary item.................. $ 20.5 $ 26.9 $ -- $ 47.4
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Preferred dividend requirements.......................... (14.7) (14.7)
----------- ----------- ------- ---------
Income (loss) before extraordinary item applicable to
common shares.......................................... $ 5.8 $ 26.9 $ -- $ 32.7
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Income (loss) per share before extraordinary item........ $ .07 $ .17
----------- ---------
----------- ---------
Weighted average number of common shares and common share
equivalents............................................ 85.5 106.4(d) 191.9
----------- ------- ---------
----------- ------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
34
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 29, 1996
------------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
Net sales................................................ $ 5,971.9 $ 1,580.8 $ 54.1(a) $7,707.1
100.3(b)
Cost of goods sold....................................... 4,483.1 962.3 100.3(b) 5,564.2
18.5(c)
Selling and administrative expenses...................... 1,045.2 142.1 54.1(a) 1,222.9
(18.5)(c)
Severance and other items................................ 10.7 10.7
----------- ----------- ------- ---------
Income (loss) from operations............................ 432.9 476.4 -- 909.3
Interest expense......................................... 165.4 259.0 424.4
Other income (expense), net.............................. 21.6 (2.9) 18.7
----------- ----------- ------- ---------
Income (loss) before income taxes, minority interests,
and extraordinary item................................. 289.1 214.5 -- 503.6
Income tax expense (benefit)............................. 127.2 43.8 171.0
----------- ----------- ------- ---------
Income (loss) before minority interests and extraordinary
item................................................... 161.9 170.7 -- 332.6
Minority interests....................................... (4.6) (4.6)
----------- ----------- ------- ---------
Income (loss) before extraordinary item.................. $ 157.3 $ 170.7 $ -- $ 328.0
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Preferred dividend requirements.......................... (58.5) (58.5)
----------- ----------- ------- ---------
Income (loss) before extraordinary item applicable to
common shares.......................................... $ 98.8 $ 170.7 $ -- $ 269.5
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Income (loss) per share before extraordinary item........ $ 1.15 $ 1.40
----------- ---------
----------- ---------
Weighted average number of common shares and common share
equivalents............................................ 86.0 106.4(d) 192.4
----------- ------- ---------
----------- ------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
35
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
Net sales................................................ $ 7,141.2 $ 1,620.9 $ 32.9(a) $8,887.9
92.9(b)
Cost of goods sold....................................... 5,585.5 1,139.4 92.9(b) 6,835.2
17.4(c)
Selling and administrative expenses...................... 1,080.5 121.4 32.9(a) 1,217.4
(17.4)(c)
Severance and other items................................ 51.9 51.9
----------- ----------- -------- ---------
Income (loss) from operations............................ 423.3 360.1 -- 783.4
Interest expense......................................... 226.4 309.9 536.3
Other income (expense), net.............................. 40.3 1.7 42.0
----------- ----------- -------- ---------
Income (loss) before income taxes, minority interests,
and extraordinary item................................. 237.2 51.9 -- 289.1
Income tax expense (benefit)............................. 109.4 18.4 127.8
----------- ----------- -------- ---------
Income (loss) before minority interests and extraordinary
item................................................... 127.8 33.5 -- 161.3
Minority interests....................................... (1.4) (1.4)
----------- ----------- -------- ---------
Income (loss) before extraordinary item.................. $ 126.4 $ 33.5 $ -- $ 159.9
----------- ----------- -------- ---------
----------- ----------- -------- ---------
Preferred dividend requirements.......................... (58.5) (58.5)
----------- ----------- -------- ---------
Income (loss) before extraordinary item applicable to
common shares.......................................... $ 67.9 $ 33.5 $ -- $ 101.4
----------- ----------- -------- ---------
----------- ----------- -------- ---------
Income (loss) per share before extraordinary item........ $ .81 $ .53
----------- ---------
----------- ---------
Weighted average number of common shares and common share
equivalents............................................ 84.1 106.4(d) 190.5
----------- -------- ---------
----------- -------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
36
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 25, 1994
------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
Net sales................................................... $ 5,706.4 $ 1,274.4 $ 33.9(a) $7,103.7
89.0(b)
Cost of goods sold.......................................... 4,734.1 887.3 89.0(b) 5,727.1
16.7(c)
Selling and administrative expenses......................... 815.7 110.3 33.9(a) 943.2
(16.7)(c)
Severance and other items................................... 9.6 9.6
----------- ----------- ----------- ---------
Income (loss) from operations............................... 147.0 276.8 -- 423.8
Interest expense............................................ 185.6 337.7 523.3
Other income (expense), net................................. 28.9 (.1) 28.8
----------- ----------- ----------- ---------
Income (loss) before income taxes, minority interests, and
extraordinary item........................................ (9.7) (61.0) -- (70.7)
Income tax expense (benefit)................................ 4.4 (18.9) (14.5)
----------- ----------- ----------- ---------
Income (loss) before minority interests and
extraordinary item........................................ (14.1) (42.1) -- (56.2)
Minority interests.......................................... 1.1 1.1
----------- ----------- ----------- ---------
Income (loss) before extraordinary item..................... $ (13.0) $ (42.1) $ -- $ (55.1)
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------
Preferred dividend requirements............................. (45.8) (45.8)
----------- ----------- ----------- ---------
Income (loss) before extraordinary item applicable to common
shares.................................................... $ (58.8) $ (42.1) $ -- $ (100.9)
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------
Income (loss) per share before extraordinary item........... $ (.72) $ (.54)
----------- ---------
----------- ---------
Weighted average number of common shares and common share
equivalents............................................... 81.7 106.4(d) 188.1
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
37
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 26, 1993
------------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
Net sales................................................ $ 4,867.7 $ 1,187.4 $ 21.0(a) $ 6,166.6
90.5(b)
Cost of goods sold....................................... 4,076.1 826.6 90.5(b) 5,008.5
15.3(c)
Selling and administrative expenses...................... 677.6 97.0 21.0(a) 780.3
(15.3)(c)
Goodwill write-off....................................... 1,980.4 1,980.4
----------- ----------- ------- ---------
Income (loss) from operations............................ 114.0 (1,716.6) -- (1,602.6)
Interest expense......................................... 137.6 342.8 480.4
Other income (expense), net.............................. 40.3 3.0 43.3
----------- ----------- ------- ---------
Income (loss) before income taxes, minority interests,
and extraordinary item................................. 16.7 (2,056.4) -- (2,039.7)
Income tax expense (benefit)............................. 18.9 (16.3) 2.6
----------- ----------- ------- ---------
Income (loss) before minority interests and
extraordinary item..................................... (2.2) (2,040.1) -- (2,042.3)
Minority interests....................................... 1.9 1.9
----------- ----------- ------- ---------
Income (loss) before extraordinary item.................. $ (.3) $(2,040.1) $ -- $(2,040.4)
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Preferred dividend requirements.......................... (32.8) (32.8)
----------- ----------- ------- ---------
Income (loss) before extraordinary item applicable to
common shares.......................................... $ (33.1) $(2,040.1) $ -- $(2,073.2)
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Income (loss) per share before extraordinary item........ $ (.40) $ (11.03)
----------- ---------
----------- ---------
Weighted average number of common shares and common share
equivalents............................................ 81.6 106.4(d) 188.0
----------- ------- ---------
----------- ------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
38
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 27, 1992
------------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
Net sales................................................ $ 4,937.9 $ 1,151.4 $ 22.2(a) $6,194.7
83.2(b)
Cost of goods sold....................................... 4,186.4 783.1 83.2(b) 5,064.9
12.2(c)
Selling and administrative expenses...................... 702.2 97.6 22.2(a) 809.8
(12.2)(c)
Severance and other items................................ 111.7 111.7
----------- ----------- ------- ---------
Income (loss) from operations............................ (62.4) 270.7 -- 208.3
Interest expense......................................... 149.1 338.4 487.5
Other income (expense), net.............................. 23.4 (2.1) 21.3
----------- ----------- ------- ---------
Income (loss) before income taxes, minority interests,
extraordinary item, and cumulative effect of accounting
changes................................................ (188.1) (69.8) -- (257.9)
Income tax expense (benefit)............................. (64.7) (.4) (65.1)
----------- ----------- ------- ---------
Income (loss) before minority interests, extraordinary
item and cumulative effect of accounting changes....... (123.4) (69.4) -- (192.8)
Minority interests....................................... 1.3 1.3
----------- ----------- ------- ---------
Income (loss) before extraordinary item and cumulative
effect of accounting changes........................... $ (122.1) $ (69.4) $ -- $ (191.5)
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Preferred dividend requirements.......................... (26.5) (26.5)
----------- ----------- ------- ---------
Income (loss) before extraordinary item and cumulative
effect of accounting changes applicable to common
shares................................................. $ (148.6) $ (69.4) $ -- $ (218.0)
----------- ----------- ------- ---------
----------- ----------- ------- ---------
Income (loss) per share before extraordinary item and
cumulative effect of accounting changes................ $ (1.82) $ (1.16)
----------- ---------
----------- ---------
Weighted average number of common shares and common share
equivalents............................................ 81.8 106.4(d) 188.2
----------- ------- ---------
----------- ------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
39
<PAGE>
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 30, 1997
------------------------------------------------------------
PRO FORMA PRO FORMA
JAMES RIVER FORT HOWARD ADJUSTMENTS COMBINED
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
(NOTE 2)
ASSETS
Current assets:
Cash and cash equivalents........................... $ 58.1 $ .7 $ 58.8
Accounts receivable................................. 691.6 70.8 762.4
Inventories......................................... 662.4 149.3 811.7
Deferred income taxes............................... 80.0 54.0 134.0
Other current assets................................ 33.3 10.1 43.4
----------- ----------- ---------
Total current assets.............................. 1,525.4 284.9 1,810.3
Property, plant and equipment............................ 5,800.8 2,062.8 7,863.6
Less accumulated depreciation............................ 2,173.9 831.3 3,005.2
----------- ----------- ---------
Net property, plant and equipment................... 3,626.9 1,231.5 4,858.4
Investments in affiliates................................ 159.5 159.5
Other assets............................................. 368.3 64.6 432.9
Goodwill................................................. 681.7 681.7
----------- ----------- ---------
Total assets........................................ $ 6,361.8 $ 1,581.0 $7,942.8
----------- ----------- ---------
----------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 478.4 $ 118.7 $ 597.1
Accrued liabilities................................. 563.5 111.3 $ 50.0(e) 724.8
Long-term debt, current portion..................... 116.3 11.4 127.7
----------- ----------- ------- ---------
Total current liabilities......................... 1,158.2 241.4 50.0 1,449.6
Long-term debt........................................... 1,848.7 2,441.5 4,290.2
Accrued postretirement benefits other than pensions...... 457.3 17.7 475.0
Other long-term liabilities.............................. 202.5 31.4 233.9
Deferred income taxes.................................... 454.4 252.5 706.9
Shareholders' equity:
Preferred stock..................................... 738.4 738.4
Common shareholders' equity (deficit)............... 1,502.3 (1,403.5) (50.0) (e) 48.8
----------- ----------- ------- ---------
Total shareholders' equity (deficit).............. 2,240.7 (1,403.5) (50.0) 787.2
----------- ----------- ------- ---------
Total liabilities and shareholders' equity.......... $ 6,361.8 $ 1,581.0 $ -- $7,942.8
----------- ----------- ------- ---------
----------- ----------- ------- ---------
</TABLE>
The accompanying notes are an integral part of this pro forma information.
40
<PAGE>
JAMES RIVER CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements reflect the
Merger under the pooling of interests method of accounting. The unaudited pro
forma condensed combined statements of operations for each of the five years in
the period ended December 29, 1996, and the three-month periods ended March 30,
1997 and March 31, 1996, give effect to the Merger as though it had occurred as
of the beginning of each period presented. The unaudited pro forma condensed
combined balance sheet as of March 30, 1997, assumes that the Merger had been
consummated on that date.
The unaudited pro forma condensed combined statements of operations exclude
(1) the positive effects of potential cost savings which may be achieved upon
combining the resources of the companies, (2) non-recurring transaction costs of
approximately $50 million to $60 million, including investment banking, legal
and accounting fees and (3) potential interest cost savings as a result of
anticipated debt refinancing and a continuation of the combining companies'
overall debt reduction programs. Further, James River expects to restructure the
combined operations, resulting in additional nonrecurring charges in 1997. The
range of amounts of such charges cannot be reasonably estimated until an
analysis of the newly combined operations is completed and a detailed
restructuring plan is developed.
Certain amounts in the James River historical financial statements have
been reclassified to conform to the 1997 presentation.
2. PRO FORMA ADJUSTMENTS
(a) Represents reclassifications of certain Fort Howard trade promotions
and allowances from net sales to selling and administrative expenses to conform
to James River's accounting classification.
(b) Represents reclassifications of Fort Howard customer freight costs from
net sales to cost of goods sold to conform to James River's accounting
classification.
(c) Represents reclassifications of Fort Howard shipping expenses from
selling and administrative expenses to cost of goods sold to conform to James
River's accounting classification.
(d) Represents an adjustment to reflect the combined weighted average
number of common shares and common share equivalents of James River and Fort
Howard, reflecting the assumed issuance of approximately 102.6 million James
River Common Shares in exchange for approximately 74.6 million Fort Howard
Common Shares outstanding as of March 31, 1997, utilizing the Exchange Ratio of
1.375 James River Common Shares for each Fort Howard Common Share. The effect of
incremental shares to reflect the impact of Fort Howard's stock option plans as
of March 31, 1997 was also included because the effect is dilutive on a pro
forma basis. The actual number of shares to be issued and options to be assumed
pursuant to the Merger will be based upon the actual number of Fort Howard
Common Shares and options issued and outstanding immediately prior to the
Effective Time.
(e) Reflects an accrual for the minimum of the estimated range of $50
million to $60 million for transaction costs related to the Merger.
3. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The unaudited pro forma condensed combined financial statements assume that
the Merger qualifies as a tax-free reorganization for federal income tax
purposes.
41
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the James River Board, James River
shareholders should be aware that, as described below, certain members of James
River's management and the James River Board may have interests in the Merger
that are different from, or in addition to, the interests of James River
shareholders generally and which may create potential conflicts of interest. The
James River Board was aware of the interests of its directors and officers when
it approved the Merger and the Merger Agreement.
In considering the recommendation of the Fort Howard Board with respect to
the Merger, stockholders of Fort Howard should be aware that, as described
below, certain members of Fort Howard's management and the Fort Howard Board may
have interests in the Merger that are different from, or in addition to, the
interests of stockholders of Fort Howard generally, and which may create
potential conflicts of interest. Certain members of management of MS&Co., which
has acted as financial advisor and has delivered an opinion to the Fort Howard
Board in connection with the Merger (see "THE PROPOSED MERGER -- Opinion of Fort
Howard's Financial Advisor"), are also members of the Fort Howard Board and also
have interests in the Merger that are different from, or in addition to, the
interests of stockholders of Fort Howard. Such interests relate to or arise
from, among other things, the terms of the Merger Agreement providing for (1)
the Board of Directors of Fort James (the "Fort James Board") initially to
consist of fifteen members, four of whom have been designated by Fort Howard,
with two of such members designated by Fort Howard being officers of MS&Co., (2)
the division of certain senior management positions of Fort James among the
existing senior management of each of the companies, (3) certain severance and
change of control arrangements and (4) the indemnification of existing directors
and officers of Fort Howard. All such additional interests are described below,
to the extent material, and except as described below or under "DIRECTORS AND
MANAGEMENT OF FORT JAMES FOLLOWING THE MERGER," such persons have, to the
knowledge of Fort Howard, no material interest in the Merger apart from those of
Fort Howard stockholders generally. The Fort Howard Board was aware of, and
considered the interests of, its directors and officers when it approved the
Merger Agreement and the Merger.
INTERESTS OF CERTAIN FORT HOWARD STOCKHOLDERS
THE STOCKHOLDERS AGREEMENT. Pursuant to the Merger Agreement, Morgan
Stanley and certain of its subsidiaries (collectively, the "Director Nominating
Stockholders") will enter into a stockholders agreement with James River (the
"Stockholders Agreement") as of the Effective Time that provides for the
appointment of four individuals specified in the Merger Agreement as members of
the Fort James Board immediately following the Effective Time and grants the
Director Nominating Stockholders the right to nominate for election at
subsequent annual or special meetings up to two members thereafter. Under the
Stockholders Agreement, so long as the Director Nominating Stockholders and
their affiliates (other than MS&Co.) continue to own at least five million Fort
James Common Shares issued to them in the Merger (including as a result of
certain specified transfers to such stockholders), Morgan Stanley will be
entitled to nominate two individuals for election as Fort James directors.
Further, until such time as the Director Nominating Stockholders and their
affiliates (other than MS&Co.) no longer hold two million Fort James Common
Shares issued to them in the Merger (including as a result of certain specified
transfers), Morgan Stanley will be entitled to nominate one director. The five
million and two million share thresholds described above will be appropriately
adjusted in the event of any stock dividend, stock split, reclassification or
similar change with respect to the Fort James Common Shares.
THE REGISTRATION RIGHTS AGREEMENT. Also pursuant to the Merger Agreement,
at the Effective Time Morgan Stanley, AT&T Investment Management Co. ("AT&T")
and First Plaza Group Trust ("FPGT") will enter into an agreement with James
River (the "Registration Rights Agreement") that grants to MS&Co., AT&T and
FPGT, along with certain of their transferees and successors (collectively, the
"Holders") certain rights to demand registration of Fort James Common Shares
received in the Merger or thereafter issued in respect of such shares
(collectively, the "Registrable Securities").
Under the Registration Rights Agreement and subject to certain limitations,
a Holder is entitled to require that Fort James register the Holder's
Registrable Securities during the first three years following the Effective
Time. The Holders are limited to three such demand registrations. Any such
registration must include at least $25 million in aggregate fair market value of
Registrable Securities or such lesser amount that includes all of the
Registrable Securities owned by the Holders.
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<PAGE>
In addition, if within the first three years following the Effective Time,
Fort James proposes to file a registration statement under the Securities Act
with respect to any offering of, or including, Fort James Common Shares for its
own account (except for certain registrations relating to shares issued in
business combinations or pursuant to employee benefit plans) or for the account
of any shareholders of Fort James other than the Holders, then Fort James will
provide the Holders an opportunity to register their Registrable Securities on
the same terms and conditions. This provision is customarily referred to as a
"piggyback" registration right.
In connection with any demand registration or piggyback registration, Fort
James will be responsible for all expenses incurred in connection with such
registration, except that each Holder will pay any underwriting discounts or
commissions that may be payable in connection with the sale of its Registrable
Securities. In addition, Fort James will indemnify each Holder and its
affiliates against certain liabilities, including liabilities under the
Securities Act, or will contribute to payments the Holders may be required to
make in respect thereof. The Registration Rights Agreement terminates, except
with respect to rights to indemnification, upon the earlier to occur of the sale
of all of the Registrable Securities by the Holders and the mutual consent of
the parties, and in any event, the rights of Holders to demand registrations or
participate in piggyback registrations are effective only for three years
following the Effective Time.
RELATIONSHIPS WITH MS&CO. AND ITS AFFILIATES. Messrs. Niehaus and Sica, who
are currently directors of Fort Howard, are officers of MS&Co., which acted as
financial advisor to Fort Howard in connection with the Merger. Messrs. Niehaus
and Sica are also officers and directors of the general partners of MSLEF, Fort
Howard Equity Investors, L.P. and Fort Howard Equity Investors II, L.P.,
investment fund partnerships (collectively, the "Funds") affiliated with Morgan
Stanley and MS&Co. As of May 5, 1997, the Morgan Stanley Group beneficially held
6,910,834 Fort Howard Common Shares comprising approximately 9.2% of the
then-outstanding Fort Howard Common Shares. The general partners of the Funds
received a carried interest, or profit participation, from the Funds based on
the rate of return on the investment in Fort Howard on May 5, 1997, when such
investment was distributed to the Funds' limited partners. Messrs. Niehaus and
Sica and Donald P. Brennan, a director of Fort Howard who also is an employee of
MS&Co., will receive personal compensation based on the success of the Funds'
investments in Fort Howard.
As of the date of this Joint Proxy Statement-Prospectus, the Morgan Stanley
Group beneficially holds approximately 9.2% of the Fort Howard Common Shares.
The Morgan Stanley Group has agreed to certain restrictions on share transfers
and to vote its shares in favor of the Merger and the Merger Agreement. See "THE
PROPOSED MERGER -- Agreements with Certain Fort Howard Stockholders."
OUTSTANDING EQUITY-BASED COMPENSATION AWARDS
As of June 23, 1997, directors and executive officers of Fort Howard owned
an aggregate of 12,000 shares of restricted stock of Fort Howard and 8,000 stock
equivalents relating to Fort Howard Common Shares and options to purchase an
aggregate of 3,122,336 Fort Howard Common Shares. As of March 31, 1997, an
aggregate of 12,000 shares of restricted stock, 8,000 stock equivalents and
1,223,400 options were unvested. As of the Effective Time, all such unvested
shares of restricted stock, stock equivalents and options will become fully
vested as a result of the Merger.
EMPLOYMENT AGREEMENT OF JAMES RIVER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
On May 4, 1997, James River entered into a new employment agreement with
Mr. Marsh, James River's Chairman and Chief Executive Officer (as amended and
restated, the "Marsh Employment Agreement"), which will become effective and
replace and supersede his current employment agreement upon the consummation of
the Merger. Under the Marsh Employment Agreement, Mr. Marsh will serve as
Chairman and Chief Executive Officer of Fort James for a three-year period
commencing at the Effective Time (the "Employment Period") which term would be
extended automatically for an additional three years unless either Fort James or
Mr. Marsh gives written notice of termination by a specified date. If the Merger
is consummated, Mr. Marsh will receive during the Employment Period an annual
base salary and will be entitled to an annual bonus opportunity of not less than
his annual base salary and annual bonus immediately prior to the Merger. Under
his new employment agreement, Mr. Marsh will receive a grant under the James
River 1996 Stock Incentive Plan (the "James River Incentive Plan") of shares of
restricted common stock (the "Restricted Stock") having a fair market value of
$2,760,000 which will vest over a three-year period. Mr. Marsh will receive an
additional grant under the James River Incentive Plan of performance shares
("Performance Shares") having a fair market value of $2,760,000
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<PAGE>
which will vest in accordance with the terms of such plan. Mr. Marsh will be
eligible to participate in Fort James' savings and retirement plans and programs
to the extent those plans and programs are applicable generally to his executive
peer group within Fort James as well as a supplemental retirement plan, and he
and his family will be eligible for welfare and other benefit plans to the same
extent.
Under the Marsh Employment Agreement, if Mr. Marsh's employment were to be
terminated other than for "Cause" (defined as a material breach by Mr. Marsh of
the Marsh Employment Agreement or intentional gross misconduct which is damaging
in a material way to Fort James), death or disability, or if Mr. Marsh
terminates his employment for "Good Reason" (defined as a material, uncured
breach by Fort James of the Marsh Employment Agreement), or if Fort James failed
to renew Mr. Marsh's Employment Agreement for the additional three-year term and
Mr. Marsh thereafter terminates his employment (a "Nonrenewal Termination"),
Fort James would be obligated to pay Mr. Marsh a lump sum cash payment in an
amount equal to the sum of (1) accrued unpaid salary plus a prorated annual
bonus based on the highest of his prior three years' annual bonuses (the
"Minimum Bonus") plus any previously deferred compensation and other
nonqualified plan balances (collectively, "Accrued Obligations") not yet paid
plus (2) three times, or two times in the event of a Nonrenewal Termination, the
combined amount of Mr. Marsh's then-annual base salary and Minimum Bonus. In
addition, under these termination conditions, the Restricted Stock and any other
unvested or unexercisable stock-based awards granted prior to the Employment
Period ("Prior Stock Awards") would immediately vest and/or become exercisable,
he would receive a supplemental retirement/pension payment based on additional
amounts he would have received under certain retirement plans had he remained
employed for three additional years, or two additional years in the case of a
Nonrenewal Termination, and Mr. Marsh and his family would be entitled to
continued coverage under Fort James' benefit plans for a minimum of three years,
or two years in the case of a Nonrenewal Termination.
Upon termination of Mr. Marsh's employment for Cause, or if he terminates
without Good Reason, Mr. Marsh would be entitled to his then unpaid Accrued
Obligations (excluding the prorated Minimum Bonus) and certain other benefits.
Upon death or termination due to disability, Mr. Marsh (or his estate) would be
entitled to any unpaid Accrued Obligations and certain other benefits, and the
Restricted Stock and any Prior Stock Awards would vest and/or become
exercisable.
The Marsh Employment Agreement further provides that Mr. Marsh will be made
whole on an after-tax basis with respect to certain excise taxes which may be
imposed upon payments under the agreement.
As described above, the Marsh Employment Agreement will, at the Effective
Time, replace and supersede Mr. Marsh's current employment agreement with James
River. Mr. Marsh's current employment agreement contains, among other things, a
"change of control" provision which would entitle him to receive three years of
salary, bonus and other benefits upon a change of control (as defined in the
agreement).
EMPLOYMENT AGREEMENT OF FORT HOWARD CHAIRMAN AND CHIEF EXECUTIVE OFFICER
On May 4, 1997, James River entered into an employment agreement with Mr.
Riordan, Fort Howard's Chairman, President and Chief Executive Officer (as
amended and restated, the "Riordan Employment Agreement"), which will become
effective and replace and supersede his current employment agreement with Fort
Howard upon the consummation of the Merger. Under the Riordan Employment
Agreement, Mr. Riordan will serve as a director on the Fort James Board and will
hold the position of President and Chief Operating Officer of Fort James during
the Employment Period, which term would be extended automatically for an
additional three years unless either Fort James or Mr. Riordan gives written
notice of termination by a specified date. During the first two years of the
Employment Period, Mr. Riordan will perform his duties both from Fort Howard's
existing headquarters and from Fort James' new executive headquarters to be
established in the Chicago, Illinois area. If the Merger is consummated, Mr.
Riordan will receive during the Employment Period an annual base salary of not
less than $700,000 and Mr. Riordan will receive a 1997 annual bonus under Fort
Howard's Management Incentive Plan (the "MIP") based on the greater of the
performance level of Fort Howard attained as of the last day of the fiscal
quarter immediately preceding the Effective Time and actual 1997 performance and
a 1998 annual bonus in an amount not less than 80% of the amount of the Fort
James Chief Executive Officer's annual bonus for such year. In addition, if the
Merger is consummated, Mr. Riordan will receive a one-time bonus of $1 million
in recognition of special services relating to the integration of Fort Howard
and James River to be paid in a cash lump sum on the six-month anniversary of
the Effective Time (the "Special Service Bonus").
Under the Riordan Employment Agreement, Mr. Riordan will receive, at the
Effective Time, a grant under the James River Incentive Plan of 100,000 shares
of Restricted Stock which will vest over a four-year period and
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a grant of 50,000 Performance Shares under the James River Incentive Plan which
will vest in accordance with the terms of such plan. In addition, at the
Effective Time, Mr. Riordan will be granted options to purchase 250,000 Fort
James Common Shares (the "Commencement Options") having an exercise price equal
to the fair market value of the underlying shares on the date of grant, which
options will vest in equal installments on the first two anniversaries of the
Effective Time. Mr. Riordan will receive a supplemental pension arrangement
providing for (1) a minimum annual pension upon termination of employment after
attaining the age of 55 of $500,000 (or, at his option, a lump-sum equivalent
payable upon termination) or (2) upon termination by Fort James of Mr. Riordan's
employment without Cause (including upon his death or disability) or if Mr.
Riordan terminates his employment for Good Reason, in each case before he
attains the age of 55, Mr. Riordan will receive an annual pension of not less
than $250,000 commencing at age 55 (or, at his option, a lump-sum equivalent
payable upon termination). During the Employment Period, Mr. Riordan will be
eligible to participate in Fort James' welfare, fringe, change of control and
other similar benefit plans to the extent applicable to Fort James' Chief
Executive Officer and will be credited for service accrued or deemed accrued
with Fort Howard, other than with respect to any defined benefit pension plan.
The Riordan Employment Agreement contains termination of employment
provisions similar to those in the Marsh Employment Agreement, except that (1)
Mr. Riordan's Performance Shares and the Commencement Options, in addition to
his Restricted Stock, would vest and/or become immediately exercisable upon
termination of employment by Fort James other than for Cause, or due to death or
disability, or if Mr. Riordan terminates his employment for Good Reason, and
under those circumstances, his Special Service Bonus would become payable, to
the extent not previously paid, and (2) Mr. Riordan would be entitled to
terminate his employment for any reason during the first two years of the
Employment Period, at which time he would receive the payments and benefits
described above in connection with a termination for Good Reason, except that
the vesting and/or exercisability of his Restricted Stock, Performance Shares
and Commencement Options would not be accelerated and if the termination occurs
during the first six months of the Employment Period he would not be entitled to
receive the Special Service Bonus. The Riordan Employment Agreement contains the
same "make-whole" provisions with respect to certain excise taxes as the Marsh
Employment Agreement.
As discussed above, the Riordan Employment Agreement will, at the Effective
Time, replace and supersede Mr. Riordan's current employment agreement with Fort
Howard. Mr. Riordan's current employment agreement contains change of control
provisions which would have entitled him to receive three years of salary, bonus
and other benefits upon termination of his employment following the Merger.
ARRANGEMENTS WITH OTHER EXECUTIVE OFFICERS
The Merger Agreement contemplated that prior to the James River Special
Meeting and the Fort Howard Special Meeting (together, the "Special Meetings"),
James River would enter into new employment agreements with certain senior
executives of Fort Howard and James River who will serve as senior or other
executives of Fort James following the Merger. See "DIRECTORS AND MANAGEMENT OF
FORT JAMES FOLLOWING THE MERGER." Sixteen of such agreements have been executed
and will become effective and replace and supersede these executives' current
employment agreements with Fort Howard or James River effective upon
consummation of the Merger (the "Executive Employment Agreements"). The
Executive Employment Agreements contain similar provisions to the Marsh
Employment Agreement with respect to term of employment and guaranteed salary
and bonus opportunity. However, 1997 bonus payments to former Fort Howard
executives under the MIP will be calculated based on the greater of Fort
Howard's performance level attained as of the last day of the fiscal quarter
immediately preceding the Effective Time and actual 1997 performance. The
Executive Employment Agreements also include grants of Restricted Stock and
Performance Shares to the senior executives at the Effective Time.
Also, like the Marsh Employment Agreement, individuals with Executive
Employment Agreements will be eligible to participate in Fort James' savings and
retirement plans and programs to the extent these plans and programs are
applicable generally to the executive's peer group within Fort James, and the
executive and his or her family will be eligible for all welfare and other
benefit plans to the same extent. For purposes of eligibility to participate and
receive benefits under Fort James' welfare benefit plans, former Fort Howard
executives will receive credit for service with Fort Howard, and Fort James will
waive any pre-existing condition exclusions and make certain other adjustments
with respect to these executives. The Executive Employment Agreements include
the same termination of employment provisions as the Marsh Employment Agreement
as well as the "make-whole" provisions with respect to certain excise taxes.
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<PAGE>
As described above, the Executive Employment Agreements will, at the
Effective Time, replace and supersede certain James River and Fort Howard senior
executives' current employment agreements. The current employment agreements of
Fort Howard executives contain change of control or similar severance provisions
which would have entitled the executives to receive a multiple of salary, bonus
and other benefits upon termination of their employment following the Merger if
they had not entered into new Executive Employment Agreements. The current
employment agreements of James River executives contain provisions which would
entitle these executives to receive three years of salary, bonus and other
benefits upon termination of their employment following a change of control of
James River.
Certain senior executives of Fort Howard who are currently parties to
employment agreements with Fort Howard (the "Existing Agreements") but who have
not entered into Executive Employment Agreements will instead enter into
amended and restated employment agreements with James River (the "Amended and
Restated Agreements"). Each Amended and Restated Agreement has a term consistent
with the applicable Existing Agreement, and will be automatically extended for
successive one-year periods unless six months' notice of termination is
delivered by either party. Each such individual will receive a salary equal to
his or her current salary, will be paid a 1997 bonus under the MIP based on the
greater of Fort Howard's performance as of the last day of the fiscal quarter
immediately preceding the Effective Time and actual 1997 performance and will be
eligible to receive benefits consistent with the Existing Agreements.
If during the term of an Amended and Restated Agreement an executive's
employment is terminated by Fort James without "cause" or an executive resigns
for "good reason" (as such terms are defined in the Existing Agreements), such
individual would be entitled under the Amended and Restated Agreement to receive
severance benefits at the level provided in the applicable Existing Agreement,
including two years (three years, in the case of one such executive or, under
certain of the Amended and Restated Agreements, one year if the termination
occurs more than two years after the Effective Time) of continued salary and
bonus payments and benefits. Under certain of the Amended and Restated
Agreements, if the executive rejects a position with Fort James due to the
relocation of his or her place of employment, he or she would be entitled to one
year of severance payments in special circumstances. The Amended and Restated
Agreements will contain the same "make-whole" provisions with respect to certain
excise taxes as contained in the Executive Employment Agreements.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the indemnification provisions contained
in the Certificate of Incorporation of Fort Howard (the "Fort Howard Charter")
and the By-Laws of Fort Howard (the "Fort Howard By-Laws") will survive the
Merger, and, prior to the Effective Time, James River will cause the certificate
of incorporation and by-laws of Merger Sub to include the same provisions. James
River and Fort Howard have agreed that these indemnification provisions will not
be amended, repealed or otherwise modified for six years after the Effective
Time in any manner that would adversely affect the rights of the individuals who
on or prior to the Effective Time were directors, officers, employees or agents
of Fort Howard or its subsidiaries. The Merger Agreement also provides that for
six years after the Effective Time, Fort James will use its best efforts to
provide to the individuals who were directors and officers of Fort Howard on May
4, 1997, liability insurance protection of the same kind and scope as that
provided by Fort Howard's directors' and officers' liability insurance policies
in effect on such date, provided that Fort James will not be required to pay
more than 200% of the current amount paid by Fort Howard to maintain such
insurance.
James River and Fort Howard have agreed (in the case of James River, after
the Effective Time, and in the case of Fort Howard, regardless of whether the
Merger becomes effective) to indemnify and hold harmless to the fullest extent
permitted under applicable law each present and former director, officer,
trustee, fiduciary, employee or agent of Fort Howard and its subsidiaries and
each such person who served at the request of Fort Howard or its subsidiaries in
such position with another corporation, partnership, joint venture, trust,
pension or other employee benefit plan or enterprise, against all costs and
expenses and certain other amounts paid in connection with any claim, action,
suit, proceeding or investigation, whether initiated before or after the
Effective Time, 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.
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DIRECTORS AND MANAGEMENT OF FORT JAMES FOLLOWING THE MERGER
DIRECTORS
The Merger Agreement provides that prior to the Effective Time, James River
will increase the number of members of the James River Board, which is currently
eleven, to fifteen. James River has agreed to take such actions as are necessary
so that the Fort James Board immediately following the Merger includes Mr.
Riordan, currently Chairman, President and Chief Executive Officer of Fort
Howard, Messrs. Niehaus and Sica, currently directors of Fort Howard and
officers of MS&Co., and Dr. Burke, currently a director of Fort Howard. Under
the Virginia Stock Corporation Act (the "VSCA") and the Bylaws of James River
(the "James River Bylaws"), the increase from eleven to fifteen members of the
James River Board requires the approval of James River's shareholders. At the
James River Special Meeting, shareholders will be asked to approve an amendment
to the James River Bylaws to effect the expansion of the James River Board as
contemplated in the Merger Agreement. See "THE JAMES RIVER SPECIAL
MEETING -- Matters to be Considered and Acted Upon." It is expected that the
eleven directors currently serving on the James River Board will continue to
serve as members of the Fort James Board immediately following the Merger.
Background information for the four individuals who will join the Fort
James Board at the Effective Time follows:
Mr. Riordan, age 47, is Chairman, President and Chief Executive Officer of
Fort Howard. He became Chairman on March 1, 1997, and has held the positions of
President and Chief Executive Officer since October 1, 1996. From March 1992
through September 1996, Mr. Riordan served as President and Chief Operating
Officer of Fort Howard. Prior to that time he was Vice President of Fort Howard.
Mr. Riordan is also a director of The Dial Corporation. Mr. Riordan has been a
director of Fort Howard since 1992.
Mr. Sica, age 46, has been a Managing Director of MS&Co. and a director of
Fort Howard since 1988. He is a Vice Chairman and Director of MSLEF and Morgan
Stanley Capital Partners III, Inc. ("MSCP III"). Mr. Sica is also a director of
ARM Financial Group, Inc., Consolidated Hydro, Inc., CSG Systems International,
Inc., Highlands Gas Corporation, Ionica L3 Limited, Kohl's Corporation, PageMart
Wireless, Inc., SITA Telecommunications Holdings N.V. and Sullivan
Communications, Inc.
Mr. Niehaus, age 41, has been a Managing Director of MS&Co. since 1990. He
is a Vice Chairman and a director of MSLEF and MSCP III. Mr. Niehaus is also a
director of American Italian Pasta Company, Silgan Corporation, Silgan Holdings
Inc., Waterford Wedgewood UK, plc (of which he is Chairman) and Waterford
Crystal Ltd. Mr. Niehaus has been a director of Fort Howard since 1988.
Dr. Burke, age 58, is President, Chief Executive Officer and a member of
the Management Board of Southeast Paper Manufacturing Company and has held these
positions since 1993. Prior to such time, he was President and Chief Operating
Officer of Garden State Paper Company. Dr. Burke has been a director of Fort
Howard since 1995.
SENIOR EXECUTIVES OF FORT JAMES FOLLOWING THE MERGER
The senior management team of Fort James following the Merger is expected
to include the following individuals from James River and Fort Howard:
<TABLE>
<CAPTION>
Fort James Position Current Position
-------------------------- --------------------------
<S> <C> <C>
Miles L. Marsh.................................. Chairman and Chief Chairman and Chief
Executive Officer Executive Officer
(James River)
Michael T. Riordan.............................. President and Chief Chairman and Chief
Operating Officer Executive Officer
(Fort Howard)
Gordon B. Bonfield, III......................... President, Packaging President, Packaging
(James River)
James K. Goodwin................................ President, North American President, North American
Consumer Business Consumer Products
(James River)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Fort James Position Current Position
-------------------------- --------------------------
<S> <C> <C>
John F. Lundgren................................ President, Consumer President, Consumer
Products Business, Products Business, Europe
Europe (James River)
Joe R. Neil..................................... President, Communications President, North American
Papers Commercial Products
(James River)
Timothy G. Reilly............................... President, North American Senior Vice President,
Commercial Business Commercial Sales and
Marketing (Fort Howard)
Ernst A. Haberli................................ Executive Vice President Senior Vice President,
and Chief Financial Strategy
Officer (James River)
John F. Rowley.................................. Executive Vice President, Executive Vice President,
Operations and Logistics Operations (Fort Howard)
Clifford A. Cutchins, IV........................ Senior Vice President Senior Vice President
and General Counsel and General Counsel
(James River)
Daniel J. Girvan................................ Senior Vice President, Senior Vice President,
Human Resources Human Resources
(James River)
R. Michael Lempke............................... Senior Vice President Vice President and
and Treasurer Treasurer
(Fort Howard)
Joseph W. McGarr................................ Senior Vice President, Vice President, Cost and
Strategy Systems Effectiveness
(James River)
William A. Paterson............................. Senior Vice President Senior Vice President
and Controller and Controller
(James River)
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS; EXECUTIVE COMPENSATION;
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
PRINCIPAL SHAREHOLDERS
Information concerning current directors and executive officers of James
River, executive compensation and ownership of James River Voting Shares by
management and principal shareholders is contained in James River's Annual
Report on Form 10-K for the fiscal year ended December 29, 1996 (the "James
River 1996 10-K").
Information concerning current directors and executive officers of Fort
Howard, executive compensation and ownership of Fort Howard's voting securities
by management and principal stockholders is contained in Fort Howard's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "Fort Howard 1996
10-K").
THE FORT HOWARD SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is furnished to the holders of Fort
Howard Common Shares in connection with the solicitation of proxies by the Fort
Howard Board for use at the Fort Howard Special Meeting to be held for the
purposes described in this document. Each copy of this Joint Proxy
Statement-Prospectus mailed to holders of Fort Howard Common Shares is
accompanied by a form of proxy for use at the Fort Howard Special Meeting.
This Joint Proxy Statement-Prospectus is also furnished to Fort Howard
stockholders as a prospectus in connection with the issuance by James River of
the James River Common Shares pursuant to the Merger.
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<PAGE>
MATTERS TO BE CONSIDERED AND ACTED UPON
At the Fort Howard Special Meeting, Fort Howard stockholders will be asked
to consider and vote upon a proposal to approve and adopt the Merger Agreement
(the "Merger Proposal"). The Merger Agreement is attached as Appendix A to this
Joint Proxy Statement-Prospectus and described under "THE MERGER AGREEMENT" and
elsewhere in this document.
DATE, PLACE AND TIME
The Fort Howard Special Meeting will be held at 11:00 a.m., local time, on
Tuesday, August 12, 1997, at The Metropolitan Club, 66th Floor, Sears Tower, 233
South Wacker Drive, Chicago, Illinois.
RECORD DATE
The Fort Howard Board has fixed the close of business on June 30, 1997 as
the record date (the "Fort Howard Special Meeting Record Date") for determining
the holders of Fort Howard Common Shares that are entitled to receive notice of
and to vote at the Fort Howard Special Meeting.
VOTES REQUIRED FOR APPROVAL
As of the Fort Howard Special Meeting Record Date, there were Fort
Howard Common Shares outstanding. Each Fort Howard Common Share outstanding on
such date is entitled to one vote upon each matter properly submitted at the
Fort Howard Special Meeting.
The affirmative vote, in person or by proxy, of at least a majority of the
outstanding Fort Howard Common Shares is required to approve the Merger
Proposal.
Abstentions and broker non-votes will be counted as present for purposes of
determining whether a quorum is present. A "broker non-vote" occurs when a
nominee who holds shares for a beneficial owner votes on one proposal but does
not vote on another proposal because the nominee does not have discretionary
voting power and has not received instructions from the beneficial owner.
Because the vote on the Merger Proposal requires the approval of at least a
majority of the votes entitled to be cast, abstentions or the failure to vote
and broker non-votes will have the same effect as a negative vote.
As of June 24, 1997, directors and executive officers of Fort Howard
owned beneficially an aggregate of 1,409,444 Fort Howard Common Shares
(including shares which may be acquired upon exercise of employee stock
options). Directors and executive officers of Fort Howard have indicated their
intention to vote their Fort Howard Common Shares in favor of the Merger
Proposal. In addition, the Supporting Stockholders have agreed with James River
to vote certain shares owned directly or indirectly by them in favor of the
Merger Proposal. See "THE PROPOSED MERGER -- Agreements with Certain Fort Howard
Stockholders."
VOTING AND REVOCATION OF PROXIES
Fort Howard Common Shares represented by proxy properly signed and received
at or prior to the Fort Howard Special Meeting, unless subsequently revoked,
will be voted in accordance with the instructions thereon. IF A PROXY IS SIGNED
AND RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS, SHARES REPRESENTED BY
THE PROXY WILL BE VOTED FOR THE MERGER PROPOSAL. Any proxy given pursuant to
this solicitation may be revoked by the person giving it at any time before the
proxy is voted by the filing of an instrument revoking it, or of a duly executed
proxy bearing a later date, with the Corporate Secretary of Fort Howard, prior
to or at the Fort Howard Special Meeting, or by voting in person at the meeting.
All written notices of revocation and other communications with respect to
revocation of proxies should be addressed as follows: Fort Howard Corporation,
P.O. Box 19130, Green Bay, Wisconsin 54307, Attention: Corporate Secretary.
