SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: May 4, 1997
JAMES RIVER CORPORATION OF VIRGINIA
(Exact name of Registrant as Specified in its Charter)
Virginia 1-7911 54-0848173
(State or Other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
Incorporation)
120 Tredegar Street, Richmond, Virginia 23219
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (804) 644-5411
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)<PAGE>
Item 5. Other Events.
James River Corporation of Virginia, a Virginia
corporation (the "Company"), James River Delaware, Inc., a
Delaware corporation and a wholly owned subsidiary of the
Company ("Merger Sub"), and Fort Howard Corporation, a Delaware
corporation ("Fort Howard"), entered into an Agreement and Plan
of Merger, dated as of May 4, 1997 (the "Merger Agreement"),
pursuant to which, among other things, Merger Sub will be
merged with and into Fort Howard, with Fort Howard as the
surviving corporation in the merger (the "Merger"), which
agreement is attached hereto as Exhibit 10.1 and is incor-
porated herein by reference.
In connection with the Merger Agreement, on May 4, 1997,
the Company entered into agreements with certain stockholders
of Fort Howard, pursuant to which, among other things, such
stockholders agreed to vote all of the shares of common stock
of Fort Howard that are beneficially owned by them at the
record date for any meeting of stockholders of Fort Howard
called to consider and vote to approve the Merger and the
Merger Agreement in favor thereof, which agreements are
attached hereto as Exhibits 10.2, 10.3 and 10.4, and are
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits.
10.1 Agreement and Plan of Merger, dated as of May 4,
1997, by and among the Company, Merger Sub and
Fort Howard.
10.2 Letter Agreement, dated May 4, 1997, among the
Company, The Morgan Stanley Leveraged Equity
Fund II, L.P., Morgan Stanley Group Inc., Fort
Howard Equity Investors, L.P., Fort Howard
Equity Investors II, L.P., Morgan Stanley
Leveraged Equity Holdings, Inc., Morgan Stanley
Equity Investors, Inc. and Morgan Stanley
Leveraged Equity Fund II, Inc.
10.3 Letter Agreement, dated May 4, 1997, between the
Company and Leeway & Co., as Nominee for the
Long-Term Investment Trust.
10.4 Letter Agreement, dated May 4, 1997, between the
Company and Mellon Bank, N.A., solely in its
capacity as Trustee for FIRST PLAZA GROUP TRUST,
(as directed by General Motors Investment
Management Corporation), and not in its
individual capacity.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly autho-
rized.
JAMES RIVER CORPORATION OF VIRGINIA
By: /s/ Clifford A. Cutchins
Clifford A. Cutchins, IV
Senior Vice President and
General Counsel
Date: May 13, 1997<PAGE>
Index to Exhibits
Exhibit Description
10.1 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.
10.2 Letter Agreement, dated May 4, 1997, among James River
Corporation of Virginia, The Morgan Stanley Leveraged
Equity Fund II, L.P., Morgan Stanley Group Inc., Fort
Howard Equity Investors, L.P., Fort Howard Equity
Investors II, L.P., Morgan Stanley Leveraged Equity
Holdings, Inc., Morgan Stanley Equity Investors, Inc.
and Morgan Stanley Leveraged Equity Fund II, Inc.
10.3 Letter Agreement, dated May 4, 1997, between James River
Corporation of Virginia and Leeway & Co., as Nominee for
the Long-Term Investment Trust.
10.4 Letter Agreement, dated May 4, 1997, between James River
Corporation of Virginia and Mellon Bank, N.A., solely in
its capacity as Trustee for FIRST PLAZA GROUP TRUST, (as
directed by General Motors Investment Management
Corporation), and not in its individual capacity.