Attendance at the Fort Howard Special Meeting will not in and of itself
constitute revocation of a proxy.
The Fort Howard By-Laws specify that only business as is stated in the
written notice of a special meeting of stockholders may be acted upon at such
meeting. Fort Howard stockholders will therefore not be entitled to present any
matters for consideration at the Fort Howard Special Meeting.
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<PAGE>
Participants in the Fort Howard Corporation Profit Sharing Retirement Plan
and the Harmon Assoc., Corp. Profit Sharing Retirement Plan (together, the
"Profit Sharing Retirement Plans") who receive this Joint Proxy
Statement-Prospectus in their capacity as participants will receive a voting
instruction form in lieu of a proxy. The trustee of the Profit Sharing
Retirement Plans will, subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), vote the shares, in person or
by proxy, in accordance with the instructions that they receive on or before
August 7, 1997. If participants fail to mark or sign and return voting
instructions to the trustee in a timely fashion, the trustee will, subject to
the requirements of ERISA, vote all shares for which timely instructions have
not been received in direct proportion to the voting of shares for which timely
instructions have been received.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Fort Howard, none of whom will be specifically compensated for such services,
may solicit proxies from the stockholders of Fort Howard, personally or by
telephone, telecopy or telegram or by other forms of communication. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy materials to beneficial owners.
In addition, Fort Howard has retained ChaseMellon Shareholder Services,
L.L.C. to assist in the solicitation of proxies from Fort Howard stockholders.
ChaseMellon Shareholder Services, L.L.C. will assist by distributing proxy
material to banks, brokers and other institutional holders. ChaseMellon
Shareholder Services, L.L.C. will also monitor returned proxy cards and may
assist in sending follow-up letters and in some cases making phone calls to
broker clients and larger record holders. The fees to be paid by Fort Howard to
ChaseMellon Shareholder Services, L.L.C. for such services are not expected to
exceed $5,500, plus reasonable out-of-pocket costs and expenses such as
trucking, air freight and postage, data processing and other miscellaneous
items. Fort Howard will bear its own expenses in connection with the
solicitation of proxies for the Fort Howard Special Meeting, other than the
expenses of printing, filing and mailing this Joint Proxy Statement-Prospectus
and the Registration Statement on Form S-4 of James River of which this Joint
Proxy Statement-Prospectus is a part (the "James River Registration Statement"),
which expenses will be shared equally by James River and Fort Howard.
THE JAMES RIVER SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is furnished to the holders of James
River Voting Shares in connection with the solicitation of proxies by the James
River Board for use at the James River Special Meeting to be held for the
purposes described in this document. Each copy of this Joint Proxy
Statement-Prospectus mailed to holders of James River Voting Shares is
accompanied by a form of proxy for use at the James River Special Meeting.
MATTERS TO BE CONSIDERED AND ACTED UPON
At the James River Special Meeting, James River shareholders will be asked
to consider and vote upon the four proposals described below (the "Proposals").
Each Proposal will be voted upon separately by James River's shareholders;
however, the Merger will not be completed and the actions contemplated in the
Proposals will not be effected unless all of the Proposals are approved by the
required vote of James River shareholders.
(1) THE "SHARE ISSUANCE PROPOSAL." James River shareholders are being asked
to approve and adopt the issuance of James River Common Shares in accordance
with the Merger.
(2) THE "CHARTER AMENDMENT PROPOSAL." James River shareholders are being
asked to approve and adopt an amendment to the Articles of Incorporation of
James River (the "James River Charter") to increase the number of James River
Common Shares that James River is authorized to issue to 500 million (from the
currently authorized 150 million shares) and to change James River's corporate
name, as of the Effective Time, to "Fort James Corporation." Because James River
does not currently have enough authorized shares of common stock to consummate
the Merger, if James River shareholders do not approve the proposed amendment to
the James River Charter, then the Merger cannot occur.
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The form of amendment which the James River shareholders are being asked to
approve and adopt is attached as Appendix B to this Joint Proxy
Statement-Prospectus.
(3) THE "BYLAW AMENDMENT PROPOSAL." James River shareholders are being
asked to adopt an amendment to the James River Bylaws to increase to fifteen the
fixed number of members on the James River Board. The James River Bylaws
currently fix the number of directors at eleven and, although the James River
Bylaws generally allow the James River Board to adopt or amend bylaws, Virginia
law and the James River Bylaws require that the proposed bylaw amendment be
adopted by the shareholders of James River. See "DIRECTORS AND MANAGEMENT OF
FORT JAMES FOLLOWING THE MERGER -- Directors" for background information on the
four individuals who will join the Fort James Board at the Effective Time.
(4) THE "STOCK PLAN AMENDMENT PROPOSAL." James River shareholders are being
asked to approve and adopt amendments to the James River Incentive Plan, which
will only be effected if the Merger is consummated, to (a) increase by eight
million the number of James River Common Shares available for issuance under
such plan and (b) permit the award of Performance Grants (as defined below)
under the James River Incentive Plan.
INCREASE IN SHARES UNDER THE JAMES RIVER INCENTIVE PLAN. A total of
5,146,774 James River Common Shares may be issued under the existing James River
Incentive Plan, of which approximately 1.5 million shares are currently
available for future grants. The purpose of the proposed amendment is to have
sufficient authorized shares for future stock incentive awards to management and
key employees of Fort James following the Merger.
Of the additional eight million shares proposed to be issuable under the
James River Incentive Plan, up to 3,944,032 shares may be issued as Restricted
Stock.
PERFORMANCE GRANTS. The proposed amendments to the James River Incentive
Plan would add provisions allowing James River to award "Performance Grants"
designed to qualify as performance-based compensation under Section 162(m) of
the Code ("Section 162(m)") and limiting the amounts of cash and shares payable
under such awards. Section 162(m) generally does not allow a publicly held
company to deduct in any one year compensation of more than $1 million paid to
the chief executive officer or any of the other four most highly compensated
executive officers, unless such payments are "performance-based" in accordance
with conditions specified in Section 162(m). In order for compensation to
qualify for the "performance-based" exemption, Section 162(m) requires
stockholder approval of the employees eligible to receive such compensation as
well as an express limitation on the number of shares which may be awarded to
any individual during a specified period as stock options and restricted stock.
In addition, for an award other than stock options granted with fair market
value exercise prices, stockholder approval of the material terms of the
performance goals upon which such award are to be conditioned is required.
The existing James River Incentive Plan contains certain features which
were approved by shareholders at the James River 1996 Annual Meeting of
Shareholders and which are designed to comply with the Section 162(m)
"performance-based" exemption. For example, shareholders approved the eligible
employees, and the 300,000 share annual limit on stock option awards to any
individual, under the existing James River Incentive Plan.
The proposed amendments to the James River Incentive Plan would add a
section permitting the Compensation Committee of the James River Board (the
"Compensation Committee") to condition awards on the attainment of
pre-established performance goals that will be administered to comply with the
requirements of Section 162(m). Performance goals would consist of one or more
of the following objective and quantifiable performance measures: cash flow;
cost reduction (or limits on cost increases); debt to capitalization; debt to
equity; earnings; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; earnings per share (including or excluding
non-recurring items); earnings per share before extraordinary items; income from
operations (including or excluding nonrecurring items); economic value added
(net operating profit after tax less a charge for use of capital); income from
operations to capital spending; free cash flow; net income (including or
excluding nonrecurring items and/or extraordinary items); net sales; price per
share, return on assets; return on capital employed; return on equity; return on
investment; return on sales; sales volume; or total return to shareholders. The
Compensation Committee would set amounts potentially payable under a Performance
Grant. The Compensation Committee would make Performance Grants prior to the
earlier of the ninetieth day of the period for which the Performance Grant
relates or the completion of 25% of such period.
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Under a Performance Grant, an employee would receive the appropriate
payments at the end of the performance period if the performance goals (and
other terms and conditions of the award) were met, as certified by the
Compensation Committee. The actual payments under a Performance Grant can be
cash, stock, or both. The aggregate maximum cash amount payable under
Performance Grants to any employee in any year may not exceed $3 million. The
aggregate number of James River Common Shares which may be awarded as a
Performance Grant during any calendar year to any employee may not exceed
300,000 shares.
The James River Board is seeking shareholder approval of the foregoing
award limits and performance measures in order to enable Fort James to make
awards designed to continue to provide tax deductions for James River.
The foregoing summary of the proposed amendments to the James River
Incentive Plan is qualified in its entirety by reference to the full text of the
amendments, which is contained in Appendix C to this Joint Proxy
Statement-Prospectus.
DATE, PLACE AND TIME
The James River Special Meeting will be held at 11:00 a.m., local time, on
Tuesday, August 12, 1997, at The Chicago Club, 81 East Van Buren Street,
Chicago, Illinois.
RECORD DATE
The James River Board has fixed the close of business on June 30, 1997 as
the record date (the "James River Special Meeting Record Date") for determining
the holders of James River Common Shares and Series P Depositary Shares that are
entitled to receive notice of and to vote at the James River Special Meeting.
VOTES REQUIRED FOR APPROVAL
As of the James River Special Meeting Record Date, there were
James River Common Shares outstanding and Series P Depositary Shares
outstanding. Each James River Common Share outstanding on such date is entitled
to one vote upon each matter properly submitted at the James River Special
Meeting and each Series P Depositary Share outstanding on the James River
Special Meeting Record Date is entitled to .8547 votes upon each such matter.
The holders of the James River Common Shares and the Series P Preferred
Shares will vote as a single class on each of the Proposals. Approval of the
Charter Amendment Proposal requires the affirmative vote, in person or by proxy,
of at least a majority of the votes entitled to be cast at the James River
Special Meeting. Approval of each of the Bylaw Amendment Proposal, the Share
Issuance Proposal and the Stock Plan Amendment Proposal and of all other matters
which may come before the James River Special Meeting requires the affirmative
vote of a majority of the votes cast, in person or by proxy, by persons entitled
to vote at the James River Special Meeting.
Abstentions and broker non-votes will be counted as present for purposes of
determining whether a quorum is present. Because the vote on the Charter
Amendment Proposal requires the approval of a majority of the votes entitled to
be cast, abstentions or the failure to vote and broker non-votes will have the
same effect as a negative vote. Because abstentions and broker non-votes do not
constitute votes cast, they will have no effect on the outcome of the Bylaw
Amendment Proposal, the Share Issuance Proposal or the Stock Plan Amendment
Proposal.
As of June 18, 1997, directors and executive officers of James River and
their affiliates owned beneficially an aggregate of 1,582,608 James River Common
Shares (including shares which may be acquired upon exercise of employee stock
options) and owned beneficially no Series P Depositary Shares. Directors and
executive officers of James River have indicated their intention to vote their
James River Common Shares in favor of the Proposals.
VOTING AND REVOCATION OF PROXIES
James River Common Shares and Series P Depositary Shares represented by
proxy properly signed and received at or prior to the James River Special
Meeting, unless subsequently revoked, will be voted in accordance with the
instructions thereon. IF A PROXY IS SIGNED AND RETURNED WITHOUT INDICATING ANY
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VOTING INSTRUCTIONS, SHARES REPRESENTED BY THE PROXY WILL BE VOTED FOR THE
PROPOSALS. If you vote in favor of the proposals, the proxy holders may, in
their discretion, vote your shares to adjourn the James River Special Meeting to
solicit additional proxies in favor of the proposals. Any proxy given pursuant
to this solicitation may be revoked by the person giving it at any time before
the proxy is voted by the filing of an instrument revoking it, or of a duly
executed proxy bearing a later date, with the Corporate Secretary of James
River, prior to or at the James River Special Meeting, or by voting in person at
the meeting. All written notices of revocation and other communications with
respect to revocation of proxies should be addressed as follows: James River
Corporation of Virginia, P.O. Box 2218, Richmond, Virginia 23218, Attention:
Corporate Secretary. Attendance at the James River Special Meeting will not in
and of itself constitute revocation of a proxy.
For participants in the James River StockPLUS Investment Plan, the enclosed
proxy serves as voting instructions to the trustee under the plan as to how to
vote the James River Common Shares beneficially owned by such participant. The
trustee under the James River StockPLUS Investment Plan has the power and
authority to vote the James River Common Shares held by the plan for which
timely voting instructions are not received in such a manner as the trustee
deems appropriate.
The James River Board is not currently aware of any business to be acted
upon at the James River Special Meeting other than as described in this
document. If, however, other matters are properly brought before the meeting,
the persons appointed as proxies will have discretion to vote or act thereon
according to their best judgment. James River shareholders will not be entitled
to present any matters for consideration at the James River Special Meeting.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
James River, none of whom will be specifically compensated for such services,
may solicit proxies from the shareholders of James River, personally or by
telephone, telecopy or telegram or by other forms of communication. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy materials to beneficial owners.
In addition, James River has retained Georgeson & Company, Inc. to assist
in the solicitation of proxies from James River shareholders. Georgeson &
Company, Inc. will assist by distributing proxy material to banks, brokers and
other institutional holders. Georgeson & Company, Inc. will also monitor
returned proxy cards and may assist in sending follow-up letters and in some
cases making phone calls to broker clients and larger record holders. The fees
to be paid by James River to Georgeson & Company, Inc. for such services are not
expected to exceed $12,000 plus reasonable out-of-pocket costs and expenses such
as trucking, air freight and postage, data processing and other miscellaneous
items. James River will bear its own expenses in connection with the
solicitation of proxies for the James River Special Meeting, other than the
expenses of printing, filing and mailing this Joint Proxy Statement-Prospectus
and the James River Registration Statement, which expenses will be shared
equally by James River and Fort Howard.
THE MERGER AGREEMENT
THIS SECTION OF THE JOINT PROXY STATEMENT-PROSPECTUS DESCRIBES CERTAIN
ASPECTS OF THE MERGER AGREEMENT AND THE PROPOSED MERGER. THE FOLLOWING
DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, WHICH IS ATTACHED AS APPENDIX A TO THIS JOINT
PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. ALL JAMES
RIVER SHAREHOLDERS AND FORT HOWARD STOCKHOLDERS SHOULD READ THE MERGER AGREEMENT
CAREFULLY.
TERMS OF THE MERGER
GENERAL. At the Effective Time, Fort Howard and James River will consummate
the Merger, in which Merger Sub will merge with and into Fort Howard. As a
result of the Merger, the separate corporate existence of Merger Sub will cease
and Fort Howard will be the surviving corporation (the "Surviving Corporation")
of the Merger and a direct wholly owned subsidiary of James River. James River
will be renamed "Fort James Corporation" at such time. If the requisite
approvals of the shareholders of Fort Howard and James River are received, the
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Merger is expected to be consummated no later than three business days after the
satisfaction or waiver of each of the conditions to consummation of the Merger.
CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of incorporation
and bylaws of Merger Sub in effect immediately prior to the Effective Time will
be the certificate of incorporation and bylaws of the Surviving Corporation.
DIRECTORS AND OFFICERS. The directors of Merger Sub immediately prior to
the Effective Time will be the initial directors of the Surviving Corporation
and the officers of Fort Howard immediately prior to the Effective Time will be
the initial officers of the Surviving Corporation.
CONVERSION OF FORT HOWARD COMMON STOCK. At the Effective Time, each Fort
Howard Common Share issued and outstanding immediately prior to the Effective
Time (other than treasury shares or shares owned by James River or its wholly
owned subsidiaries which will be cancelled) will automatically be converted into
the right to receive 1.375 James River Common Shares, including the
corresponding percentage of a right to purchase shares of James River Series M
Cumulative Participating Preferred Stock pursuant to the Amended and Restated
Rights Agreement, dated as of May 12, 1992, as amended, between James River and
NationsBank of Virginia, N.A., as Rights Agent (the "Rights Agreement"). The
Exchange Ratio is subject to adjustment in the event of certain changes in the
number or class of outstanding James River Common Shares or Fort Howard Common
Shares. Upon the Merger, Fort Howard Common Shares will no longer be outstanding
and will be cancelled and retired automatically and will cease to exist, and
each certificate previously representing any such shares will thereafter
represent only the right to receive a certificate representing the James River
Common Shares into which such Fort Howard Common Shares were converted in the
Merger.
No fractional James River Common Shares will be issued in the Merger.
Instead, each Fort Howard stockholder who would otherwise be entitled to receive
a fraction of a James River Common Share will be entitled to that portion of the
Fort Howard Common Shares Fund (as defined herein) equal to the fraction, the
numerator of which is the amount of the fractional shares interest to which such
holder is entitled (after taking into account all Fort Howard Common Shares then
held by such holder) and the denominator of which is the aggregate amount of
fractional shares interests to which all holders of Fort Howard Common Shares
are entitled. The "Fort Howard Common Shares Fund" means the net proceeds of the
sale on the NYSE by the bank or trust designated by James River to act as the
exchange agent for the Merger (the "Exchange Agent"), as soon as practicable
following the Effective Time, of the excess of the number of whole James River
Common Shares delivered to the Exchange Agent by James River (which will equal
the aggregate number of James River Common Shares issuable to Fort Howard
stockholders pursuant to the Merger Agreement) over the aggregate number of
whole James River Common Shares to be distributed to holders of Fort Howard
Common Shares pursuant to the Merger Agreement. The amount, if any, payable to
Fort Howard stockholders from the Fort Howard Common Shares Fund will be reduced
by the amount James River or the Exchange Agent is required to deduct and
withhold with respect to such payment pursuant to the Code or any other
applicable tax law. Such amounts so withheld and deducted will be deemed to have
been paid to the holder of Fort Howard Common Shares in respect of which such
deduction and withholding was made.
Because the Exchange Ratio is fixed, the number of James River Common
Shares to be received by stockholders of Fort Howard upon consummation of the
Merger will depend only on the number of Fort Howard Common Shares outstanding
at the Effective Time, and will not be adjusted due to any increase or decrease
in the market price of the Fort Howard Common Shares or James River Common
Shares, including any such increase or decrease after the date of this Joint
Proxy Statement-Prospectus and after the dates of the James River Special
Meeting and the Fort Howard Special Meeting.
EFFECTIVE TIME
The Merger will become effective and the Effective Time will occur
immediately following the filing of a certificate of merger or other appropriate
documents (the "Certificate of Merger") with the Secretary of State of the State
of Delaware, or at such other date and time specified in such filing.
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EXCHANGE OF SHARES
As of the Effective Time, James River will deposit with the Exchange Agent
certificates representing the James River Common Shares (such certificates,
together with cash in lieu of fractional shares and any dividends or
distributions payable with respect thereto, the "Exchange Fund") issuable
pursuant to the Merger Agreement in exchange for certificates formerly
representing outstanding Fort Howard Common Shares. Promptly after the Effective
Time, the Exchange Agent will mail to each holder of record of certificates
which immediately prior to the Effective Time represented outstanding Fort
Howard Common Shares (the "Certificates"), a letter of transmittal and
instructions which are to be used to surrender of the Certificates in exchange
for certificates representing James River Common Shares and cash in lieu of
fractional shares. FORT HOWARD STOCKHOLDERS SHOULD NOT SURRENDER THEIR
CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE SUCH A LETTER OF TRANSMITTAL AND
INSTRUCTIONS. Upon surrender of a Certificate for cancellation to the Exchange
Agent together with a duly executed letter of transmittal and such other
documents as may be required pursuant to its instructions, the holder of such
Certificate will be entitled to receive in exchange therefor a certificate
representing that number of whole James River Common Shares which such holder
has the right to receive in respect of the Fort Howard Common Shares formerly
represented by such Certificate (after taking into account all Fort Howard
Common Shares then held by such holder), cash in lieu of fractional James River
Common Shares to which such holder is entitled pursuant to the Merger Agreement
and any dividends or other distributions to which such holder is entitled
pursuant to the Merger Agreement, and the Certificate so surrendered will be
cancelled. No interest will be paid or accrued on any cash in lieu of fractional
shares or on any unpaid dividends and distributions payable to holders of
Certificates. Notwithstanding the foregoing, no certificate representing James
River Common Shares or cash in lieu of a fractional share will be delivered to a
person who is a Pooling Affiliate (as defined herein) of Fort Howard unless such
affiliate has executed and delivered to James River the appropriate agreement as
provided in the Merger Agreement. See "THE PROPOSED MERGER -- Restrictions on
Resales by Affiliates." In the event of a transfer of ownership of Fort Howard
Common Shares which is not registered in the transfer records of Fort Howard, a
certificate representing the proper number of James River Common Shares may be
issued to a transferee if the Certificate representing such Fort Howard Common
Shares is presented to the Exchange Agent accompanied by all documents required
for such transfer and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered properly, each Certificate will be deemed to
represent only the right to receive upon such surrender the certificate
representing James River Common Shares, cash in lieu of any fractional shares
and any dividends or other distributions, in each case as provided in the Merger
Agreement.
No dividends or other distributions declared or made after the Effective
Time with respect to James River Common Shares with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the James River Common Shares represented thereby, and no cash
payment in lieu of fractional shares will be paid to any such holder, until the
holder surrenders properly the Certificate. Subject to applicable law, following
surrender of a Certificate, there will be paid promptly to the holder of the
certificate representing whole James River Common Shares issued in exchange
therefor, without interest, cash in lieu of fractional shares and any dividends
or other distributions with a record date after the Effective Time already paid
with respect to such whole shares and on the appropriate payment date, the
amount of dividends or other distributions payable with respect to such whole
shares with a record date after the Effective Time but prior to surrender and a
payment date occurring after surrender.
ASSUMPTION OF STOCK AWARDS. Prior to the Effective Time, James River and
Fort Howard will cause each unexpired and unexercised option to purchase Fort
Howard Common Shares (each a "Fort Howard Option") under the Fort Howard
Management Equity Plan and the Fort Howard 1995 Stock Incentive Plan (together,
the "1995 Plan") and the Amended and Restated Management Equity Participation
Agreement (the "MEPA" and, together with the 1995 Plan, the "Fort Howard Stock
Option Plans") to be automatically adjusted at the Effective Time and thereafter
represent an option to purchase a number of James River Common Shares (each an
"Adjusted Option") equal to the number of Fort Howard Common Shares subject to
such Fort Howard Option multiplied by the Exchange Ratio at an exercise price
per James River Common Share equal to the exercise price in effect under such
Fort Howard Option immediately prior to the Effective Time divided by the
Exchange Ratio. Each Adjusted Option will otherwise be subject to the same terms
and conditions (including provisions regarding vesting and acceleration) as the
corresponding Fort Howard Option. The date of grant of the Adjusted Option will
be the date on which the corresponding Fort Howard Option was granted. The 1995
Plan provides that, without
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any further action on the part of the Fort Howard Board or otherwise, each Fort
Howard Option and each share of Restricted Stock and each Stock Equivalent (as
such terms are defined in the 1995 Plan) granted under the 1995 Plan that is
outstanding immediately prior to the Effective Time will become fully vested
and, in the case of Fort Howard Options, exercisable as of the Effective Time.
At the Effective Time, James River will assume all of Fort Howard's
obligations with respect to the Adjusted Options and all references to Fort
Howard in the Fort Howard Stock Option Plans and the related stock option
agreements will be deemed to refer to James River. As promptly as practicable
after the Effective Time, James River will issue to each holder of an
outstanding Fort Howard Option a document evidencing the foregoing assumption by
James River. Also, James River will file with the SEC a Registration Statement
on Form S-8 with respect to the issuance of James River Common Shares upon
exercise of the Adjusted Options.
FORT JAMES FOLLOWING THE MERGER
NAME CHANGE. As of the Effective Time, James River will change its
corporate name to "Fort James Corporation."
BOARD OF DIRECTORS. The Merger Agreement provides that prior to the
Effective Time, James River will (1) increase the number of members of the James
River Board to fifteen and (2) take such action as may be necessary to include
on the Fort James Board immediately following the Effective Time the following
four individuals: Messrs. Riordan, Niehaus and Sica and Dr. Burke. See
"DIRECTORS AND MANAGEMENT OF FORT JAMES FOLLOWING THE MERGER."
CERTAIN OFFICERS. The Merger Agreement provides that James River will take
action so that at the Effective Time certain specified Fort Howard employees
hold certain positions with Fort James. See "DIRECTORS AND MANAGEMENT OF FORT
JAMES FOLLOWING THE MERGER."
HEADQUARTERS. The Merger Agreement provides that as soon as reasonably
practicable after the Effective Time, the executive headquarters of Fort James
will be relocated to the Chicago, Illinois area.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
James River and Fort Howard relating to, among other things, (1) organization
and general corporate matters; (2) their respective capitalization; (3)
authorization, execution, delivery, performance and enforceability of the Merger
Agreement and certain related matters, and the absence of conflicts, violations
and defaults under their respective charters and bylaws and certain other
agreements and documents; (4) compliance with laws and governmental consents;
(5) documents filed by them with the SEC and the accuracy of the information
contained therein; (6) the absence of certain changes and events since the date
of their most recent audited financial statements; (7) certain employee benefit
and labor matters; (8) accounting and tax treatment of the Merger; (9) material
contracts and debt instruments; (10) litigation; (11) environmental matters;
(12) trademark, patent and copyright related matters; (13) taxes and tax
returns; and (14) insurance coverage. In addition, Fort Howard made
representations with respect to severance and employment agreements with certain
directors, officers, employees and consultants, severance programs or policies
and plans, programs, agreements or arrangements with certain change of control
provisions. James River made representations with respect to Merger Sub and the
ownership by James River of all of Merger Sub's outstanding capital stock.
CERTAIN COVENANTS
CONDUCT PENDING THE MERGER. Each of James River and Fort Howard has agreed
that between the date of the Merger Agreement and the Effective Time it will
conduct its business and that of its subsidiaries only in the ordinary course of
business consistent with past practice, and each of James River and Fort Howard
has further agreed with respect to both itself and its subsidiaries to use its
reasonable best efforts to keep available the services of such current officers,
significant employees and consultants and to preserve the current relationships
with such of its customers, suppliers and other persons with whom it has
significant business relations as it deems reasonably necessary to preserve
substantially intact its business organization. The Merger Agreement provides
that James River and its subsidiaries and Fort Howard and its subsidiaries,
respectively, will not take any action outside of the parameters specified in
the Merger Agreement, such as, among other things and with certain exceptions,
amending its organizational documents; issuing, selling or encumbering any
shares of capital stock or
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options to acquire any shares of such capital stock; selling, leasing or
encumbering property or assets (except in the ordinary course of business);
declaring or paying dividends or recapitalizing or redeeming its capital stock;
making certain acquisitions, incurring certain indebtedness, entering into,
materially changing or terminating certain material contracts, and authorizing
or making certain capital expenditures; increasing the compensation paid to its
employees, granting severance or termination pay to its directors, officers or
other employees, adopting or amending certain compensation plans and
arrangements for the benefit of any director, officer or employee or
accelerating the vesting of any stock-based compensation; waiving, settling or
compromising any material claim or taking any action that would prevent or
impede the Merger from qualifying for pooling of interests accounting treatment
or as a reorganization within the meaning of Section 368 of the Code.
CONSENTS. Each of James River and Fort Howard also agreed to coordinate and
cooperate in determining whether any action by or filing with a governmental
entity is required or any actions, consents, approvals or waivers are required
to be obtained from parties to any material contract in connection with
consummation of the Merger and each has also agreed to coordinate and cooperate
in seeking to obtain any such action, consent, approval or waiver. The parties
have also agreed to give prompt notice to the other with respect to consents;
notices from governmental entities; suits, investigations or claims relating to
consummation of the Merger; the occurrence of a default that with notice or
lapse of time or both will become a material default under a material contract;
and any change that is reasonably likely to result in a material adverse effect
on James River or Fort Howard or is likely to delay or impede the ability of
either to consummate the transactions contemplated by the Merger Agreement. Each
of James River and Fort Howard has also agreed to use its reasonable best
efforts to obtain any consents necessary such that the Merger will not
constitute a change of control or similar event which constitutes a default (or
an event which with notice or lapse of time or both would become a default)
under any material contract or other instrument or obligation to which it or any
of its subsidiaries is a party.
ACCESS TO INFORMATION. Each party agreed as to itself and its subsidiaries
that, until the Effective Time, except as required pursuant to any applicable
confidentiality or similar agreement or applicable law or regulation, it will,
among other things, provide the other with access at reasonable times upon prior
notice to its books and records and its officers, employees, agents, properties,
offices and other facilities. The parties have also agreed to, and to cause
their respective representatives to, comply with all of their respective
obligations under the Confidentiality Agreements between James River and Fort
Howard, each dated March 24, 1997.
COOPERATION. James River and Fort Howard have each agreed to use their best
efforts to consummate the transactions contemplated by the Merger Agreement as
promptly as practicable, obtain any consents and permits, avoid any action by a
governmental entity and make all necessary filings. The parties have also agreed
to use their best efforts to obtain any government clearance required to
complete the transactions, to respond to governmental requests for information,
and to contest, resist and appeal any action or order that restricts, prevents
or prohibits consummation of the Merger or any other transaction contemplated by
the Merger Agreement. The parties have agreed not to commit to any divestiture
or hold-separate agreement or restriction in the operations of any business
without the consent of the other, and neither party is required to take any such
action, if such action would, individually or in the aggregate, materially
adversely affect the financial condition or results of operations of James River
and Fort Howard.
POOLING. The parties have each agreed that between the date of the Merger
Agreement and the Effective Time they will not knowingly (1) take any action
that is reasonably likely to jeopardize the treatment of the Merger as a pooling
of interests for accounting purposes or (2) fail to take any action to preserve
such treatment, and that they will take all reasonable action necessary to cause
the Merger to be so treated if action taken by any party does jeopardize such
treatment.
AFFILIATE AGREEMENTS. Each of James River and Fort Howard has agreed to
provide to the other party not less than 45 days prior to the Effective Time a
list of names and addresses of each person who, in the reasonable judgment of
James River or Fort Howard, as the case may be, is an affiliate within the
meaning of Rule 145 under the Securities Act or otherwise applicable SEC
accounting releases with respect to pooling of interests accounting treatment
(each such person, a "Pooling Affiliate") and to deliver not less than 30 days
prior to the Effective Time an affiliate letter in the forms attached as
exhibits to the Merger Agreement, executed by each Pooling Affiliate identified
in the respective list.
INDEMNIFICATION; INSURANCE. James River and Fort Howard have agreed to
maintain certain indemnification provisions in the Fort Howard Charter and the
Fort Howard By-Laws, to provide ongoing directors' and officers'
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insurance to certain individuals covered under Fort Howard's directors' and
officers' liability insurance policies and to provide certain other
indemnification. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER --
Indemnification and Insurance."
EMPLOYEE MATTERS. James River and Fort Howard have agreed to cooperate in
developing new benefit plans for Fort James following the Effective Time and to
maintain for a period of two years after the Effective Time employee benefit
plans which will provide benefits to Fort Howard employees that are no less
favorable in the aggregate than the benefits provided under the Fort Howard
employee benefit plans prior to the Effective Time. Fort Howard employees will
be credited with service under certain of such new benefit plans, subject to
certain exceptions. James River and Fort Howard have agreed that executives of
Fort Howard who participate in the MIP will be paid 1997 bonuses based on the
greater of Fort Howard's performance as of the last day of the fiscal quarter
immediately preceding the Effective Time and actual 1997 performance. The Merger
Agreement also contains certain other covenants relating to employee benefits
matters.
OTHER. The Merger Agreement also contains certain other covenants including
covenants relating to the preparation and distribution of this Joint Proxy
Statement-Prospectus, NYSE listing, public announcements, mutual notification of
certain matters, publication of financial results for combined operations after
the Merger, and delivery of letters of accountants.
CONDITIONS TO THE MERGER
In addition to the approvals of the shareholders of James River and Fort
Howard sought hereby in connection with the Merger, the obligations of James
River and Fort Howard to consummate the Merger are subject to the satisfaction
of a number of other conditions, including the absence of any stop orders or
proceedings seeking a stop order with respect to the James River Registration
Statement; the absence of any statute, order, judgment or injunction by any
court or governmental entity that would prevent consummation of the Merger or
any of the other transactions contemplated in the Merger Agreement, provided
that each of Fort Howard and James River use their best efforts to cause any
such decree, judgment, injunction or other order to be vacated or lifted; and
the receipt of all material governmental consents, orders and approvals and the
expiration of any waiting periods imposed by, any governmental entity necessary
for the consummation of the Merger, except for such consents, approvals and
authorizations the failure to obtain which would not have a material adverse
effect on Fort Howard or James River after the Effective Time.
Each party's obligations under the Merger Agreement are also conditioned
upon the accuracy in all material respects of the representations and warranties
made by the other party; the performance in all material respects by the other
party of its covenants under the Merger Agreement; the receipt of all material
third-party consents except those consents which the failure to so receive would
not have a material adverse effect on such party; the receipt of an opinion of
such party's counsel as to the federal tax consequences of the Merger; the
receipt of a customary "cold comfort letter" in connection with the James River
Registration Statement from the other party's independent public accountants,
dated as of the date the James River Registration Statement becomes effective
and as of the Effective Time; the receipt of an opinion of such party's
independent public accountants, dated as of the date the James River
Registration Statement becomes effective and as of the Effective Time, to the
effect that the Merger qualifies for pooling of interests accounting treatment
if consummated in accordance with the Merger Agreement; the declaration of the
effectiveness by the SEC of the James River Registration Statement; and the
authorization for listing on the NYSE, upon official notice of issuance, of the
James River Common Shares to be issued in the Merger.
Fort Howard's obligation to consummate the Merger is further conditioned
upon James River having proffered executed employment agreements in the form
contemplated by the Merger Agreement to certain Fort Howard senior executives,
and upon the execution and delivery by James River of the Stockholders Agreement
and the Registration Rights Agreement.
At any time prior to the Effective Time, to the extent legally allowed,
James River or Fort Howard, without approval of the shareholders and
stockholders, respectively, may waive compliance with any of the agreements or
satisfaction of any of the conditions for the benefit of that company contained
in the Merger Agreement.
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GOVERNMENTAL APPROVALS
ANTITRUST. Under the Merger Agreement, the obligations of each party to
consummate the Merger are subject to, among other conditions, the expiration or
termination of any waiting period applicable to the consummation of the Merger
under the HSR Act. For a description of the regulatory approval requirements
under the HSR Act and applicable European competition laws, see "THE PROPOSED
MERGER -- HSR Act and Other Regulatory Approvals."
OTHER APPROVALS. The obligations of each party to consummate the Merger are
also subject to all other material authorizations, consents, orders or approvals
of, or declarations or filings with, or expiration of waiting periods imposed
by, any other governmental entity necessary for the Merger and the consummation
of the transactions contemplated by the Merger Agreement, having been filed,
expired or obtained, other than those for which the failure to be filed, expired
or obtained, would not have a material adverse effect on Fort Howard or James
River. There can be no assurance that any applicable regulatory authority will
approve or take other required action with respect to the Merger or as to the
timing of such regulatory approval or other action. James River and Fort Howard
are not aware of any other governmental approvals or actions that are required
in order to consummate the Merger except in connection with the Securities Act,
the filing of merger-related documents under the General Corporation Law of the
State of Delaware (the "DGCL"), compliance with applicable securities or "blue
sky" laws of the various states or as described elsewhere in this Joint Proxy
Statement-Prospectus.
LIMITATION ON NEGOTIATIONS
The Merger Agreement provides that each of James River and Fort Howard will
not, directly or indirectly, and will instruct its officers, directors,
employees, agents and advisors not to, directly or indirectly, take any action
to (1) solicit, initiate or knowingly encourage (including by way of furnishing
nonpublic information), or take any other action knowingly to facilitate, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to its stockholders or shareholders, as the case may be)
that constitutes, or may reasonably be expected to lead to, any Competing
Transaction (as defined below), (2) enter into or maintain or participate in any
way in discussions or negotiate with any individual or entity in furtherance of
such inquiries or to obtain a Competing Transaction, or (3) agree to or approve,
recommend or endorse any Competing Transaction, or authorize or permit any of
the officers, directors, employees or affiliates of such party or any of its
subsidiaries, or any of such party's advisors or representatives, to take any
such action. The parties have agreed to notify the other party promptly if any
proposal or offer, or inquiry or contact with respect to any proposal or offer,
regarding a Competing Transaction is made. The parties also agreed to cease
immediately and terminate all existing discussions or negotiations with respect
to a Competing Transaction and to request promptly the return of all
confidential information furnished to any such party. The parties agreed not to
release any third party from or waive any provision of any confidentiality or
standstill agreement to which it is a party.
Notwithstanding the foregoing, James River and Fort Howard may furnish,
pursuant to a customary confidentiality agreement, information to and
participate in discussions or negotiations with any person that, after the day
of signing of the Merger Agreement, has submitted a written proposal relating to
a Competing Transaction which the party did not solicit and which did not
otherwise result from a breach of the above-described provisions of the Merger
Agreement. Such furnishing of information or participation in discussions or
negotiations are limited to the extent that (1) such proposal is received prior
to the obtaining of the approval of James River's shareholders, in the case of
James River, and Fort Howard's stockholders, in the case of Fort Howard, and (2)
the James River Board or the Fort Howard Board, as applicable, determines in
good faith that the failure to do so would cause it to breach its fiduciary
duties to its stockholders or shareholders, as the case may be, under applicable
laws after receipt of advice to such effect from independent legal counsel.
A "Competing Transaction" is defined in the Merger Agreement as any of the
following involving James River or Fort Howard, respectively, other than the
Merger: any proposed (1) merger, consolidation, share exchange, business
combination or other similar transaction involving such party, (2) sale, lease
exchange, transfer or other disposition directly or indirectly of 25% or more of
the consolidated assets of such party and its subsidiaries, taken as a whole, or
(3) transaction in which any person will acquire beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), or the right to acquire beneficial ownership of, or any
"group" (as defined under the Exchange Act) will have been formed
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which beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the outstanding voting capital stock of James River or Fort Howard,
respectively.
AMENDMENT; WAIVER
AMENDMENT. The Merger Agreement may be amended in writing by action by or
on behalf of the James River Board and the Fort Howard Board at any time prior
to the Effective Time except that, after approval of the Merger by the Fort
Howard stockholders, no amendment may be made which would reduce the amount or
change the type of consideration into which the Fort Howard Common Shares will
be converted in the Merger.
WAIVER. At any time prior to the Effective Time, any party to the Merger
Agreement may, in writing, (1) extend the time for the performance of any of the
obligations of the other party, (2) waive any inaccuracies in the
representations and warranties of the other party contained in the Merger
Agreement or any documents delivered pursuant to the Merger Agreement and (3)
waive compliance by the other party with any of the agreements or the conditions
contained in the Merger Agreement, provided that after any approval of the
Merger by the Fort Howard stockholders there may not be, without further
approval of such stockholders, any extension or waiver of the Merger Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the holders of Fort Howard Common Shares other than as contemplated
by the Merger Agreement.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after shareholder approval (1) by mutual
consent of James River and Fort Howard; (2) by either party (provided such party
is not in breach of any material representation, warranty, covenant or other
agreement contained in the Merger Agreement) if there has been a breach by the
other party of its representations, warranties, covenants or agreements
contained in the Merger Agreement, or any such representation or warranty will
have become untrue, in any such case such that the conditions to such party's
obligation to effect the Merger will not be satisfied and such breach or
condition has not been promptly cured within thirty days following receipt by
such party of written notice of such breach; (3) by either party if any decree,
permanent injunction, judgment, order or other action by any court of competent
jurisdiction or any governmental entity preventing or prohibiting consummation
of the Merger has become final and nonappealable; (4) by either party if the
Merger is not consummated before December 31, 1997, unless the failure of the
closing of the transactions contemplated by the Merger Agreement to occur by
such date is due to the failure of the party seeking to terminate the Merger
Agreement to perform or observe in all material respects the covenants and
agreements of such party set forth in the Merger Agreement, provided that the
Merger Agreement may be extended not more than sixty days by either party by
written notice to the other party if the Merger is not consummated as a direct
result of (a) either party having failed to receive all regulatory approvals or
consents required to be obtained by such party with respect to the Merger or (b)
the existence of litigation or any governmental proceeding seeking to prevent or
prohibit consummation of the Merger; or (5) by either party if the Merger
Agreement fails to receive the requisite vote for approval and adoption by the
stockholders of Fort Howard or the shareholders of James River.
TERMINATION FEES. Fort Howard has agreed to pay to James River a fee of $95
million if, in the event of termination of the Merger Agreement by either party
pursuant to the provisions described in clause (4) or (5) above based upon the
failure of Fort Howard's stockholders to approve and adopt the Merger Agreement
by the requisite vote, and so long as at the time of such termination James
River is not in material breach of any representation, warranty or material
covenant contained in the Merger Agreement, if any of the following occurs: (1)
prior to a vote of the Fort Howard stockholders with respect to the Merger
Agreement, a Competing Transaction with respect to Fort Howard is proposed, and
(2) within one year of termination of the Merger Agreement, (a) Fort Howard
enters into a definitive agreement with a third party providing for an
acquisition of Fort Howard or a majority of Fort Howard's assets or voting
securities by such third party or the consolidation or merger of Fort Howard
pursuant to which Fort Howard's stockholders will hold less than 60% of the
outstanding voting securities of the resulting corporation immediately following
consummation of such transaction or (b) any third party acquires beneficial
ownership of more than 50% of the outstanding voting securities of Fort Howard.
James River has agreed to pay to Fort Howard a fee of $95 million if, in
the event of termination of the Merger Agreement by either party pursuant to the
provisions described above in clause (4) or (5) above based upon the failure of
James River shareholders to approve certain matters in connection with the
Merger and so
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long as at the time of such termination Fort Howard is not in material breach of
any representation, warranty or material covenant contained in the Merger
Agreement, if any of the following occurs: (1) prior to a vote of the James
River shareholders with respect to the required matters, a Competing Transaction
with respect to James River is proposed, and (2) within one year of termination
of the Merger Agreement, (a) James River enters into a definitive agreement with
a third party providing for an acquisition of James River or a majority of James
River's assets or voting securities by such third party or the consolidation or
merger of James River pursuant to which James River shareholders will hold less
than 60% of the outstanding voting securities of the resulting corporation
immediately following consummation of such transaction or (b) any third party
acquires beneficial ownership of more than 50% of the outstanding voting
securities of James River.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS OF
FORT HOWARD AND JAMES RIVER
James River is incorporated in the Commonwealth of Virginia and the rights
of James River shareholders are governed by the VSCA, the James River Charter
and the James River Bylaws. Fort Howard is incorporated in the State of Delaware
and the rights of Fort Howard stockholders currently are governed by the DGCL,
the Fort Howard Charter and the Fort Howard By-Laws. Upon consummation of the
Merger, Fort Howard stockholders will become James River shareholders and their
rights will be governed by the VSCA, the James River Charter and the James River
Bylaws. The following is a brief summary of certain differences between the
rights of Fort Howard stockholders and the rights of James River shareholders,
and is qualified in its entirety by reference to the relevant portions of the
DGCL, the VSCA, the Fort Howard Charter and the Fort Howard By-Laws, and the
James River Charter and the James River Bylaws.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Fort Howard consists of 200 million Fort
Howard Common Shares and 50 million shares of Preferred Stock, par value $.01
per share ("Fort Howard Preferred Stock"). With respect to the Fort Howard
Preferred Stock, the Fort Howard Board is authorized, without stockholder
approval, to designate classes or series of such shares and to determine the
relative rights, preferences and limitations of any such class or series. As of
the date of this Joint Proxy Statement-Prospectus, no classes or series of Fort
Howard Preferred Stock have been designated by the Fort Howard Board.
The authorized capital stock of James River consists of 150 million James
River Common Shares and 5 million shares of preferred stock, par value $10 per
share ("James River Preferred Stock"). If, at the James River Special Meeting,
the James River shareholders approve the proposals relating to the Merger that
are described in this Joint Proxy Statement-Prospectus and the Merger is
completed, the number of authorized James River Common Shares will be increased
to 500 million. See "THE JAMES RIVER SPECIAL MEETING -- Matters to be Considered
and Acted Upon."
With respect to the James River Preferred Stock, the James River Board is
authorized, without shareholder approval, to designate classes or series of such
shares and to determine the relative rights, preferences and limitations of any
such class or series. As of the date of this Joint Proxy Statement-Prospectus,
an aggregate of 3,866,241 shares of James River Preferred Stock had been
designated, of which 3,626,811 shares were issued and outstanding. In connection
with the Merger, an additional 100,000 shares of James River's Series M
Cumulative Participating Preferred Stock ("Series M Preferred Stock") will be
designated and will be reserved for issuance under the Rights Agreement. See
" -- Rights Agreement."
SHAREHOLDER VOTING REQUIREMENTS
The DGCL generally requires approval of amendments to the certificate of
incorporation, certain mergers, consolidations, dissolutions or sale of
substantially all of a corporation's assets by a vote of a majority of each
class of the outstanding shares entitled to vote thereon. Any amendment to the
Fort Howard Charter containing provisions that would be inconsistent with its
current provisions that (1) permit the Fort Howard Board to designate series or
classes of preferred stock, (2) provide for the staggered board of directors (as
described below) or (3) specify the stockholder vote required to approve a
by-law amendment, requires approval by holders of at least 80% of the votes
entitled to be cast.
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The VSCA generally requires approval of amendments to the articles of
incorporation, certain mergers, consolidations, dissolutions or a sale of
substantially all of a corporation's assets by a vote of two-thirds of the
outstanding shares entitled to vote on such a matter unless the articles of
incorporation provide for a greater or lesser vote, which vote may not be less
than a majority of the outstanding shares entitled to vote on such a matter. The
James River Charter provides generally that amendments to the James River
Charter must be approved, subject to the rights of holders of James River
Preferred Stock, by a majority of the outstanding shares entitled to vote on
such an amendment. An amendment which has the effect of reducing the vote
required to approve a merger or certain other extraordinary transactions,
however, requires a two-thirds vote.
DIRECTORS
NUMBER AND ELECTION. The Fort Howard Charter and Fort Howard By-Laws
provide for a board of directors of not less than three and not more than
fifteen members. The exact number of directors is set by resolution of the Fort
Howard Board, which currently provides for a nine-member board of directors.
The James River Charter and James River Bylaws currently provide for a
board of eleven directors. The James River Board may, by adopting an amendment
to the James River Bylaws, increase or decrease the size of the board by up to
30% of the number of directors last elected by the shareholders. If, at the
James River Special Meeting, the James River shareholders approve the proposals
relating to the Merger that are described in this document and the Merger is
completed, the Fort James Board will consist of fifteen directors. See "THE
JAMES RIVER SPECIAL MEETING -- Matters to be Considered and Acted Upon" and
"DIRECTORS AND MANAGEMENT OF FORT JAMES FOLLOWING THE MERGER."
Both the DGCL and the VSCA permit a board of directors to be "staggered" if
provided for in the corporation's certificate or articles of incorporation. The
Fort Howard Charter provides for a staggered board of directors. The Fort Howard
Board is divided into three groups, each group comprised of one-third of the
board of directors, with one such group elected each year to serve for a period
of three years. The staggering of the Fort Howard Board may have the effect of
discouraging a hostile acquiror from seeking to gain control of Fort Howard
through a proxy fight for board control, which could not be accomplished in any
given year. The James River Charter does not provide for a staggered board of
directors, and each James River Board member is elected annually.
REMOVAL. Fort Howard stockholders may remove members of the Fort Howard
Board for cause only. Directors of James River may be removed by the
corporation's shareholders with or without cause.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Under the Fort Howard By-Laws, nomination of individuals for election to
the Fort Howard Board may be made at any annual meeting of stockholders or at
any special meeting of stockholders called for the purpose of electing directors
(1) by or at the direction of the Fort Howard Board or (2) by any stockholder of
record on the date of the giving of the notice of nomination who is also a
stockholder of record on the record date for such meeting and who complies with
the specified notice procedures described below.
A stockholder's notice of nomination must be received at Fort Howard's
principal executive offices (1) in the case of an annual meeting, not less than
sixty days nor more than ninety days prior to the anniversary date of the
immediately preceding annual meeting of stockholders or (2) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
notice of the date of the special meeting is mailed or public disclosure of the
date of the special meeting is made, whichever first occurs.
Under the James River Bylaws, nomination of individuals for election to the
James River Board may be made (1) by the board of directors or (2) by a
shareholder of record of a class of shares entitled to vote for the election of
directors at the time of the giving of the notice of the shareholder's intent to
so nominate an individual or individuals. Such notice must be received at James
Rivers' principal offices (1) on or after December 1st of the year immediately
preceding the year in which the shareholder meeting will be held and before
January 1st of the year in which the meeting will be held, if the meeting is to
be an annual meeting and clause (2) below is not applicable, (2) not less than
sixty days before an annual meeting, if the date of the applicable annual
meeting, as prescribed in the James River Bylaws, has been changed by more than
thirty days, or (3) for a special meeting of
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shareholders called for the purpose of electing directors, not later than the
close of business on the tenth day following the day on which notice of such
meeting is first given to shareholders.
See "SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS" for a description of the
general requirements under the Fort Howard By-Laws and the James River Bylaws
for submitting shareholder proposals.
AMENDMENT OF BYLAWS
Under the DGCL, the power to adopt, amend, or repeal by-laws is vested
exclusively in the stockholders entitled to vote, unless the corporation's
certificate of incorporation confers such power on the board of directors as
well. The Fort Howard Charter authorizes the Fort Howard Board to make, alter or
repeal by-laws by a majority of the whole board of directors. In accordance with
the Fort Howard Charter, stockholders may make, amend or repeal a by-law only
with the approval of 80% of the outstanding voting shares.
The VSCA provides that a corporation's board of directors may amend or
repeal bylaws, subject to the corporation's articles of incorporation reserving
such powers exclusively to the shareholders. The James River Charter does not
reserve any such powers exclusively to the James River shareholders. The James
River Bylaws provide for bylaw amendments by either the James River Board,
generally by a majority of the board, or by the James River shareholders, and
allow the shareholders to specify that a shareholder-adopted bylaw may not be
amended or repealed by the James River Board. The James River Bylaws also
provide for "constitutive resolutions" of the James River Board, which must be
adopted by a unanimous vote of the directors present and voting when a quorum is
present, and may be rescinded, revoked, amended or modified only by the vote of
all of the directors then in office.
BUSINESS COMBINATION STATUTES
Fort Howard is subject to Section 203 of the DGCL, which provides that any
person who acquired 15% or more of a corporation's voting stock (thereby
becoming an "interested stockholder") may not engage in certain "business
combinations" with the corporation for a period of three years following the
date the person became an interested stockholder unless (1) the board of
directors has approved, prior to the date that person became an interested
stockholder, either the business combination or the transaction that resulted in
the person becoming an interested stockholder, (2) upon consummation of the
transaction that resulted in the person becoming an interested stockholder, that
person owns at least 85% of the corporation's voting stock outstanding at the
time the transaction is commenced (excluding shares owned by persons who are
both directors and officers and shares owned by employee stock plans in which
participants do not have the right to determine whether shares will be tendered
in a tender or exchange offer) or (3) the business combination is approved by
the board of directors and authorized by the affirmative vote of at least
two-thirds of the outstanding voting stock not owned by the interested
stockholder.
The VSCA does not contain a business combination statute such as Section
203 of the DGCL described above. The VSCA does contain "control share
acquisition" provisions, which regulate the process by which a person may
acquire control of certain Virginia corporations without the consent or
cooperation of the corporation's board of directors. However, as permitted under
the VSCA, the James River Bylaws provide that James River is not subject to
Virginia's control share statute.
LIMITATION ON DIRECTOR LIABILITY
The Fort Howard Charter contains a provision, permitted by the DGCL, that
eliminates the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duties as a director,
except for liability of a director (1) for breach of the duty of loyalty, (2)
for actions or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) for payment of improper dividends
or redemptions, or (4) for any transaction from which the director derived an
improper payment.
As permitted under the VSCA, the James River Charter limits the liability
of a director or officer of the corporation in a proceeding brought by or on
behalf of James River or its shareholders to $1 for damages arising from a
single transaction or occurrence. This limitation of liability does not apply in
cases where the director or officer has engaged in willful misconduct or a
knowing violation of criminal law.
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INDEMNIFICATION
The Fort Howard Charter contains provisions under which Fort Howard will
indemnify, to the fullest extent permitted by law, individuals who are made a
party to an action or proceeding by virtue of the fact that such individual is
or was a director, officer, employee or agent of Fort Howard or, at Fort
Howard's request, of another corporation. The DGCL generally permits such
indemnification to the extent that the individual acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal proceeding, had
reasonable cause to believe his conduct was lawful.
The VSCA allows for similar indemnification if the individual conducted
himself in good faith and believed, in the case of conduct in his official
capacity with the corporation, that his conduct was in its best interests and,
in all other cases, that his conduct was at least not opposed to its best
interests and further, in the case of any criminal proceeding, that he had no
reasonable cause to believe that his conduct was unlawful. The James River
Charter makes such indemnification mandatory for directors and officers and
permits the corporation to indemnify employees, agents and certain other
individuals to the same extent.
Under the VSCA and the James River Charter, James River may not provide the
indemnification described above (1) in connection with a proceeding by or in the
right of the corporation where the individual is adjudged liable to the
corporation or in connection with any other proceeding where the individual was
adjudged liable on the basis that he received improper personal benefit or (2)
if the expenses for which indemnification is sought were incurred as a result of
the individual's willful misconduct or a knowing violation of law. The DGCL and
the Fort Howard Charter permit the indemnification described above in cases
where the individual is adjudged liable to the corporation, but only to the
extent that the Delaware Court of Chancery or the court in which the action was
brought determines that such individual is fairly and reasonably entitled to
indemnity.
RIGHTS AGREEMENT
Fort Howard has not adopted a stockholder rights plan.
James River has adopted the Rights Agreement, which will continue in effect
as the rights plan for Fort James following the Merger. Fort Howard stockholders
who receive James River Shares in the Merger will receive one related Right (as
defined below) for each James River Common Share issued to them in the Merger.
All references in the following description to James River Common Shares, Series
M Preferred Stock and the James River Board also refer to the Fort James Common
Shares, Fort James Series M Preferred Stock and the Fort James Board.
The following description of the Rights Agreement is qualified in its
entirety by reference to the terms of the Rights Agreement. See "WHERE YOU CAN
FIND MORE INFORMATION."
Pursuant to the Rights Agreement, a right (a "Right") is attached to each
James River Common Share outstanding and entitles the registered holder thereof
to purchase from James River a unit (a "Unit") consisting of one one-thousandth
of a share of Series M Preferred Stock, at an initial purchase price of $150 per
Unit (the "Purchase Price"), subject to adjustment.
Each share of Series M Preferred Stock, when issued, will have a minimum
preferential quarterly dividend of $1.00 per share, but will be entitled to an
aggregate dividend of 1,000 times the James River Common Share dividend. In the
event of any merger, consolidation or other transaction in which the James River
Common Shares are exchanged for other securities or assets, each share of Series
M Preferred Stock will be entitled to receive 1,000 times the amount received
per James River Common Share. Each share of Series M Preferred Stock will have
1,000 votes, voting together with the James River Common Shares and such other
voting rights provided by law. Additionally, in the event of liquidation, each
share of Series M Preferred Stock will entitle the holder thereof to receive a
preferential liquidation payment equal to the greater of $150,000 or 1,000 times
the liquidation value of a James River Common Share, plus accrued and unpaid
dividends, or a ratable distribution in the event that the assets of James River
are insufficient to pay the liquidation preferences in full.
The Rights will separate from the corresponding James River Common Shares
upon the earlier of (1) ten days following a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or has obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding shares of the James River Common Shares and (2) ten
business days after the date of commencement of, or
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first public announcement of the intent of any person (other than James River
and certain related entities) to commence, a tender or exchange offer, the
consummation of which would result in a person or group beneficially owning 15%
or more of outstanding James River Common Shares (the earlier of (1) or (2), the
"Distribution Date"). Until the Distribution Date, (1) Rights will be evidenced
by one or more certificates held by the rights agent under the Rights Agreement,
and will be represented by the related James River Common Share certificates (2)
may be transferred with and only with such James River Common Share
certificates, (3) new James River Common Share certificates will contain a
notation incorporating the Rights Agreement by reference and (4) the surrender
for transfer of any certificates for James River Common Shares outstanding will
also constitute the transfer of Rights associated with the James River Common
Shares represented by such certificate. As soon as practicable after the
Distribution Date, rights certificates (the "Rights Certificates") will be
mailed to holders of record of the James River Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on March 1, 1999, unless earlier exercised by the
holder thereof or redeemed by James River as described below. Until a Right is
exercised, the holder thereof, as such, will have no rights as a shareholder of
James River, including without limitation, the right to vote or to receive
dividends. While the distribution of Rights will not be taxable to James River
or to its shareholders, shareholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights become exercisable.
Each holder of a Right will have the right to receive, upon exercise of a
Right, James River Common Shares (or, in certain circumstances, cash, property
or other securities of James River) having a value equal to two times the
Purchase Price then in effect, if after the Distribution Date, (1) James River
is the surviving company in a merger with an Acquiring Person and the James
River Common Shares are not changed or exchanged, (2) an Acquiring Person
consummates, with James River or any subsidiary, any one of a number of
transactions listed in the Rights Agreement, examples of which include acquiring
stock or convertible securities except on a pro rata basis with other
shareholders, obtaining any assets except on an arm's-length basis, obtaining
any assets having a fair market value of more than $5 million or receiving
certain financial benefits such as loans, guarantees, tax benefits or
compensation except as a full-time employee at normal rates, (3) while there is
an Acquiring Person, an event occurs which results in such Acquiring Person's
ownership interest being increased by more than 1% (e.g. a reverse stock split),
or (4) an Acquiring Person becomes the beneficial owner of 15% or more of the
James River Common Shares except pursuant to a cash tender offer for all
outstanding shares which is determined to be fair by the Continuing Directors
(as defined below) (each of which events is popularly termed a "flip-in" event).
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. The "Continuing Directors" are the
directors on the Distribution Date or new directors elected or nominated by a
majority of the Continuing Directors in office on the date of such election or
nomination.
For example, if the Purchase Price is $150, upon exercise of a Right and
the payment of $150, a Right holder would receive $300 worth of James River
Common Shares (or other consideration, as noted above).
Each holder of a Right will have the right to receive, upon exercise,
common stock (or equivalent securities) of the acquiring entity having a value
equal to two times the Purchase Price then in effect, if after an announcement
that a person or group has become an Acquiring Person, (1) James River is
acquired in a merger or other business combination transaction (other than a
merger of the type described pursuant to certain flip-in events), or (2) 50% or
more of James River's assets or earning power is sold or transferred (each of
which events is popularly termed a "flip-over" event).
If James River is not able to issue the Series M Preferred Stock or James
River Common Shares because of the absence of necessary regulatory approval,
restrictions contained in the James River Charter or for any other reason, a
person exercising Rights will be entitled to receive a combination of cash or
property or other securities having a value equal to the value of the Series M
Preferred Stock or the James River Common Shares which would otherwise have been
issued upon exercise of the Rights.
At any time until ten days after the announcement that a person or group
has become an Acquiring Person, James River may redeem the Rights in whole, but
not in part, at a price of $.01 per Right, payable in cash or
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James River Common Shares. When the James River Board orders a redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the redemption price.
After a person or group becomes an Acquiring Person and before the
Acquiring Person acquires 50% or more of the outstanding James River Common
Shares, James River, with the approval of a majority of the Continuing
Directors, may require a holder to exchange all or any portion of his Rights for
one James River Common Share or one one-thousandth of a share of Series M
Preferred Stock (or a share of a class or series of James River Preferred Stock
having equivalent rights) per right.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
James River Board prior to the Distribution Date. After the Distribution Date,
the Rights Agreement may still be amended by the Board (under certain
circumstances only with the approval of a majority of the Continuing Directors)
in order to cure any ambiguity, defect or inconsistency, to make changes which
do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement (including the time period for redeeming the Rights);
provided, however, that no amendment to adjust the time period governing
redemption shall be made if the Rights are not redeemable.
EXPERTS
The consolidated financial statements of James River as of December 29,
1996 and December 31, 1995, and the related consolidated statements of
operations, cash flows and changes in capital accounts for each of the three
years in the period ended December 29, 1996, incorporated by reference in this
Joint Proxy Statement-Prospectus have been incorporated herein in reliance on
the report of Coopers & Lybrand, L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Fort Howard included
in Fort Howard's Annual Report on Form 10-K for the year ended December 31,
1996, have been audited by Arthur Andersen LLP, independent public accountants,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements have been incorporated herein
by reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the James River Special Meeting and representatives of Arthur Andersen LLP are
expected to be present at the Fort Howard Special Meeting. These representatives
will have an opportunity to make statements at these meetings if they so desire
and will be available to respond to appropriate questions.
LEGAL MATTERS
Certain legal matters relating to the James River Common Shares and the
related Rights to be issued pursuant to the Merger will be passed upon for James
River by McGuire, Woods, Battle & Boothe, L.L.P., Richmond, Virginia, which
serves as primary outside legal counsel to James River. Anne M. Whittemore, a
director of James River, is a partner in the law firm of McGuire, Woods, Battle
& Boothe, L.L.P. Lawyers of such firm own an aggregate of approximately 20,000
James River Common Shares.
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS
Any James River shareholder desiring to make a proposal to be acted upon at
the 1998 Annual Meeting of James River Shareholders must present the proposal to
Clifford A. Cutchins, IV, the James River Corporate Secretary, whose address is
P.O. Box 2218, Richmond, Virginia 23218, no later than November 17, 1997, in
order for the proposal to be considered for inclusion in James River's proxy
statement for that meeting. Any such proposal must meet the applicable
requirements of the Exchange Act and the rules and regulations thereunder.
The James River Bylaws specify the procedure that a shareholder must follow
to nominate directors or to bring other business before a shareholder meeting.
To nominate a candidate for director at the 1998 Annual Meeting of James River
Shareholders, a shareholder must give a notice of nomination to the Corporate
Secretary no earlier than December 1, 1997, but no later than December 31, 1997.
The notice must describe various matters relating to the nominee, including his
or her name, address, occupation and the number of James River Common
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Shares he or she holds. To bring other business before the 1998 Annual Meeting
of James River Shareholders, a shareholder must give notice to the Corporate
Secretary no earlier than December 1, 1997, but no later than December 31, 1997,
and must include in the notice a description of the proposed business, the
reasons for such business, and other specified matters. However, if the
shareholder wishes the proposal to be included in James River's proxy statement
for the 1998 Annual Meeting of James River Shareholders, the notice must be
presented, in the manner described above, no later than November 17, 1997. James
River shareholders can receive a copy of the James River Charter and the James
River Bylaws free of charge by writing to the Corporate Secretary of James
River.
Due to the contemplated consummation of the Merger, Fort Howard does not
currently expect to hold a 1998 Annual Meeting of Stockholders because Fort
Howard voting shares will not be publicly traded after the Merger. In the event
that the Merger is not consummated and such a meeting is held, proposals of
stockholders intended to be presented at the 1998 Annual Meeting of Stockholders
must have been received by Fort Howard no later than November 26, 1997 to be
eligible for inclusion in Fort Howard's proxy statement and proxy relating to
that meeting.
Under the Fort Howard Charter and the Fort Howard By-Laws, stockholders
desiring to nominate persons for election as directors or to bring other
business before an annual meeting of stockholders must deliver or mail a notice
to the Corporate Secretary of Fort Howard that must be received at the principal
executive offices of Fort Howard not less than 60 days nor more than 90 days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders. In the event an annual meeting is called for a date that is not
within 30 days before or after the anniversary of the immediately preceding
annual meeting of stockholders, a stockholder's notice, in order to be timely,
must be so received no later than the close of business on the earlier to occur
of (1) the tenth day following the day on which notice of the date of the annual
meeting is mailed and (2) public disclosure of the date of the annual meeting.
Stockholders' notices must contain the specific information set forth in the
Fort Howard Charter and the Fort Howard By-Laws. Stockholders can receive a copy
of the Fort Howard Charter and the Fort Howard By-Laws free of charge by writing
to the Corporate Secretary of Fort Howard.
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WHERE YOU CAN FIND MORE INFORMATION
James River and Fort Howard 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 that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information about
the public reference rooms. The companies' public filings are also available
from commercial document retrieval services and at the Internet web site
maintained by the SEC at <http://www.sec.gov>. In addition, reports, proxy
statements and other information concerning James River may be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
James River has filed the James River Registration Statement to register
with the SEC the James River Common Shares to be issued to Fort Howard
stockholders in the Merger. This Joint Proxy Statement-Prospectus is a part of
the James River Registration Statement and constitutes a prospectus of James
River, as well as a proxy statement of James River for the James River Special
Meeting and a proxy statement of Fort Howard for the Fort Howard Special
Meeting.
As allowed by SEC rules, this Joint Proxy Statement-Prospectus does not
contain all the information that shareholders can find in the James River
Registration Statement or the exhibits to the James River Registration
Statement.
The SEC allows James River and Fort Howard to "incorporate by reference"
information into this Joint Proxy Statement-Prospectus, which means that the
companies can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this Joint Proxy Statement-Prospectus, except
for any information superseded by information contained directly in the Joint
Proxy Statement-Prospectus. This Joint Proxy Statement-Prospectus incorporates
by reference the documents set forth below that James River and Fort Howard have
previously filed with the SEC. These documents contain important information
about our companies and their financial condition.
<TABLE>
<S> <C>
JAMES RIVER SEC FILINGS (FILE NO. 1-7911) PERIOD
- ------------------------------------------ --------
Annual Report on Form 10-K................................................ Year ended December 29, 1996
Quarterly Reports on Form 10-Q............................................ Quarter ended March 30, 1997
Current Reports on Form 8-K............................................... Dated May 4, 1997 (2 reports)
</TABLE>
Description of the James River Common Shares contained in James River's
Registration Statement on Form 8-A dated January 3, 1980, incorporating by
reference the description included under "Description of Common Stock" in
Amendment No. 1 to Registration Statement No. 2-63209, as amended by Amendment
No. 4 to Application or Report on Form 8 dated July 28, 1992.
<TABLE>
<S> <C>
FORT HOWARD SEC FILINGS (FILE NO. 0-20473) PERIOD
- -------------------------------------------------------------------------- ----------------------------------
Annual Report on Form 10-K................................................ Year ended December 31, 1996
Quarterly Reports on Form 10-Q............................................ Quarter ended March 31, 1997
Current Reports on Form 8-K............................................... Dated May 5, 1997 and May 4, 1997
(2 reports)
</TABLE>
Description of the Fort Howard Common Shares contained in Fort Howard's
Registration Statement on Form 8-A dated March 8, 1995, incorporating by
reference the description included under the heading "Description of Capital
Stock" in the form of Prospectus filed by Fort Howard with the SEC pursuant to
Rule 424(b) under the Securities Act relating to Fort Howard's Registration
Statement on Form S-1 (File No. 33-56573), including any amendment or report
filed for the purpose of updating such description.
We incorporate by reference additional documents that James River or Fort
Howard may file with the SEC between the date of this Joint Proxy
Statement-Prospectus and the date of the Special Meetings. These include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, as well as proxy statements.
James River has supplied all information contained or incorporated by
reference in this Joint Proxy Statement-Prospectus relating to James River, and
Fort Howard has supplied all such information relating to Fort Howard.
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If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC
or the SEC's Internet web site described above. Documents incorporated by
reference are available from us without charge, excluding all exhibits unless we
have specifically incorporated by reference an exhibit in this Joint Proxy
Statement-Prospectus. Shareholders may obtain documents incorporated by
reference in this Joint Proxy Statement-Prospectus by requesting them in writing
or by telephone from the appropriate company at the following addresses:
JAMES RIVER CORPORATION OF VIRGINIA
Attention: Investor Relations
P.O. Box 2218
Richmond, Virginia 23218
Tel.: (888) 649-4362 (toll free)
FORT HOWARD CORPORATION
Attention: Public Affairs Department
P.O. Box 19130
Green Bay, Wisconsin 54307
Tel.: (414) 435-8821, ext. 4087
If you would like to request documents from either of us, please do so by
August 5, 1997 to ensure you will receive them before the Special Meetings. If
you request any incorporated documents from us we will mail them to you by first
class mail, or other equally prompt means, within one business day of receiving
your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT-PROSPECTUS TO VOTE YOUR SHARES AT THE
SPECIAL MEETINGS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS. THIS JOINT PROXY STATEMENT-PROSPECTUS IS DATED JUNE 26,
1997. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE JOINT PROXY
STATEMENT-PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT-PROSPECTUS TO SHAREHOLDERS NOR
THE ISSUANCE OF JAMES RIVER COMMON SHARES IN THE MERGER WILL CREATE ANY
IMPLICATION TO THE CONTRARY.
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
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<S> <C>
Accrued Obligations........................... 44
Acquiring Person.............................. 64
Adjusted Option............................... 55
Amended and Restated Agreements............... 46
AT&T.......................................... 42
broker non-vote............................... 49
Bylaw Amendment Proposal...................... 51
Cause......................................... 44
Certificate of Merger......................... 54
Certificates.................................. 55
Charter Amendment Proposal.................... 50
Code.......................................... 26
Commencement Options.......................... 45
Company X..................................... 13
comparable public company trading analysis.... 23
Compensation Committee........................ 51
Competing Transaction......................... 59
Continuing Directors.......................... 65
DCF........................................... 20
DGCL.......................................... 59
Director General.............................. 28
Director Nominating Stockholders.............. 42
Distribution Date............................. 65
DOJ........................................... 28
EBIT.......................................... 19
EBITDA........................................ 19
Effective Time................................ 26
Employment Period............................. 43
EPS........................................... 19
ERISA......................................... 50
Exchange Act.................................. 59
Exchange Agent................................ 54
Exchange Fund................................. 55
Exchange Ratio................................ 6
Executive Employment Agreements............... 45
Existing Agreements........................... 46
Expected Synergies............................ 18
First Call.................................... 19
First Plaza................................... 25
Fort Howard................................... 3
Fort Howard 1996 10-K......................... 48
Fort Howard Board............................. 12
Fort Howard By-Laws........................... 46
Fort Howard Charter........................... 46
Fort Howard Common Shares..................... 6
Fort Howard Common Shares Fund................ 54
Fort Howard Comparables....................... 19
Fort Howard Comparable Transactions........... 23
Fort Howard Option............................ 55
Fort Howard Preferred Stock................... 61
<CAPTION>
PAGE
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<S> <C>
Fort Howard Special Meeting................... 5
Fort Howard Special Meeting Record Date....... 49
Fort Howard Stock Option Plans................ 55
Fort James.................................... 3
Fort James Board.............................. 42
Fort James Common Shares...................... 31
FPGT.......................................... 42
FTC........................................... 28
Funds......................................... 43
GAAP.......................................... 17
Good Reason................................... 44
Historical Exchange Ratios.................... 24
Holders....................................... 42
HSR Act....................................... 28
IBES.......................................... 23
IRS........................................... 26
James River................................... 3
James River 1996 10-K......................... 48
James River Board............................. 12
James River Bylaws............................ 47
James River Charter........................... 50
James River Common Shares..................... 6
James River Incentive Plan.................... 43
James River Preferred Stock................... 61
James River Registration Statement............ 50
James River Special Meeting................... 6
James River Special Meeting Record Date....... 52
James River Voting Shares..................... 31
Leeway........................................ 25
LTM........................................... 19
Marsh Employment Agreement.................... 43
MEPA.......................................... 55
Merger........................................ 15
Merger Agreement.............................. 15
Merger Proposal............................... 49
Mergers Act................................... 29
Merger Sub.................................... 15
Merrill Lynch................................. 12
Merrill Lynch Opinion......................... 17
Minimum Bonus................................. 44
Minister...................................... 29
MIP........................................... 44
MMC........................................... 28
Morgan Stanley................................ 12
Morgan Stanley Group.......................... 12
MS&Co......................................... 12
MSCP III...................................... 47
MSLEF......................................... 12
New Credit Facility........................... 30
Nonrenewal Termination........................ 44
NYSE.......................................... 23
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
OFT........................................... 28
Performance Grants............................ 51
Performance Shares............................ 43
Pooling Affiliate............................. 57
Pooling Restriction Period.................... 30
Prior Stock Awards............................ 44
Profit Sharing Retirement Plans............... 50
Proposals..................................... 50
Purchase Price................................ 64
Registration Rights Agreement................. 42
Registrable Securities........................ 42
Restricted Stock.............................. 43
Right......................................... 64
Rights Agreement.............................. 54
Rights Certificates........................... 65
Riordan Employment Agreement.................. 44
Salomon Brothers.............................. 12
Salomon Opinion............................... 17
Scott Paper Acquisition....................... 19
SEC........................................... 30
second request................................ 28
Secretary of State............................ 28
Section 162(m)................................ 51
<CAPTION>
PAGE
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<S> <C>
Securities Act................................ 30
Selected Acquisition Transactions............. 19
Selected Comparable Companies................. 23
Selected Pro Forma Data....................... 10
Series M Preferred Stock...................... 61
Series P Depositary Shares.................... 31
Series P Preferred Stock...................... 31
Share Issuance Proposal....................... 50
Special Meetings.............................. 45
Special Service Bonus......................... 44
Stockholders Agreement........................ 42
Stockholder Support Agreements................ 25
Stock Plan Amendment Proposal................. 51
Supporting Stockholders....................... 25
Surviving Corporation......................... 53
Transaction Value............................. 19
Unaudited Pro Forma Information............... 32
Unit.......................................... 64
U.S. Person................................... 26
Value Line.................................... 23
VSCA.......................................... 47
1973 Act...................................... 28
1995 Plan..................................... 55
</TABLE>
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APPENDIX A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JAMES RIVER CORPORATION OF VIRGINIA,
JAMES RIVER DELAWARE, INC.
AND
FORT HOWARD CORPORATION
DATED AS OF MAY 4, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
<CAPTION>
ARTICLE I
THE MERGER
<S> <C> <C>
SECTION 1.01. The Merger............................................................................. A-1
SECTION 1.02. Effective Time......................................................................... A-1
SECTION 1.03. Effect of the Merger................................................................... A-1
SECTION 1.04. Certificate of Incorporation; By-laws.................................................. A-1
SECTION 1.05. Directors and Officers................................................................. A-1
<CAPTION>
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
<S> <C> <C>
SECTION 2.01. Conversion of Securities............................................................... A-2
SECTION 2.02. Exchange of Certificates............................................................... A-3
SECTION 2.03. Stock Transfer Books................................................................... A-5
SECTION 2.04. Stock Options and Other Stock Awards................................................... A-5
<CAPTION>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<S> <C> <C>
SECTION 3.01. Organization and Qualification; Subsidiaries........................................... A-6
SECTION 3.02. Certificate of Incorporation and By-laws; Corporate Books and Records.................. A-6
SECTION 3.03. Capitalization......................................................................... A-6
SECTION 3.04. Authority Relative to This Agreement................................................... A-7
SECTION 3.05. No Conflict; Required Filings and Consents............................................. A-7
SECTION 3.06. Permits; Compliance.................................................................... A-8
SECTION 3.07. SEC Filings; Financial Statements...................................................... A-8
SECTION 3.08. Absence of Certain Changes or Events................................................... A-9
SECTION 3.09. Employee Benefit Plans; Labor Matters.................................................. A-9
SECTION 3.10. Accounting and Tax Matters............................................................. A-10
SECTION 3.11. Contracts; Debt Instruments............................................................ A-10
SECTION 3.12. Litigation............................................................................. A-11
SECTION 3.13. Environmental Matters.................................................................. A-11
SECTION 3.14. Trademarks, Patents and Copyrights..................................................... A-12
SECTION 3.15. Taxes.................................................................................. A-12
SECTION 3.16. Opinion of Financial Advisor........................................................... A-13
SECTION 3.17. Vote Required.......................................................................... A-13
SECTION 3.18. Brokers................................................................................ A-13
SECTION 3.19. Insurance.............................................................................. A-13
<CAPTION>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
<S> <C> <C>
SECTION 4.01. Organization and Qualification; Subsidiaries........................................... A-13
SECTION 4.02. Certificate of Incorporation and By-laws; Corporate Books and Records.................. A-14
SECTION 4.03. Capitalization......................................................................... A-14
SECTION 4.04. Authority Relative to This Agreement................................................... A-15
SECTION 4.05. No Conflict; Required Filings and Consents............................................. A-15
SECTION 4.06. Permits; Compliance.................................................................... A-16
SECTION 4.07. SEC Filings; Financial Statements...................................................... A-16
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 4.08. Absence of Certain Changes or Events................................................... A-17
SECTION 4.09. Employee Benefit Plans; Labor Matters.................................................. A-17
SECTION 4.10. Accounting and Tax Matters............................................................. A-18
SECTION 4.11. Contracts; Debt Instruments............................................................ A-18
SECTION 4.12. Litigation............................................................................. A-19
SECTION 4.13. Environmental Matters.................................................................. A-19
SECTION 4.14. Trademarks, Patents and Copyrights..................................................... A-19
SECTION 4.15. Taxes.................................................................................. A-19
SECTION 4.16. Ownership of Merger Sub; No Prior Activities........................................... A-20
SECTION 4.17. Opinion of Financial Advisor........................................................... A-20
SECTION 4.18. Vote Required.......................................................................... A-20
SECTION 4.19. Brokers................................................................................ A-20
SECTION 4.20. Insurance.............................................................................. A-20
<CAPTION>
ARTICLE V
COVENANTS
<S> <C> <C>
SECTION 5.01. Conduct of Business by the Company Pending the Closing................................. A-21
SECTION 5.02. Conduct of Business by Parent Pending the Closing...................................... A-22
SECTION 5.03. Cooperation............................................................................ A-24
SECTION 5.04. Notices of Certain Events.............................................................. A-24
SECTION 5.05. Contractual Consents................................................................... A-24
<CAPTION>
ARTICLE VI
ADDITIONAL AGREEMENTS
<S> <C> <C>
SECTION 6.01. Registration Statement; Proxy Statement................................................ A-24
SECTION 6.02. Stockholders' Meetings................................................................. A-25
SECTION 6.03. Access to Information; Confidentiality................................................. A-25
SECTION 6.04. No Solicitation of Transactions........................................................ A-26
SECTION 6.05. Appropriate Action; Consents; Filings.................................................. A-26
SECTION 6.06. Pooling................................................................................ A-28
SECTION 6.07. Letters of Accountants................................................................. A-28
SECTION 6.08. Update Disclosure; Breaches............................................................ A-28
SECTION 6.09. Pooling Affiliates..................................................................... A-28
SECTION 6.10. Public Announcements................................................................... A-29
SECTION 6.11. NYSE Listing........................................................................... A-29
SECTION 6.12. Employee Matters....................................................................... A-29
SECTION 6.13. [Intentionally Omitted]................................................................ A-29
SECTION 6.14. Indemnification of Directors and Officers.............................................. A-29
SECTION 6.15. Plan of Reorganization................................................................. A-30
SECTION 6.16. Headquarters........................................................................... A-30
SECTION 6.17. Obligations of Merger Sub.............................................................. A-30
<CAPTION>
ARTICLE VII
CLOSING CONDITIONS
<S> <C> <C>
SECTION 7.01. Conditions to Obligations of Each Party Under This Agreement........................... A-30
SECTION 7.02. Additional Conditions to Obligations of Parent and Merger Sub.......................... A-31
SECTION 7.03. Additional Conditions to Obligations of the Company.................................... A-32
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
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SECTION 8.01. Termination............................................................................ A-33
SECTION 8.02. Effect of Termination.................................................................. A-33
SECTION 8.03. Amendment.............................................................................. A-34
SECTION 8.04. Waiver................................................................................. A-34
SECTION 8.05. Fees and Expenses...................................................................... A-34
<CAPTION>
ARTICLE IX
GENERAL PROVISIONS
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SECTION 9.01. Non-Survival of Representations and Warranties......................................... A-34
SECTION 9.02. Notices................................................................................ A-34
SECTION 9.03. Certain Definitions.................................................................... A-35
SECTION 9.04. Headings............................................................................... A-36
SECTION 9.05. Severability........................................................................... A-36
SECTION 9.06. Entire Agreement....................................................................... A-36
SECTION 9.07. Assignment............................................................................. A-36
SECTION 9.08. Parties in Interest.................................................................... A-36
SECTION 9.09. Mutual Drafting........................................................................ A-36
SECTION 9.10. Governing Law.......................................................................... A-36
SECTION 9.11. Counterparts........................................................................... A-36
</TABLE>
<TABLE>
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ANNEX A EMPLOYEE BENEFITS
EXHIBITS 1(a), (b) and (c) FORMS OF SUPPORT LETTERS
EXHIBIT 6.09(a) FORM OF COMPANY AFFILIATE LETTER
EXHIBIT 6.09(b) FORM OF PARENT AFFILIATE LETTER
EXHIBIT 7.03(d) FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT 7.03(e) FORM OF STOCKHOLDERS AGREEMENT
</TABLE>
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<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
SECTION
-------
affiliate Section 9.03(a)
Agreement Preamble
Articles Amendment Section 4.04
beneficial owner Section 9.03(b)
Blue Sky Laws Section 3.05(b)
Business Day Section 9.03(c)
CERCLA Section 3.13
Certificate of Merger Section 1.02
Certificates Section 2.02(b)
Code Preamble
Company Preamble
Company Benefit Plans Section 3.09(a)
Company Breakup Fee Section 8.02(b)
Company By-laws Section 3.02(a)
Company Certificate Section 3.02(a)
Company Change in Control Arrangements Section 3.09(e)
Company Common Stock Section 2.01(a)
Company Disclosure Schedule Article III Preamble
Company Material Adverse Effect Section 3.01
Company Material Contract Section 3.11
Company Meeting Section 6.02
Company Option Section 2.04
Company Permits Section 3.06
Company Preferred Stock Section 3.03
Company SEC Filings Section 3.07(a)
Company Stock Option Plans Section 2.04
Company Subsidiaries Section 3.01
Company Trigger Event Section 8.02(b)
Competing Transaction Section 6.04(c)
Confidentiality Agreements Section 6.03(b)
control Section 9.03(d)
DGCL Preamble
Effective Time Section 1.02
Environmental Laws Section 3.13
Environmental Permits Section 3.13
ERISA Section 3.09(a)
Excess Shares Section 2.02(e)(ii)
Exchange Act Section 3.05(b)
Exchange Agent Section 2.02(a)
Exchange Fund Section 2.02(a)
Exchange Ratio Section 2.01(a)
GAAP Section 3.07(b)
Governmental Entity Section 3.05(b)
</TABLE>
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<TABLE>
<S> <C>
SECTION
--------------------
Hazardous Materials Section 3.13
HSR Act Section 3.05(b)
Indemnified Parties Section 6.14(b)
Insurance Amount Section 6.14(c)
IRS Section 3.09(a)
knowledge Section 9.03(e)
Law Section 3.05(a)
Merger Preamble
Merger Consideration Section 2.01(d)
Merger Sub Preamble
Merger Sub Common Stock Section 2.01(c)
Merrill Lynch Section 4.17
Morgan Stanley Section 3.16
1995 Plan Section 2.04
NYSE Section 2.02(e)(ii)
Order Section 6.05(a)(ii)
Parent Preamble
Parent Benefit Plans Section 4.09(a)
Parent Breakup Fee Section 8.02(c)
Parent Common Stock Section 2.01(a)
Parent Disclosure Schedule Article IV Preamble
Parent Material Adverse Effect Section 4.01
Parent Material Contract Section 4.11
Parent Meeting Section 6.02
Parent Option Section 2.04
Parent Permits Section 4.06
Parent Preferred Stock Section 4.03
Parent SEC Filings Section 4.07(a)
Parent Stock Options Plans Section 4.03
Parent Subsidiaries Section 4.01
Parent Trigger Event Section 8.02(c)
person Section 9.03(f)
plan of reorganization Section 6.15
Pooling Affiliate Section 6.09(a)
Proprietary Rights Section 3.14
Proxy Statement Section 6.01(a)
Registration Statement Section 6.01(a)
Representatives Section 6.03(a)
Salomon Brothers Section 4.17
Securities Act Section 3.05(b)
Series D Preferred Stock Section 4.03
Series K Preferred Stock Section 4.03
Series L Preferred Stock Section 4.03
Series M Preferred Stock Section 4.03
Series N Preferred Stock Section 4.03
Series O Preferred Stock Section 4.03
</TABLE>
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<TABLE>
<S> <C>
SECTION
--------------------
Series P Preferred Stock Section 4.03
Share Issuance Section 4.04
Stock Plan Amendment Section 4.04
Stockholders' Meetings Section 6.02
subsidiary or subsidiaries Section 9.03(g)
Surviving Corporation Section 1.01
Taxes Section 3.15(a)
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 4, 1997 (this "AGREEMENT"),
among James River Corporation of Virginia, a Virginia corporation ("PARENT"),
James River Delaware, Inc., a Delaware corporation and a wholly owned subsidiary
of Parent ("MERGER SUB"), and Fort Howard Corporation, a Delaware corporation
(the "COMPANY").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable the merger of Merger Sub with and
into the Company (the "MERGER") upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders and Parent has approved this Agreement and the Merger as
the sole stockholder of Merger Sub;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization under the provisions of section
368(a) of the United States Internal Revenue Code of 1986, as amended (the
"CODE");
WHEREAS, as a condition to, and in connection with the execution of this
Agreement, Parent and each of Morgan Stanley Group, Inc., Mellon Bank, N.A., as
Trustee for First Plaza Group Trust, and AT&T Investment Management Co. will
enter into Support Agreements in the form attached hereto as Exhibits 1(a), 1(b)
and 1(c), respectively; and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests";
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the Effective Time
(as defined below), Merger Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION").
SECTION 1.02. EFFECTIVE TIME. No later than three business days after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the date and time of such
filing, or if another date and time is specified in such filing, such specified
date and time, being the "EFFECTIVE TIME").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BY-LAWS. At the Effective Time,
the Certificate of Incorporation and the By-laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the By-laws of the Surviving Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. (a) The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation. The officers of the
Company immediately prior
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to the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation.
(b) Parent shall take such action so that, upon the Effective Time, the
persons listed on Schedule 1.05(b), subject to availability, shall hold the
positions with Parent set forth on Schedule 1.05(b).
(c) Prior to the Effective Time, Parent shall (i) increase the number of
the members of the Board of Directors of Parent to 15 and (ii) take such action
as may be necessary such that the Board of Directors of Parent, immediately
following the Effective Time includes the four (4) persons listed on Schedule
1.05(c) attached hereto and reasonably satisfactory to Parent (it being
understood that the names of the persons will be inserted on Schedule 1.05(c)
and such Schedule as so completed shall be delivered by the Company to Parent
within 30 days after the date of this Agreement).