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
Page
ARTICLE I
THE MERGER
SECTION 1.01. The Merger............................... 1
SECTION 1.02. Effective Time........................... 2
SECTION 1.03. Effect of the Merger..................... 2
SECTION 1.04. Certificate of Incorporation; By-laws.... 2
SECTION 1.05. Directors and Officers................... 2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities................. 3
SECTION 2.02. Exchange of Certificates................. 4
SECTION 2.03. Stock Transfer Books..................... 7
SECTION 2.04. Stock Options and Other Stock Awards..... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification;
Subsidiaries............................9
SECTION 3.02. Certificate of Incorporation and By-laws;
Corporate Books and Records.............. 10
SECTION 3.03. Capitalization........................... 10
SECTION 3.04. Authority Relative to This Agreement..... 11
SECTION 3.05. No Conflict; Required Filings and
Consents................................. 12
SECTION 3.06. Permits; Compliance...................... 13
SECTION 3.07. SEC Filings; Financial Statements........ 13
SECTION 3.08. Absence of Certain Changes or Events..... 14
SECTION 3.09. Employee Benefit Plans; Labor Matters.... 14
SECTION 3.10. Accounting and Tax Matters............... 17
SECTION 3.11. Contracts; Debt Instruments.............. 17
SECTION 3.12. Litigation............................... 18
SECTION 3.13. Environmental Matters.................... 18
SECTION 3.14. Trademarks, Patents and Copyrights....... 20
SECTION 3.15. Taxes.................................... 20
<PAGE>
ii
SECTION 3.16. Opinion of Financial Advisor............. 21
SECTION 3.17. Vote Required............................ 21
SECTION 3.18. Brokers.................................. 21
SECTION 3.19. Insurance................................ 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
SECTION 4.01. Organization and Qualification;
Subsidiaries............................. 22
SECTION 4.02. Certificate of Incorporation and By-laws;
Corporate Books and Records.............. 22
SECTION 4.03. Capitalization........................... 23
SECTION 4.04. Authority Relative to This Agreement..... 24
SECTION 4.05. No Conflict; Required Filings and
Consents................................. 25
SECTION 4.06. Permits; Compliance...................... 26
SECTION 4.07. SEC Filings; Financial Statements........ 26
SECTION 4.08. Absence of Certain Changes or Events..... 27
SECTION 4.09. Employee Benefit Plans; Labor Matters.... 27
SECTION 4.10. Accounting and Tax Matters............... 29
SECTION 4.11. Contracts; Debt Instruments.............. 29
SECTION 4.12. Litigation............................... 30
SECTION 4.13. Environmental Matters.................... 31
SECTION 4.14. Trademarks, Patents and Copyrights....... 31
SECTION 4.15. Taxes.................................... 32
SECTION 4.16. Ownership of Merger Sub; No Prior
Activities............................... 33
SECTION 4.17. Opinion of Financial Advisor............. 33
SECTION 4.18. Vote Required............................ 33
SECTION 4.19. Brokers.................................. 33
SECTION 4.20. Insurance................................ 33
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company
Pending the Closing...................... 34
SECTION 5.02. Conduct of Business by Parent Pending
the Closing.............................. 37
SECTION 5.03. Cooperation.............................. 39
SECTION 5.04. Notices of Certain Events................ 39
SECTION 5.05. Contractual Consents..................... 40
<PAGE>
iii
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Proxy Statement.. 40
SECTION 6.02. Stockholders' Meetings................... 42
SECTION 6.03. Access to Information; Confidentiality... 42
SECTION 6.04. No Solicitation of Transactions.......... 42
SECTION 6.05. Appropriate Action; Consents; Filings.... 44
SECTION 6.06. Pooling.................................. 46
SECTION 6.07. Letters of Accountants................... 46
SECTION 6.08. Update Disclosure; Breaches.............. 47
SECTION 6.09. Pooling Affiliates....................... 47
SECTION 6.10. Public Announcements..................... 48
SECTION 6.11. NYSE Listing............................. 48
SECTION 6.12. Employee Matters......................... 48
SECTION 6.13. [Intentionally Omitted].................. 48
SECTION 6.14. Indemnification of Directors and
Officers................................. 48
SECTION 6.15. Plan of Reorganization................... 49
SECTION 6.16. Headquarters............................. 50
SECTION 6.17. Obligations of Merger Sub................ 50
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party
Under This Agreement..................... 50
SECTION 7.02. Additional Conditions to Obligations
of Parent and Merger Sub................. 51
SECTION 7.03. Additional Conditions to Obligations
of the Company........................... 52
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.............................. 54
SECTION 8.02. Effect of Termination.................... 55
SECTION 8.03. Amendment................................ 56
SECTION 8.04. Waiver................................... 56
SECTION 8.05. Fees and Expenses........................ 57
<PAGE>
iv
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations and
Warranties............................... 57
SECTION 9.02. Notices.................................. 57
SECTION 9.03. Certain Definitions...................... 58
SECTION 9.04. Headings................................. 59
SECTION 9.05. Severability............................. 59
SECTION 9.06. Entire Agreement......................... 59
SECTION 9.07. Assignment............................... 60
SECTION 9.08. Parties in Interest...................... 60
SECTION 9.09. Mutual Drafting.......................... 60
SECTION 9.10. Governing Law............................ 60
SECTION 9.11. Counterparts............................. 60
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 SOUTHFORK AFFILIATE
LETTER
EXHIBIT 7.03(d) FORM OF REGISTRATION RIGHTS
AGREEMENT
EXHIBIT 7.03(e) FORM OF STOCKHOLDERS AGREEMENT
<PAGE>
v
Index of Defined Terms
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)
<PAGE>
vi
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)
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
<PAGE>
vii
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
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)
<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").<PAGE>
2
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 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).<PAGE>
3
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. <PAGE>
4
(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
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 <PAGE>
5
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 amount of dividends or
other distributions with a record date after the<PAGE>
6
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.<PAGE>
7
(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 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 <PAGE>
8
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<PAGE>
9
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.
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<PAGE>
10
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<PAGE>
11
Company or any Company Subsidiary. Since April 1, 1997, 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<PAGE>
12
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, 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<PAGE>
13
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.<PAGE>
14
(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.