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Each share of common stock, par value $0.01 per share, of the Company
("COMPANY COMMON STOCK") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be cancelled
pursuant to Section 2.01(b)) shall be converted, subject to Section 2.02(e),
into the right to receive 1.375 shares of common stock, par value $0.10 per
share ("PARENT COMMON STOCK"), of Parent (the "EXCHANGE RATIO"), including the
corresponding percentage of a right to purchase shares of Series M Cumulative
Participating Preferred Stock of Parent pursuant to the Amended and Restated
Rights Agreement, dated May 12, 1992, as amended by Amendment No. 1, dated June
8, 1992, between Parent and NationsBank of Virginia, N.A. and as amended by
Amendment No. 2, dated January 31, 1996, between Parent and Wachovia Bank of
North Carolina, N.A.; PROVIDED, HOWEVER, that, in any event, if between the date
of this Agreement and the Effective Time the outstanding shares of Parent Common
Stock or Company Common Stock shall have been changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Exchange Ratio shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares. All such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each certificate previously representing any such shares shall
thereafter represent the right to receive a certificate representing the shares
of Parent Common Stock into which such Company Common Stock was converted in the
Merger. Certificates previously representing shares of Company Common Stock
shall be exchanged for certificates representing whole shares of Parent Common
Stock issued in consideration therefor upon the surrender of such certificates
in accordance with the provisions of Section 2.02, without interest. No
fractional share of Parent Common Stock shall be issued, and, in lieu thereof, a
cash payment shall be made pursuant to Section 2.02(e) hereof.
(b) Each share of Company Common Stock held in the treasury of the Company
and each share of Company Common Stock owned by Parent or any direct or indirect
wholly owned subsidiary of Parent or of the Company immediately prior to the
Effective Time shall be cancelled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(c) Each share of common stock, par value $0.01 per share, of Merger Sub
("MERGER SUB COMMON STOCK") issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one newly and validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
(d) Parent may, with the Company's consent (which will not be unreasonably
withheld), at any time change the method of effecting the acquisition of the
Company by Parent, and, upon providing such consent, the Company shall cooperate
in such efforts, if and to the extent Parent deems such change to be desirable
including, without limitation, to provide for a merger of the Company with and
into Parent or a wholly owned subsidiary of Parent, or to provide for mergers
among certain of the Subsidiaries of Parent and the Company to occur
substantially simultaneously with the Effective Time; PROVIDED, HOWEVER, that no
such change shall (i) alter or change the amount or kind of consideration to be
issued to holders of Company Common Stock as provided for in this
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Agreement (the "MERGER CONSIDERATION"), (ii) adversely affect the proposed
accounting treatment for the Merger or the proposed tax-free treatment to the
Company for the Merger and to the Company's stockholders for receiving the
Merger Consideration, (iii) be deemed to cause a breach of the representations
set forth in Sections 3.05 and 4.05 to the extent additional consents of third
parties are thereby required or (iv) materially delay receipt of any consent
referred to in Section 7.01(d) or the consummation of the transactions
contemplated by this Agreement.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of the
Effective Time, Parent shall deposit, or shall cause to be deposited, with a
bank or trust company designated by Parent (the "EXCHANGE AGENT"), for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock (such certificates for shares of
Parent Common Stock, together with cash in lieu of fractional shares and any
dividends or distributions with respect thereto, being hereinafter referred to
as the "EXCHANGE FUND") issuable pursuant to Section 2.01 in exchange for
outstanding shares of Company Common Stock. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Parent Common Stock contemplated to be
issued pursuant to Section 2.01 out of the Exchange Fund. Except as contemplated
by Section 2.02(e) hereof, the Exchange Fund shall not be used for any other
purpose.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent shall
instruct the Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "CERTIFICATES") (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive in
respect of the shares of Company Common Stock formerly represented by such
Certificate (after taking into account all shares of Company Common Stock then
held by such holder), cash in lieu of fractional shares of Parent Common Stock
to which such holder is entitled pursuant to Section 2.02(e) and any dividends
or other distributions to which such holder is entitled pursuant to Section
2.02(c), and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on any cash in lieu of fractional shares or on
any unpaid dividends and distributions payable to holders of Certificates.
Notwithstanding anything to the contrary contained herein, no certificate
representing Parent Common Stock or cash in lieu of a fractional share interest
shall be delivered to a person who is a Pooling Affiliate (as defined in Section
6.09(a)) of the Company unless such affiliate has theretofore executed and
delivered to Parent the agreement referred to in Section 6.09(a). In the event
of a transfer of ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a transferee
if the Certificate representing such shares of Company Common Stock is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of Parent Common Stock, cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.02(e) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.02(c).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock represented thereby, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.02(e), until the holder of such Certificate shall surrender such Certificate.
Subject to the effect of escheat, tax or other applicable Laws (as defined
below), following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 2.02(e) and the
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amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the appropriate payment date, the amount of dividends
or other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. All shares of Parent Common
Stock issued upon conversion of the shares of Company Common Stock in accordance
with the terms hereof (including any cash paid pursuant to Section 2.02(c) or
(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
(e) NO FRACTIONAL SHARES. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to Parent
Common Stock shall be payable on or with respect to any fractional share and
such fractional share interests will not entitle the owner thereof to any rights
of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (x) the number of full shares of Parent
Common Stock delivered to the Exchange Agent by Parent pursuant to Section
2.02(a) over (y) the aggregate number of full shares of Parent Common Stock to
be distributed to holders of Company Common Stock pursuant to Section 2.02(b)
(such excess being herein called the "EXCESS SHARES"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for such holders of
Parent Common Stock, shall sell the Excess Shares at then prevailing prices on
the New York Stock Exchange, Inc. (the "NYSE"), all in the manner provided in
paragraph (iii) of this Section 2.02(e).
(iii) The sale of the Excess Shares by the Exchange Agent shall be executed
on the NYSE through one or more member firms of the NYSE and shall be executed
in round lots to the extent practicable. Until the net proceeds of any such sale
or sales have been distributed to such holders of Company Common Stock, the
Exchange Agent will hold such proceeds in trust for such holders of Company
Common Stock as part of the Exchange Fund. Parent shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs of the Exchange Agent
incurred in connection with such sale or sales of Excess Shares. In addition,
Parent shall pay the Exchange Agent's compensation and expenses in connection
with such sale or sales. The Exchange Agent shall determine the portion of such
net proceeds to which each holder of Company Common Stock shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds by a fraction the
numerator of which is the amount of the fractional share interest to which such
holder of Company Common Stock is entitled (after taking into account all shares
of Company Common Stock then held by such holder) and the denominator of which
is the aggregate amount of fractional share interests to which all holders of
Certificates representing Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall promptly pay such amounts
to such holders of Company Common Stock subject to and in accordance with the
terms of Section 2.02(c).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for one year after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
Company Common Stock who have not theretofore complied with this Article II
shall thereafter look only to Parent for the shares of Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock to which they are
entitled pursuant to Section 2.02(e) and any dividends or other distributions
with respect to Parent Common Stock to which they are entitled pursuant to
Section 2.02(c), in each case, without any interest thereon.
(g) NO LIABILITY. Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock for any such shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any abandoned property,
escheat or similar Law.
(h) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond, in such reasonable amount as Parent may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in
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exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock to
which the holders thereof are entitled pursuant to Section 2.02(e) and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c), in each case, without any interest thereon.
(i) WITHHOLDING. Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Company Common Stock such amounts as Parent or the Exchange
Agent are required to deduct and withhold under the Code, or any provision of
state, local or foreign tax law, with respect to the making of such payment. To
the extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of Company Common Stock in respect of whom such
deduction and withholding was made by Parent or the Exchange Agent.
SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
certificates representing shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock except as otherwise provided herein or by Law. On
or after the Effective Time, any Certificates presented to the Exchange Agent or
Parent for any reason shall be converted into the shares of Parent Common Stock,
any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 2.02(c).
SECTION 2.04. STOCK OPTIONS AND OTHER STOCK AWARDS. (a) Prior to the
Effective Time, the Company and Parent shall take such action as may be
necessary to cause each unexpired and unexercised option to purchase shares of
Company Common Stock (each, a "COMPANY OPTION") under (i) the Company's
Management Equity Plan and 1995 Stock Incentive Plan (the "1995 PLAN"), copies
of which (as amended through the date hereof) have heretofore been provided to
Parent by the Company and (ii) the Amended and Restated Management Equity
Participation Agreement, dated as of August 8, 1988, by and among the Company
and the other parties signatory thereto, as amended and supplemented from time
to time through the date hereof, a copy of which (in the form in effect as of
the date hereof) has heretofore been provided to Parent by the Company
(collectively, the "COMPANY STOCK OPTION PLANS"), to be automatically converted
at the Effective Time into an option (a "PARENT OPTION") to purchase a number of
shares of Parent Common Stock equal to the number of shares of Company Common
Stock that could have been purchased under such Company Option multiplied by the
Exchange Ratio (rounded to the nearest whole number of shares of Parent Common
Stock), at a price per share of Parent Common Stock equal to the per-share
option exercise price specified in the Company Option divided by the Exchange
Ratio (rounded down to the nearest whole cent). Such Parent Option shall
otherwise be subject to the same terms and conditions (including provisions
regarding vesting and the acceleration thereof) as such Company Option. The 1995
Plan provides that, without any further action on the part of the Company Board
of Directors, any Committee thereof, or otherwise, each Company Option granted
thereunder that is outstanding immediately prior to the Effective Time shall
become fully vested and exercisable as of the Effective Time. The date of grant
of the substituted Parent Option shall be the date on which the corresponding
Company Option was granted. At the Effective Time, (i) all references in the
Company Stock Option Plans and in the related stock option agreements to the
Company shall be deemed to refer to Parent; and (ii) Parent shall assume all of
the Company's obligations with respect to Company Options as so amended. As
promptly as reasonably practicable after the Effective Time, Parent shall issue
to each holder of an outstanding Company Option a document evidencing the
foregoing assumption by Parent. As soon as practicable after the Effective Time,
to the extent necessary to provide for registration of shares of Parent Common
Stock subject to such substituted Parent Options, Parent shall file a
registration statement on Form S-8 (or any successor form) with respect to such
shares of Parent Common Stock and shall use its best efforts to maintain such
registration statement (or any successor form), including the current status of
any related prospectus or prospectuses, for so long as the Parent Options remain
outstanding. None of the Company Options are "incentive stock options" within
the meaning of Section 422 of the Code.
(b) The 1995 Plan provides that, without any further action on the part of
the Company Board of Directors, any Committee thereof, or otherwise, each share
of Restricted Stock and each Stock Equivalent (as such terms are defined in the
1995 Plan) that is outstanding immediately prior to the Effective Time shall
become fully vested as of the Effective Time.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "COMPANY DISCLOSURE
SCHEDULE"), which shall identify exceptions by specific Section references, the
Company hereby represents and warrants to Parent as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and each subsidiary of the Company (collectively, the "COMPANY
SUBSIDIARIES") has been duly organized, and is validly existing and in good
standing, under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect (as defined below). Each of
the Company and the Company Subsidiaries is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing or good standing necessary, except for
such failures to be so qualified or licensed and in good standing that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
For purposes of this Agreement, "COMPANY MATERIAL ADVERSE EFFECT" means any
change in or effect on the business of the Company and the Company Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
financial condition, results of operations or prospects of the Company and the
Company Subsidiaries taken as a whole. Section 3.01 of the Company Disclosure
Schedule sets forth a complete and correct list of all of the Company
Subsidiaries. Except as set forth in Section 3.01(b) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary holds any interest in a
partnership or joint venture of any kind.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BY-LAWS; CORPORATE BOOKS AND
RECORDS. (a) The copies of the Company's Restated Certificate of Incorporation
(the "COMPANY'S CERTIFICATE") and Restated By-laws (the "COMPANY'S BY-LAWS")
that are set forth as exhibits to the Company's Form 10-K for the year ended
December 31, 1996 are complete and correct copies thereof. The Company's
Certificate and the Company's By-laws are in full force and effect. The Company
is not in violation of any of the provisions of the Company's Certificate or the
Company's By-laws.
(b) In all material respects, the minute books of the Company and the
Company Subsidiaries through January 1, 1997 contain accurate records of all
meetings and accurately reflect all other actions taken by the stockholders, the
Boards of Directors and all committees of the Boards of Directors of the Company
and the Company Subsidiaries since January 1, 1995. Complete and accurate copies
of all such minute books and of the stock register of the Company and each
Company Subsidiary have been made available by the Company to Parent.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 100,000,000 shares of Company Common Stock and (b) 50,000,000
shares of preferred stock, par value $0.01 per share (the "COMPANY PREFERRED
STOCK"). As of April 1, 1997, (i) 74,639,227 shares of Company Common Stock were
issued and outstanding, all of which were validly issued and fully paid,
nonassessable and free of preemptive rights, (ii) 3,678 shares of Company Common
Stock were held in the treasury of the Company or by the Company Subsidiaries,
(iii) 4,637,363 shares of Company Common Stock were reserved for issuance upon
exercise of Company Options heretofore granted pursuant to the Company Stock
Option Plans, (iv) 77,146 shares of Company Common Stock were reserved for
issuance pursuant to the Company's Directors' Stock Plan, (v) 263,751 shares of
Company Common Stock reserved for issuance under the Company's Employee Stock
Purchase Plan and (vi) no shares of Company Preferred Stock were issued or
outstanding. Except for 4,637,363 Company Options, 12,000 shares of Restricted
Stock and 8,000 Stock Equivalents (as such terms are defined in the Company
Stock Option Plans) granted pursuant to the Company Stock Option Plans or
agreements or arrangements described in Section 3.03 or 3.09 of the Company
Disclosure Schedule (including, but not limited to, the Company's Employee Stock
Purchase Plan), there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is bound
relating to the issued or unissued capital stock of the Company or any Company
Subsidiary, or securities convertible into or exchangeable for such capital
stock, or obligating the Company or any Company Subsidiary to issue or sell any
shares of capital stock, or securities convertible into or exchangeable for such
capital stock, of, or other equity interests in, the Company or any Company
Subsidiary. Since April 1, 1997,
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the Company has not issued any shares of its capital stock, or securities
convertible into or exchangeable for such capital stock, other than (i) those
shares of capital stock reserved for issuance as set forth in this Section 3.03
or Section 3.03 of the Company Disclosure Schedule and (ii) shares issued in the
ordinary course pursuant to the Company's Employee Stock Purchase Plan and the
Company's Stock Fund under the Company's Profit Sharing Plan in the ordinary
course. The Company has previously provided Parent with a list, as of the date
hereof, of the prices at which outstanding Company Options may be exercised
under the applicable Company Stock Option Plan and the number of Company Options
outstanding at each such price. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance prior to the Effective Time on the terms
and conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in this Section 3.03 or Section 3.03 of
the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any Company Subsidiary (i) restricting the
transfer of, (ii) affecting the voting rights of, (iii) requiring the
repurchase, redemption or disposition of, (iv) requiring the registration for
sale of, or (v) granting any preemptive or antidilutive right with respect to,
any shares of Company Common Stock or any capital stock of any Company
Subsidiary. Each outstanding share of capital stock of each Company Subsidiary
is duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights and is owned by the Company or another Company Subsidiary is
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's or such other
Company Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where failure to own such shares free and clear would not,
individually or in the aggregate, have a Company Material Adverse Effect. Except
as set forth in Section 3.03 of the Company Disclosure Schedule, there are no
material outstanding contractual obligations of the Company or any Company
Subsidiary to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Company Subsidiary or any other
person, other than guarantees by the Company of any indebtedness of any Company
Subsidiary.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated herein to be consummated by the Company. The execution and delivery
of this Agreement by the Company and the consummation by the Company of such
transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Company and no
other stockholder votes are necessary to authorize this Agreement or to
consummate such transactions (other than, with respect to the Merger, the
adoption of this Agreement by the affirmative vote of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon). The Board
of Directors of the Company has directed that this Agreement and the
transactions contemplated hereby be submitted to the Company's stockholders for
approval at a meeting of such stockholders. This Agreement has been duly
authorized and validly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The Company has taken all appropriate
actions so that the restrictions on business combinations contained in Section
203 of the DGCL will not apply with respect to or as a result of the Merger
without any further action on the part of the stockholders or the Board of
Directors of the Company. To the Company's knowledge, no other state takeover
statute is applicable to the Merger.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, (i) (assuming the stockholder approval
set forth in Section 3.04 is obtained) conflict with or violate any provision of
the Company's Certificate or the Company's By-laws or any equivalent
organizational documents of any Company Subsidiary, (ii) assuming that all
consents, approvals, authorizations and other actions described in Section
3.05(b) have been obtained and all filings and obligations described in Section
3.05(b) have been made, conflict with or violate any foreign or domestic law,
statute, code, ordinance, rule, regulation, order, judgment, writ, stipulation,
award, injunction or decree ("LAW") applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected or (iii) except as set forth in Section 3.05(a)
of the Company Disclosure Schedule, result in any breach of, any loss of any
benefit under or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, Company Permit (as defined in Section 3.06)
or other instrument or obligation, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations,
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breaches, defaults or other occurrences which would neither, individually or in
the aggregate, (A) have a Company Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement by the Company.
(b) Except as set forth in Section 3.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any domestic or foreign governmental, administrative, judicial or regulatory
authority ("GOVERNMENTAL ENTITY"), except (i) for applicable requirements of the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "EXCHANGE ACT"), the Securities Act of
1933, as amended (together with the rules and regulations promulgated
thereunder, the "SECURITIES ACT"), state securities or "blue sky" laws ("BLUE
SKY LAWS"), the NYSE, state takeover laws, premerger notification requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR ACT"), filing and recordation of the
Certificate of Merger as required by the DGCL and as otherwise set forth in
Section 3.05(b) of the Company Disclosure Schedule and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not (A) prevent or materially delay consummation
of the Merger, (B) otherwise prevent the Company from performing its material
obligations under this Agreement or (C) individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and the Company
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals, clearances and orders of any Governmental Entity necessary for the
Company or any Company Subsidiary to own, lease and operate its properties or to
carry on their respective businesses substantially in the manner described in
the Company SEC Filings (as defined herein) and as it is now being conducted
(the "COMPANY PERMITS"), and all such Company Permits are valid, and in full
force and effect, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits would neither, individually or in
the aggregate, (a) have a Company Material Adverse Effect nor (b) prevent or
materially delay the performance of this Agreement by the Company, and, as of
the date of this Agreement, no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened, except where
the failure to have, or the suspension or cancellation of, any of the Company
Permits would neither, individually or in the aggregate, (x) have a Company
Material Adverse Effect nor (y) prevent or materially delay the performance of
this Agreement by the Company. Neither the Company nor any Company Subsidiary is
in conflict with, or in default or violation of, (i) any Law applicable to the
Company or any Company Subsidiary or by which any property, asset or operation
of the Company or any Company Subsidiary is bound or affected or (ii) any
Company Permits, except for any such conflicts, defaults or violations that
would neither, individually or in the aggregate, (A) have a Company Material
Adverse Effect nor (B) prevent or materially delay the performance of this
Agreement by the Company.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has timely
filed all registration statements, prospectuses, forms, reports and documents
required to be filed by it under the Securities Act or the Exchange Act, as the
case may be, since January 1, 1995 (collectively, the "COMPANY SEC FILINGS").
The Company SEC Filings (i) were prepared in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No Company Subsidiary is subject to the periodic
reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company SEC Filings was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly the consolidated
financial position of the Company and the consolidated Company Subsidiaries as
of the respective dates thereof and for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to have a Company Material
Adverse Effect). The books and records of the Company and its Subsidiaries have
been, and are being, maintained in accordance with GAAP and any other applicable
legal and accounting requirements.
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(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and the consolidated Company Subsidiaries as of December 31, 1996
included in the Company's Form 10-K for the year ended December 31, 1996,
including the notes thereto, neither the Company nor any Company Subsidiary has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in notes thereto prepared in accordance with GAAP, except for
liabilities or obligations incurred in the ordinary course of business since
December 31, 1996 that would neither, individually or in the aggregate, (i) have
a Company Material Adverse Effect nor (ii) prevent or materially delay the
performance of this Agreement by the Company.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1996, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 3.08 of the Company Disclosure Schedule or as disclosed in any
Company SEC Filing filed prior to the date hereof, the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(a) any Company Material Adverse Effect or an event or development (including in
connection with the Merger) that would, individually or in the aggregate, have a
Company Material Adverse Effect, (b) any event that could reasonably be expected
to prevent or materially delay the performance of this Agreement by the Company,
or (c) any action taken by the Company or any of the Company Subsidiaries during
the period from January 1, 1997 through the date of this Agreement that, if
taken during the period from the date of this Agreement through the Effective
Time, would constitute a breach of Section 5.01.
SECTION 3.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) Section 3.09(a) of
the Company Disclosure Schedule sets forth a true and complete list as of the
date hereof of each material employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan", as defined
in section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), maintained or contributed to by the Company or any Company
Subsidiary, or with respect to which the Company or any Company Subsidiary could
incur material liability under section 4069, 4212(c) or 4204 of ERISA (the
"COMPANY BENEFIT PLANS"). With respect to each Company Benefit Plan which is a
stock-based plan, the Company has heretofore delivered to Parent a true and
complete copy of such Company Benefit Plan. With respect to each other Company
Benefit Plan, the Company will make available to Parent, promptly after the date
hereof, a true and complete copy of such Company Benefit Plan and (i) the most
recent annual report (Form 5500) filed with the Internal Revenue Service (the
"IRS"), (ii) the most recent actuarial report or valuation (if any) relating to
any Company Benefit Plan subject to Title IV of ERISA and (iii) the most recent
determination letter, if any, issued by the IRS with respect to any Company
Benefit Plan qualified under Section 401(a) of the Code.
(b) With respect to each Company Benefit Plan which is subject to Title IV
of ERISA, (A) the present value of accrued benefits under such Company Benefit
Plan, based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Company Benefit Plan's actuary with
respect to such Company Benefit Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Company Benefit Plan
allocable to such accrued benefits, (B) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Company
Benefit Plan for which the 30-day notice requirement has not been waived, except
where such reportable event would not have a Company Material Adverse Effect,
and (C) no condition exists which would subject the Company or any Company
Subsidiary to any fine under Section 4071 of ERISA, except where such condition
would not have a Company Material Adverse Effect. No Company Benefit Plan is a
"multiemployer pension plan" (as such term is defined in section 3(37) of
ERISA).
(c) With respect to the Company Benefit Plans, no event has occurred and,
to the knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any Company Subsidiary
could be subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law which, individually or in the
aggregate, would have a Company Material Adverse Effect. Each of the Company
Benefit Plans has been operated and administered in all material respects in
accordance with applicable laws and administrative or governmental rules and
regulations, including, but not limited to, ERISA and the Code, except where a
violation of any such law, rule or regulation would not have a Company Material
Adverse Effect. Each of the Company Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter as to such qualification from the IRS, and no event has
occurred, either by reason of any action or failure to act, which would cause
the loss of any such qualification, except where such loss of qualification
would not have a Company Material Adverse Effect. Except
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as set forth in Section 3.09(c) of the Company Disclosure Schedule, no Company
Benefit Plan provides benefits, including, without limitation, death or medical
benefits (whether or not insured), with respect to current or former employees
of the Company or any Company Subsidiary beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension plan" (as such
term is defined in Section 3(2) of ERISA), (iii) deferred compensation benefits
accrued as liabilities on the books of the Company or any Company Subsidiary or
(iv) benefits the full cost of which is borne by the current or former employee
(or his beneficiary). All contributions or other amounts payable by the Company
or any Company Subsidiary as of the Effective Time with respect to each Company
Benefit Plan in respect of current or prior plan years have been paid or accrued
in accordance with GAAP and Section 412 of the Code.
(d) Except as set forth in Section 3.09(d) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement or other labor union contract is being negotiated by the Company or
any Company Subsidiary that is material to the Company and the Company
Subsidiaries taken as a whole. As of the date of this Agreement, there is no
material labor dispute, strike, slowdown or work stoppage against the Company or
any Company Subsidiary pending or, to the knowledge of the Company, threatened
which may interfere with the respective business activities of the Company or
any Company Subsidiary, except where such dispute, strike, slowdown or work
stoppage would not have a Company Material Adverse Effect. As of the date of
this Agreement, to the knowledge of the Company, none of the Company, any
Company Subsidiary or their respective representatives or employees has
committed any unfair labor practices in connection with the operation of the
respective businesses of the Company or any Company Subsidiary, and there is no
charge or complaint against the Company or any Company Subsidiary by the
National Labor Relations Board or any comparable state or foreign agency pending
or, to the knowledge of the Company, threatened, except where such unfair labor
practice, charge or complaint would not have a Company Material Adverse Effect.
(e) The Company has identified in Section 3.09(e) of the Company Disclosure
Schedule and has made available to Parent true and complete copies of (i) all
severance and employment agreements with directors, executive officers, key
employees or material consultants of the Company; (ii) all severance programs
and policies of each of the Company and each Company Subsidiary with or relating
to its employees; and (iii) all plans, programs, agreements and other
arrangements of each of the Company and each Company Subsidiary with or relating
to its employees which contain change in control provisions (the "COMPANY CHANGE
IN CONTROL ARRANGEMENTS"). Except as set forth in Section 3.09(e) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of the Company or any of its affiliates from the Company or any of its
affiliates under any Company Benefit Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any Company Benefit Plan or (iii) result in
any acceleration of the time of payment or vesting of any material benefits.
SECTION 3.10. ACCOUNTING AND TAX MATTERS. Neither the Company nor, to the
knowledge of the Company, any of its affiliates has taken or agreed to take any
action that would prevent the Merger from qualifying for "pooling of interests"
accounting treatment under applicable U.S. accounting rules, including, without
limitation, GAAP and applicable SEC accounting standards, or would prevent the
Merger from constituting a transaction qualifying under section 368(a) of the
Code. The Company is not aware of any agreement, plan or other circumstance that
would prevent the Merger from so qualifying under the accounting rules and
section 368(a) of the Code and, as of the date of this Agreement, the Company
has no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
SECTION 3.11. CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in or
attached as exhibits to the Company SEC Filings or as disclosed in Section 3.11
of the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries is a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) except as set forth in Section
3.09(e) of the Company Disclosure Schedule, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, (ii) as of the date hereof,
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which is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), which requires expenditures in excess of $25 million
or which requires annual expenditures in excess of $10 million and is not
cancelable within one year, that has not been filed or incorporated by reference
in the Company SEC Filings, (iii) which contains any material non-compete
provisions with respect to any line of business or geographic area in which
business is conducted with respect to the Company or any of the Company
Subsidiaries or which restricts the conduct of any line of business by the
Company or any of the Company Subsidiaries or any geographic area in which the
Company or any of the Company Subsidiaries may conduct business, in each case in
any material respect, or (iv) which would prohibit or materially delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement. The Company has previously made available to Parent true and correct
copies of all employment and deferred compensation agreements with directors,
executive officers and key employees, and material agreements with consultants,
which are in writing and to which the Company or any of the Company Subsidiaries
is a party. Each contract, arrangement, commitment or understanding of the type
described in this Section 3.11, whether or not set forth in Section 3.11 of the
Company Disclosure Schedule, is referred to herein as a "COMPANY MATERIAL
CONTRACT." Each Company Material Contract is valid and binding on the Company or
any of the Company Subsidiaries, as applicable, and in full force and effect,
and the Company and each of the Company Subsidiaries have in all material
respects performed all obligations required to be performed by them to date
under each Company Material Contract, except where such noncompliance,
individually or in the aggregate, would not have a Company Material Adverse
Effect. Neither the Company nor any Company Subsidiary knows of, or has received
notice of, any violation or default under (nor does there exist any condition
which with the passage of time or the giving of notice would cause such a
violation of or default under) any Company Material Contract or any other loan
or credit agreement, note, bond, mortgage, indenture or lease, or any other
contract, agreement, arrangement or understanding to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate, result in a Company
Material Adverse Effect. Set forth in Section 3.11 of the Company Disclosure
Schedule is a description of any material changes to the amount and terms of the
indebtedness of the Company and the Company Subsidiaries from that described in
the notes to the financial statements incorporated in the Company's Form 10-K
for the year ended December 31, 1996.
SECTION 3.12. LITIGATION. Except as disclosed in the Company SEC Filings or
in Section 3.12 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened in writing against the Company or any Company Subsidiary by or before
any Governmental Entity that (a) individually or in the aggregate, is reasonably
likely to have a Company Material Adverse Effect or (b) challenges the validity
or propriety, or seeks to prevent consummation of, the transactions contemplated
by this Agreement. Except as disclosed in the Company SEC Filings or in Section
3.12 of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is subject to any outstanding order, writ, injunction or decree which
has had or, insofar as can be reasonably foreseen, individually or in the
aggregate, would have a Company Material Adverse Effect.
SECTION 3.13. ENVIRONMENTAL MATTERS. Except as disclosed in the Company SEC
Filings or in Section 3.13 of the Company Disclosure Schedule or as would not,
individually or in the aggregate, have a Company Material Adverse Effect:
(a) the Company and the Company Subsidiaries (i) are in compliance with
all, and are not subject to any asserted liability or, to the Company's
knowledge, any liability, in each case with respect to any, applicable
Environmental Laws (as defined below), (ii) hold or have applied for all
Environmental Permits (as defined below) and (iii) are in compliance with their
respective Environmental Permits;
(b) neither the Company nor any Company Subsidiary has received any written
notice, demand, letter, claim or request for information alleging that the
Company or any of its Subsidiaries may be in violation of, or liable under, any
Environmental Law;
(c) neither the Company nor any Company Subsidiary (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree or
judicial order relating to compliance with Environmental Laws, Environmental
Permits or the investigation, sampling, monitoring, treatment, remediation,
removal or cleanup of Hazardous Materials (as defined below) and, to the
knowledge of the Company, no investigation, litigation or other proceeding is
pending or threatened in writing with respect thereto, or (ii) is an indemnitor
in connection
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with any threatened or asserted claim by any third-party indemnitee for any
liability under any Environmental Law or relating to any Hazardous Materials;
and
(d) none of the real property owned or leased by the Company or any Company
Subsidiary is listed or, to the knowledge of the Company, proposed for listing
on the "National Priorities List" under CERCLA, as updated through the date
hereof, or any similar state or foreign list of sites requiring investigation or
cleanup.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended as of the date hereof.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, treaty, writ or order and any
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree, judgment, stipulation,
injunction, permit, authorization, policy, opinion, or agency requirement, in
each case having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and safety
or natural resources, including, without limitation, those relating to the use,
handling, presence, transportation, treatment, storage, disposal, release,
threatened release or discharge of Hazardous Materials or noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
"ENVIRONMENTAL PERMITS" means any permit, approval, identification number,
license and other authorization required under any applicable Environmental Law.
"HAZARDOUS MATERIALS" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (b) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
SECTION 3.14. TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set forth in
Section 3.14 of the Company Disclosure Schedule, or to the extent the inaccuracy
of any of the following (or the circumstances giving rise to such inaccuracy),
individually or in the aggregate, would not have a Company Material Adverse
Effect, the Company and each of the Company Subsidiaries own or possess adequate
licenses or other legal rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
service marks, trade secrets, software, mailing lists, mask works, know-how and
other proprietary rights and information, including all applications with
respect thereto (collectively, "PROPRIETARY RIGHTS") used or held for use in
connection with the business of the Company and the Company Subsidiaries as
currently conducted or as contemplated to be conducted, and the Company is
unaware of any assertion or claim challenging the validity of any of the
foregoing. The conduct of the business of the Company and the Company
Subsidiaries as currently conducted and as contemplated to be conducted did not,
does not and will not infringe in any way any Proprietary Rights of any third
party that, individually or in the aggregate, could have a Company Material
Adverse Effect. To the Company's knowledge, there are no infringements of any
Proprietary Rights owned by or licensed by or to the Company or any Company
Subsidiary that, individually or in the aggregate, could have a Company Material
Adverse Effect.
SECTION 3.15. TAXES. (a) Except for such matters as would not have a
Company Material Adverse Effect, (i) the Company and the Company Subsidiaries
have timely filed or will timely file all returns and reports required to be
filed by them with any taxing authority with respect to Taxes (as defined below)
for any period ending on or before the Effective Time, taking into account any
extension of time to file granted to or obtained on behalf of the Company and
the Company Subsidiaries, (ii) all Taxes that are due prior to the Effective
Time have been paid or will be paid (other than Taxes which (1) are not yet
delinquent or (2) are being contested in good faith and have not been finally
determined), (iii) as of the date hereof, no deficiency for any Tax has been
asserted or assessed by a taxing authority against the Company or any of the
Company Subsidiaries which deficiency has not been paid other than any
deficiency being contested in good faith and (iv) the Company and the Company
Subsidiaries have provided adequate reserves (in accordance with GAAP) in their
financial statements for any Taxes that have not been paid, whether or not shown
as being due on any returns. As used in this Agreement, "TAXES" shall mean any
and all taxes, fees, levies, duties, tariffs, imposts and other charges of any
kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any Governmental
Entity or taxing authority, including, without limitation: taxes or other
charges on
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or with respect to income, franchise, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value-added or gains taxes; license, registration and documentation fees; and
customers' duties, tariffs and similar charges.
(b) To the best of the Company's knowledge, there are no material disputes
pending, or claims asserted in writing for, Taxes or assessments upon the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries been requested in writing to give any currently effective waivers
extending the statutory period of limitation applicable to any federal or state
income tax return for any period which disputes, claims, assessments or waivers
are reasonably likely to have a Company Material Adverse Effect.
(c) There are no Tax liens upon any property or assets of the Company or
any of the Company Subsidiaries except liens for current Taxes not yet due and
except for liens which have not had and are not reasonably likely to have a
Company Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by the Company or any of
its Subsidiaries, and the IRS has not initiated or proposed any such adjustment
or change in accounting method, in either case which adjustment or change has
had or is reasonably likely to have a Company Material Adverse Effect.
(e) Except as set forth in the financial statements described in Section
3.07, neither the Company nor any of its Subsidiaries has entered into a
transaction which is being accounted for under the installment method of Section
453 of the Code, which would be reasonably likely to have a Company Material
Adverse Effect.
SECTION 3.16. OPINION OF FINANCIAL ADVISOR. Morgan Stanley & Co.
Incorporated ("MORGAN STANLEY") has delivered to the Board of Directors of the
Company its written opinion dated May 4, 1997, a copy of which opinion has been
delivered to Parent, that, as of such date, the Exchange Ratio is fair from a
financial point of view to the holders of Company Common Stock.
SECTION 3.17. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of capital stock of the Company necessary to
approve the Merger.
SECTION 3.18. BROKERS. No broker, finder or investment banker (other than
Morgan Stanley) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of the Company or any Company Subsidiary. The Company has heretofore made
available to Parent a complete and correct copy of all agreements between the
Company and Morgan Stanley pursuant to which such firm would be entitled to any
payment relating to the Merger.
SECTION 3.19. INSURANCE. The Company maintains insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
that of the Company (taking into account the cost and availability of such
insurance).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as set forth in the Disclosure Schedule delivered by Parent and
Merger Sub to the Company prior to the execution of this Agreement (the "PARENT
DISCLOSURE SCHEDULE"), which shall identify exceptions by specific Section
references, Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent,
Merger Sub and each other subsidiary of Parent (collectively, the "PARENT
SUBSIDIARIES") has been duly organized, and is validly existing and in good
standing, under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually
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or in the aggregate, have a Parent Material Adverse Effect (as defined below).
Each of Parent, Merger Sub and the other Parent Subsidiaries is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing or good standing necessary,
except for such failures to be so qualified or licensed and in good standing
that would not, individually or in the aggregate, have a Parent Material Adverse
Effect. For purposes of this Agreement, "PARENT MATERIAL ADVERSE EFFECT" means
any change in or effect on the business of Parent, Merger Sub and the Parent
Subsidiaries that is, or is reasonably likely to be, materially adverse to the
business, financial condition, results of operations or prospects of Parent and
the Parent Subsidiaries taken as a whole. Section 4.01 of the Parent Disclosure
Schedule sets forth a complete and correct list of all of the Parent
Subsidiaries. Except as set forth in Section 4.01 of the Parent Disclosure
Schedule, neither Parent nor any Parent Subsidiary holds any interest in a
partnership or joint venture of any kind.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BY-LAWS; CORPORATE BOOKS AND
RECORDS. (a) The copies of Parent's Articles of Incorporation and By-laws that
are set forth as exhibits to Parent's Form 10-K for the year ended December 29,
1996 are complete and correct copies thereof. Parent has heretofore furnished to
the Company a complete and correct copy of the Certificate of Incorporation and
By-Laws, as amended or restated, of Merger Sub. Such Articles of Incorporation,
Certificate of Incorporation and By-laws are in full force and effect. Neither
Parent nor Merger Sub is in violation of any of the provisions of its Articles
or Certificate of Incorporation or By-laws.
(b) In all material respects, the minute books of Parent and the Parent
Subsidiaries through January 1, 1997 contain accurate records of all meetings
and accurately reflect all other actions taken by the stockholders, the Boards
of Directors and all committees of the Boards of Directors of Parent and the
Parent Subsidiaries since January 1, 1995. Complete and accurate copies of all
such minute books (except for portions relating to deliberations regarding the
Merger, which were redacted), and of the stock register of Parent and each
Parent Subsidiary have been made available by Parent to the Company.
SECTION 4.03. CAPITALIZATION. The authorized capital stock of Parent
consists of (a) 150,000,000 shares of Parent Common Stock and (b) 5,000,000
shares of preferred stock, par value $10 per share (the "PARENT PREFERRED
STOCK"). As of February 20, 1997, (i) 86,305,095 shares of Parent Common Stock
were issued and outstanding, all of which were validly issued and fully paid,
nonassessable and free of preemptive rights and (ii) no shares of Parent Common
Stock were held in the treasury of Parent or by the Parent Subsidiaries. As of
December 29, 1996, (i) 30,963,114 shares of Parent Common Stock were reserved
for issuance upon exercise of current stock options granted pursuant to the
stock based plans set forth in Section 4.09(a) of the Parent Disclosure Schedule
(the "PARENT STOCK OPTION PLANS"), upon exercise of future grants of stock
options and upon conversion or exchange of Parent Preferred Stock and (ii) of
the Parent Preferred Stock, (A) 39,574 shares were designated, and no shares
were issued and outstanding, as Series D Cumulative Preferred Stock (the "SERIES
D CUMULATIVE PREFERRED STOCK"), (B) 2,000,000 shares were designated, and
1,999,895 shares were issued and outstanding, as Series K $3.375 Cumulative
Convertible Exchangeable Preferred Stock (the "SERIES K PREFERRED STOCK"), (C)
1,000,000 shares were designated, and 1,000,000 shares (represented by 4,000,000
depositary shares) were issued and outstanding as Series L $14.00 Cumulative
Convertible Exchangeable Preferred Stock (the "SERIES L PREFERRED STOCK"), (D)
150,000 shares were designated, and no shares were issued and outstanding, as
Series M Cumulative Preferred Stock (to be increased to 250,000 shares in
connection with this Agreement) (the "SERIES M PREFERRED STOCK"), (E) 280,000
shares were designated, and 264,042 shares (represented by 1,056,168 depositary
shares) were issued and outstanding, as Series N $14.00 Cumulative Convertible
Exchangeable Preferred Stock (the "SERIES N PREFERRED STOCK"), (F) 230,000
shares were designated, and 196,230 shares (represented by 3,924,600 depositary
shares) were issued and outstanding, as Series O 8-1/4% Cumulative Preferred
Stock (the "SERIES O PREFERRED STOCK"), and (G) 166,667 shares were designated,
and 166,644 shares (represented by 166,644,366 depositary shares) were issued
and outstanding, as Series P 9% Cumulative Convertible Preferred Stock (the
"SERIES P PREFERRED STOCK"), all of which were validly issued and fully paid,
nonassessable and free of preemptive rights. Except for Parent Options granted
pursuant to the Parent Stock Option Plans, shares issuable upon conversion of
Parent Preferred Stock or agreements or arrangements described in Section 4.03
or Section 4.09 of the Parent Disclosure Schedule, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character to which Parent or any Parent Subsidiary is a party or by which Parent
or any Parent Subsidiary is bound relating to the issued or unissued capital
stock of Parent or any Parent Subsidiary, or securities convertible into or
exchangeable for such capital stock or obligating Parent or any Parent
Subsidiary to
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issue or sell any shares of capital stock, or securities convertible into or
exchangeable for such capital stock of, or other equity interests in, Parent or
any Parent Subsidiary. Since February 20, 1997, Parent has not issued any shares
of its capital stock, or securities convertible into or exchangeable for such
capital stock, other than those shares of capital stock reserved for issuance as
set forth in this Section 4.03. All shares of Parent Common Stock subject to
issuance as aforesaid, upon issuance prior to the Effective Time on the terms
and conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. The shares of Parent Common Stock to be issued in connection
with the Merger, when issued as contemplated herein, will be duly authorized,
validly issued, fully paid and nonassessable and will not be issued in violation
of any preemptive rights. Except as set forth in Section 4.03 of the Parent
Disclosure Schedule, there are no outstanding contractual obligations of Parent
or any Parent Subsidiary (i) restricting the transfer of, (ii) affecting the
voting rights of, (iii) requiring the repurchase, redemption or disposition of,
(iv) requiring the registration for sale of, or (v) granting any preemptive or
antidilutive right with respect to, any shares of Parent Common Stock or any
capital stock of any Parent Subsidiary. Each outstanding share of capital stock
of each Parent Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and is owned by Parent or another
Parent Subsidiary, is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on Parent's
or such other Parent Subsidiary's voting rights, charges and other encumbrances
of any nature whatsoever, except where failure to own such shares free and clear
would not, individually or in the aggregate, have a Parent Material Adverse
Effect. Except as set forth in Section 4.03 of the Parent Disclosure Schedule,
there are no material outstanding contractual obligations of Parent or any
Parent Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Parent Subsidiary or any other
person, other than guarantees by the Company of any indebtedness of any Parent
Subsidiary.
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated herein to be consummated by Parent. Each of (i)
the execution and delivery of this Agreement by each of Parent and Merger Sub
and the consummation by Parent and Merger Sub of such transactions, (ii) an
amendment to the Articles of Incorporation of Parent to increase the number of
authorized shares of Parent Common Stock to 500,000,000 and to change Parent's
name, as of the Effective Time, to Fort James Corporation (the "ARTICLES
AMENDMENT"), (iii) the issuance (the "SHARE ISSUANCE") of shares of Parent
Common Stock in accordance with the Merger and (iv) an amendment to the Stock
Incentive Plan of Parent to increase by 8,000,000 the number of shares available
for issuance thereunder (the "STOCK PLAN AMENDMENT"), have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent and Merger Sub are necessary to authorize this Agreement
or to consummate such transactions other than, with respect to (a) the adoption
of the Articles Amendment by the affirmative vote of a majority of the votes
entitled to be cast, and (b) the adoption of Share Issuance and the Stock Plan
Amendment by the affirmative vote of a majority of votes cast, in each case, by
the holders of outstanding shares of Parent Common Stock and Series P Preferred
Stock, voting together as a class (with the Series P Preferred Stock voting on
the basis of 85.47 votes per share). The Board of Directors of Parent has
directed that the Articles Amendment, the Share Issuance and the Stock Plan
Amendment be submitted to Parent's shareholders for approval at a meeting of
such shareholders. This Agreement has been duly authorized and validly executed
and delivered by Parent and Merger Sub and constitutes a legal, valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, (i) (assuming
the shareholder approval set forth in Section 4.04 is obtained) conflict with or
violate any provision of the Certificate of Incorporation or By-laws of Parent
or Merger Sub or any equivalent organizational documents of any Parent
Subsidiary, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 4.05(b) have been obtained and all filings and
obligations described in Section 4.05(b) have been made, conflict with or
violate any foreign or domestic Law applicable to Parent, Merger Sub or any
Parent Subsidiary or by which any property or asset of Parent, Merger Sub or any
Parent Subsidiary is bound or affected or (iii) except as set forth in Section
4.05(a) of the Parent Disclosure Schedule, result in any breach of, any loss of
any benefit under or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in
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the creation of a lien or other encumbrance on any property or asset of Parent,
Merger Sub or any Parent Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, Parent Permit (as defined in
Section 4.06), other instrument or obligation, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would neither, individually or in the aggregate, (A) have a
Parent Material Adverse Effect nor (B) prevent or materially delay the
performance of this Agreement by Parent and Merger Sub.
(b) Except as set forth in Section 4.05(b) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any domestic or foreign Governmental Entity, except (i) for
applicable requirements of the Exchange Act, the Securities Act, Blue Sky Laws,
the NYSE, state takeover laws, premerger notification requirements of the HSR
Act, filing and recordation of the Certificate of Merger as required by the DGCL
and as otherwise set forth in Section 4.05(b) of the Parent Disclosure Schedule
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not (A) prevent or
materially delay consummation of the Merger, (B) otherwise prevent Parent from
performing its material obligations under this Agreement or (C) individually or
in the aggregate, have a Parent Material Adverse Effect.
SECTION 4.06. PERMITS; COMPLIANCE. Each of Parent and the Parent
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals, clearances and orders of any Governmental Entity necessary for Parent
or any Parent Subsidiary to own, lease and operate its properties or to carry on
their respective businesses substantially in the manner described in the Parent
SEC Filings (as defined herein) and as it is now being conducted (the "PARENT
PERMITS"), and all such Parent Permits are valid, and in full force and effect,
except where the failure to have, or the suspension or cancellation of, any of
the Parent Permits would neither, individually or in the aggregate, (a) have a
Parent Material Adverse Effect nor (b) prevent or materially delay the
performance of this Agreement by Parent, and, as of the date of this Agreement,
no suspension or cancellation of any of the Parent Permits is pending or, to the
knowledge of Parent, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Parent Permits would neither,
individually or in the aggregate, (x) have a Parent Material Adverse Effect nor
(y) prevent or materially delay the performance of this Agreement by Parent.
Neither Parent nor any Parent Subsidiary is in conflict with, or in default or
violation of, (i) any Law applicable to Parent or any Parent Subsidiary or by
which any property, asset or operation of Parent or any Parent Subsidiary is
bound or affected or (ii) any Parent Permits, except for any such conflicts,
defaults or violations that would neither, individually or in the aggregate, (A)
have a Parent Material Adverse Effect nor (B) prevent or materially delay the
performance of this Agreement by Parent.
SECTION 4.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent has timely
filed all registration statements, prospectuses, forms, reports and documents
required to be filed by it under the Securities Act or the Exchange Act, as the
case may be, since January 1, 1995 (collectively, the "PARENT SEC FILINGS"). The
Parent SEC Filings (i) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time they were filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No Parent Subsidiary is subject to the periodic
reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Parent SEC Filings was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly the consolidated financial position of Parent and the consolidated Parent
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a Parent
Material Adverse Effect). The books and records of Parent and its Subsidiaries
have been, and are being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements.
(c) Except as and to the extent set forth on the consolidated balance sheet
of Parent and the consolidated Parent Subsidiaries as of December 29, 1996
included in Parent's Form 10-K for the year ended December 29, 1996, including
the notes thereto, neither Parent nor any Parent Subsidiary has any liabilities
or obligations of
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any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP, except for liabilities or obligations incurred in the
ordinary course of business since December 29, 1996 that would neither,
individually or in the aggregate, (i) have a Parent Material Adverse Effect nor
(ii) prevent or materially delay the performance of this Agreement by Parent.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 29,
1996, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 4.08 of the Parent Disclosure Schedule or as disclosed in any Parent
SEC Filing filed prior to the date hereof, Parent and the Parent Subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a) any
Parent Material Adverse Effect or an event or development (including in
connection with the Merger) that would, individually or in the aggregate, have a
Parent Material Adverse Effect, (b) any event that could reasonably be expected
to prevent or materially delay the performance of this Agreement by Parent or
(c) any action taken by Parent or any of the Parent Subsidiaries during the
period from December 30, 1996 through the date of this Agreement that, if taken
during the period from the date of this Agreement through the Effective Time,
would constitute a breach of Section 5.02.
SECTION 4.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) Section 4.09(a) of
the Parent Disclosure Schedule sets forth a true and complete list as of the
date hereof of each material employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan", as defined
in section 3(3) of ERISA, maintained or contributed to by Parent or any Parent
Subsidiary, or with respect to which Parent or any Parent Subsidiary could incur
material liability under section 4069, 4212(c) or 4204 of ERISA (the "PARENT
BENEFIT PLANS"). With respect to each Parent Benefit Plan which is a stock-based
plan, Parent has heretofore delivered to the Company a true and complete copy of
such Parent Benefit Plan. With respect to each other Parent Benefit Plan, Parent
will make available to the Company, promptly after the date hereof, a true and
complete copy of such Parent Benefit Plan and (i) the most recent annual report
(Form 5500) filed with the IRS, (ii) the most recent actuarial report or
valuation (if any) relating to any Parent Benefit Plan subject to Title IV of
ERISA and (iii) the most recent determination letter, if any, issued by the IRS
with respect to any Parent Benefit Plan qualified under Section 401(a) of the
Code.
(b) Except as set forth in Schedule 4.09(b) of the Parent Disclosure
Schedule, with respect to each Parent Benefit Plan which is subject to Title IV
of ERISA, (A) the present value of accrued benefits under such Parent Benefit
Plan, based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Parent Benefit Plan's actuary with
respect to such Parent Benefit Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Parent Benefit Plan
allocable to such accrued benefits, (B) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Parent
Benefit Plan for which the 30-day notice requirement has not been waived, except
where such reportable event would not have a Parent Material Adverse Effect, and
(C) no condition exists which would subject Parent or any ERISA Affiliate to any
fine under Section 4071 of ERISA, except where such condition would not have a
Parent Material Adverse Effect. Except as set forth in Section 4.09(b) of the
Parent Disclosure Schedule, no Parent Benefit Plan is a "multiemployer pension
plan" (as such term is defined in section 3(37) of ERISA).
(c) With respect to the Parent Benefit Plans, no event has occurred and, to
the knowledge of Parent, there exists no condition or set of circumstances in
connection with which Parent or any Parent Subsidiary could be subject to any
liability under the terms of such Parent Benefit Plans, ERISA, the Code or any
other applicable Law which, individually or in the aggregate, would have a
Parent Material Adverse Effect. Each of the Parent Benefit Plans has been
operated and administered in all material respects in accordance with applicable
laws and administrative or governmental rules and regulations, including, but
not limited to, ERISA and the Code, except where a violation of any such law,
rule or regulation would not have a Parent Material Adverse Effect. Each of the
Parent Benefit Plans intended to be "qualified" within the meaning of Section
401(a) of the Code has received a favorable determination letter as to such
qualification from the IRS, and no event has occurred, either by reason of any
action or failure to act, which would cause the loss of any such qualification,
except where such loss of qualification would not have a Parent Material Adverse
Effect. Except as set forth on Section 4.09(c) of the Parent Disclosure
Schedule, no Parent Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with respect to
current or former employees of Parent or any Parent Subsidiary beyond their
retirement or other termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement benefits under any "employee
pension plan" (as such term is defined in
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Section 3(2) of ERISA), (iii) deferred compensation benefits accrued as
liabilities on the books of Parent or any Parent Subsidiary, or (iv) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary). All contributions or other amounts payable by Parent or any Parent
Subsidiary as of the Effective Time with respect to each Parent Benefit Plan in
respect of current or prior plan years have been paid or accrued in accordance
with GAAP and Section 412 of the Code.
(d) Parent and the Parent Subsidiaries have no obligations or liabilities
(whether accrued, absolute, contingent or otherwise) with respect to any
collective bargaining agreements that, individually or in the aggregate, would
have a Parent Material Adverse Effect.
(e) Except as set forth in Section 4.09(e) of the Parent Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of Parent or any of its affiliates from Parent or any of its affiliates
under any Parent Benefit Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Parent Benefit Plan or (iii) result in any
acceleration of the time of payment or vesting of any material benefits.
SECTION 4.10. ACCOUNTING AND TAX MATTERS. Neither Parent nor, to the
knowledge of Parent, any of its affiliates has taken or agreed to take any
action that would prevent the Merger from qualifying for "pooling of interests"
accounting treatment under applicable U.S. accounting rules, including, without
limitation, GAAP and applicable SEC accounting standards, or would prevent the
Merger from constituting a transaction qualifying under section 368(a) of the
Code. Parent is not aware of any agreement, plan or other circumstance that
would prevent the Merger from so qualifying under the accounting rules and
section 368(a) of the Code and, as of the date of this Agreement, Parent has no
reason to believe that the Merger will not qualify as a "pooling of interests"
for accounting purposes.
SECTION 4.11. CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in or
attached as exhibits to the Parent SEC Filings or as disclosed in Section 4.11
of the Parent Disclosure Schedule, neither Parent nor any of the Parent
Subsidiaries is a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) except as set forth in Section
4.09(e) of the Parent Disclosure Schedule, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, (ii) as of the date hereof,
which is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), which requires expenditures in excess of $25 million
or which requires annual expenditures in excess of $10 million and is not
cancelable within one year, that has not been filed or incorporated by reference
in the Parent SEC Filings, (iii) which contains any material non-compete
provisions with respect to any line of business or geographic area in which
business is conducted with respect to Parent or any of the Parent Subsidiaries
or which restricts the conduct of any line of business by Parent or any of the
Parent Subsidiaries or any geographic area in which Parent or any of the Parent
Subsidiaries may conduct business, in each case in any material respect, or (iv)
which would prohibit or materially delay the consummation of the Merger or any
of the transactions contemplated by this Agreement. Parent has previously made
available to the Company true and correct copies of all employment and deferred
compensation agreements with directors, executive officers and key employees,
and material agreements with consultants, which are in writing and to which
Parent or any of the Parent Subsidiaries is a party. Each contract, arrangement,
commitment or understanding of the type described in this Section 4.11, whether
or not set forth in Section 4.11 of the Disclosure Schedule, is referred to
herein as a "PARENT MATERIAL CONTRACT." Each Parent Material Contract is valid
and binding on Parent or any of the Parent Subsidiaries, as applicable, and in
full force and effect, and Parent and each of the Parent Subsidiaries have in
all material respects performed all obligations required to be performed by them
to date under each Parent Material Contract, except where such noncompliance,
individually or in the aggregate, would not have a Parent Material Adverse
Effect. Neither Parent nor any Parent Subsidiary knows of, or has received
notice of, any violation or default under (nor does there exist any condition
which with the passage of time or the giving of notice would cause such a
violation of or default under) any Parent Material Contract or any other loan or
credit agreement, note, bond, mortgage, indenture or lease, or any other
contract, agreement, arrangement or understanding to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate, result in a Parent
Material Adverse Effect. Set forth in Section 4.11 of the Parent Disclosure
Schedule is a
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description of any material changes to the amount and terms of the indebtedness
of Parent and the Parent Subsidiaries from that described in the notes to the
financial statements incorporated in Parent's Form 10-K for the year ended
December 29, 1996.
SECTION 4.12. LITIGATION. Except as disclosed in the Parent SEC Filings or
in Section 4.12 of the Parent Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of Parent,
threatened in writing against Parent or any Parent Subsidiary by or before any
Governmental Entity that (a) individually or in the aggregate, is reasonably
likely to have a Parent Material Adverse Effect or (b) challenges the validity
or propriety, or seeks to prevent consummation of, the transactions contemplated
by this Agreement. Except as disclosed in the Parent SEC Filings or in Section
4.12 of the Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary
is subject to any outstanding order, writ, injunction or decree which has had
or, insofar as can be reasonably foreseen, individually or in the aggregate,
would have a Parent Material Adverse Effect.
SECTION 4.13. ENVIRONMENTAL MATTERS. Except as disclosed in the Parent SEC
Filings or in Section 4.13 of the Parent Disclosure Schedule or as would not,
individually or in the aggregate, have a Parent Material Adverse Effect:
(a) Parent and the Parent Subsidiaries (i) are in compliance with all, and
are not subject to any asserted liability or, to Parent's knowledge, any
liability, in each case with respect to any, applicable Environmental Laws, (ii)
hold or have applied for all Environmental Permits and (iii) are in compliance
with their respective Environmental Permits;
(b) neither Parent nor any Parent Subsidiary has received any written
notice, demand, letter, claim or request for information alleging that Parent or
any of its Subsidiaries may be in violation of, or liable under, any
Environmental Law;
(c) neither Parent nor any Parent Subsidiary (i) has entered into or agreed
to any consent decree or order or is subject to any judgment, decree or judicial
order relating to compliance with Environmental Laws, Environmental Permits or
the investigation, sampling, monitoring, treatment, remediation, removal or
cleanup of Hazardous Materials and, to the knowledge of Parent, no
investigation, litigation or other proceeding is pending or threatened in
writing with respect thereto, or (ii) is an indemnitor in connection with any
threatened or asserted claim by any third-party indemnitee for any liability
under any Environmental Law or relating to any Hazardous Materials; and
(d) none of the real property owned or leased by Parent or any Parent
Subsidiary is listed or, to the knowledge of Parent, proposed for listing on the
"National Priorities List" under CERCLA, as updated through the date hereof, or
any similar state or foreign list of sites requiring investigation or cleanup.
SECTION 4.14. TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set forth in
Section 4.14 of the Parent Disclosure Schedule, or to the extent the inaccuracy
of any of the following (or the circumstances giving rise to such inaccuracy),
individually or in the aggregate, would not have a Parent Material Adverse
Effect, Parent and each of the Parent Subsidiaries own or possess adequate
licenses or other legal rights to use all Proprietary Rights used or held for
use in connection with the business of Parent and the Parent Subsidiaries as
currently conducted or as contemplated to be conducted, and Parent is unaware of
any assertion or claim challenging the validity of any of the foregoing. The
conduct of the business of Parent and the Parent Subsidiaries as currently
conducted and as contemplated to be conducted did not, does not and will not
infringe in any way any Proprietary Rights of any third party that, individually
or in the aggregate, could have a Parent Material Adverse Effect. To Parent's
knowledge, there are no infringements of any Proprietary Rights owned by or
licensed by or to Parent or any Parent Subsidiary that, individually or in the
aggregate, could have a Parent Material Adverse Effect.
SECTION 4.15. TAXES. (a) Except for such matters as would not have a Parent
Material Adverse Effect, (i) Parent and the Parent Subsidiaries have timely
filed or will timely file all returns and reports required to be filed by them
with any taxing authority with respect to Taxes for any period ending on or
before the Effective Time, taking into account any extension of time to file
granted to or obtained on behalf of Parent and the Parent Subsidiaries, (ii) all
Taxes that are due prior to the Effective Time have been paid or will be paid
(other than Taxes which (1) are not yet delinquent or (2) are being contested in
good faith and have not been finally determined), (iii) as of the date hereof,
no deficiency for any Tax has been asserted or assessed by a taxing authority
against Parent or any of the Parent Subsidiaries which deficiency has not been
paid other than any deficiency
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being contested in good faith and (iv) Parent and the Parent Subsidiaries have
provided adequate reserves (in accordance with GAAP) in their financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any returns.
(b) To the best of Parent's knowledge, there are no material disputes
pending, or claims asserted in writing for, Taxes or assessments upon Parent, or
any of the Parent Subsidiaries, nor has Parent or any of the Parent Subsidiaries
been requested in writing to give any currently effective waivers extending the
statutory period of limitation applicable to any federal or state income tax
return for any period which disputes, claims, assessments or waivers are
reasonably likely to have a Parent Material Adverse Effect.
(c) There are no Tax liens upon any property or assets of Parent or any of
the Parent Subsidiaries except liens for current Taxes not yet due and except
for liens which have not had and are not reasonably likely to have a Parent
Material Adverse Effect.
(d) Neither Parent nor any of the Parent Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by Parent or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method, in either case which adjustment or change has had
or is reasonably likely to have a Parent Material Adverse Effect.
(e) Except as set forth in the financial statements described in Section
3.07, neither Parent nor any of the Parent Subsidiaries has entered into a
transaction which is being accounted for under the installment method of Section
453 of the Code, which would be reasonably likely to have a Parent Material
Adverse Effect.
SECTION 4.16. OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. (a) Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement.
(b) As of the Effective Time, all of the outstanding capital stock of
Merger Sub will be owned directly by Parent. As of the Effective Time, there
will be no options, warrants or other rights (including registration rights),
agreements, arrangements or commitments to which Merger Sub is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, Merger Sub or obligating Merger Sub to grant, issue or sell any
shares of the capital stock of, or other equity interests in, Merger Sub, by
sale, lease, license or otherwise. There are no obligations, contingent or
otherwise, of Merger Sub to repurchase, redeem or otherwise acquire any shares
of the capital stock of Merger Sub.
(c) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Merger Sub has not and will not
have incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
SECTION 4.17. OPINION OF FINANCIAL ADVISOR. Each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MERRILL LYNCH") and Salomon Brothers Inc ("SALOMON
BROTHERS") has delivered to the Board of Directors of Parent its written opinion
dated May 4, 1997 that, as of such date, the Exchange Ratio is fair from a
financial point of view to Parent.
SECTION 4.18. VOTE REQUIRED. The votes described in Section 4.04 of this
Agreement are the only votes of the holders of any class or series of capital
stock of Parent necessary to approve the transactions contemplated by this
Agreement.
SECTION 4.19. BROKERS. No broker, finder or investment banker (other than
Merrill Lynch and Salomon Brothers) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of Parent or any Parent Subsidiary. Parent has heretofore
made available to the Company a complete and correct copy of all agreements
between Parent and each of Merrill Lynch and Salomon Brothers pursuant to which
such firms would be entitled to any payment relating to the Merger.
SECTION 4.20. INSURANCE. Parent maintains insurance coverage with reputable
insurers in such amounts and covering such risks as are in accordance with
normal industry practice for companies engaged in businesses similar to that of
Parent (taking into account the cost and availability of such insurance).
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ARTICLE V
COVENANTS
SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.01 of the Company Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Parent shall
otherwise agree in writing, which agreement shall not be unreasonably withheld
or delayed, (1) the business of the Company and the Company Subsidiaries shall
be conducted only in, and the Company and the Company Subsidiaries shall not
take any action except in, the ordinary course of business consistent with past
practice and (2) the Company shall use its reasonable best efforts to keep
available the services of such of the current officers, significant employees
and consultants of the Company and the Company Subsidiaries and to preserve the
current relationships of the Company and the Company Subsidiaries with such of
the customers, suppliers and other persons with which the Company or any Company
Subsidiary has significant business relations as the Company deems reasonably
necessary in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except as set forth in Section 5.01
of the Company Disclosure Schedule or as contemplated by any other provision of
this Agreement, the Board of Directors of the Company shall not (unless required
by applicable Laws or stock exchange regulations) cause or permit the Company or
any Company Subsidiary to, and shall neither cause nor permit any of the
Company's affiliates (over which it exercises control), or any of their
officers, directors, employees and agents to, between the date of this Agreement
and the Effective Time, directly or indirectly, do, or agree to do, any of the
following without the prior written consent of Parent, which consent shall not
be unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation or By-laws
or equivalent organizational documents (other than to increase the authorized
shares of Company Common Stock to 200,000,000);
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license, guarantee or encumbrance of, (i) any shares of
capital stock of the Company or any Company Subsidiary of any class, or
securities convertible or exchangeable or exercisable for any shares of such
capital stock, or any options, warrants or other rights of any kind to acquire
any shares of such capital stock or such convertible or exchangeable securities,
or any other ownership interest (including, without limitation, any phantom
interest), of the Company or any Company Subsidiary or (ii) except in the
ordinary course of business and in a manner consistent with past practice, any
property or assets of the Company or any Company Subsidiary, except (A) the
issuance of Company Common Stock upon the exercise of Company Options, (B)
pursuant to contracts or agreements in force at the date of this Agreement (C)
sales, transfers or dispositions of receivables in connection with the
securitization of such receivables or (D) in the ordinary course pursuant to the
Company's Employee Stock Purchase Plan or the stock fund under the Company's
Profit Sharing Plan;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (other than dividends paid by Company Subsidiaries to the Company
or to other Company Subsidiaries in the ordinary course) or enter into any
agreement with respect to the voting of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) except pursuant to the Company's 1997 capital plan, a copy of which has
been provided to Parent, (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization, person or any division
thereof (other than a wholly-owned Company Subsidiary) or any assets, other than
acquisitions of assets in the ordinary course of business consistent with past
practice and any other acquisitions for consideration that are not, in the
aggregate, in excess of $10,000,000; (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any person for
borrowed money, except for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice or other
indebtedness for borrowed money with a maturity of not more than one year in a
principal amount not, in the aggregate, in excess of $10,000,000; (iii)
terminate, cancel or request any material change in, or agree to any material
change in, any Company Material Contract or enter into any contract or
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agreement material to the business, results of operations or financial condition
of the Company and the Company Subsidiaries taken as a whole, in either case
other than in the ordinary course of business, consistent with past practice;
(iv) make or authorize any capital expenditure, other than capital expenditures
that are not, in the aggregate, in excess of $10,000,000 for the Company and the
Company Subsidiaries taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be
permitted under this Section 5.01(e);
(f) except as set forth in Annex A hereto or as may be required by
contractual commitments or corporate policies with respect to severance or
termination pay in existence on the date hereof as disclosed in Section 3.09 of
the Company Disclosure Schedule or Annex A hereto: (i) increase the compensation
payable or to become payable to its officers or employees (except for increases
in accordance with past practices in salaries or wages of employees of the
Company or any Company Subsidiary which are not across-the-board increases),
(ii) grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other employee
of the Company or any Company Subsidiary, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or employee, except as
contemplated by this Agreement or to the extent required by applicable Law or
the terms of a collective bargaining agreement or (iii) take any affirmative
action to accelerate the vesting of any stock-based compensation;
(g) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with past
practice or except as required by changes in GAAP;
(h) waive, release, assign, settle or compromise any material claims or
litigation except in the ordinary course of business and consistent with past
practices;
(i) make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability;
(j) take any action that would prevent or impede the Merger from qualifying
(A) for "pooling-of-interests" accounting treatment or (B) as a reorganization
within the meaning of Section 368 of the Code;
(k) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, or in any of the conditions to the Merger set forth in Article
VII not being satisfied or in a violation of any provision of this Agreement,
except, in every case, as may be required by applicable law; or
(l) authorize or enter into any formal or informal agreement or otherwise
make any commitment to do any of the foregoing.
SECTION 5.02. CONDUCT OF BUSINESS BY PARENT PENDING THE CLOSING. Parent
agrees that, between the date of this Agreement and the Effective Time, except
as set forth in Section 5.02 of the Parent Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless the Company shall
otherwise agree in writing, which agreement shall not be unreasonably withheld
or delayed, (1) the businesses of Parent and the Parent Subsidiaries shall be
conducted only in, and Parent and the Parent Subsidiaries shall not take any
action except in, the ordinary course of business consistent with past practice
and (2) Parent shall use its reasonable best efforts to keep available the
services of such of the current officers, significant employees and consultants
of Parent and the Parent Subsidiaries and to preserve the current relationships
of Parent and the Parent Subsidiaries with such of the customers, suppliers and
other persons with which Parent or any Parent Subsidiary has significant
business relations as Parent deems reasonably necessary in order to preserve
substantially intact its business organization. By way of amplification and not
limitation, except as set forth in Section 5.02 of the Parent Disclosure
Schedule or as contemplated by any other provision of this Agreement, the Board
of Directors of Parent shall not (unless required by applicable Laws or stock
exchange regulations) cause or permit Parent or any Parent Subsidiary to, and
shall neither cause nor permit any of Parent's affiliates (over which it
exercises control), or any of their officers, directors, employees and agents
to, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following, without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed:
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(a) amend or otherwise change its Certificate of Incorporation or By-laws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license, guarantee or encumbrance of, (i) any shares of
capital stock of Parent or any Parent Subsidiary of any class, or securities
convertible or exchangeable or exercisable for any shares of such capital stock,
or any options, warrants or other rights of any kind to acquire any shares of
such capital stock or such convertible or exchangeable securities, or any other
ownership interest (including, without limitation, any phantom interest) of
Parent or any Parent Subsidiary or (ii) except in the ordinary course of
business and in a manner consistent with past practice, any property or assets
of Parent or any Parent Subsidiary, except (A) the issuance of Parent Common
Stock upon the exercise of Parent Options or the conversion or exchange of
Parent Preferred Stock, (B) the award of options in connection with promotions
and new employee hires in the ordinary course of business and consistent with
past practice, (C) pursuant to contracts or agreements in force at the date of
this Agreement or (D) sales, transfers or dispositions of receivables in
connection with the securitization of such receivables;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (except (i) for regular quarterly cash dividends at a rate not in
excess of $.15 per share of Parent Common Stock, (ii) for cash dividends paid on
Parent Preferred Stock in accordance with its terms and (iii) for dividends paid
by any Parent Subsidiary to Parent or a Parent Subsidiary in the ordinary
course) or enter into any agreement with respect to the voting of its capital
stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) except pursuant to the Parent's 1997 capital plan, a copy of which has
been provided to the Company (i) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization, person or any division
thereof (other than a wholly owned Parent Subsidiary) or any assets, other than
acquisitions of assets in the ordinary course of business consistent with past
practice and any other acquisitions for consideration that are not, in the
aggregate, in excess of $10,000,000; (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any person for
borrowed money, except for (A) indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice or in connection
with transactions otherwise permitted under this Section 5.02, (B) indebtedness
incurred to refinance any existing indebtedness of Parent, the Company or any of
their respective subsidiaries in connection with the Merger or (C) other
indebtedness for borrowed money with a maturity of not more than one year in a
principal amount not, in the aggregate, in excess of $10,000,000; (iii)
terminate, cancel or request any material change in, or agree to any material
change in, any Parent Material Contract or, except in connection with
transactions permitted under this Section 5.02(e), enter into any contract or
agreement material to the business, results of operations or financial condition
of Parent and the Parent Subsidiaries taken as a whole, in either case other
than in the ordinary course of business, consistent with past practice; (iv)
make or authorize any capital expenditure, other than capital expenditures that
are not, in the aggregate, in excess of $10,000,000 for Parent and the Parent
Subsidiaries taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be
permitted under this Section 5.02(e);
(f) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with past
practice or except as required by changes in GAAP;
(g) waive, release, assign, settle or compromise any material claims or
litigation except in the ordinary course of business and consistent with past
practice or where such settlement involves the payment of amounts which are not
material to Parent and the Parent Subsidiaries taken as a whole;
(h) make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability;
(i) take any action that would prevent or impede the Merger from qualifying
(A) for "pooling-of-interests" accounting treatment or (B) as a reorganization
within the meaning of Section 368 of the Code;
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(j) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, or in any of the conditions to the Merger set forth in Article
VII not being satisfied or in a violation of any provision of this Agreement,
except, in every case, as may be required by applicable law; or
(k) authorize or enter into any formal or informal agreement or otherwise
make any commitment to do any of the foregoing.
SECTION 5.03. COOPERATION. The Company and Parent shall coordinate and
cooperate in connection with (i) the preparation of the Registration Statement
and the Proxy Statement, (ii) determining whether any 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
Parent Material Contracts or Company Material Contracts, in connection with the
consummation of the Merger and (iii) seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Registration Statement and the Proxy
Statement and timely seeking to obtain any such actions, consents, approvals or
waivers.
SECTION 5.04. NOTICES OF CERTAIN EVENTS. Each of the Company and Parent
shall give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be required
in connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or threatened in writing
against, relating to or involving or otherwise affecting the Company, any
Company Subsidiary, Parent or any Parent Subsidiary that relate to the
consummation of the Merger; (iv) the occurrence of a default or event that, with
notice or lapse of time or both, will become a material default under any Parent
Material Contract or Company Material Contract; and (v) any change that is
reasonably likely to result in any Parent Material Adverse Effect or a Company
Material Adverse Effect or is likely to delay or impede the ability of either
Parent or the Company to consummate the transactions contemplated by this
Agreement or to fulfill its obligations set forth herein.
SECTION 5.05. CONTRACTUAL CONSENTS. Prior to or at the Effective Time, each
of the Company and Parent shall use its reasonable best efforts to obtain any
consents necessary such that the Merger will not constitute a change of control,
or any similar event, which constitutes a default (or an event which with notice
or lapse of time or both would become a default) under any material contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which it or any of its subsidiaries is a party.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT; PROXY STATEMENT. (a) As promptly as
practicable after the execution of this Agreement, (i) Parent and the Company
shall prepare and file with the SEC a joint proxy statement relating to the
meetings of the Company's stockholders and Parent's stockholders to be held in
connection with the Merger (together with any amendments thereof or supplements
thereto, the "PROXY STATEMENT") and (ii) Parent shall prepare and file with the
SEC a registration statement on Form S-4 (together with all amendments thereto,
the "REGISTRATION STATEMENT") in which the Proxy Statement shall be included as
a prospectus, in connection with the registration under the Securities Act of
the shares of Parent Common Stock to be issued to the stockholders of the
Company pursuant to the Merger. Each of Parent and the Company will use all
reasonable efforts to cause the Registration Statement to become effective as
promptly as practicable, and, prior to the effective date of the Registration
Statement, Parent shall take all or any action required under any applicable
federal or state securities laws in connection with the issuance of shares of
Parent Common Stock in the Merger. Each of Parent and the Company shall furnish
all information concerning it and the holders of its capital stock as the other
may reasonably request in connection with such actions and the preparation of
the Registration Statement and Proxy Statement. As promptly as practicable after
the Registration Statement shall have become effective, each of Parent and the
Company shall mail the Proxy Statement to its respective stockholders. The Proxy
Statement shall include the recommendation of the Board of Directors of each of
Parent and the Company in favor of the Merger, unless otherwise required by the
applicable fiduciary duties of the respective directors of Parent and the
Company, as determined by such directors in good faith after consultation with
independent legal counsel (who may be such party's regularly engaged independent
legal counsel). No modification or withdrawal of such recommendation
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shall relieve either party of its obligation to submit this Agreement and the
transactions contemplated hereby to their respective stockholders in accordance
with applicable law.
No amendment or supplement to the Proxy Statement or the Registration
Statement will be made by Parent or the Company without the approval of the
other party (which approval shall not be unreasonably withheld or delayed).
Parent and the Company each will advise the other, 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 Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information.
(b) The information supplied by Parent for inclusion in the Registration
Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
Parent and the Company, (iii) the time of each of the Stockholders' Meetings (as
defined below), and (iv) the Effective Time, 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. If at any
time prior to the Effective Time any event or circumstance relating to Parent or
any Parent Subsidiary, or their respective officers or directors, should be
discovered by Parent which should be set forth in an amendment or a supplement
to the Registration Statement or Proxy Statement, Parent shall promptly inform
the Company. All documents that the Company is responsible for filing with the
SEC in connection with the transactions contemplated herein will comply as to
form and substance in all material aspects with the applicable requirements of
the Securities Act and the rules and regulations thereunder and the Exchange Act
and the rules and regulations thereunder.
(c) The information supplied by the Company for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the
Registration Statement is declared effective, (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company and Parent, (iii) the time of each of the
Stockholders' Meetings, and (iv) the Effective Time, 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. If at any time prior to the Effective Time any event or circumstance
relating to the Company or any Company Subsidiary, or their respective officers
or directors, should be discovered by the Company which should be set forth in
an amendment or a supplement to the Registration Statement or Proxy Statement,
the Company shall promptly inform Parent. All documents that Parent is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
SECTION 6.02. STOCKHOLDERS' MEETINGS. The Company shall call and hold a
meeting of its stockholders (the "COMPANY MEETING") and Parent shall call and
hold a meeting of its stockholders (the "PARENT MEETING" and, together with the
Company Meeting, the "STOCKHOLDERS' MEETINGS") as promptly as practicable for
the purpose of voting upon the approval of the Merger, and Parent and the
Company shall use their best efforts to hold the Stockholders' Meetings on the
same day and as soon as practicable after the date on which the Registration
Statement becomes effective.
SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which the Company or Parent or any of their respective
subsidiaries is a party or pursuant to applicable Law or the regulations or
requirements of any stock exchange or other regulatory organization with whose
rules the parties are required to comply, from the date of this Agreement to the
Effective Time, the Company and Parent shall (and shall cause their respective
subsidiaries to): (i) provide to the other (and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives, collectively, "REPRESENTATIVES") access at reasonable times
upon prior notice to the officers, employees, agents, properties, offices and
other facilities of the other and its subsidiaries and to the books and records
thereof and (ii) furnish promptly such information concerning the business,
properties, contracts, assets, liabilities, personnel and other aspects of the
other party and its subsidiaries as the other party or its Representatives may
reasonably request. No investigation conducted pursuant to this Section 6.03
shall affect or be deemed to modify any representation or warranty made in this
Agreement.
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(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement dated March 24, 1997 between the Company and Parent
and the Confidentiality Agreement dated March 24, 1997 between Parent and the
Company (collectively, the "CONFIDENTIALITY AGREEMENTS") with respect to the
information disclosed pursuant to this Section 6.03.
SECTION 6.04. NO SOLICITATION OF TRANSACTIONS. (a) Each of the Company and
Parent will not, directly or indirectly, and will instruct its officers,
directors, employees, subsidiaries, affiliates, agents or advisors or other
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it) not to, directly or indirectly, take any action to
(i) solicit, initiate or knowingly encourage (including by way of furnishing
nonpublic information), or take any other action knowingly to facilitate, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to its stockholders or shareholders, as the case may be)
that constitutes, or may reasonably be expected to lead to, any Competing
Transaction, (ii) enter into or maintain or participate in any way in
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Competing Transaction, or (iii) agree to or approve,
recommend or endorse any Competing Transaction, or authorize or permit any of
the officers, directors, employees or affiliates of such party or any of its
subsidiaries, or any investment banker, financial advisor, attorney, accountant
or other representative retained by such party or any of such party's
subsidiaries, to take any such action. The Company shall notify Parent and
Parent shall notify the Company promptly if any proposal or offer, or any
inquiry or contact with any person with respect thereto, regarding a Competing
Transaction is made. The Company and Parent shall cease immediately and cause to
be terminated any and all existing discussions or negotiations with any parties
conducted heretofore with respect to a Competing Transaction and promptly
request that all confidential information furnished on behalf of the Company or
Parent be returned. Each of the Company and Parent agrees not to release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party.
(b) Notwithstanding anything to the contrary in Section 6.04(a), the Board
of Directors of each of the Company and Parent may cause Parent or the Company
to furnish, pursuant to a customary confidentiality agreement the terms of
which, if more favorable to the other party to such confidentiality agreement
than those in place with the other party hereto shall be extended to the other
party hereto, information to, and may participate in discussions or negotiations
with, any person that, unsolicited by it after the day of the signing of this
Agreement, has submitted a written proposal to it relating to a Competing
Transaction which was not solicited by it or which did not otherwise result from
a breach of Section 6.04(a), to the extent that (i) such proposal is received
prior to the obtaining of the approval of the Company's stockholders, in the
case of the Company, or the shareholders of Parent, in the case of Parent, and
(ii) the Board of the Company or Parent (as applicable) determines in good faith
that the failure to do so would cause it to breach its fiduciary duties to the
Company or its stockholders or Parent or its shareholders under applicable Laws
after receipt of advice to such effect from independent legal counsel (who may
be such party's regularly engaged independent legal counsel). Such furnishing of
information and participation in discussions or negotiations in accordance with
this Section 6.04(b) shall not constitute a breach of this Agreement by such
party; provided that neither the Company nor Parent shall have any right to
terminate this Agreement or otherwise cease performance of its obligations
hereunder except pursuant to Article VIII hereof.
(c) A "COMPETING TRANSACTION" with respect to the Company or Parent,
respectively, means any of the following involving the Company or Parent,
respectively, other than the Merger any proposed (i) merger, consolidation,
share exchange, business combination or other similar transaction involving such
party (ii) sale, lease, exchange transfer or other disposition directly or
indirectly of 25% or more of the consolidated assets of such party and its
subsidiaries, taken as a whole, or (iii) transaction in which any person shall
acquire beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 25% or
more of the outstanding voting capital stock of the Company or Parent,
respectively.
SECTION 6.05. APPROPRIATE ACTION; CONSENTS; FILINGS. (a) (i) The Company
and Parent shall use their best efforts to (A) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable, (B)
obtain from any Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent or
the Company or any of their subsidiaries, or to avoid any action or proceeding
by any Governmental Entity
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(including, without limitation, those in connection with the HSR Act), in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated herein, including, without
limitation, the Merger, and (iii) make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (x) the Securities Act and the Exchange Act, and any other
applicable federal or state securities Laws, (y) the HSR Act and (z) any other
applicable Law; PROVIDED that Parent and the Company shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, to accept all reasonable additions, deletions or
changes suggested in connection therewith. The Company and Parent shall furnish
to each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable Law (including all
information required to be included in the Proxy Statement and the Registration
Statement) in connection with the transactions contemplated by this Agreement.
The Company and Parent shall not take any action, or refrain from taking any
action, the effect of which would be to delay or impede the ability of the
Company and Parent to consummate the transactions contemplated by this
Agreement.
(ii) Each of the parties hereto agrees, and shall cause each of its
respective subsidiaries to cooperate and to use their respective best efforts to
obtain any government clearances required for completion of the transactions
(including through compliance with the HSR Act and any applicable foreign
governmental reporting requirements), to respond to any government requests for
information, and to contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "ORDER") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement, including, without limitation, by vigorously pursuing all available
avenues of administrative and judicial appeal and all available legislative
action. Each of the parties hereto also agrees to take any and all of the
following actions to the extent necessary to obtain the approval of any
Governmental Entity with jurisdiction over the enforcement of any applicable
laws regarding the Merger: entering into negotiations; providing information;
substantially complying with any second request for information pursuant to the
HSR Act; making proposals; entering into and performing agreements or submitting
to judicial or administrative orders; selling or otherwise disposing of, or
holding separate (through the establishment of a trust or otherwise) particular
assets or categories of assets, or businesses of Parent, the Company or any of
their respective subsidiaries; and withdrawing from doing business in a
particular jurisdiction. The parties hereto will consult and cooperate with one
another, and consider in good faith the views of one another, in connection with
any analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or in behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or any other
federal, state or foreign antitrust or fair trade law. Each party shall promptly
notify the other party of any communication to that party from any Governmental
Entity in connection with any required filing with, or approval or review by,
such Governmental Entity in connection with the Merger and permit the other
party to review in advance any such proposed communication to any Governmental
Entity. Neither party shall agree to participate in any meeting with any
Governmental Entity in respect of any such filings, investigation or other
inquiry unless it consults with the other party in advance and, to the extent
permitted by such Governmental Entity, gives the other party the opportunity to
attend and participate thereat. Notwithstanding any other provision of this
Agreement, in connection with seeking any such approval of a Governmental
Entity, neither party shall, without the other party's prior written consent
(which shall not be unreasonably withheld), commit to any divestiture
transaction and neither party shall be required to agree to sell or hold
separate and agree to sell, before or after the Effective Time, any of the
Company's or Parent's businesses, product lines, properties or assets, or agree
to any changes or restrictions in the operation of such businesses, product
lines, properties or assets, if such divestiture or such restrictions would,
individually or in the aggregate, materially adversely affect the financial
condition or results of operations of Parent and the Company.
(b) (i) The Company and Parent shall give (or shall cause their respective
subsidiaries to give) any notices to third parties, and use, and cause their
respective subsidiaries to use, all reasonable efforts to obtain any third party
consents, (A) necessary, proper or advisable to consummate the transactions
contemplated in this Agreement, (B) disclosed or required to be disclosed in the
Company Disclosure Schedule or the Parent Disclosure Schedule, as the case may
be, or (C) required to prevent a Company Material Adverse Effect from occurring
prior to or after the Effective Time or a Parent Material Adverse Effect from
occurring after the Effective Time.
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(ii) In the event that either party shall fail to obtain any third party
consent described in subsection (b) (i) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably requested by the
other party hereto, to minimize any adverse effect upon the Company and Parent,
their respective subsidiaries, and their respective businesses resulting, or
which could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, the Company
shall promptly notify Parent in writing of any pending or, to the knowledge of
the Company, threatened action, proceeding or investigation by any Governmental
Entity or any other person (i) challenging or seeking material damages in
connection with the Merger or the conversion of Company Common Stock into Parent
Common Stock pursuant to the Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of Parent or, to the
knowledge of the Company, its subsidiaries to own or operate all or any portion
of the businesses or assets of the Company or its subsidiaries, which in either
case is reasonably likely to have a Company Material Adverse Effect prior to or
after the Effective Time, or a Parent Material Adverse Effect after the
Effective Time.
SECTION 6.06. POOLING. (a) From and after the date hereof and until the
Effective Time, none of Parent, Merger Sub, the Company, or any of their
respective subsidiaries or other affiliates over which they exercise control,
shall knowingly take any action, or knowingly fail to take any action, that is
reasonably likely to jeopardize the treatment of the Merger as a "pooling of
interests" for accounting purposes. Between the date of this Agreement and the
Effective Time, each of Parent, Merger Sub and the Company shall take all
reasonable actions necessary to cause the Merger to be characterized as a
pooling of interests for accounting purposes if such a characterization shall be
jeopardized by action taken by Parent, Merger Sub or the Company prior to the
Effective Time.
(b) Parent shall cause financial results covering the first full month of
post-Merger combined operations to be published within 90 days after the
Effective Time.
SECTION 6.07. LETTERS OF ACCOUNTANTS. (a) The Company shall use its best
efforts to cause to be delivered to Parent "cold comfort" letters of Arthur
Andersen, LLP, its independent public accountant, dated the date on which the
Registration Statement shall become effective and as of the Effective Time,
respectively, and addressed to Parent, in form and substance reasonably
satisfactory to Parent and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement and transactions
such as those contemplated by this Agreement.
(b) Parent shall use its best efforts to cause to be delivered to the
Company "cold comfort" letters of Coopers & Lybrand, L.L.P., its independent
public accountant, dated the date on which the Registration Statement shall
become effective and as of the Effective Time, respectively, and addressed to
the Company, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement and transactions such as those contemplated by this
Agreement.
SECTION 6.08. UPDATE DISCLOSURE; BREACHES. From and after the date of this
Agreement until the Effective Time, each party hereto shall promptly notify the
other party hereto by written update to its Disclosure Schedule of (i) the
occurrence, or non-occurrence, of any event that would be likely to cause any
condition to the obligations of any party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied, or (ii) the
failure of the Company or Parent, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
pursuant to this Agreement which would be likely to result in any condition to
the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 6.08 shall not cure any breach
of any representation or warranty requiring disclosure of such matter prior to
the date of this Agreement or otherwise limit or affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.09. POOLING AFFILIATES. (a) Not less than 45 days prior to the
Effective Time, the Company shall deliver to Parent a list of names and
addresses of each person who, in the Company's reasonable judgment is an
affiliate within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act or otherwise applicable SEC accounting
releases with respect to pooling-of-interests accounting treatment (each such
person, a "POOLING AFFILIATE") of the Company. The Company shall provide Parent
such information and
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documents as Parent shall reasonably request for purposes of reviewing such
list. The Company shall deliver or cause to be delivered to Parent, not later
than 30 days prior to the Effective Time, an affiliate letter in the form
attached hereto as Exhibit 6.09(a), executed by each of the Pooling Affiliates
of the Company identified in the foregoing list. Parent shall be entitled to
place legends as specified in such affiliate letters on the certificates
evidencing any of the Parent Common Stock to be received by such Pooling
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of such Letters.
(b) Not less than 45 days prior to the Effective Time, Parent shall deliver
to the Company a list of names and addresses of each person who, in Parent's
reasonable judgment is a Pooling Affiliate of Parent. Parent shall provide the
Company such information and documents as the Company shall reasonably request
for purposes of reviewing such list. Parent shall deliver or cause to be
delivered to the Company, not later than 30 days prior to the Effective Time, an
affiliate letter in the form attached hereto as Exhibit 6.09(b), executed by
each of the Pooling Affiliates of Parent identified in the foregoing list.
SECTION 6.10. PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by Law or any listing agreement with the NYSE or the National
Association of Securities Dealers, Inc.
SECTION 6.11. NYSE LISTING. Parent shall promptly prepare and submit to the
NYSE a listing application covering the shares of Parent Common Stock to be
issued in the Merger, and shall use all reasonable efforts to cause such shares
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Effective Time.
SECTION 6.12. EMPLOYEE MATTERS. Annex A hereto sets forth certain
additional agreements among the parties hereto with respect to employee benefit
matters and is hereby incorporated herein by reference.
SECTION 6.13. [Intentionally Omitted]
SECTION 6.14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) Parent and the
Surviving Corporation agree that the indemnification obligations set forth in
the Company's Certificate and the Company's By-laws, in each case as of the date
of this Agreement, shall survive the Merger (and, prior to the Effective Time,
Parent shall cause the Certificate of Incorporation and By-laws of Merger Sub to
reflect such provisions) 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 the
Company or its subsidiaries.
(b) The Company shall, to the fullest extent permitted under applicable Law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, Parent and the Surviving Corporation
shall, to the fullest extent permitted under applicable Law, indemnify and hold
harmless, each present and former director, officer, trustee, fiduciary,
employee or agent of the Company and each Company Subsidiary and each such
person who served at the request of the Company or any Company Subsidiary as a
director, officer, trustee, partner, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust, 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
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) the Company or Parent and the Surviving Corporation, as
the case may be, shall pay the fees and expenses of counsel selected by any
Indemnified Party, which counsel shall be reasonably satisfactory to the Company
or to Parent 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) the Company and Parent and the Surviving
Corporation shall cooperate in the defense of any such matter.
(c) For six years from the Effective Time, the Surviving Corporation shall
use its best efforts to provide to the Company's current directors and officers
liability insurance protection of the same kind and scope as that
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provided by the Company's directors' and officers' liability insurance policies
(copies of which have been made available to Parent); PROVIDED, HOWEVER, that in
no event shall Parent be required to expend more than 200% of the current amount
expended by the Company (the "INSURANCE AMOUNT") to maintain or procure
insurance coverage pursuant hereto and further provided that if Parent is unable
to maintain or obtain the insurance called for by this Section 6.14(c), Parent
shall use its best efforts to obtain as much comparable insurance as available
for the Insurance Amount.
(d) In the event the Company 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 the Company or the Surviving
Corporation, as the case may be, honor the indemnification obligations set forth
in this Section 6.14.
(e) The obligations of the Company, the Surviving Corporation, and Parent
under this Section 6.14 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 6.14 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
6.14 applies shall be third-party beneficiaries of this Section 6.14).
SECTION 6.15. PLAN OF REORGANIZATION. The Agreement is intended to
constitute a "plan of reorganization" within the meaning of section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date hereof and until the Effective Time, each party hereto shall use its
reasonable best efforts to cause the Merger to qualify, and will not knowingly
take any actions or cause any actions to be taken which could prevent the Merger
from qualifying, as a reorganization under the provisions of section 368(a) of
the Code. Following the Effective Time, neither the Surviving Corporation,
Parent nor any of their affiliates shall knowingly take any action or knowingly
cause any action to be taken which would cause the Merger to fail to qualify as
a reorganization under section 368(a) of the Code.
SECTION 6.16. HEADQUARTERS. As promptly as reasonably practicable after the
Effective Time, Parent shall cause its executive headquarters to be relocated to
the Chicago, Illinois area.
SECTION 6.17. OBLIGATIONS OF MERGER SUB. Parent shall take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT.
The respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable Law:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have been initiated
or, to the knowledge of Parent or the Company, threatened by the SEC.
(b) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company
and the matters specified in Section 4.04 shall have been approved by the
requisite affirmative vote of the Parent Common Stock and the Series P Preferred
Stock.
(c) NO ORDER. No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, judgment, injunction or
other order (whether temporary, preliminary or permanent), in any case which is
in effect and which prevents or prohibits consummation of the Merger or any
other transactions contemplated in this Agreement;
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PROVIDED, HOWEVER, that the parties shall use their best efforts to cause any
such decree, judgment, injunction or other order to be vacated or lifted.
(d) CONSENTS AND APPROVALS. All consents, approvals and authorizations set
forth in Section 3.05 or 4.05 or the related sections of the Company Disclosure
Schedule or the Parent Disclosure Schedule required to be obtained to consummate
the Merger shall have been obtained, except for such consents, approvals and
authorizations the failure of which to obtain would not have a Company Material
Adverse Effect or a Parent Material Adverse Effect after the Effective Time.
(e) HSR ACT. The applicable waiting period, together with any extensions
thereof, under the HSR Act shall have expired or been terminated.
(f) NYSE. The shares of Parent Common Stock issuable to the Company's
stockholders in the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated herein are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in this Agreement, without giving effect to
any update to the Company Disclosure Schedule under Section 6.08, shall be true
and correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect to such
standard) as of the Effective Time as though made on and as of the Effective
Time, except that those representations and warranties which address matters
only as of a particular date shall remain true and correct in all material
respects (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be true and
correct in all respects giving effect to such standard) as of such date. Parent
shall have received a certificate of the Chief Executive Officer or Chief
Financial Officer of the Company to that effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time. Parent shall have received a certificate of the Chief Executive Officer or
Chief Financial Officer of the Company to that effect.
(c) TAX OPINION. Parent shall have received the opinion of Wachtell,
Lipton, Rosen & Katz, special counsel to Parent, in form and substance
reasonably satisfactory to Parent, based upon facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, to the effect that (i) the Merger will be
treated for federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code, and Parent, Merger Sub and the Company
will each be a party to the reorganization, (ii) no gain or loss will be
recognized by Parent, Merger Sub or the Company as a result of the Merger, and
(iii) no gain or loss will be recognized by the stockholders of the Company who
exchange their Company Common Stock solely for Parent Common Stock pursuant to
the Merger (except with respect to cash received in lieu of a fractional share
interest), dated the date of the Effective Time, which opinion shall be
reasonably satisfactory in form and substance to the Parent. In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of officers of Parent, the Company and certain stockholders of
Parent and the Company.
(d) ACCOUNTANT LETTERS. Parent shall have received from the Company "cold
comfort" letters of Arthur Andersen, LLP, dated the date on which the
Registration Statement shall become effective and the Effective Time,
respectively, and addressed to Parent, in form and substance satisfactory to
Parent, and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement and transactions such as those
contemplated by this Agreement.
(e) POOLING OPINION. Parent shall have received the opinion of Coopers &
Lybrand, L.L.P., dated as of the date on which the Registration Statement shall
become effective and the Effective Time, to the effect that the Merger qualifies
for pooling-of-interests accounting treatment if consummated in accordance with
this Agreement.
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SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement is also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent contained in this Agreement, without giving effect to any
update to the Parent Disclosure Schedule under Section 6.08, shall be true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect to such
standard) as of the Effective Time as though made on and as of the Effective
Time, except that those representations and warranties which address matters
only as of a particular date shall remain true and correct in all material
respects (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be true and
correct in all respects giving effect to such standard) as of such date. The
Company shall have received a certificate of the Chief Executive Officer or
Chief Financial Officer of Parent to that effect.
(b) AGREEMENTS AND COVENANTS. Parent shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time. The Company shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of Parent to that effect.
(c) EMPLOYMENT AGREEMENTS. Parent shall have proffered executed employment
agreements to (i) Michael T. Riordan substantially in the form attached to Annex
A as Exhibit A and (ii) each of the individuals listed on Schedule I to Exhibit
B to Annex A substantially in the form attached as Exhibit C to Annex A or, if
applicable, substantially on the terms described on Exhibit B to Annex A.
(d) REGISTRATION RIGHTS AGREEMENT. Parent shall have executed and delivered
a Registration Rights Agreement substantially in the form of Exhibit 7.03(d)
attached hereto with such changes thereto as the Stockholders (as defined
therein) shall reasonably request, which changes shall be reasonably
satisfactory to Parent.
(e) STOCKHOLDERS AGREEMENT. Parent shall have executed and delivered a
Stockholders Agreement substantially in the form of Exhibit 7.03(e) attached
hereto.
(f) TAX OPINION. The Company shall have received the opinion of Shearman &
Sterling, in form and substance reasonably satisfactory to the Company based
upon facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, to the effect
that (i) the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of section 368(a) of the Code,
and Parent, Merger Sub and the Company will each be a party to the
reorganization, (ii) no gain or loss will be recognized by Parent, Merger Sub or
the Company as a result of the Merger, and (iii) no gain or loss will be
recognized by the stockholders of the Company who exchange their Company Common
Stock solely for Parent Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest), dated the date of the
Effective Time. In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of Parent, the Company and
certain stockholders of Parent and the Company.
(g) ACCOUNTANT LETTERS. The Company shall have received from Parent "cold
comfort" letters of Coopers & Lybrand, L.L.P., dated the date on which the
Registration Statement shall become effective and the Effective Time,
respectively, and addressed to the Company, in form and substance satisfactory
to the Company, and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement and transactions such as those
contemplated by this Agreement.
(h) POOLING OPINION. The Company shall have received the opinion of Arthur
Andersen LLP, dated as of the date on which the Registration Statement shall
become effective and the Effective Time, to the effect that the Merger qualifies
for pooling-of-interests accounting treatment if consummated in accordance with
this Agreement.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of the Company and Parent:
(a) by mutual consent of Parent and the Company;
(b) (i) by Parent (provided that Parent is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein), if there has been a breach by the Company of any of
its representations, warranties, covenants or agreements contained in
this Agreement, or any such representation and warranty shall have become
untrue, in any such case such that Section 7.02(a) or Section 7.02(b)
will not be satisfied and such breach or condition has not been promptly
cured within 30 days following receipt by the Company of written notice
of such breach;
(ii) by the Company (provided that the Company is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein), if there has been a breach by Parent of any
of its representations, warranties, covenants or agreements contained in
this Agreement, or any such representation and warranty shall have become
untrue, in any such case such that Section 7.03(a) or Section 7.03(b)
will not be satisfied and such breach or condition has not been promptly
cured within 30 days following receipt by Parent of written notice of
such breach;
(c) by either Parent or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable;
(d) by either Parent or the Company if the Merger shall not have
been consummated before December 31, 1997, unless the failure of the
Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe in all material
respects the covenants and agreements of such party set forth herein;
PROVIDED, HOWEVER, that this Agreement may be extended not more than 60
days by Parent or the Company by written notice to the other party if the
Merger shall not have been consummated as a direct result of (i) the
Company or Parent having failed to receive all regulatory approvals or
consents required to be obtained by the Company or Parent with respect to
the Merger or (ii) the existence of litigation or any governmental
proceeding seeking to prevent or prohibit consummation of the Merger; or
(e) by either Parent or the Company if the Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders
of the Company or the stockholders of Parent at the Stockholders'
Meetings or any adjournment or postponement thereof.
SECTION 8.02. EFFECT OF TERMINATION. (a) In the event of the termination of
this Agreement by either the Company or Parent pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of Parent or the Company, other than the provisions of
Section 6.03, this Section 8.02 and Section 8.05, and except to the extent that
such termination results from the wilful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
(b) In the event of termination of this Agreement without consummation of
the transactions contemplated hereby by either party pursuant to Section 8.01(d)
or (e) based upon the Company having failed to receive the requisite stockholder
vote to approve and adopt this Agreement and (i) so long as at the time of such
termination Parent is not in material breach of any representation, warranty or
material covenant contained herein and (ii) if a Company Trigger Event (as
defined herein) shall occur, the Company shall make payment to Parent (within
two business days after notice of demand for payment following the Company
Trigger Event) by wire transfer of immediately available funds of a breakup fee
in the amount of $95,000,000 (the "COMPANY BREAKUP FEE"). A "COMPANY TRIGGER
EVENT" shall be deemed to have occurred if, (i) prior to a vote of the Company's
stockholders with respect to this Agreement a Competing Transaction with respect
to the Company shall have been proposed, and (ii) within one year of termination
of this Agreement, (A) the Company shall have entered into a definitive
agreement with a third party providing for the acquisition of the Company or a
majority of the Company's assets
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or voting securities by such third party or the consolidation or merger of the
Company pursuant to which the Company's stockholders will hold less than 60% of
the outstanding voting securities of the resulting corporation immediately
following consummation of such transaction or (B) any third party shall have
acquired beneficial ownership of more than 50% of the outstanding voting
securities of the Company.
(c) In the event of termination of this Agreement without consummation of
the transactions contemplated hereby by either party pursuant to Section 8.01(d)
or (e) based upon Parent having failed to receive the requisite shareholder vote
to approve the matters set forth in Section 4.04 and (i) so long as at the time
of such termination the Company is not in material breach of any representation,
warranty or material covenant contained herein and (ii) if a Parent Trigger
Event (as defined herein) shall occur, Parent shall make payment to the Company
(within two business days of notice of demand for payment following the Parent
Trigger Event by wire transfer of immediately available funds of a breakup fee
in the amount of $95,000,000 (the "PARENT BREAKUP FEE"). A "PARENT TRIGGER
EVENT" shall be deemed to have occurred if, (i) prior to a vote of Parent's
shareholders with respect to this Agreement, a Competing Transaction with
respect to Parent shall have been proposed, and (ii) within one year of
termination of this Agreement (A) Parent shall have entered into a definitive
agreement with a third party providing for the acquisition of Parent or a
majority of Parent's assets or voting securities by such third party or the
consolidation or merger of Parent pursuant to which Parent's shareholders will
hold less than 60% of the outstanding voting securities of the resulting
corporation immediately following consummation of such transaction or (B) any
third party shall have acquired beneficial ownership of more than 50% of the
outstanding voting securities of Parent.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Company Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein; PROVIDED, HOWEVER,
that after any approval of the transactions contemplated by this Agreement by
the stockholders of the Company, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion
thereof which reduces the amount or changes the form of the consideration to be
delivered to the holders of Company Common Stock hereunder other than as
contemplated by this Agreement. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
SECTION 8.05. FEES AND EXPENSES. All expenses incurred by the parties
hereto shall be borne solely and entirely by the party which has incurred the
same; PROVIDED, HOWEVER, that each of Parent and the Company shall pay one-half
of the expenses related to printing, filing and mailing the Registration
Statement and the Proxy Statement and all SEC and other regulatory filing fees
incurred in connection with the Registration Statement and the Proxy Statement.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and
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shall be effective upon receipt, if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to the
telecopier number specified below:
(a) If to Parent or Merger Sub, addressed to it at:
120 Tredegar Street
Richmond, VA 23219
Telecopier No.: (804) 343-4609
Attention: Clifford A. Cutchins, IV
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopier No.: (212) 403-2000
Attention: Patricia A. Vlahakis
(b) If to the Company, addressed to it at:
1919 South Broadway
Green Bay, WI 54304
Telecopier No.: (414) 435-3225
Attention: Secretary
With a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopier No.: (212) 848-7179
Attention: Faith D. Grossnickle
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first-mentioned person;
(b) "BENEFICIAL OWNER" means with respect to any shares of Company Common
Stock or Parent Common Stock a person who shall be deemed to be the beneficial
owner of such shares (i) which such person or any of its affiliates or
associates beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates (as such term is defined in Rule 12b-2 of
the Exchange Act) has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding, (iii)
which are beneficially owned, directly or indirectly, by any other persons with
whom such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any such shares or (iv) pursuant to Section 13(d) of the Exchange
Act and any rules or regulations promulgated thereunder;
(c) "BUSINESS DAY" shall mean any day other than a day on which banks in
the State of New York are authorized or obligated to be closed;
(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "KNOWLEDGE" will be deemed to be present when the matter in question
was brought to the attention of any executive officer of Parent or the Company,
as the case may be;
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(f) "PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d) of the Exchange Act);
(g) "SUBSIDIARY" or "SUBSIDIARIES" of Parent, the Company, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which Parent, the Company, the Surviving
Corporation or such other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 50% or more
of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the Board of Directors or other governing
body of such corporation or other legal entity.
SECTION 9.04. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 9.06. ENTIRE AGREEMENT. This Agreement (together with the Exhibits,
Parent and Company Disclosure Schedules and the other documents delivered
pursuant hereto) and the Confidentiality Agreements constitute the entire
agreement of the parties and supersede all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or remedies hereunder.
SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise.
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and assigns, and nothing in this Agreement, express or implied, other than
pursuant to Section 2.04, 6.06(b), 6.12 or 6.14 or the right to receive the
consideration payable in the Merger pursuant to Article II, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.09. MUTUAL DRAFTING. Each party hereto has participated in the
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
SECTION 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
JAMES RIVER CORPORATION OF
VIRGINIA
By: /s/ Miles L. Marsh
--------------------------
Name: Miles L. Marsh
Title: Chairman and Chief
Executive Officer
JAMES RIVER DELAWARE, INC.
By: /s/ Clifford A. Cutchins, IV
---------------------------------
Name: Clifford A. Cutchins, IV
Title: President
FORT HOWARD CORPORATION
By: /s/ Michael T. Riordan
----------------------------
Name: Michael T. Riordan
Title: Chairman and Chief
Executive Officer
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<PAGE>
APPENDIX B
PROPOSED AMENDMENTS TO
JAMES RIVER CORPORATION OF VIRGINIA
AMENDED AND RESTATED ARTICLES OF INCORPORATION
1. Article I is amended to read as follows:
The name of the corporation is Fort James Corporation.
2. Section A of Article III is amended by replacing "150,000,000" with
"500,000,000."
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APPENDIX C
PROPOSED AMENDMENTS TO
JAMES RIVER CORPORATION OF VIRGINIA BYLAWS
1. The first sentence of Section 2.2 is amended to read: "The number of
directors of the Corporation shall be fifteen."
2. The first sentence of Section 8.1 is amended to read as follows:
The corporate seal of the Corporation shall be circular and shall
have inscribed thereon, within and around the circumference,
"Fort James Corporation".
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APPENDIX D
PROPOSED AMENDMENTS TO
JAMES RIVER CORPORATION OF VIRGINIA
1996 STOCK INCENTIVE PLAN
1. Section 2(c) is amended to read as follows:
"(c) 'Award' means the award of an Option, Restricted Stock, Incentive
Stock or a Performance Grant under the Plan."
2. The first sentence of Section 3 is amended to read as follows:
"The following types of Awards may be granted under the Plan: Options,
Restricted Stock, Incentive Stock and Performance Grants."
3. Section 4 is amended by replacing "5,146,774" with "13,146,774" each
place that it appears.
4. Section 7(b) is amended by adding the following at the end:
"The terms and conditions on Restricted Stock may include the achievement
of one or more Performance Goals as defined in Section 22. Any award of
Restricted Stock that is subject to a Performance Goal shall be governed by the
provisions of Section 22 to the extent that the award is intended to comply with
the requirements of Code section 162(m)."
5. Section 7(c) is amended by adding the following sentence at the end:
"The Committee's discretion shall be limited as provided in Section 22 to
the extent that the award is intended to comply with the requirements of Code
section 162(m)."
6. Section 7(e) is amended by replacing "1,584,108" with "3,944,403".
7. A new Section 22 is added as follows:
"22. PERFORMANCE GRANTS.
(a) Each Performance Grant shall be evidenced by an Award setting
forth the Performance Goals for the award, including the
Performance Measure, the target and maximum amounts payable and
such other terms and conditions as are applicable to the
Performance Grant. Each Performance Grant shall be granted and
administered to comply with the requirements of Code section
162(m). The aggregate maximum amount payable under the Plan to any
Participant in any Plan Year shall not exceed $3,000,000.
The aggregate number of shares of Company Stock which may be
awarded to any Participant as a Performance Grant during any Plan
Year shall not exceed 300,000. In the event of any conflict
between an Award and the Plan, the terms of the Plan shall govern.
(b) The Committee shall establish the Performance Goals for
Performance Grants to Participants. The Committee shall determine
the extent to which any Performance Measure shall be used and
weighted in determining Performance Grants. The Committee may vary
the Performance Measure, Performance Goals and weightings from
Participant to Participant, Performance Grant to Performance Grant
and Plan Year to Plan Year. The Committee may increase, but not
decrease, any Performance Goal during a Plan Year.
(c) The committee shall establish for each Performance Grant the
amount of cash or Company Stock payable at specified levels of
performance, based on the Performance Goal for each Performance
Measure. Any Performance Grant shall be made not later than 90
days after the start of the period for which the Performance Grant
relates and shall be made prior to the completion of 25% of such
period. All determinations regarding the achievement of any
Performance Goals will be made by the Committee. The Committee may
not increase during a Plan Year the amount of cash or Common Stock
that would otherwise be payable upon achievement of the
Performance Goal or Goals but may reduce or eliminate the payments
as provided in a Performance Grant.
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<PAGE>
(d) The actual payments to a Participant under a Performance Grant
will be calculated by applying the achievement of a Performance
Measure to the Performance Goal as established in the Grant
Agreement. All calculations of actual payments shall be made by
the Committee and the Committee shall certify in writing the
extent, if any, to which the Performance Goals have been met.
(e) Performance Grants will be paid in cash, Company Stock or both, at
such time or times as are provided in the Grant Agreement. The
Committee may provide in the Grant Agreement that the Participant
may make a prior election to defer the payment under a Performance
Grant subject to such terms and conditions as the Committee may
determine.
(f) Nothing contained in the Plan will be deemed in any way to limit
or restrict any Employer or the Committee from making any award or
payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
(g) A Participant who receives a Performance Grant payable in Company
Stock shall have no rights as a shareholder until the Company
Stock is issued pursuant to the terms of the Performance Grant.
The Company Stock may be issued without cash consideration.
(h) A Participant's interest in a Performance Grant may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise
encumbered.
(i) As used in the Plan, the following terms shall have the meanings
indicated:
(i) 'Performance Goal' means a target performance or range of
target performances of one or more Performance Measures.
(ii) 'Performance Grant' means an Award made pursuant to this
Section 22.
(iii) 'Performance Measure' means one or more of the following
financial measures: cash flow; cost reduction (or limits on
cost increases); debt to capitalization; debt to equity;
earnings; earnings before interest and taxes, earnings before
interest, taxes, depreciation and amortization; earnings per
share (including or excluding nonrecurring items); earnings
per share before extraordinary items; income from operations
(including or excluding nonrecurring items); economic value
added (net operating profit after tax less a charge for use
of capital as determined under a methodology approved by the
Committee); income from operations to capital spending; free
cash flow; net income (including or excluding nonrecurring
items and/or extraordinary items); net sales; price per share
of Company Stock; return on assets; return on capital
employed; return on equity; return on investment; return on
sales; sales volume; or total return to shareholders. Any
Performance Measure may be used to measure the performance of
the Company as whole or any business unit of the Company. As
determined by the Committee, any Performance Measure shall be
calculated in accordance with the Company's public financial
statements, generally accepted accounting principles, or
under a methodology established by the Committee prior to the
issuance of a Performance Grant which is consistently
applied. The Committee shall have the power and complete
discretion to determine the methodology for the calculation
of Performance Measures."
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APPENDIX E
[MERRILL LYNCH LETTERHEAD]
Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York 10281-1330
May 4, 1997
Board of Directors
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Members of the Board of Directors:
James River Corporation of Virginia (the "Company"), James River Delaware,
Inc., a newly formed wholly owned subsidiary of the Company (the "Merger Sub")
and Fort Howard Corporation ("Fort Howard") propose to enter into an Agreement
and Plan of Merger (the "Agreement") pursuant to which the Merger Sub will be
merged with and into Fort Howard in a transaction (the "Merger") in which each
outstanding share of Fort Howard's common stock, par value $.01 per share (the
"Fort Howard Shares"), will be converted into the right to receive 1.375 shares
(the "Exchange Ratio") of the common stock of the Company, par value $.10 per
share (the "Company Shares").
You have asked us whether, in our opinion as investment bankers, the
Exchange Ratio is fair, from a financial point of view, to the Company.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and Fort Howard which we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts and
projections, relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company and Fort Howard, as well as
the amount and timing of the cost savings and related expenses and
synergies expected to result from the Merger (the "Expected
Synergies"), furnished to us by the Company and Fort Howard;
(3) Conducted discussions with members of senior management and
representatives of the Company and Fort Howard concerning the matters
described in clauses (1) and (2) above, as well as their respective
businesses and prospects before and after giving effect to the Merger
and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Fort Howard Shares and compared them with those of
certain publicly traded companies which we deemed to be relevant and
with those of certain other transactions which we deemed to be
relevant;
(5) Reviewed certain publicly available and other information concerning
the trading of, and the trading market for, the Company Shares and the
Fort Howard Shares;
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[MERRILL LYNCH LETTERHEAD]
(6) Reviewed the results of operations of the Company and Fort Howard and
compared them with those of certain publicly traded companies which we
deemed to be relevant;
(7) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed a draft dated May 4, 1997 of the Agreement, including the
exhibits thereto; and
(10) Reviewed and considered such other financial studies and analyses and
took into account such other matters as we deemed necessary, including
our assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available and we have not
assumed any responsibility for independently verifying such information. We have
not undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or Fort Howard or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or Fort Howard. With respect to the financial forecast and projection
information and the Expected Synergies furnished to or discussed with or
reviewed by or for us by the Company or Fort Howard, we have assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's or Fort Howard's, as the case may be, management
as to the expected future financial performance of the Company or Fort Howard,
as the case may be, and the Expected Synergies. We express no view as to such
information or the assumptions on which they were based. We have further assumed
that the Merger will be accounted for as a pooling of interests under generally
accepted accounting principles and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes. We have also assumed, in
all respects material to our analysis, that the representations and warranties
of each party contained in the Agreement are true and correct, that each party
will perform all of the covenants and agreements required to be performed by it
under the Agreement and that all conditions to the consummation of the Merger
will be satisfied without waiver thereof. We have also assumed that the final
form of the Agreement, including the exhibits thereto, as and when executed,
will be substantially similar to the last drafts thereof reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof, and we assume no responsibility to update or revise
our opinion based upon circumstances or events occurring after the date hereof.
We have assumed that in the course of obtaining the necessary regulatory or
other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits to the Company of the Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities arising out of
our engagement. We have, in the past, provided financial advisory and financing
services to the Company and Fort Howard and/or their affiliates and may continue
to do so and have received fees for the rendering of such services. In addition,
in the ordinary course of our business, we may actively trade the Company Shares
and other securities of the Company, as well as the Fort Howard Shares and other
securities of Fort Howard, for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion is limited to the fairness, from a financial point of view,
to the Company of the Exchange Ratio in connection with the
E-2
<PAGE>
[MERRILL LYNCH LETTERHEAD]
Merger, and we do not address the merits of the underlying decision by the
Company to engage in the Merger and this opinion does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed Merger.
We are not expressing any opinion herein as to the prices at which the
Company Shares will trade following the announcement or consummation of the
Merger, which may vary depending upon, among other factors, changes in interest
rates, currency exchange rates, dividend rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair, from a financial point of
view, to the Company.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
/s/ MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
E-3
<PAGE>
APPENDIX F
SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
212-783-7000
[SALOMON BROTHERS LETTERHEAD]
May 4, 1997
Board of Directors
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Members of the Board of Directors:
James River Corporation of Virginia (the "Company"), James River Delaware,
Inc., a newly formed wholly owned subsidiary of the Company (the "Merger Sub")
and Fort Howard Corporation ("Fort Howard") propose to enter into an Agreement
and Plan of Merger (the "Agreement") pursuant to which the Merger Sub will be
merged with and into Fort Howard in a transaction (the "Merger") in which each
outstanding share of Fort Howard's common stock, par value $.01 per share (the
"Fort Howard Shares"), will be converted into the right to receive 1.375 shares
(the "Exchange Ratio") of the common stock of the Company, par value $.10 per
share (the "Company Shares").
You have asked us whether, in our opinion as investment bankers, the
Exchange Ratio is fair, from a financial point of view, to the Company.
In arriving at the opinion set forth below, we have, among other things:
(i) reviewed certain publicly available business and financial information
relating to the Company and Fort Howard which we deemed to be relevant; (ii)
reviewed certain information, including financial forecasts and projections,
relating to the business, earnings, cash flow, assets, liabilities and prospects
of the Company and Fort Howard, as well as the amount and timing of the cost
savings and related expenses and synergies expected to result from the Merger
(the "Expected Synergies"), furnished to us by the Company and Fort Howard;
(iii) conducted discussions with members of senior management and
representatives of the Company and Fort Howard concerning the matters described
in clauses (i) and (ii) above, as well as their respective businesses and
prospects before and after giving effect to the Merger and the Expected
Synergies; (iv) reviewed the market prices and valuation multiples for the
Company Shares and the Fort Howard Shares and compared them with those of
certain publicly traded companies which we deemed to be relevant and with those
of certain other transactions which we deemed to be relevant; (v) reviewed
certain publicly available and other information concerning the trading of, and
the trading market for, the Company Shares and the Fort Howard Shares; (vi)
reviewed the results of operations of the Company and Fort Howard and compared
them with those of certain publicly traded companies which we deemed to be
relevant; (vii) compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which we deemed to be relevant;
(viii) reviewed the potential pro forma impact of the Merger; (ix) reviewed a
draft dated May 4, 1997 of the Agreement, including the exhibits thereto; and
(x) reviewed and considered such other financial studies and analyses and took
into account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
- --------------------------------------------------------------------------------
SALOMON BROTHERS INC & WORLDWIDE AFFILIATES
- --------------------------------------------------------------------------------
Atlanta Bangkok Boston Chicago Frankfurt Hong Kong London Los Angeles Madrid
Melbourne Mexico Milan Moscow New Delhi New York Osaka Paris San Francisco
Seoul Singapore Sydney Taipei Tokyo Toronto Zug Zurich
F-1
<PAGE>
SALOMON BROTHERS INC
[SALOMON BROTHERS LETTERHEAD]
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available and we have not
assumed any responsibility for independently verifying such information. We have
not undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or Fort Howard or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or Fort Howard. With respect to the financial forecast and projection
information and the Expected Synergies furnished to or discussed with or
reviewed by or for us by the Company or Fort Howard, we have assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's or Fort Howard's, as the case may be, management
as to the expected future financial performance of the Company or Fort Howard,
as the case may be, and the Expected Synergies. We express no view as to such
information or the assumptions on which they were based. We have further assumed
that the Merger will be accounted for as a pooling of interests under generally
accepted accounting principles and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes. We have also assumed, in
all respects material to our analysis, that the representations and warranties
of each party contained in the Agreement are true and correct, that each party
will perform all of the covenants and agreements required to be performed by it
under the Agreement and that all conditions to the consummation of the Merger
will be satisfied without waiver thereof. We have also assumed that the final
form of the Agreement, including the exhibits thereto, as and when executed,
will be substantially similar to the last drafts thereof reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof, and we assume no responsibility to update or revise
our opinion based upon circumstances or events occurring after the date hereof.
We have assumed that in the course of obtaining the necessary regulatory or
other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits to the Company of the Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities arising out of
our engagement. We have, in the past, provided financial advisory and financing
services to the Company and Fort Howard and/or their affiliates and may continue
to do so and have received fees for the rendering of such services. In addition,
in the ordinary course of our business, we may actively trade the Company Shares
and other securities of the Company, as well as the Fort Howard Shares and other
securities of Fort Howard, for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion is limited to the fairness, from a financial point of view,
to the Company of the Exchange Ratio in connection with the Merger, and we do
not address the merits of the underlying decision by the Company to engage in
the Merger and this opinion does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the proposed Merger.
F-2
<PAGE>
SALOMON BROTHERS INC
[SALOMON BROTHERS LETTERHEAD]
We are not expressing any opinion herein as to the prices at which the
Company Shares will trade following the announcement or consummation of the
Merger, which may vary depending upon, among other factors, changes in interest
rates, currency exchange rates, dividend rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair, from a financial point of
view, to the Company.
Very truly yours,
/s/ SALOMON BROTHERS INC
SALOMON BROTHERS INC
F-3
<PAGE>
APPENDIX G
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
May 4, 1997
Board of Directors
Fort Howard Corporation
1919 South Broadway
Green Bay, WI 54307-9130
Members of the Board:
We understand that Fort Howard Corporation ("Fort Howard"), James River
Corporation of Virginia ("James River") and James River Delaware, Inc. ("Merger
Sub"), a wholly owned subsidiary of James River, have entered into an Agreement
and Plan of Merger, dated as of May 4, 1997 (the "Merger Agreement"), which
provides, among other things, for the merger of Merger Sub with and into James
River (the "Merger"). Pursuant to the Merger, each issued and outstanding share
of common stock, par value $.01 per share of Fort Howard (the "Fort Howard
Common Stock"), other than shares held in treasury will be converted into the
right to receive 1.375 shares (the "Exchange Ratio") of common stock, par value
$.10 per share, of James River (the "James River Common Stock"). The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to the holders of shares
of Fort Howard Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Fort Howard and James River, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning Fort Howard and James River prepared by
the managements of Fort Howard and James River, respectively;
(iii) analyzed certain financial projections of Fort Howard and James
River prepared by the managements of Fort Howard and James River,
respectively;
(iv) discussed the past and current operations and financial condition and
the prospects of Fort Howard and James River with senior executives
of Fort Howard and James River, respectively;
(v) analyzed the pro forma impact of the Merger on the combined company's
earnings per share, consolidated capitalization and financial ratios;
(vi) reviewed the reported prices and trading activity for the Fort Howard
Common Stock and the James River Common Stock;
(vii) compared the financial performance of Fort Howard and James River and
the prices and trading activity of the Fort Howard Common Stock and
the James River Common Stock with that of certain other comparable
publicly traded companies and their securities;
(viii) discussed the strategic objectives of the Merger and the plan for
the combined company, including estimates of potential synergies and
other benefits, with senior executives of Fort Howard and James
River;
(ix) reviewed the financial terms, to the extent publicly available, of
certain comparable precedent merger transactions;
G-1
<PAGE>
MORGAN STANLEY
(x) participated in discussions and negotiations among representatives of
Fort Howard and James River and their financial and legal advisors;
(xi) reviewed the Merger Agreement and certain related documents; and
(xii) performed such analyses and considered such other factors as we have
deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information supplied or otherwise made available to us
by Fort Howard and James River for the purposes of this opinion. With respect to
the financial projections, including synergies and other benefits expected to be
derived from the Merger, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
future financial performances of Fort Howard and James River, respectively. We
have not made any independent valuation or appraisal of the assets or
liabilities of Fort Howard and James River, nor have we been furnished with any
such appraisals. In addition, we have assumed the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Fort Howard in
connection with this transaction and will receive a fee for our services in
connection herewith. In the past, Morgan Stanley has provided financial advisory
and financing services for Fort Howard and James River and received fees for
those services. In addition, Morgan Stanley and certain partnerships managed by
affiliates of Morgan Stanley currently own approximately 26% of the outstanding
equity of Fort Howard and three employees of Morgan Stanley are directors of
Fort Howard. Morgan Stanley expects that such partnerships will be significant
stockholders of James River, and that two of such employees will be directors of
James River, after the Merger.
It is understood that this letter is for the information of the Board of
Directors of Fort Howard and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing with the Securities and Exchange Commission in connection with the
Merger. In addition, we express no advice or opinion as to how the holders of
Fort Howard Common Stock should vote at the shareholders' meeting held in
connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Exchange Ratio pursuant to the Merger Agreement is fair from a financial point
of view to the holders of shares of Fort Howard Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ BRUCE D. FIEDOREK
--------------------------------
Bruce D. Fiedorek
Vice Chairman and Managing Director
G-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 10 of the Virginia Stock Corporation Act (the "VSCA") sets forth
conditions and limitations governing the indemnification of officers, directors,
and other persons of the Registrant.
The Registrant's Restated Articles of Incorporation (the "Registrant
Charter") provide as follows:
(a) In every instance permitted by the VSCA, the liability of a director or
officer of the Registrant to the Registrant or its shareholders arising out of a
single transaction, occurrence or course of conduct is limited to one dollar.
(b) The Registrant will indemnify any individual who is, was or is
threatened to be made a party to a proceeding (including a proceeding by or in
the right of the Registrant) because he is or was a director or officer of the
Registrant or because he is or was serving the Registrant or any other legal
entity in any capacity at the request of the Registrant while a director or
officer of the Registrant, against all liabilities and reasonable expenses
incurred in the proceeding except such liabilities and expenses as are incurred
because of his willful misconduct or knowing violation of the criminal law.
Service as a director or officer of a legal entity controlled by the Registrant
is deemed service at the request of the Registrant. The determination that
indemnification under this provision of the Registrant Charter is permissible
and the evaluation as to the reasonableness of expenses in a specific case will
be made, in the case of a director, as provided by law, and in the case of an
officer, as provided in paragraph (c) below, provided, however, that if a
majority of the directors of the Registrant has changed after the date of the
alleged conduct giving rise to a claim for indemnification, such determination
and evaluation shall, at the option of the person claiming indemnification, be
made by special legal counsel agreed upon by the board of directors and such
person. Unless a determination has been made that indemnification is not
permissible, the Registrant will make advances and reimbursements for expenses
incurred by a director or officer in a proceeding upon receipt of an undertaking
from him to repay the same if it is ultimately determined that he is not
entitled to indemnification. Such undertaking will be an unlimited, unsecured
general obligation of the director or officer and shall be accepted without
reference to his ability to make repayment. The termination of a proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent will not of itself create a presumption that a director or
officer acted in such a manner as to make him ineligible for indemnification.
The Registrant is authorized to contract in advance to indemnify and make
advances and reimbursements for expenses to any of its directors or officers to
the same extent provided in this paragraph (b).
(c) The Registrant may, to a lesser extent or to the same extent that it is
required to provide indemnification and make advances and reimbursements for
expenses to its directors and officers pursuant to paragraph (b) above, provide
indemnification and make advances and reimbursements for expenses to its
employees and agents, the directors, officers, employees and agents of its
subsidiaries and predecessor entities, and any person serving any other legal
entity in any capacity at the request of the Registrant and, if authorized by
general or specific action of the Board of Directors of the Registrant, may
contract in advance to do so. The determination that indemnification under the
provisions described in this paragraph (c) is permissible, the authorization of
such indemnification and the evaluation as to the reasonableness of expenses in
a specific case shall be made as authorized from time to time by general or
specific action of the Board of Directors of the Registrant, which action may be
taken before or after a claim for indemnification is made or as otherwise
provided by law. No person's rights under paragraph (b) above shall be limited
by the provisions in this paragraph (c).
(d) Every reference in the provisions described above to persons who are or
may be entitled to indemnification includes all persons who formerly occupied
any of the positions referred to and their respective heirs, executors and
administrators. Special legal counsel selected to make determinations under
these provisions may be counsel for the Registrant. Indemnification pursuant to
these provisions shall not be exclusive of any other right of indemnification to
which any person may be entitled, including indemnification pursuant to a valid
contract, indemnification by legal entities other than the Registrant and
indemnification under policies of insurance purchased and maintained by the
Registrant or others. However, no person will be entitled to indemnification by
the Registrant to the extent he is indemnified by another, including an insurer.
The Registrant is authorized to purchase and maintain insurance against any
liability it may have under these provisions or to protect any of the persons
named above against any liability arising from their service to the Registrant
or any other legal entity at the request of the Registrant regardless of the
Registrant's power to indemnify against such liability.
II-1
<PAGE>
<PAGE>
(e) The provisions described above apply to indemnification, advances and
reimbursement for expenses made after the Registrant Charter's adoption whether
arising from conduct or events occurring before or after such adoption. No
amendment, modification or repeal of these provisions will diminish the rights
provided thereunder to any person arising from conduct or events occurring
before the adoption of such amendment, modification or repeal.
The Registrant has insurance to indemnify its directors and officers,
within the limits of the Registrant's insurance policies, for those liabilities
in respect of which such indemnification insurance is permitted under the laws
of the State of Virginia.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. See Exhibit Index.
(b) FINANCIAL STATEMENT SCHEDULES. None.
(c) REPORT, OPINION OR APPRAISAL. Not Applicable.
ITEM 22. UNDERTAKINGS
(a) 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 provisions described under Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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.
(b) The undersigned Registrant hereby undertakes 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 Section 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.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-2
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond, Commonwealth of
Virginia on June 26, 1997.
JAMES RIVER CORPORATION OF VIRGINIA
By/s/ CLIFFORD A. CUTCHINS, IV
--------------------------------
CLIFFORD A. CUTCHINS, IV
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- -----------------
<S> <C> <C>
/s/MILES L. MARSH Chairman of the Board, Chief June 26, 1997
------------------------------------------ Executive Officer and Director
MILES L. MARSH
/s/WILLIAM A. PATERSON Senior Vice President June 26, 1997
------------------------------------------ and Controller
WILLIAM A. PATERSON (Principal Financial and Accounting
Officer)
/s/BARBARA L. BOWLES Director June 26, 1997
------------------------------------------
BARBARA L. BOWLES
/s/WILLIAM T. BURGIN Director June 26, 1997
------------------------------------------
WILLIAM T. BURGIN
/s/WILLIAM T. COMFORT, JR. Director June 26, 1997
------------------------------------------
WILLIAM T. COMFORT, JR.
/s/GARY P. COUGHLAN Director June 26, 1997
------------------------------------------
GARY P. COUGHLAN
/s/WILLIAM V. DANIEL Director June 26, 1997
------------------------------------------
WILLIAM V. DANIEL
/s/BRUCE C. GOTTWALD Director June 26, 1997
------------------------------------------
BRUCE C. GOTTWALD
/s/ROBERT M. O'NEIL Director June 26, 1997
------------------------------------------
ROBERT M. O'NEIL
/s/RICHARD L. SHARP Director June 26, 1997
------------------------------------------
RICHARD L. SHARP
/s/ANNE MARIE WHITTEMORE Director June 26, 1997
------------------------------------------
ANNE MARIE WHITTEMORE
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibits required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of May 4, 1997, by and among James River Corporation of
Virginia ("James River"), James River Delaware, Inc. and Fort Howard Corporation ("Fort Howard")
included as Appendix A to the Joint Proxy Statement included as part of this Registration Statement.
The Registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the
Commission upon request.
3.1 Form of Amendment to Registrant's Restated Articles of Incorporation included as Appendix B to the
Joint Proxy Statement-Prospectus included as part of this Registration Statement.
3.2 Form of Amendment to Registrant's Restated Bylaws included as Appendix C to the Joint Proxy
Statement -- Prospectus included as part of this Registration Statement.
4.1 Amended and Restated Rights Agreement, dated May 12, 1992, between James River and NationsBank of
Virginia, N.A., as Rights Agent, and Amendment No. 1 to such Rights Agreement, dated June 8, 1992
(incorporated by reference to Exhibits 2 and 3, respectively, to the Registrant's filing of
Amendment 1 dated July 28, 1992, to its Registration Statement of Form 8-A dated March 3, 1989).
4.2 Amendment No. 2 to Amended and Restated Rights Agreement dated May 12, 1992, as amended by Amendment
No. 1, dated June 8, 1992, between James River and Wachovia Bank of North Carolina, N.A., dated
January 31, 1996 (incorporated by reference to Exhibit 4(b) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995).
4.3 In reliance upon item 601(b)(4)(iii)(A) of Regulation S-K, various instruments defining the rights
of holders of long-term debt of the Registrant and its subsidiaries are not being filed because the
total amount of securities authorized and outstanding under each such instrument does not exceed 10%
of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant
hereby agrees to furnish a copy of such instrument to the Commission upon request.
5.1 Opinion of McGuire, Woods, Battle & Boothe L.L.P. as to the legality of the shares and related
preferred share purchase rights being issued (including consent).
8.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the federal income tax consequences of the
Merger (including consent).
8.2 Opinion of Shearman & Sterling regarding the federal income tax consequences of the Merger
(including consent).
10.1 Form of Stockholders Agreement.
10.2 Form of Registration Rights Agreement.
10.3 Amended and Restated Employment Agreement, dated as of June 10, 1997, between James River and Miles
L. Marsh.
10.4 Amended and Restated Employment Agreement, dated as of June 26, 1997, between James River and
Michael T. Riordan.
10.5 Form of Employment Agreement between the Registrant and executive officers of Fort Howard.
10.6 Form of Employment Agreement between the Registrant and executive officers of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P. relating to the audited financial statements of James River
Corporation of Virginia.
23.2 Consent of Arthur Andersen LLP relating to the audited financial statements of Fort Howard
Corporation.
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1).
23.4 Consent of Shearman & Sterling (included in Exhibit 8.2).
23.5 Consent of McGuire, Woods, Battle & Boothe L.L.P. (included in Exhibit 5.1).
99.1 Form of Proxy Card of James River.
99.2 Form of Proxy Card of Fort Howard Corporation.
99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
99.4 Consent of Salomon Brothers Inc.
99.5 Consent of Morgan Stanley & Co. Incorporated.
99.6 Consent of Michael T. Riordan to being named as about to become a director of the Registrant.
99.7 Consent of Robert H. Niehaus to being named as about to become a director of the Registrant.
99.8 Consent of Frank V. Sica to being named as about to become a director of the Registrant.
99.9 Consent of James L. Burke to being named as about to become a director of the Registrant.
</TABLE>
II-4
Exhibit 5.1
[Letterhead of McGuire Woods Battle & Boothe, LLP]
June 26, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, VA 23219
Ladies and Gentlemen:
We have acted as counsel to James River Corporation of Virginia, a
Virginia corporation ("James River"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") being filed today with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "1933 Act"), with respect to the proposed merger (the
"Merger") of James River Delaware, Inc., a Delaware corporation and a
wholly-owned subsidiary of James River ("Merger Sub"), with and into Fort Howard
Corporation, a Delaware Corporation ("Fort Howard"), and the conversion in the
Merger of each share of the common stock of Fort Howard into the right to
receive 1.375 shares of the common stock of James River, par value $.10 per
share (all such shares, the "James River Shares"), including the corresponding
percentage of a right to purchase one 1/1000th of a share of James River
Series M Cumulative Participating Preferred Stock (the "James River Rights")
pursuant to the Amended and Restated Rights Agreement, dated as of May 12, 1992,
as amended (the "Rights Agreement"), between James River and NationsBank of
Virginia, N.A., as Rights Agent.
In connection with this opinion, we have examined the Registration
Statement, the Articles of Incorporation and Bylaws of James River and such
corporate records of James River and other materials as we have deemed necessary
for the issuance of this opinion.
Based upon the foregoing, we are of the opinion that:
1. James River is a corporation duly organized and is validly existing
under the laws of the Commonwealth of Virginia.
2. Upon the amendment of the Articles of Incorporation of James River
to authorize a sufficient number of shares of the common stock of James River,
upon the issuance of the James River Shares in connection with the Merger having
been approved by the shareholders of James River, and upon the Merger becoming
effective pursuant to the Delaware General Corporation Law, all as described
in the Registration Statement and any amendments thereto, the James River Shares
will have been duly authorized and, when
<PAGE>
June 26, 1997
Page 2
issued in the manner described in the Registration Statement and any amendments
thereto, will be validly issued, fully paid, and non-assessable and will entitle
the holders thereof to James River Rights as provided in the Rights Agreement.
We re-affirm our opinion regarding the James River Rights given to
James River's Board of Directors as confirmed in our letter of February 9, 1989,
a copy of which was attached as part of Exhibit 5 to James River's registration
statement (No. 33-56657) on Form S-8 filed with the Commission on November 30,
1994, except that the discussion therein of the effect of Section 13.1-638 of
the Virginia Stock Corporation Act, as amended (the "VSCA") on certain transfer
restrictions relating to the James River Rights was rendered unnecessary by an
amendment to the VSCA effective July 1, 1990.
We hereby consent (i) to the filing of this opinion with the Commission
as an exhibit to the Registration Statement and (ii) to the statement made in
reference to our firm under the caption "Legal Matters" in the Prospectus which
is made a part of the Registration Statement. We do not admit by giving this
consent that we are in the category of persons whose consent is required under
Section 7 of the 1933 Act.
Very truly yours,
/s/ McGuire, Woods, Battle &
Boothe, L.L.P.
Exhibit 8.1
[Letterhead of Wachtell, Lipton, Rosen & Katz]
June 26, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Ladies and Gentlemen:
We have acted as special counsel to James River Corporation of
Virginia, a Virginia corporation ("James River"), in connection with the
proposed merger (the "Merger") of James River Delaware, Inc., a Delaware
corporation and a wholly owned subsidiary of James River ("Merger Sub"), with
and into Fort Howard Corporation, a Delaware corporation ("Fort Howard"), upon
the terms and conditions set forth in the Agreement and Plan of Merger, by and
among James River, Merger Sub and Fort Howard, dated as of May 4, 1997 (the
"Agreement"). At your request, in connection with the filing of the Registration
Statement of James River on Form S-4 (the "Registration Statement"), we are
rendering our opinion concerning certain federal income tax consequences of the
Merger.
For purposes of the opinion set forth below, we have relied,
with the consent of James River and the consent of Fort Howard, upon the
accuracy and completeness of the statements and representations (which
statements and representations we have neither investigated nor verified) and
relied upon covenants contained, respectively, in the certificates of the
officers of James River and Fort Howard (copies of which are attached hereto and
which are incorporated herein by reference), and have assumed that such
certificates will be complete
<PAGE>
James River Corporation of Virginia
June 26, 1997
Page 2
and accurate as of the Effective Time and those covenants will be complied with
in all material respects. We have also relied upon the accuracy of the
Registration Statement and the Joint Proxy Statement-Prospectus (together, the
"Proxy Statement") filed with the Securities and Exchange Commission, as amended
through the date hereof, in connection with the Merger. Any capitalized term
used and not defined herein has the meaning given to it in the Proxy Statement
or the Agreement, as the case may be.
We have also assumed that the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Proxy Statement and that the Merger will qualify as a statutory merger under the
applicable laws of the State of Delaware.
Based upon and subject to the foregoing, the discussion
contained in the Proxy Statement under the caption "The Proposed Merger --
Material Federal Income Tax Consequences", except as otherwise indicated,
represents our opinion as to the material federal income tax consequences of the
Merger under currently applicable law.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement
and to the reference to us under the caption "The Proposed Merger -- Material
Federal Income Tax Consequences" and elsewhere in the Proxy Statement. In giving
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
Exhibit 8.2
[Letterhead of Shearman & Sterling]
June 26, 1997
Fort Howard Corporation
1919 South Broadway
Green Bay, Wisconsin 54303
Ladies and Gentlemen:
We are acting as counsel to Fort Howard Corporation, a Delaware
corporation ("Fort Howard"), in connection with the proposed merger (the
"Merger") of James River Delaware, Inc. ("Merger Sub"), a Delaware corporation
and direct wholly owned subsidiary of James River Corporation of Virginia
("James River"), a Virginia corporation, with and into Fort Howard, pursuant to
an Agreement and Plan of Merger (the "Agreement"), dated as of May 4, 1997 by
and among James River, Merger Sub, and Fort Howard. James River is filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended, a registration statement on Form S-4 (the "Registration
Statement") with respect to the common stock of James River to be issued to
holders of shares of common stock of Fort Howard (the "Common Stock") in
connection with the Merger. At your request, in connection with the filing of
the Registration Statement, we are rendering our opinion concerning certain
federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have, with the
consent of James River and the consent of Fort Howard, relied upon the accuracy
and completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) and relied upon
covenants contained in the certificates of the officers of James River and Fort
Howard (copies of which are attached hereto and which are incorporated herein by
reference), and have assumed that such statements and representations in those
certificates will be complete and accurate as of the Effective Time and those
covenants will be complied with in all material respects. We have also relied
upon the accuracy of the Registration Statement and the Joint Proxy
Statement-Prospectus (together, the "Proxy Statement") filed with the
Commission, as amended through the date hereof, in connection with the Merger.
Any capitalized term used and not defined herein has the meaning given to it in
the Proxy Statement or the Agreement, as the case may be.
<PAGE>
Fort Howard Corporation 2 June 26, 1997
We have also assumed that the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Proxy Statement and that the Merger will qualify as a statutory merger under
applicable state laws.
Based upon and subject to the foregoing, we are of the opinion
that, subject to the limitations set forth therein, the discussion contained in
the Proxy Statement under the caption "The Proposed Merger -- Material Federal
Income Tax Consequences", is an accurate summary of the material federal income
tax consequences of the Merger under currently applicable law.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the reference to
us under the caption "The Proposed Merger -- Material Federal Income Tax
Consequences" and elsewhere in the Proxy Statement. In giving such consent, we
do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
Very truly yours,
LMB/AVH/CAH
/s/ SHEARMAN & STERLING
Exhibit 10.1
Form of Stockholders Agreement
Stockholders Agreement (this "Agreement") dated as of ______
__, 1997 among James River Corporation of Virginia, a Virginia corporation (the
"Company"), Morgan Stanley Group Inc. ("MS Group"), Morgan Stanley Leveraged
Equity Fund II, L.P. ("MSLEF II") and Fort Howard Equity Investors II, L.P. ("FH
II" and, collectively with MSLEF II and MS Group, the "Stockholders").
WHEREAS, James River Delaware, Inc., a Delaware corporation
and a wholly owned subsidiary of the Company ("Merger Sub"), will be merged (the
"Merger") with and into Fort Howard Corporation, a Delaware corporation ("Fort
Howard"), pursuant to an Agreement and Plan of Merger by and among the Company,
Merger Sub and Fort Howard dated as of May 4, 1997 (the "Merger Agreement");
WHEREAS, the Stockholders and certain of their affiliates will
receive the number of shares of common stock, par value $0.10 per share, of the
Company ("Common Stock"), set forth on Schedule I to this Agreement (the
"Shares") pursuant to the Merger; and
WHEREAS, it is a condition to the obligations of the parties
to the Merger Agreement that this Agreement be executed by the Company
concurrently with the closing under the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereto hereby
agree as follows:
Section 1. (a) Appointment of Directors. Promptly upon the
execution of this Agreement, the Board of Directors of the Company (the "Board")
shall take all necessary action to increase the size of the Board to fifteen
(15) and to appoint the four (4) persons listed on Schedule 1.05(c) to the
Merger Agreement (which persons shall be reasonably satisfactory to the
Company) as directors on the Board. So long as the Stockholders and their
affiliates other than Morgan Stanley & Co. Incorporated ("MS&Co.") beneficially
own the requisite number of Shares pursuant to Section 1(b) or (c), as
applicable, the Company shall cause the person(s) designated pursuant to Section
1(b) or (c) to be appointed or nominated for election as directors on the Board
<PAGE>
at each annual meeting thereafter and at each special meeting, if any, at which
directors are being elected.
(b) From and after the effective time of the Merger and until
the date on which the Stockholders and their affiliates other than MS&Co. no
longer hold at least five million of the then outstanding Shares (the "Upper
Director Threshold") MS Group shall be entitled to designate two (2) persons
reasonably satisfactory to the Company to be nominated for election as directors
on the Board; provided, however, that (i) so long as MSLEF II owns any Shares,
MSLEF II shall be entitled to designate one (1) of such persons to be nominated
as a director on the Board and (ii) so long as FH II owns any Shares, FH II
shall be entitled to designate one (1) of such persons to be nominated as a
director on the Board and provided, further, that any such nominee of MSLEF II
or FH II, as the case may be, shall be reasonably satisfactory to the Company.
(c) From and after the effective time of the Merger and until
the date on which the Stockholders and their affiliates other than MS&Co. no
longer hold at least two million of the then outstanding Shares (the "Lower
Director Threshold" and, together with the Upper Director Threshold, the
"Director Thresholds") MS Group shall be entitled to designate one (1) person
reasonably satisfactory to the Company to be nominated for election as a
director on the Board; provided, however, that (i) so long as either MSLEF II or
FH II (but not both) owns any Shares, such entity shall be entitled to designate
such person to be nominated for election as a director on the Board and (ii) if
both MSLEF II and FH II own any Shares, MSLEF II shall have the right provided
for in clause (i) above.
(d) None of MS Group, MSLEF II and FH II shall be entitled to
designate any nominee for election as a director on the Board from and after the
time when the Stockholders and their affiliates other than MS&Co. own less than
two million of the then outstanding Shares.
(e) If the number of outstanding shares of Common Stock shall
change into a different number of shares or shall be designated as a different
class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the number or class
of shares required for purposes of the Director Thresholds shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares. No
shares of Common Stock acquired after the effective time of the Merger, other
than shares acquired (i) with respect to a Stockholder or an affiliate of a
Stockholder
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<PAGE>
which is a limited partnership, pursuant to a distribution or transfer to the
partners of such a Stockholder or such an affiliate of a Stockholder pursuant to
or otherwise in accordance with its Agreement of Limited Partnership or (ii)
pursuant to any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, shall be included for purposes of
determining whether the Director Thresholds are met.
Section 2. Certain Notices. Each of MSLEF II and FH II shall,
within ten business days, notify the Company if it no longer owns any Shares of
Common Stock and MS Group shall, within ten business days, notify the Company if
the Stockholders and their affiliates other than MS&Co. own less than the number
of Shares required for purposes of either of the Director Thresholds.
Section 3. Miscellaneous. This Agreement shall survive
indefinitely and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York. If any provision of this Agreement is rendered void, invalid or
unenforceable by any court of law for any reason, such invalidity or
unenforceability shall not void or render invalid or unenforceable any other
provision of this Agreement. This Agreement may be changed, waived, discharged
or terminated only with the written consent of each party hereto. This Agreement
may be executed in one or more counterparts, and with counterpart signature
pages, each of which shall be an original, but all of which together shall
constitute one and the same Agreement.
Section 4. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to any of the Stockholders, to:
[ ]
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopier No.: (212) 848-7179
Attention: Faith D. Grossnickle, Esq.
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<PAGE>
(b) if to the Company, to
James River Corporation of Virginia
120 Tredegar Street
Richmond, VA 23219
Attention: Clifford A. Cutchins, IV
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Telecopier No.: (212) 403-2000
Attention: Patricia A. Vlahakis, Esq.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Agreement
to be duly executed by their respective authorized signatories thereunto duly
authorized as of the date first above written.
JAMES RIVER CORPORATION OF VIRGINIA
By ________________________________
Name:
Title:
MORGAN STANLEY GROUP INC.
By ________________________________
Name:
Title:
MORGAN STANLEY LEVERAGED EQUITY
FUND II, L.P.
By ________________________________
Name:
Title:
FORT HOWARD EQUITY INVESTORS II, L.P.
By ________________________________
Name:
Title:
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<PAGE>
Schedule I
Ownership of Shares
As of The Effective Time
Morgan Stanley Group Inc. ___________________
MSLEF II ___________________
FH II ___________________
[other affiliates] ___________________
Exhibit 10.2
Form of Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT dated as of _______ __, 1997
(the "Agreement") among JAMES RIVER CORPORATION OF VIRGINIA, a Virginia
corporation (the "Company") and the parties listed on the signature pages of
this Agreement (each a "Stockholder" and, collectively, the "Stockholders" and,
together with the Company, the "Parties") who will, as of the effective time of
the Merger (as defined below) be holders of shares of common stock, par value
$0.10 per share, of the Company (the "Common Shares") in such number as set
forth on Schedule I to this Agreement.
PRELIMINARY STATEMENTS
WHEREAS, James River Delaware, Inc., a Delaware Corporation
and wholly owned subsidiary of the Company ("Merger Sub") will be merged with
and into Fort Howard Corporation, a Delaware corporation ("Fort Howard") (the
"Merger"), pursuant to an Agreement and Plan of Merger dated as of May 4, 1997
by and among the Company, Merger Sub and Fort Howard (the "Merger Agreement");
WHEREAS, the Stockholders will receive the Common Shares
pursuant to the Merger; and
WHEREAS, it is a condition to the obligations of the parties
to the Merger Agreement to consummate the Merger that this Agreement be entered
into by the Parties concurrently with the closing under the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the Parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Terms used but not defined herein
are used herein as defined in the Merger Agreement. The following terms, as
used herein, have the following meanings:
(a) the "Commission" means the Securities and Exchange
Commission;
<PAGE>
(b) "Demand Registration" has the meaning specified in Section
2.02;
(c) "Holder(s)" means the Stockholders and the transferees of
Registrable Securities which are affiliates of such transferring
Stockholder or, in the case of any transfers by AT&T Investment
Management Co., a successor trust or the trust for a successor plan in
connection with or following the reorganization of the pension plans or
trust of AT&T Corp. and Lucent Technologies Inc.;
(d) "Piggyback Registration" has the meaning specified in
Section 2.03;
(e) "Pooling Period" means the period commencing at the
effective time of the Merger and continuing until the date on which the
Company first publishes (in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a report to
the Commission on Form 10-K, 10-Q or 8-K, or any other public filing or
announcement) financial results covering at least 30 days of
post-Merger combined operations;
(f) "Registrable Securities" means (i) Common Shares issued or
issuable in the Merger to the Stockholders at the Effective Time and
(ii) any securities issued or issuable in respect of such Common Shares
by way of conversion, exchange, stock dividend, split or combination,
recapitalization, merger, consolidation, other reorganization or
otherwise; and
(g) "Subsidiary" or "Subsidiaries" means any corporation,
partnership, joint venture or other legal entity of which the Company
or such other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 50%
or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the Board of Directors
or other governing body of such corporation or other legal entity.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.01. Registrable Securities. The registration rights
provided herein apply to Registrable Securities, but with respect to any
particular Registrable Security, only
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<PAGE>
so long as such security continues to be a Registrable Security. Any Registrable
Security will cease to be a Registrable Security when (i) a registration
statement covering such Registrable Security has been declared effective by the
Commission and such Registrable Security has been disposed of pursuant to such
effective registration statement, (ii) it is sold pursuant to Rule 144
promulgated under the Securities Act (or another exemption from the registration
requirements of the Securities Act), (iii) it has been otherwise transferred,
upon which transfer the Company has delivered a new certificate or other
evidence of ownership for such Registrable Security not bearing the legend
required pursuant to Section 6.09(a) of the Merger Agreement and it may be
resold without subsequent registration under the Securities Act (or under any
appropriate exemption) or any blue sky law then in force or (iv) it shall have
ceased to be outstanding.
SECTION 2.02. Demand Registration. (a) At any time during the
first three years after the Effective Time ("Initial Demand Period"), any Holder
of Registrable Securities may request in writing that the Company register in an
underwritten public offering under the Securities Act, all or part of such
Holder's Registrable Securities (a "Demand Registration") and the Company shall
thereupon promptly use its best efforts to effect, subject to the next sentence
and the provisions of Subsection 2.02(c), such Demand Registration. No Demand
Registration shall be effected until 30 days following the end of the Pooling
Period and the Company shall not be obligated (i) to effect a Demand
Registration in the six-month period following a sale of Registrable Securities
under a previous Demand Registration, (ii) subject to Section 2.04, to effect
more than three Demand Registrations or (iii) to effect a Demand Registration
with respect to less than $25,000,000 in aggregate fair market value of
Registrable Securities or such lesser amount as shall constitute all of the
Registrable Securities then held by the Holders. A request for Demand
Registration will specify the number of shares of Registrable Securities
proposed to be sold. A registration will not count as a Demand Registration
until the registration statement relating thereto has been declared effective by
the Commission.
(b) Promptly (but in no event more than 15 days) after receipt
of a request for registration of Registrable Securities pursuant to Section
2.02(a) hereof, the Company shall provide notice of such request to all Holders
of Registrable Securities on the books of the Company other than those who made
the request under Section 2.02(a), and each such Holder shall have the right,
within a period of fifteen (15) days after the date of such notice, to request
the Company to include in the offering to which the Demand Registration
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<PAGE>
relates all or a portion of such Holder's Registrable Securities.
(c) In the event that the Holders making a request to be
included in a Demand Registration pursuant to Section 2.02(b) together with the
Holders who requested registration of Registrable Securities pursuant to Section
2.02(a) hereof (the "Participating Holders") have requested registration of
Registrable Securities in excess of the Maximum Demand Amount (as hereinafter
defined), if applicable, each Participating Holder shall have the right to
register up to such number of such Holder's Registrable Securities which bears
the same proportion to the Maximum Demand Amount as all of the Registrable
Securities owned by such Participating Holder bears to the total number of
Registrable Securities owned by all Participating Holders (hereinafter referred
to as a Participating Holder's "Eligible Securities"). To the extent that any
Participating Holder does not elect to have all or part of such Participating
Holder's Eligible Securities included in the offering for which Demand
Registration has been made, the Eligible Securities of the other Participating
Holders who elect to participate in the offering shall be increased pro rata
based on the number of Eligible Securities owned by each.
The "Maximum Demand Amount" means the maximum number of
Registrable Securities that the managing underwriter or underwriters of the
offering advise the Company may be included in such offering without materially
and adversely affecting the success of the offering.
(d) Morgan Stanley Leveraged Equity Fund II L.P. ("MSLEF II"),
so long as it holds any Registrable Securities and is participating in a Demand
Registration, or in all other circumstances a majority of the Holders
participating in the Demand Registration, shall select the book-running and
other managing underwriters in connection with such offering and any additional
investment bankers and managers to be used in connection with the offering, in
each case which are reasonably satisfactory to the Company.
(e) Notwithstanding any provision of this Agreement to the
contrary, if advised by the managing underwriter or underwriters of an offering
of securities for the account of the Company, the Company shall not be required
to effect a separate registration pursuant to this Section 2.02 during the
period starting with the date of filing by the Company of, and ending on a date
60 days following the effective date of, a registration statement pertaining to
such offering for the account of the Company; provided that the Company shall
actively employ in good faith all reasonable efforts to cause
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<PAGE>
such registration statement to become effective as soon as possible thereafter.
SECTION 2.03. Piggyback Registration. If during the Initial
Demand Period the Company proposes to file a registration statement under the
Securities Act with respect to an offering of (or including) Common Shares (i)
for the Company's own account (other than a registration statement on Form S-4
or S-8 (or any substitute form that may be adopted by the Commission)) or (ii)
for the account of any holders of Common Shares other than the Holders, then the
Company shall give written notice of such proposed filing to the Holders as soon
as practicable (but in no event less than 30 days before the anticipated filing
date), and such notice shall offer, subject to the terms and conditions hereof,
the Holders the opportunity to register such Registrable Securities as the
Holders may request, within 15 days after receipt of such notice, on the same
terms and conditions as the Company's or such other holders' shares of Common
Stock (a "Piggyback Registration").
SECTION 2.04. Reduction of Offering. (a) Notwithstanding
anything contained herein to the contrary, if the managing underwriter or
underwriters of an offering described in Section 2.02 or 2.03 shall advise the
Company that either (i) the size of the offering that the Holders, the Company
and any other persons intend to make or (ii) the combination of securities that
the Holders, the Company and such other persons intend to include in such
offering are such that the success of the offering would be materially and
adversely affected, then:
(A) if the size of the offering is the basis of such
underwriter's advice, the amount of Registrable Securities to be
offered for the account of the Holders shall be reduced in the manner
set forth in Section 2.02(c) to the extent necessary to reduce the
total amount of securities to be included in such offering to the
amount recommended by such managing underwriter or underwriters;
provided, however, that (x) in the case of a Demand Registration, the
amount of Registrable Securities to be offered for the account of the
Holders shall be reduced only after the amount of securities to be
offered for the account of the Company and such other persons has been
reduced to zero and (y) in the case of a Piggyback Registration, if
securities are being offered for the account of persons other than the
Company, then the proportion by which the amount of such Registrable
Securities intended to be offered for the account of the Holders is
reduced shall not exceed the proportion by which the amount of such
securities intended to be offered for the account of such other persons
is reduced; or
-5-
<PAGE>
(B) if the combination of securities to be offered is the
basis of such underwriter's advice, then
(x) in the case of a Demand Registration, the
Registrable Securities to be included in such offering shall
be reduced as described in clause (A) above (subject to the
proviso in clause (A)(x)) or
(y) in the case of a Piggyback Registration, the
Registrable Securities to be included in such offering shall
be reduced as described in clause (A) above (subject to the
proviso in clause (A)(y)); provided, however, that if such
reduction in the number of Registrable Securities would, in
the judgment of the managing underwriter, be insufficient to
eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such
offering, such Registrable Securities will be excluded from
such offering.
(b) If there is any reduction or exclusion by more than 50% of
Registrable Securities pursuant to Section 2.02(c) or this Section 2.04 in
connection with any registration requested pursuant to Section 2.02(a), such
registration shall not be deemed to be a Demand Registration for the purposes of
determining the maximum number of Demand Registrations the Company is obligated
to effect.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.01. Filings; Information. Subject to the
limitations in Article II, whenever the Holders request that any Registrable
Securities be registered pursuant to Section 2.02 hereof:
(a) the Company will as expeditiously as practicable prepare
and file with the Commission a registration statement on any form for
which the Company then qualifies and which counsel for the Company
shall deem appropriate and available for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended
method of distribution thereof, and use its best efforts to cause such
filed registration statement to become and remain effective for a
period of the lesser of 90 days and such period as is necessary to
complete such offering;
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<PAGE>
(b) the Company will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish
to the Holders and each managing underwriter, if any, copies thereof,
and thereafter furnish to the Holders and each such underwriter, if
any, such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits
thereto and documents incorporated by reference therein) and the
prospectus included in such registration statement (including each
preliminary prospectus) as the Holders or such underwriter may
reasonably request in order to facilitate the sale of the Registrable
Securities;
(c) after the filing of the registration statement, the
Company will promptly notify the Holders of any stop order issued or,
to the knowledge of the Company, threatened to be issued by the
Commission and take all necessary actions required to prevent the entry
of such stop order or to remove it if entered;
(d) the Company will endeavor to qualify the Registrable
Securities for offer and sale under such other securities or blue sky
laws of such jurisdictions in the United States as the Holders or the
managing underwriter, if any, reasonably (in light of the Holders'
intended plan of distribution) requests; provided, however, that the
Company will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) the Company shall, as promptly as practicable, notify the
Holders, at any time when a prospectus relating to the sale of the
Registrable Securities is required by law to be delivered in connection
with sales by an underwriter or dealer, of the occurrence of an event
requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and as promptly as practicable make available to the
Holders and to the underwriters any such supplement or amendment. The
Holders agree that, upon receipt of any notice from the Company of the
happening of
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any event of the kind described in the preceding sentence, the Holders
will forthwith discontinue the offer and sale of Registrable Securities
pursuant to the registration statement covering such Registrable
Securities until receipt of the copies of such supplemented or amended
prospectus and, if so directed by the Company, the Holders will deliver
to the Company all copies, other than permanent file copies then in the
Holders' possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the
event the Company shall give such notice, the Company shall extend the
period during which such registration statement shall be maintained
effective as provided in Section 3.01(a) hereof by the number of days
during the period from and including the date of the giving of such
notice to the date when the Company shall make available to the Holders
such supplemented or amended prospectus;
(f) the Company will enter into customary agreements
(including an underwriting agreement in customary form) and take such
other actions as are reasonably required in order to expedite or
facilitate the sale of such Registrable Securities;
(g) the Company will furnish to the Holders and to each
managing underwriter, if any, a signed counterpart, addressed to the
Holders and each underwriter, of (i) an opinion or opinions of counsel
to the Company (including a "Rule 10b-5" opinion) and (ii) a comfort
letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the
type customarily covered by opinions or comfort letters delivered to
such parties;
(h) commencing within three months after the effective date of
the registration statement, the Company will make generally available
to its securityholders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
the rules and regulations of the Commission thereunder;
(i) the Company will use its best efforts to cause all Common
Shares (including, without limitation, all Registrable Securities) to
be listed on each securities exchange, if any, or the National
Association of Securities Dealers' interdealer quotation system on
which similar securities issued by the Company are then listed; and
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(j) Management of the Company and the Participating Holders
will cooperate in the selling effort, and the Company will coordinate
and conduct a "road show" in connection with such offering.
The Company may require the Holders promptly to furnish in
writing to the Company such information regarding the Holders' plan of
distribution of the Registrable Securities and other information as the Company
may from time to time reasonably request or as may be legally required in
connection with such registration.
SECTION 3.02. Registration Expenses. In connection with any
Demand Registration or Piggyback Registration, the Holders shall be responsible
for any underwriting discounts or commission that may be payable in connection
with the sale of its securities. The Company will pay all other expenses
incurred in connection with such registration, including, but not limited to,
(i) all filing fees with the Commission, (ii) fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the securities), (iii)
printing expenses, (iv) the fees and expenses incurred in connection with the
listing of the securities, (v) fees and expenses of counsel and independent
certified public accountants for the Company (including the expenses of any
comfort letters pursuant to Section 3.01(g) hereof) and (vi) the reasonable fees
and expenses of any additional experts retained by the Company in connection
with such registration. The Company shall also pay internal Company expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties) relating to any Demand
Registration or Piggyback Registration.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01. Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Holder, its employees, officers and
directors, and each person, if any, who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities caused by
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Securities
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or
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caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information furnished in writing to the Company by or on
behalf of such Holder expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Holder if a copy of the current prospectus was
not provided to a purchaser and such current prospectus would have cured the
defect giving rise to such loss, claim, damage or liability or for any sales
occurring after the Company has informed such Holder under Section 3.01(e) and
prior to the delivery by the Company of any supplement or amendment to such
prospectus. The Company also agrees to indemnify any underwriters of the
Registrable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Holders provided in this Section 4.01.
SECTION 4.02. Indemnification by the Holders. Each Holder
agrees to indemnify and hold harmless the Company, its officers and directors,
and each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to the Holders, but only with
reference to information furnished in writing by or on behalf of such Holder
expressly for use in any registration statement or prospectus relating to the
Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus. Each Holder also agrees to indemnify and hold harmless
underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters on substantially the same basis as
that of the indemnification of the Company provided in this Section 4.02.
Notwithstanding anything to the contrary in this Agreement,
the obligation of each Holder to indemnify according to this Agreement will be
individual to each Holder and will be limited to the net proceeds received by
such Holder from the sale of Registrable Securities pursuant to such
registration statement.
SECTION 4.03. Conduct of Indemnification Proceedings. In case
any proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 4.01 or 4.02, such person (the "Indemnified Party") shall
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promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment.
SECTION 4.04. Contribution. (a) To the extent any
indemnification by an Indemnifying Party to an Indemnified Party is prohibited
or limited by law, the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party
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or Indemnified Party, and such Parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a Party as a result of the losses, claims, damages or liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
(b) The Parties agree that it would not be just and equitable
if contribution pursuant to this Section 4.04 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
ARTICLE V
COVENANT
SECTION 5.01. The Company shall cause financial results
covering the first full month of post-Merger combined operations to be published
within 90 days after the effective time of the Merger.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Participation in Underwritten Registrations. No
Holder may participate in any underwritten registered offering contemplated
hereunder unless such Holder (a) agrees to sell its securities on the basis
provided in any underwriting arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms hereof and of such
underwriting arrangements.
SECTION 6.02. Rule 144. The Company covenants that it will use
its best efforts to file any reports required to be filed by it under the
Securities Act and the Exchange Act and that it will take such further action as
the Holders may reasonably request, all to the extent required from time to time
to enable the Holders to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act,
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<PAGE>
as such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Holder, the Company
will promptly deliver to the Holders a written statement as to whether it has
complied with such requirements.
SECTION 6.03. Holdback Agreement. In connection with any
offering in which a Holder participates pursuant to this Agreement, the Company
agrees (i) not to effect any public sale or distribution of any Common Shares,
or any securities convertible into or exchangeable or exercisable for Common
Shares (other than any such sale or distribution of such securities pursuant to
registration of such securities on Form S-4 or S-8 or any successor forms or any
such sale or distribution of such securities in connection with any merger or
consolidation involving the Company or a Subsidiary or the acquisition by the
Company or a Subsidiary of the capital equity or substantially all of the assets
of any other Person), during the 14 days prior to, and during the period
recommended by the underwriter of such offering (but in no event more than 120
days) beginning on, the effective date of any registration statement except as
part of such registration statement and (ii) that any agreement entered into
after the date of this Agreement pursuant to which the Company issues or agrees
to issue any privately placed securities shall contain a provision under which
holders of such securities agree not to effect any public sale or distribution
of any such securities during the periods described in (i) above, in each case
including a sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act (except as part of any such registration, if
permitted); provided, however, that the provisions of this Section 6.03 shall
not prevent the conversion or exchange of any securities pursuant to their terms
into or for other securities.
SECTION 6.04. Assignment. The Stockholders shall be entitled
to assign the registration rights granted herein, in whole or in part, to any
transferee of Registrable Securities which is an affiliate of the transferring
Stockholder or, in the case of AT&T Investment Management Co. is a successor
trust or the trust for a successor plan in connection with or following the
reorganization of the pension plans or trust of AT&T Corp. and Lucent
Technologies Inc. provided that such Registrable Securities do not cease being
Registrable Securities pursuant to Section 2.01 upon consummation of such
transfer. Upon such assignment, each reference in this Agreement to the
"Stockholders" or the "Parties" shall be deemed to include the assignee.
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<PAGE>
SECTION 6.05. Termination. This Agreement shall be terminated
upon the earlier to occur of (i) the sale of all Registrable Securities by the
Holders and (ii) the mutual consent of the Parties; provided, however, that
Article IV shall survive such termination.
SECTION 6.06. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective Parties at the following
addresses (or at such other address for a Party as shall be specified in a
notice given in accordance with this Section 6.06) (with a copy, in each case,
to Shearman & Sterling, 599 Lexington Avenue, New York, NY 10022, Telecopier:
(212) 848-7179, Attention: Faith D. Grossnickle, Esq.):
(a) if to the Company:
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Telecopier: (804) 343-4609
Attention: Clifford A. Cutchins, IV
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Telecopier No.: (212) 403-2000
Attention: Patricia A. Vlahakis, Esq.
(b) if to [Morgan Stanley & Co., Incorporated]:
1221 Avenue of the Americas
New York, New York 10022
Telecopier: ____________
Attention: _____________
(c) if to AT&T Investment Management Co.:
---------------------
---------------------
Telecopier: ____________
Attention: _____________
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<PAGE>
(d) if to First Plaza Group Trust:
---------------------
---------------------
Telecopier: ____________
Attention: _____________
SECTION 6.07. Amendments; Waiver. (a) Subject to the terms of
Section 6.05 hereof, this Agreement may not be amended or modified except by an
instrument in writing signed by, or on behalf of, the Parties; provided,
however, that the Parties may (i) extend the time for the performance of any of
the obligations or other acts of the other Party or (ii) waive compliance with
any of the agreements or conditions of the other Party contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition, of this Agreement. The failure of any Party to assert any of its
rights hereunder shall not constitute a waiver of any such rights.
SECTION 6.08. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions set forth in this Agreement is not affected
in any manner materially adverse to any Party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the Parties as closely as possible in a mutually
acceptable manner in order that the transactions set forth in this Agreement be
consummated as originally contemplated to the fullest extent possible.
SECTION 6.09. Binding Effect; Benefit. This Agreement shall be
binding upon and shall inure to the benefit of the Parties and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the Parties or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
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<PAGE>
SECTION 6.10. Specific Performance. The Parties agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the Parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 6.11. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court.
SECTION 6.12. Headings. The descriptive headings contained
in this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 6.13. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different Parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 6.14. Waiver of Jury Trial. EACH OF THE COMPANY AND
THE STOCKHOLDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE
COMPANY OR THE STOCKHOLDERS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
SECTION 6.15. Entire Agreement. This Agreement (including the
schedules hereto) constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings among the Parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any Party
unless made in writing and signed by all Parties.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
JAMES RIVER CORPORATION OF VIRGINIA
By _________________________________
Name:
Title:
MORGAN STANLEY & CO., INCORPORATED
By _________________________________
Name:
Title:
AT&T INVESTMENT MANAGEMENT CO.
By _________________________________
Name:
Title:
FIRST PLAZA GROUP TRUST
By: Mellon Bank, N.A.,
as Trustee
By _________________________________
Name:
Title:
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Schedule I
Ownership of Shares
Immediately After The Effective Time
MS&Co. ____________________
AT&T Investment Management Co. ____________________
First Plaza Group Trust ____________________
[other affiliates] ____________________
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Exhibit 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT by and between James River Corporation of Virginia,
a Virginia corporation (the "Company"), and Miles L. Marsh (the "Executive"),
dated as of the 10th day of June, 1997, amending and restating the agreement
between the parties dated as of May 4, 1997.
1. Employment Period. Subject to the consummation of the
transactions contemplated by the Agreement and Plan of Merger among the Company,
James River Delaware, Inc. and Fort Howard Corporation ("Fort Howard") dated as
of May 4, 1997 (the "Merger Agreement"), the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the closing date of the merger contemplated by the Merger
Agreement (the "Commencement Date") and ending on the third anniversary of the
Commencement Date (the "Employment Period"); provided, however, that the
Employment Period shall automatically be extended without action by either party
for an additional three year period unless, not later than six months prior to
the third anniversary of the Commencement Date, either party shall give notice
to the other in writing that such party does not intend to extend the Employment
Period. A notice delivered by the Company that it does not intend to extend the
term of this Agreement shall hereinafter be referred to as a "Nonrenewal
Notice".
2. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, the Executive shall serve as Chairman and Chief
Executive Officer of the Company with duties and responsibilities consistent
therewith. The Executive shall be located at the Company's headquarters. During
the Employment Period, the Executive shall serve on the Board of Directors of
the Company.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full attention and time during normal business hours
to the business and affairs of the Company and to use the Executive's reasonable
best efforts to perform such responsibilities in a professional manner. It shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such
<PAGE>
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the
Commencement Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Commencement
Date shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base Salary")
in an amount no less than the Executive's annual base salary immediately prior
to the Commencement Date, payable in cash. The Annual Base Salary shall be paid
no less frequently than in equal bi-weekly installments.
(ii) Annual Bonus. During the Employment Period,
the Executive shall have an annual bonus opportunity no less than that provided
to the Executive for the year ending immediately prior to the Commencement Date.
(iii) Long-Term Incentives. Upon commencement of
the Employment Period, the Executive shall receive a grant of shares of
restricted stock (the "Restricted Stock") and performance shares (the
"Performance Shares") pursuant to the Company's 1996 Stock Incentive Plan with a
Fair Market Value of the amount set forth on Exhibit A hereto. The Restricted
Stock shall vest one-third on the first anniversary of the date of grant, an
additional one-third on the second anniversary of the date of grant and a final
one-third on the third anniversary of the date of grant. The Performance Shares
shall vest in accordance with the Company's Stock Incentive Plan. For purposes
this Section 2(b)(iii), the "Fair Market Value" of the Company's common stock
shall be the average closing price of the Company's common stock on the New York
Stock Exchange for the five trading days prior to the date of grant. The
Restricted Stock grants shall provide that if the Company shall terminate the
Executive's employment other than for Cause during the Employment Period,
including by reason of the Executive's death or Disability, or the Executive
shall terminate employment for Good Reason during the Employment Period, such
Restricted Stock shall become immediately vested.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be eligible to participate in all savings
and retirement plans, practices, policies and programs to the extent applicable
generally to
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other peer executives of the Company and its affiliated companies, including,
without limitation, the James River Corporation of Virginia Miles L. Marsh
Supplemental Retirement Plan.
(v) Welfare and Other Benefit Plans. During the
Employment Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
welfare, fringe, change of control protection, incentive, vacation and other
similar benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies.
With respect to the Company's welfare benefit plans, the Company shall cause any
such plan to waive any pre-existing condition exclusions and actively-at-work
requirements thereunder with respect to the Executive and the Executive's
eligible dependents and shall ensure that any covered expenses incurred on or
before the Commencement Date shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Commencement Date to the extent that such expenses are
taken into account for the benefit of peer executives of the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
business expenses incurred by the Executive, in accordance with the policies of
the Company. The Company shall reimburse the Executive for any losses and normal
transaction expenses taken as a result of the sale of his primary residence in
either Chicago or Connecticut, such loss to take into account the cost of
purchase, improvements and all real estate commissions. The provisions of the
preceding sentence shall survive the termination of this Agreement.
(vii) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and an
automobile of his choice and payment of related expenses.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the Vacation
Policy as set forth in the Company's Benefits and Policies Manual, but in no
event less than four weeks per year, as defined in the Benefits and Policies
Manual.
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(ix) Indemnity. The Executive shall be indemnified
by the Company against claims arising in connection with the Executive's status
as an employee, officer, director or agent of the Company in accordance with the
Company's indemnity policies for its senior executives, subject to applicable
law.
3. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 9(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Commencement
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall have the meaning set forth in the
Company's Long-Term Disability Plan.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) intentional gross misconduct by the Executive damaging in
a material way to the Company, or
(ii) a material breach of this Agreement, after the Company
has given the Executive notice thereof and a reasonable opportunity to
cure.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean a material breach by the Company of this Agreement after the
Executive has given the Company notice of the breach and a reasonable
opportunity to cure.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 9(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the
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facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than thirty days
after the giving of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Commencement Date, as the
case may be.
4. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause, death or
Disability, or the Executive shall terminate employment for Good Reason or the
Company shall deliver a Nonrenewal Notice and the Executive thereafter
terminates the Executive's employment at the end of the Employment Period (a
"Nonrenewal Termination"):
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate
of the amounts set forth in clauses A, B and C below:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the highest bonus
paid to the Executive with respect to the three years ending
prior to the year in which the Date of Termination occurs (the
"Minimum Bonus") and (y) a fraction, the numerator of which is
the number of days in the current calendar year through the
Date of Termination, and the denominator of which is 365 and
(3) any compensation previously deferred by the Executive
(together with
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any accrued interest or earnings thereon) and any other
nonqualified benefit plan balances to the extent not
theretofore paid (the sum of the amounts described in
clauses (1), (2), and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount equal to the product of (1)
three, or two in the case of a Nonrenewal Termination and (2)
the sum of (x) the Executive's Annual Base Salary and (y) the
Minimum Bonus; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the Company's
qualified defined benefit retirement plan or such other
qualified defined benefit pension plan in which the Executive
participates, if any (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than
those in effect under the Company's Retirement Plan
immediately prior to the Commencement Date), and any excess or
supplemental retirement plan in which the Executive
participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for three
years, or two years in the case of a Nonrenewal Termination,
after the Date of Termination assuming for this purpose that
all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three or two years, as
the case may be, is the sum of the Annual Base Salary and
Minimum Bonus over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under
the Retirement Plan and the SERP as of the Date of
Termination;
(ii) the Restricted Stock and any other stock awards
that were outstanding immediately prior to the Commencement Date
("Prior Stock Awards") shall become immediately vested and/or
exercisable, as the case may be;
(iii) for three years, or two years in the case of a
Nonrenewal Termination, after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits
to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the welfare
plans, programs, practices and policies described in Section 2(b)(v) of
this Agreement if the Executive's employment had not been terminated,
including the cost of $3 million of term life insurance on the
Executive's life or, if more favorable to the
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Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies
and their families, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary
to those provided under such other plan during such applicable period
of eligibility. For purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three or two years,
as the case may be, after the Date of Termination and to have retired
on the last day of such period;
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
entitled to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies,
excluding any severance plan or policy except to the extent that such
plan or policy provides, in accordance with its terms, benefits with a
value in excess of the benefits payable to the Executive under this
Section 4 (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(v) the Executive shall be provided with title to the Company
car.
(b) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause or the Executive terminates employment
without Good Reason during the Employment Period, this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay to
the Executive (x) Accrued Obligations less the amount determined under Section
4(a)(i)A(2) hereof, and (y) Other Benefits, in each case to the extent
theretofore unpaid.
(c) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30
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<PAGE>
days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 4(c) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive death benefits as in effect on the date of the
Executive's death with respect to other peer executives of the Company and its
affiliated companies and their beneficiaries. In addition, the Restricted Stock
and any Prior Stock Awards shall vest immediately and/or become exercisable, as
the case may be.
(d) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 4(d)
shall include, and the Executive shall be entitled after the Disability
Commencement Date to receive, disability and other benefits as in effect
generally with respect to other peer executives of the Company and its
affiliated companies and their families. In addition, the Restricted Stock and
any Prior Stock Awards shall vest immediately and/or become exercisable, as the
case may be.
5. Confidential Information; Noncompetition. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process
(provided the Company has been given notice of and opportunity to challenge or
limit the scope of disclosure purportedly so required), communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it.
(b) In the event of a termination of the Executive's
employment by the Company for Cause or by the Executive without Good Reason,
until the second anniversary of the Executive's Date of Termination, the
Executive will
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not directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director or otherwise with, or have any financial interest
in, any business which is in competition with the Company or any of its
affiliates in any geographic area where such business is being conducted during
such period. Ownership, for personal investment purposes only of not in excess
of 2% of the voting stock of any publicly held corporation shall not constitute
a violation hereof.
6. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
7. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this
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<PAGE>
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary or any
termination of this Agreement notwithstanding, in the event it shall be
determined that any payment or distribution or benefit made or provided by the
Company or its affiliates to or for the benefit of the Executive whether
pursuant to this Agreement or otherwise, and determined without regard to any
additional payments required under this Section 8) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Coopers & Lybrand LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company
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<PAGE>
exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
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<PAGE>
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
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(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company:
120 Tredegar Street
Richmond, VA 23219
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) On and after the Commencement Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof and, subject to the closing of the Merger, any such agreement
shall be deemed terminated without any remaining obligations of either party
thereunder. Without limiting the foregoing, in the event the Executive was an
employee of the Company prior to the Commencement Date, any provision of a prior
agreement or other plan or arrangement applicable to the Executive that would
have accelerated the vesting of awards under the Company's Stock Incentive Plans
or benefits under other plans or arrangements of the Company shall not apply.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Miles L. Marsh
------------------------------------------
Miles L. Marsh
JAMES RIVER CORPORATION OF VIRGINIA
By /s/ Daniel J. Girvan
---------------------------------------
Daniel J. Girvan
Senior Vice President,
Human Resources
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Exhibit 10.4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT by and between James River Corporation of Virginia,
a Virginia corporation (the "Company") and Michael T. Riordan (the "Executive"),
dated as of the 26th day of June, 1997, amending and restating the agreement
between the parties dated as of the 4th day of May, 1997.
1. Employment Period. Subject to the consummation of the
transactions contemplated by the Agreement and Plan of Merger among the Company,
James River Delaware, Inc. and Fort Howard Corporation ("Fort Howard") dated as
of May 4, 1997 (the "Merger Agreement"), the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the closing date of the merger contemplated by the Merger
Agreement (the "Commencement Date") and ending on the third anniversary of the
Commencement Date (the "Employment Period"); provided, however that the
Employment Period shall automatically be extended without action by either party
for an additional three year period unless, not later than six months prior to
the third anniversary of the Commencement Date, either party shall give notice
to the other in writing that such party does not intend to extend the Employment
Period. A notice delivered by the Company that it does not intend to extend the
term of this Agreement shall hereinafter be referred to as a "Nonrenewal
Notice."
2. Terms of Employment. (a) Position and Duties. (i) During
the Employment Period, the Executive shall serve as President and Chief
Operating Officer of the Company, reporting directly to the Chief Executive
Officer of the Company with duties and responsibilities consistent therewith.
Until the second anniversary of the Commencement Date, the Executive's services
shall be performed at Fort Howard's current headquarters location, or at such
other place within a fifty-mile radius of such current location as the Board of
Directors of the Company (the "Board") may from time to time deem appropriate.
Following the second anniversary of the Commencement Date, the Executive's
services may be required to be performed in the Chicago, Illinois metropolitan
area or in such other location as shall be mutually agreed (in any such case, a
"Permitted Location"). Notwithstanding the foregoing, the Executive shall be
required to travel to the extent necessary to the performance of the Executive's
responsibilities under this Agreement. The Executive shall use Company owned or
leased aircraft for purposes of such travel whenever practicable, and the
Company recognizes that it may
<PAGE>
from time to time be necessary, appropriate, desirable or convenient for the
Executive to be accompanied in such travel by persons who are not employees of
the Company, including the Executive's spouse and other members of the
Executive's family. During the Employment Period, the Executive shall serve on
the Board.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full attention and time during normal business hours to the
business and affairs of the Company and to use the Executive's reasonable best
efforts to perform such responsibilities in a professional manner. It shall not
be a violation of this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Executive prior
to the Commencement Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Commencement Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base Salary")
in an amount of no less than $700,000, payable in cash. The Annual Base Salary
shall be paid no less frequently than in equal bi-weekly installments.
(ii) Annual Bonus; Special Bonus. The Executive's bonus under
Fort Howard's Management Incentive Plan (the "MIP") for the fiscal year ending
December 31, 1997 shall be calculated based on the greater of (x) the
performance level of Fort Howard attained as of the Effective Time and (y)
actual 1997 performance, and for the fiscal year ending December 31, 1998, the
Executive's bonus under the MIP (or a successor bonus plan) shall be at a level
that is no less than 80% of the bonus paid to the Chief Executive Officer of the
Company for such year. In addition, in recognition of the extraordinary efforts
that shall be required on the Executive's part in assisting in the integration
of Fort Howard and the Company following the Merger, the Executive shall receive
a special service recognition bonus (the "Special Service Bonus") in the amount
of $1 million to be paid in a cash lump sum on the six-month anniversary of the
Commencement Date.
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(iii) Long-Term Incentives. Upon commencement of the
Employment Period, the Executive shall receive a grant of 100,000 shares of
restricted stock (the "Restricted Stock") and 50,000 performance shares (the
"Performance Shares") pursuant to the Company's 1996 Stock Incentive Plan. The
Restricted Stock shall vest as follows:
Date Vested Shares
---- -------------
First anniversary of Commencement Date 50,000
Second anniversary of Commencement Date 66,666
Third anniversary of Commencement Date 83,333
Fourth anniversary of Commencement Date 100,000
The Performance Shares shall vest in accordance with the Company's 1996 Stock
Incentive Plan in a manner consistent with performance share awards granted to
the Chief Executive Officer of the Company. On the Commencement Date, the
Company shall grant the Executive options to purchase 250,000 shares of common
stock of the Company (the "Options") which shall vest in equal installments on
the first two anniversaries of the Commencement Date. The Options shall have an
exercise price equal to the Fair Market Value of the stock subject thereto on
the date of grant. For purposes this Section 2(b)(iii), the "Fair Market Value"
of the Company's common stock shall be the average closing price of the
Company's common stock on the New York Stock Exchange for the five trading days
prior to the date of grant. The Restricted Stock, Performance Shares and Option
grants shall provide that if the Company shall terminate the Executive's
employment other than for Cause during the Employment Period, including by
reason of the Executive's death or Disability, or the Executive shall terminate
employment for Good Reason during the Employment Period, such stock awards shall
become immediately vested.
(iv) Savings and Retirement Plans. The Company shall provide
the Executive with a supplemental pension arrangement (the "Company Supplemental
Plan") that shall provide the Executive with an annual pension upon termination
of employment with the Company after attaining the age of 55 of not less than
$500,000 (or, at the Executive's election, the lump-sum equivalent, which shall
be payable at the time of termination), provided that, in the event of a
termination of the Executive's employment by the Company without Cause
(including by reason of the Executive's Disability or, if applicable, death) or
a resignation by the Executive for Good Reason prior to the attainment of age
55, the Executive shall receive an annual pension equal to not less than
$250,000 commencing at age 55 (or, at the Executive's election, the lump-sum
equivalent, which shall be payable at the time of termination). The other terms
and conditions of the Company
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Supplemental Plan shall be mutually agreed between the Executive and the
Company, but shall be no less favorable than those provided under the
supplemental pension arrangements maintained for the Chief Executive Officer of
the Company. During the Employment Period, the Executive shall be eligible to
participate in all other savings and retirement plans, practices, policies and
programs to the extent applicable generally to the Chief Executive Officer of
the Company, other than the Miles L. Marsh Supplemental Retirement Plan.
(v) Welfare and Other Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare,
fringe, change of control protection, incentive, vacation and other similar
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to the
Chief Executive Officer of the Company. For purposes of all such plans, the
Company shall credit the Executive with full credit for all service accrued or
deemed accrued with Fort Howard for purposes of eligibility to participate and
receive benefits, vesting and benefit accruals, except the Executive shall not
receive such credit for purposes of benefit accruals in a defined benefit
pension plan. With respect to the Company's welfare benefit plans, the Company
shall cause any such plan to waive any pre-existing condition exclusions and
actively-at-work requirements thereunder with respect to the Executive and the
Executive's eligible dependents and shall ensure that any covered expenses
incurred on or before the Commencement Date shall be taken into account for
purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions after the Commencement Date to the extent that such
expenses are taken into account for the benefit of the Chief Executive Officer
of the Company.
(vi) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive, in accordance with the policies of the
Company.
(vii) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits on the same basis as the Chief
Executive Officer, including, without limitation, tax and financial planning
services, payment of club dues, and an automobile of his choice and payment of
related expenses.
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(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the Vacation Policy as set
forth in the Company's Benefits and Policies Manual, but in no event less than
four weeks per year, as defined in the Benefits and Policies Manual.
(ix) Indemnity. The Executive shall be indemnified by the
Company against claims arising in connection with the Executive's status as an
employee, officer, director or agent of the Company in accordance with the
Company's indemnity policies for its senior executives, subject to applicable
law.
3. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 9(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Commencement
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall have the meaning set forth in the
Company's Long-Term Disability Plan.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) intentional gross misconduct by the Executive
damaging in a material way to the Company, or
(ii) a material breach of this Agreement, after the
Company has given the Executive notice thereof and a reasonable
opportunity to cure.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean a material breach by the Company of this Agreement after the
Executive has given the Company notice of the breach and a reasonable
opportunity to cure.
(d) Special Termination Rights. Notwithstanding anything to
the contrary in this Agreement, for a period of
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24 months following the Commencement Date, the Executive shall have the right to
terminate his employment for any reason pursuant to a Notice of Termination
delivered prior to the end of such 24 month period (a "Special Termination").
(e) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 9(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, (iii) if the Date
of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice), or (iv) provides 30 days notice from the
Executive in the event of a Special Termination. The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Commencement Date, as the
case may be.
4. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause, death or
Disability, or the Executive shall terminate employment for Good Reason or the
Company shall deliver a Nonrenewal Notice and the Executive thereafter
terminates the Executive's employment at the end of the Employment Period (a
"Nonrenewal Termination"):
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(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
amounts set forth in clauses A, B and C below:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the highest bonus paid to the
Executive with respect to the three years ending prior to the
year in which the Date of Termination occurs (the "Minimum
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current calendar year through the Date
of Termination, and the denominator of which is 365 and (3)
any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any other nonqualified benefit plan balances to the extent not
theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of (1) three, two
in the case of a Nonrenewal Termination, and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Minimum
Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified
defined benefit retirement plan or such other qualified
defined benefit pension plan in which the Executive
participates, if any (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than
those in effect under the Company's Retirement Plan
immediately prior to the Commencement Date), and any excess or
supplemental retirement plan in which the Executive
participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for three
years, two years in the case of a Nonrenewal Termination,
after the Date of Termination assuming for this purpose that
all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three or two years, as
the case may be, is the sum of the Annual Base Salary and
Minimum Bonus over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under
the Retirement Plan and the SERP as of the Date of
Termination;
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(ii) the Restricted Stock, Performance Shares and
Options (collectively, the "Stock Awards") shall become immediately vested
and/or exercisable, as the case may be;
(iii) for three years, two years in the case of a
Nonrenewal Termination, after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the welfare plans, programs, practices and policies
described in Section 2(b)(v) of this Agreement if the Executive's employment had
not been terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to the Chief Executive Officer of
the Company and his family, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided under
such other plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed until
three or two years, as the case may be, after the Date of Termination and to
have retired on the last day of such period;
(iv) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is entitled to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies, excluding any severance plan or policy except to the extent
that such plan or policy provides, in accordance with its terms,
benefits with a value in excess of the benefits payable to the
Executive under this Section 4 (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits");
(v) the Executive shall be provided with free and
clear title to the Company car; and
(vi) to the extent not previously paid, the
Executive shall be paid the Special Service Bonus.
(b) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause or the
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<PAGE>
Executive terminates employment without Good Reason during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x) Accrued
Obligations less the amount determined under Section 4(a)(i)A(2) hereof, and (y)
Other Benefits, in each case to the extent theretofore unpaid.
(c) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 4(c) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive death
benefits as in effect on the date of the Executive's death with respect to other
peer executives of the Company and its affiliated companies and their
beneficiaries. In addition, the Stock Awards shall vest immediately and/or
become exercisable, as the case may be.
(d) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 4(d)
shall include, and the Executive shall be entitled after the Disability
Commencement Date to receive, disability and other benefits as in effect
generally with respect to other peer executives of the Company and its
affiliated companies and their families. In addition, the Stock Awards shall
vest immediately and/or become exercisable, as the case may be.
(e) Special Termination. In the event of a Special
Termination, the Executive shall be entitled to payment of the amounts set forth
in Section 4(a)(i), Section 4(a)(iii) and Section 4(a)(iv).
5. Confidential Information; Noncompetition. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which
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<PAGE>
shall have been obtained by the Executive during the Executive's employment by
the Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process
(provided the Company has been given notice of and opportunity to challenge or
limit the scope of disclosure purportedly so required), communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it.
(b) In the event of a termination of the Executive's
employment by the Company for Cause or by the Executive without Good Reason,
until the second anniversary of the Executive's Date of Termination, the
Executive will not directly or indirectly, own, manage, operate, control or
participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner, director or otherwise with, or have
any financial interest in, any business which is in competition with the Company
or any of its affiliates in any geographic area where such business is being
conducted during such period. Ownership, for personal investment purposes only
of not in excess of 2% of the voting stock of any publicly held corporation
shall not constitute a violation hereof.
6. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
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<PAGE>
7. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary or any
termination of this Agreement notwithstanding, in the event it shall be
determined that any payment or distribution or benefit made or provided by the
Company or its affiliates, including Fort Howard, to or for the benefit of the
Executive (whether pursuant to this Agreement or otherwise, and determined
without regard to any additional payments required under this Section 8) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by
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<PAGE>
Coopers & Lybrand LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 8(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
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<PAGE>
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 8(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 8(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 8(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to
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<PAGE>
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Miscellaneous. (a) This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
--------------------
c/o Fort Howard Corporation
1919 South Broadway
Green Bay, WI 54304
If to the Company:
------------------
120 Tredegar Street
Richmond, VA 23219
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) On and after the Commencement Date, this Agreement shall
supersede any other agreement between the parties or between Fort Howard and the
Executive with respect to the subject matter hereof and, subject to the closing
of
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the Merger, any such agreement shall be deemed terminated without any
remaining obligations of either party thereunder.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Michael T. Riordan
----------------------------------------
Michael T. Riordan
JAMES RIVER CORPORATION OF VIRGINIA
By /s/ Daniel J. Girvan
-------------------------------------
Daniel J. Girvan
Senior Vice President,
Human Resources
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Exhibit 10.5
Form of Employment Agreement for Fort Howard Executives
EMPLOYMENT AGREEMENT
AGREEMENT by and between James River Corporation of Virginia,
a Virginia corporation (the "Company") and _____ (the "Executive"), dated as of
the ______ day of ______, 1997.
1. Employment Period. Subject to the consummation of the
transactions contemplated by the Agreement and Plan of Merger among the Company,
James River Delaware, Inc. and Fort Howard Corporation ("Fort Howard") dated as
of May 4, 1997 (the "Merger Agreement"), the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the closing date of the merger contemplated by the Merger
Agreement (the "Commencement Date") and ending on the third anniversary of the
Commencement Date (the "Employment Period"); provided, however that the
Employment Period shall automatically be extended without action by either party
for an additional three year period unless, not later than six months prior to
the third anniversary of the Commencement Date, either party shall give notice
to the other in writing that such party does not intend to extend the Employment
Period. A notice delivered by the Company that it does not intend to extend the
term of this Agreement shall hereinafter be referred to as a "Nonrenewal
Notice."
2. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, the Executive shall serve in the position and at
the location set forth on Exhibit A hereto.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full attention and time during normal business hours
to the business and affairs of the Company and to use the Executive's reasonable
best efforts to perform such responsibilities in a professional manner. It shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Commencement Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
<PAGE>
Commencement Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base Salary")
in an amount no less than the Executive's annual base salary immediately prior
to the Commencement Date, payable in cash. The Annual Base Salary shall be paid
no less frequently than in equal bi-weekly installments.
(ii) Annual Bonus. The Executive's bonus under Fort
Howard's Management Incentive Plan (the "MIP") for the fiscal year ending
December 31, 1997 shall be calculated based on the greater of (x) the
performance level of Fort Howard attained as of the Effective Time and (y)
actual 1997 performance. During the Employment Period for fiscal years beginning
after December 31, 1997, the Executive shall have an annual bonus opportunity no
less than that provided to peer executives of the Company and its affiliates.
(iii) Long-Term Incentives. Upon commencement of the
Employment Period, the Executive shall receive a grant of shares of restricted
stock (the "Restricted Stock") and performance shares (the "Performance Shares")
pursuant to the Company's 1996 Stock Incentive Plan with a Fair Market Value of
the amount set forth on Exhibit A hereto. The Restricted Stock shall vest
one-third on the first anniversary of the date of grant, an additional one-third
on the second anniversary of the date of grant and a final one-third on the
third anniversary of the date of grant. The Performance Shares shall vest in
accordance with the Company's Stock Incentive Plan in a manner consistent with
performance share grants made to peer executives of the Company. For purposes
this Section 2(b)(iii), the "Fair Market Value" of the Company's common stock
shall be the average closing price of the Company's common stock on the New York
Stock Exchange for the five trading days prior to the date of grant. The
Restricted Stock grants shall provide that if the Company shall terminate the
Executive's employment other than for Cause during the Employment Period,
including by reason of the Executive's death or Disability, or the Executive
shall terminate employment for Good Reason during the Employment Period, such
Restricted Stock shall become immediately vested.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be eligible to participate in all savings
and retirement plans, practices, policies and pro-
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grams to the extent applicable generally to other peer executives of the Company
and its affiliated companies.
(v) Welfare and Other Benefit Plans. During the
Employment Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
welfare, fringe, change of control protection, incentive, vacation and other
similar benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies.
For purposes of all such plans, the Company shall credit the Executive with full
credit for all service accrued or deemed accrued with Fort Howard for purposes
of eligibility to participate and receive benefits, vesting and benefit
accruals, except that the Executive shall not receive such credit for purposes
of benefit accruals in a defined benefit pension plan. With respect to the
Company's welfare benefit plans, the Company shall cause any such plan to waive
any pre-existing condition exclusions and actively-at-work requirements
thereunder with respect to the Executive and the Executive's eligible dependents
and shall ensure that any covered expenses incurred on or before the
Commencement Date shall be taken into account for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions after
the Commencement Date to the extent that such expenses are taken into account
for the benefit of peer executives of the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
business expenses incurred by the Executive, in accordance with the policies of
the Company.
(vii) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and an
automobile of his choice and payment of related expenses.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the Vacation
Policy as set forth in the Company's Benefits and Policies Manual, but in no
event less than four weeks per year, as defined in the Benefits and Policies
Manual.
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<PAGE>
(ix) Indemnity. The Executive shall be indemnified
by the Company against claims arising in connection with the Executive's status
as an employee, officer, director or agent of the Company in accordance with the
Company's indemnity policies for its senior executives, subject to applicable
law.
3. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 9(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Commencement
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall have the meaning set forth in the
Company's Long-Term Disability Plan.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) intentional gross misconduct by the Executive damaging in a
material way to the Company, or
(ii) a material breach of this Agreement, after the Company has
given the Executive notice thereof and a reasonable opportunity to
cure.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean a material breach by the Company of this Agreement after the
Executive has given the Company notice of the breach and a reasonable
opportunity to cure.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 9(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances
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claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Commencement Date, as the
case may be.
4. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause, death or
Disability, or the Executive shall terminate employment for Good Reason or the
Company shall deliver a Nonrenewal Notice and the Executive thereafter
terminates the Executive's employment at the end of the Employment Period (a
"Nonrenewal Termination"):
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
amounts set forth in clauses A, B and C below:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the highest bonus paid to the
Executive with respect to the three years ending prior to the
year in which the Date of Termination occurs (the "Minimum
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current calendar year through the Date
of Termi-
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<PAGE>
nation, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any other
nonqualified benefit plan balances to the extent not
theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of (1) three, or
two in the case of a Nonrenewal termination and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Minimum
Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified
defined benefit retirement plan or such other qualified
defined benefit pension plan in which the Executive
participates, if any (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than
those in effect under the Company's Retirement Plan
immediately prior to the Commencement Date), and any excess or
supplemental retirement plan in which the Executive
participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for three
years, or two years in the case of a Nonrenewal Termination,
after the Date of Termination assuming for this purpose that
all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three or two years, as
the case may be, is the sum of the Annual Base Salary and
Minimum Bonus over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under
the Retirement Plan and the SERP as of the Date of
Termination;
(ii) the Restricted Stock and any other stock awards that were
outstanding immediately prior to the Commencement Date ("Prior Stock
Awards") shall become immediately vested and/or exercisable, as the
case may be;
(iii) for three years, or two years in the case of a Nonrenewal
Termination, after the Executive's Date of Termination, or such longer
period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the welfare
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plans, programs, practices and policies described in Section 2(b)(v) of
this Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company
and its affiliated companies and their families, provided, however,
that if the Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits)
of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to
have remained employed until three years or two years, as the case may
be, after the Date of Termination and to have retired on the last day
of such period;
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
entitled to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies,
excluding any severance plan or policy except to the extent that such
plan or policy provides, in accordance with its terms, benefits with a
value in excess of the benefits payable to the Executive under this
Section 4 (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(v) the Executive shall be provided with free and clear title to
the Company car.
(b) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause or the Executive terminates employment
without Good Reason during the Employment Period, this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay to
the Executive (x) Accrued Obligations less the amount determined under Section
4(a)(i)A(2) hereof, and (y) Other Benefits, in each case to the extent
theretofore unpaid.
(c) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the
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<PAGE>
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 4(c) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive death benefits as in effect on the date of the
Executive's death with respect to other peer executives of the Company and its
affiliated companies and their beneficiaries. In addition, the Restricted Stock
and any Prior Stock Awards shall vest immediately and/or become exercisable, as
the case may be.
(d) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 4(d)
shall include, and the Executive shall be entitled after the Disability
Commencement Date to receive, disability and other benefits as in effect
generally with respect to other peer executives of the Company and its
affiliated companies and their families. In addition, the Restricted Stock and
any Prior Stock Awards shall vest immediately and/or become exercisable, as the
case may be.
5. Confidential Information; Noncompetition. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process
(provided the Company has been given notice of and opportunity to challenge or
limit the scope of disclosure purportedly so required), communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it.
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(b) In the event of a termination of the Executive's by the
Company for Cause or by the Executive without Good Reason, until the second
anniversary of the Executive's Date of Termination, the Executive will not
directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director or otherwise with, or have any financial interest
in, any business which is in competition with the Company or any of its
affiliates in any geographic area where such business is being conducted during
such period. Ownership, for personal investment purposes only of not in excess
of 2% of the voting stock of any publicly held corporation shall not constitute
a violation hereof.
6. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
7. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or other-
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<PAGE>
wise) to all or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary or any
termination of this Agreement notwithstanding, in the event it shall be
determined that any payment or distribution or benefit made or provided by the
Company or its affiliates, including Fort Howard, to or for the benefit of the
Executive whether pursuant to this Agreement or otherwise, and determined
without regard to any additional payments required under this Section 8) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Coopers & Lybrand LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code
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<PAGE>
at the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
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foregoing provisions of this Section 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Miscellaneous. (a) This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without reference to principles of conflict
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of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
--------------------
If to the Company:
------------------
120 Tredegar Street
Richmond, VA 23219
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) On and after the Commencement Date, this Agreement shall
supersede any other agreement between the parties or between Fort Howard and the
Executive with respect to the subject matter hereof and, subject to the closing
of the Merger, any such agreement shall be deemed terminated without any
remaining obligations of either party thereunder.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
------------------------
[Executive]
JAMES RIVER CORPORATION OF VIRGINIA
By
--------------------------------
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Exhibit 10.6
Form of Employment Agreement for James River Executives
EMPLOYMENT AGREEMENT
AGREEMENT by and between James River Corporation of Virginia,
a Virginia corporation (the "Company") and _____ (the "Executive"), dated as of
the ______ day of ______, 1997.
1. Employment Period. Subject to the consummation of the
transactions contemplated by the Agreement and Plan of Merger among the Company,
James River Delaware, Inc. and Fort Howard Corporation ("Fort Howard") dated as
of May 4, 1997 (the "Merger Agreement"), the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the closing date of the merger contemplated by the Merger
Agreement (the "Commencement Date") and ending on the third anniversary of the
Commencement Date (the "Employment Period"); provided, however that the
Employment Period shall automatically be extended without action by either party
for an additional three year period unless, not later than six months prior to
the third anniversary of the Commencement Date, either party shall give notice
to the other in writing that such party does not intend to extend the Employment
Period. A notice delivered by the Company that it does not intend to extend the
term of this Agreement shall hereinafter be referred to as a "Nonrenewal
Notice."
2. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, the Executive shall serve in the position and at
the location set forth on Exhibit A hereto.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full attention and time during normal business hours
to the business and affairs of the Company and to use the Executive's reasonable
best efforts to perform such responsibilities in a professional manner. It shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly
<PAGE>
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Commencement Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Commencement Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base Salary")
in an amount no less than the Executive's annual base salary immediately prior
to the Commencement Date, payable in cash. The Annual Base Salary shall be paid
no less frequently than in equal bi-weekly installments.
(ii) Annual Bonus. During the Employment Period,
the Executive shall have an annual bonus opportunity no less than that provided
to peer executives of the Company and its affiliates.
(iii) Long-Term Incentives. Upon commencement of
the Employment Period, the Executive shall receive a grant of shares of
restricted stock (the "Restricted Stock") and performance shares (the
"Performance Shares") pursuant to the Company's 1996 Stock Incentive Plan with a
Fair Market Value of the amount set forth on Exhibit A hereto. The Restricted
Stock shall vest one-third on the first anniversary of the date of grant, an
additional one-third on the second anniversary of the date of grant and a final
one-third on the third anniversary of the date of grant. The Performance Shares
shall vest in accordance with the Company's Stock Incentive Plan in a manner
consistent with performance shares granted to other peer executives. For
purposes this Section 2(b)(iii), the "Fair Market Value" of the Company's common
stock shall be the average closing price of the Company's common stock on the
New York Stock Exchange for the five trading days prior to the date of grant.
The Restricted Stock grants shall provide that if the Company shall terminate
the Executive's employment other than for Cause during the Employment Period,
including by reason of the Executive's death or Disability, or the Executive
shall terminate employment for Good Reason during the Employment Period, such
Restricted Stock shall become immediately vested.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be eligible to participate in all savings
and retirement plans, practices, policies and
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programs to the extent applicable generally to other peer executives of the
Company and its affiliated companies.
(v) Welfare and Other Benefit Plans. During the
Employment Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
welfare, fringe, change of control protection, incentive, vacation and other
similar benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
business expenses incurred by the Executive, in accordance with the policies of
the Company.
(vii) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and an
automobile of his choice and payment of related expenses.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the Vacation
Policy as set forth in the Company's Benefits and Policies Manual, but in no
event less than four weeks per year, as defined in the Benefits and Policies
Manual.
(ix) Indemnity. The Executive shall be indemnified
by the Company against claims arising in connection with the Executive's status
as an employee, officer, director or agent of the Company in accordance with the
Company's indemnity policies for its senior executives, subject to applicable
law.
3. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 9(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
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day after receipt of such notice by the Executive (the "Disability Commencement
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall have the meaning set forth in the
Company's Long-Term Disability Plan.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) intentional gross misconduct by the Executive damaging
in a material way to the Company, or
(ii) a material breach of this Agreement, after the Company
has given the Executive notice thereof and a reasonable opportunity to
cure.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean a material breach by the Company of this Agreement after the
Executive has given the Company notice of the breach and a reasonable
opportunity to cure.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 9(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company
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for Cause, or by the Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein, as the case may be,
(ii) if the Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Commencement Date, as the case may be.
4. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause, death or
Disability, or the Executive shall terminate employment for Good Reason or the
Company shall deliver a Nonrenewal Notice and the Executive thereafter
terminates the Executive's employment at the end of the Employment Period (a
"Nonrenewal Termination"):
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
amounts set forth in clauses A, B and C below:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the highest bonus paid to the
Executive with respect to the three years ending prior to the
the year in which the Date of Termination occurs (the
"Minimum Bonus") and (y) a fraction, the numerator of which
is the number of days in the current calendar year through
the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any other nonqualified benefit plan balances to the extent
not theretofore paid (the sum of the amounts described in
clauses (1), (2), and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount equal to the product of (1) three, or
two in the case of a Nonrenewal Termination, and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Minimum
Bonus; and
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<PAGE>
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified
defined benefit retirement plan or such other qualified
defined benefit pension plan in which the Executive
participates, if any (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than
those in effect under the Company's Retirement Plan
immediately prior to the Commencement Date), and any excess or
supplemental retirement plan in which the Executive
participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for three
years, or two years in the case of a Nonrenewal Termination,
after the Date of Termination assuming for this purpose that
all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years, or two
years, as the case may be, is the sum of the Annual Base
Salary and Minimum Bonus over (b) the actuarial equivalent of
the Executive's actual benefit (paid or payable), if any,
under the Retirement Plan and the SERP as of the Date of
Termination;
(ii) the Restricted Stock and any other stock awards that were
outstanding immediately prior to the Commencement Date ("Prior Stock
Awards") shall become immediately vested and/or exercisable, as the
case may be;
(iii) for three years, or two years in the case of a
Nonrenewal Termination, after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits
to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the welfare
plans, programs, practices and policies described in Section 2(b)(v) of
this Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company
and its affiliated companies and their families, provided, however,
that if the Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. For purposes of
determining eligibility
-6-
<PAGE>
(but not the time of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed
until three years or two years, as the case may be, after the Date of
Termination and to have retired on the last day of such period;
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
entitled to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies,
excluding any severance plan or policy except to the extent that such
plan or policy provides, in accordance with its terms, benefits with a
value in excess of the benefits payable to the Executive under this
Section 4 (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(v) the Executive shall be provided with free and clear title
to the Company car.
(b) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause or the Executive terminates employment
without Good Reason during the Employment Period, this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay to
the Executive (x) Accrued Obligations less the amount determined under Section
4(a)(i)A(2) hereof, and (y) Other Benefits, in each case to the extent
theretofore unpaid.
(c) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 4(c) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive death
benefits as in effect on the date of the Executive's death with respect to other
peer executives of the Company and its affiliated companies and their
beneficiaries. In addition, the Restricted Stock and any
-7-
<PAGE>
Prior Stock Awards shall vest immediately and/or become exercisable, as the case
may be.
(d) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 4(d)
shall include, and the Executive shall be entitled after the Disability
Commencement Date to receive, disability and other benefits as in effect
generally with respect to other peer executives of the Company and its
affiliated companies and their families. In addition, the Restricted Stock and
any Prior Stock Awards shall vest immediately and/or become exercisable, as the
case may be.
5. Confidential Information; Noncompetition. (a) The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies, and their respective businesses, which shall
have been obtained by the Executive during the Executive's employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process
(provided the Company has been given notice of and opportunity to challenge or
limit the scope of disclosure purportedly so required), communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it.
(b) In the event of a termination of the Executive's by the
Company for Cause or by the Executive without Good Reason, until the second
anniversary of the Executive's Date of Termination, the Executive will not
directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director or otherwise with, or have any financial interest
in, any business which is in competition with the Company or any of its
affiliates in any geographic area where such business is being conducted during
such period. Ownership, for personal
-8-
<PAGE>
investment purposes only of not in excess of 2% of the voting stock of any
publicly held corporation shall not constitute a violation hereof.
6. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
7. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
-9-
<PAGE>
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary or any
termination of this Agreement notwithstanding, in the event it shall be
determined that any payment or distribution or benefit made or provided by the
Company or its affiliates, including Fort Howard, to or for the benefit of the
Executive whether pursuant to this Agreement or otherwise, and determined
without regard to any additional payments required under this Section 8) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Coopers & Lybrand LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 8(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment
-10-
<PAGE>
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determi-
-11-
<PAGE>
nation before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay such claim and sue for
a refund, the Company shall advance the amount of such payment to the Executive,
on an interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
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<PAGE>
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
--------------------
If to the Company:
------------------
120 Tredegar Street
Richmond, VA 23219
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) On and after the Commencement Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof and, subject to the closing of the Merger, any such agreement
shall be deemed terminated without any remaining obligations of either party
thereunder. Without limiting the foregoing, in the event the Executive was an
employee of the Company prior to the Commencement Date, any provision of a prior
agreement or other plan or arrangement applicable to the Executive that would
have accelerated the vesting
-13-
<PAGE>
of awards under the Company's Stock Incentive Plans or benefits under other
plans or arrangements of the Company shall not apply.
-14-
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
------------------------
[Executive]
JAMES RIVER CORPORATION OF VIRGINIA
By__________________________________
-15-
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
James River Corporation of Virginia
We consent to the incorporation by reference in this
Registration Statement on Form S-4 of James River Corporation of Virginia
("James River") of our report dated January 23, 1997, except as to the
information presented in Note 17, for which the date is February 21, 1997, on
our audits of the consolidated financial statements of James River as of
December 29, 1996 and December 31, 1995, and for each of the three fiscal years
in the period ended December 29, 1996, which report is included in the Annual
Report on Form 10-K of James River for the fiscal year ended December 29, 1996.
We also consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Richmond, Virginia
June 26, 1997
Exhibit 23.2
[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated January 31, 1997
included in Fort Howard Corporation's Form 10-K for the year ended December 31,
1996 and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
June 23, 1997
Exhibit 99.1
FORM OF PROXY
JAMES RIVER CORPORATION OF VIRGINIA
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned appoints Clifford A. Cutchins, IV, Daniel J. Girvan, and
William A. Paterson (each with power to act alone and with power of
substitution) as proxies and authorizes them to represent and vote, as directed,
all voting securities of James River Corporation of Virginia held of record by
the undersigned on June 30, 1997 upon all matters properly coming before the
Special Meeting of Shareholders to be held on August 12, 1997, and any
adjournment thereof.
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Approve issuance of shares pursuant to the Merger with Fort Howard
Corporation [ ] [ ] [ ]
2. Amend the Articles of Incorporation [ ] [ ] [ ]
3. Amend the Company's Bylaws [ ] [ ] [ ]
4. Amend the James River 1996 Stock Incentive Plan [ ] [ ] [ ]
</TABLE>
(PLEASE DATE AND SIGN THE REVERSE SIDE)
<PAGE>
[LOGO] JAMES RIVER CORPORATION
James River Corporation offers a new service to shareholders called
Shareholder Direct. Through this service, shareholders can listen to the
corporate profile, obtain copies of financial publications, listen to and/or
obtain copies of press releases, and hear a recent stock price quote. We invite
you to try this new service by calling toll-free (888) 526-3711
(arrow)PLEASE DETACH HERE(arrow)
(continued from the other side)
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. If no direction is made, this
proxy will be voted in accordance with the Board of Directors' recommendations.
Please sign exactly as name appears at
left. When signing as attorney,
executor, trustee or other
representative capacity, state full
title.
Date , 1997
-----------------------------
PLEASE DETACH HERE
---------------------------------------
(Signature)
---------------------------------------
(Signature)
PLEASE SIGN, DATE AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE.
EXHIBIT 99.2
FORM OF PROXY
[FORT HOWARD LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 12, 1997
The undersigned hereby appoints Michael T. Riordan, Kathleen J. Hempel and James
W. Nellen II, or any of them, proxies of the undersigned, with full power of
substitution, to vote all shares of Common Stock of Fort Howard Corporation that
the undersigned is entitled to vote at the Special Meeting of Stockholders to be
held on Tuesday, August 12, 1997, at 11:00 a.m., local time, at the Metropolitan
Club, Sears Tower, 66th Floor, 233 South Wacker Drive, Chicago, Illinois, and at
any adjournments thereof. The proxies have the authority to vote such stock as
directed on the reverse side hereof with respect to the proposal set forth in
the Joint Proxy Statement/Prospectus with the same effect as though the
undersigned were present in person and voting such shares. The undersigned
hereby revokes all proxies heretofore given to vote at the Special Meeting of
Stockholders and any adjournment thereof.
PLEASE INDICATE ON THE REVERSE SIDE OF THIS CARD HOW YOUR STOCK IS TO BE VOTED.
UNLESS YOU OTHERWISE INDICATE, THIS PROXY WILL BE VOTED "FOR" THE APPROVAL OF
THE MERGER AGREEMENT WITH JAMES RIVER CORPORATION OF VIRGINIA AS SET FORTH IN
PROPOSAL NO. 1 NOTED ON THE REVERSE SIDE HEREOF AT THE SPECIAL MEETING OF
STOCKHOLDERS AND AT ANY ADJOURNMENT THEREOF. YOUR SHARES CANNOT BE VOTED UNLESS
YOU SIGN THIS CARD.
(CONTINUED, AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
This proxy, when properly executed, will be voted as directed. If no direction
is given, shares of Common Stock will be voted "FOR" the proposal set forth
below.
PLEASE MARK YOUR
CHOICE LIKE THIS [X] IN
DARK INK AND SIGN AND
DATE BELOW
The Board of Directors recommends a vote "FOR" the proposal set forth below.
1. Approval of the Merger Agreement with James River Corporation of Virginia.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please indicate whether you will be
attending the Special Meeting in
person:
Will Attend Will Not Attend
[ ] [ ]
SIGNATURE(S)
------------------------------
-------------------------------------------
DATED:
------------------------------------
IMPORTANT: Please sign exactly as name(s)
appear hereon. Joint Owners
should each sign. When signing
as executor, administrator,
trustee, guardian, attorney or
corporate officer, please give
full title.
Exhibit 99.3
[Letterhead of Merrill Lynch, Pierce,
Fenner & Smith Incorporated]
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia
Members of the Board of Directors:
We hereby consent to the use of our opinion letter dated May 4,
1997 to the Board of Directors of James River Corporation of Virginia ("James
River") included as Appendix E to the Joint Proxy Statement-Prospectus which
forms a part of the Registration Statement on Form S-4 relating to the proposed
merger of James River Delaware, Inc., a Delaware corporation and a wholly owned
subsidiary of James River, with Fort Howard Corporation, a Delaware corporation,
and to the references to such opinion in such Joint Proxy Statement-Prospectus.
In giving such consent we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ Merrill Lynch, Pierce,
Fenner & Smith, Inc.
---------------------------------
By: Managing Director
Investment Banking Group
June 26, 1997
Exhibit 99.4
[Salomon Brothers Inc Letterhead]
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Members of the Board of Directors:
We hereby consent to the use of our name and to the
description of our opinion letter to the Board of Directors of James River
Corporation of Virginia ("James River") in, and to the inclusion of such opinion
letter as Appendix F to, the Joint Proxy Statement-Prospectus which is made a
part of the Registration Statement on Form S-4 of James River, relating to the
proposed merger of James River Delaware, Inc. with Fort Howard Corporation, and
to the references to our firm name therein. By giving such consent we do not
thereby admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "expert" as used in, or that we come
within the category of persons whose consent is required under, the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder.
SALOMON BROTHERS INC
/s/ Salomon Brothers Inc
--------------------------
New York, New York
June 26, 1997
Exhibit 99.5
[Letterhead of Morgan Stanley & Co. Incorporated]
Fort Howard Corporation
1919 South Broadway
P.O. Box 19130
Green Bay, Wisconsin 54307
Members of the Board of Directors:
We hereby consent to the inclusion in the Registration
Statement on Form S-4 of James River Corporation of Virginia ("James River")
relating to the proposed merger of James River Delaware, Inc. with Fort Howard
Corporation, of our opinion letter, dated May 4, 1997, included as Appendix G in
the Joint Proxy Statement-Prospectus which is a part of the Registration
Statement, and to the references to our firm name therein. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder nor do we admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts" as
used in Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ Bruce D. Fiedorek
-------------------------------
June 26, 1997
Exhibit 99.6
[Letterhead of Fort Howard Corporation]
June 24, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
To the Board of Directors:
I hereby consent to being named as a person about to become a
director of James River Corporation of Virginia, a Virginia corporation ("James
River"), in connection with the consummation of the merger (the "Merger") of
James River Delaware, Inc. ("Merger Sub") into Fort Howard Corporation ("Fort
Howard"), pursuant to the Agreement and Plan of Merger, dated as of May 4, 1997,
by and among James River, Merger Sub and Fort Howard, in the Registration
Statement on Form S-4 filed by James River with the Securities and Exchange
Commission in connection with the Merger (the "Registration Statement"), and to
the filing of this Consent as an exhibit to the Registration Statement.
Sincerely,
/s/ Michael T. Riordan
Exhibit 99.7
June 26, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
To the Board of Directors:
I hereby consent to being named as a person about to become a
director of James River Corporation of Virginia, a Virginia corporation ("James
River"), in connection with the consummation of the merger (the "Merger") of
James River Delaware, Inc. ("Merger Sub") into Fort Howard Corporation ("Fort
Howard"), pursuant to the Agreement and Plan of Merger, dated as of May 4, 1997,
by and among James River, Merger Sub and Fort Howard, in the Registration
Statement on Form S-4 filed by James River with the Securities and Exchange
Commission in connection with the Merger (the "Registration Statement"), and to
the filing of this Consent as an exhibit to the Registration Statement.
Sincerely,
/s/ Robert H. Niehaus
Exhibit 99.8
June 26, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
To the Board of Directors:
I hereby consent to being named as a person about to become a
director of James River Corporation of Virginia, a Virginia corporation ("James
River"), in connection with the consummation of the merger (the "Merger") of
James River Delaware, Inc. ("Merger Sub") into Fort Howard Corporation ("Fort
Howard"), pursuant to the Agreement and Plan of Merger, dated as of May 4, 1997,
by and among James River, Merger Sub and Fort Howard, in the Registration
Statement on Form S-4 filed by James River with the Securities and Exchange
Commission in connection with the Merger (the "Registration Statement"), and to
the filing of this Consent as an exhibit to the Registration Statement.
Sincerely,
/s/ Frank V. Sica
Exhibit 99.9
June 26, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
To the Board of Directors:
I hereby consent to being named as a person about to become a
director of James River Corporation of Virginia, a Virginia corporation ("James
River"), in connection with the consummation of the merger (the "Merger") of
James River Delaware, Inc. ("Merger Sub") into Fort Howard Corporation ("Fort
Howard"), pursuant to the Agreement and Plan of Merger, dated as of May 4, 1997,
by and among James River, Merger Sub and Fort Howard, in the Registration
Statement on Form S-4 filed by James River with the Securities and Exchange
Commission in connection with the Merger (the "Registration Statement"), and to
the filing of this Consent as an exhibit to the Registration Statement.
Sincerely,
/s/ James L. Burke