(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<PAGE>
15
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 as set
forth in Section 3.09(c) of the Company Disclosure Schedule, no
Company Benefit Plan provides<PAGE>
16
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<PAGE>
17
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, 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<PAGE>
18
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<PAGE>
19
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
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.<PAGE>
20
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 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.<PAGE>
21
(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.<PAGE>
22
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 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<PAGE>
23
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<PAGE>
24
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 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<PAGE>
25
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 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.<PAGE>
26
(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<PAGE>
27
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 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<PAGE>
28
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<PAGE>
29
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 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<PAGE>
30
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
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<PAGE>
31
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<PAGE>
32
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 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.<PAGE>
33
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<PAGE>
34
industry practice for companies engaged in businesses similar to
that of Parent (taking into account the cost and availability of
such insurance).
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,<PAGE>
35
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 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);<PAGE>
36
(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.<PAGE>
37
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:
(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;<PAGE>
38
(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;<PAGE>
39
(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;
(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<PAGE>
40
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 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.<PAGE>
41
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.<PAGE>
42
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.
(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<PAGE>
43
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 6.05(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 6.05(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<PAGE>
44
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 (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:<PAGE>
45
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 the Surviving Corporation.
(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.
(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 <PAGE>
46
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<PAGE>
47
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 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.<PAGE>
48
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<PAGE>
49
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
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<PAGE>
50
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;
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.<PAGE>
51
(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<PAGE>
52
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.
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<PAGE>
53
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,<PAGE>
54
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.
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;<PAGE>
55
(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 an
Acquisition Proposal with respect to the Company shall have
been made, 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 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)<PAGE>
56
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 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, an
Acquisition Proposal with respect to Parent shall have been
made, 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<PAGE>
57
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 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<PAGE>
58
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;<PAGE>
59
(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;
(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<PAGE>
60
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.<PAGE>
61
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<PAGE>
Exhibit 10.2
May 4, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Attention: Clifford A. Cutchins, IV
Ladies and Gentlemen:
The undersigned understand that James River Corpora-
tion of Virginia ("Parent"), and Fort Howard Corporation (the
"Company") are entering into an Agreement and Plan of Merger,
dated as of May 4, 1997 (the "Merger Agreement"), providing
for, among other things, a merger between a wholly owned sub-
sidiary of Parent and the Company (the "Merger"), in which all
of the outstanding shares of common stock, par value $.01 per
share, of the Company (the "Company Common Stock") will be
exchanged for shares of common stock, par value $.10 per share,
of Parent.
The undersigned are stockholders of the Company and
are entering into this letter agreement to induce you to enter
into the Merger Agreement and to consummate the transactions
contemplated thereby.
The undersigned severally confirm their agreement
with you as follows:
1. Each of the undersigned represents, warrants and
agrees that Schedule I annexed hereto sets forth the number of
shares of Company Common Stock of which one or more of the
undersigned is the record or beneficial owner (the "Shares")
and that, as of the date hereof, the undersigned which owns or
own such Shares owns them, free and clear of all liens,
charges, encumbrances, voting agreements and commitments of
every kind, except as disclosed in Schedule I.
2. Each of the undersigned agrees that it will not
contract to sell, sell or otherwise transfer or dispose of any
of the Shares, or any interest therein, or securities convert-
ible thereinto or any voting rights with respect thereto, other
than: (a) in a pro rata distribution or transfer to the part-
ners of an undersigned which is a limited partnership pursuant
to or otherwise in accordance with its Agreement of Limited
Partnership, (b) pursuant to the Merger, (c) with your prior
written consent, (d) a transfer to a party who<PAGE>
2
executes a counterpart of this agreement to be bound by the
terms and provisions hereof or (e) Shares transferred to the
Company in connection with the exercise of stock options to the
extent that as of the date hereof the related option agreement
permits Shares to be so used in connection with the exercise of
stock options.
3. Each of the undersigned agrees that all of the
Shares that are beneficially owned by the undersigned at the
record date for any meeting of stockholders of the Company
called to consider and vote to approve the Merger and other
transactions contemplated thereby will be voted by the under-
signed entitled to vote such Shares in favor thereof.
4. Each of the undersigned agrees to cooperate
fully with you in connection with the Merger Agreement and the
transactions contemplated thereby. Each of the undersigned
agrees that the undersigned will not initiate, solicit or en-
courage any discussions, inquiries or proposals with any third
party that constitute or may reasonably be expected to lead to
a Competing Transaction (as defined in the Merger Agreement),
or provide any such person with information or assistance or
negotiate with any such person with respect to a possible Com-
peting Transaction. It is understood that certain affiliates
of the undersigned may be officers, directors, affiliates or
representatives of the Company and this letter agreement shall
not be violated by the exercise by any such officer, director,
affiliate (which is not a signatory hereto) or representative
of its rights, obligations or duties, or limit or restrict in
any way the Company's rights, obligations or duties, or the
actions of such officers, directors, affiliates (which are not
signatories hereto) or representatives in the exercise thereof,
as set forth in or in connection with the Merger Agreement and
the transactions contemplated thereby.
5. Each of the undersigned confirms that clause (a)
of paragraph 2 in the letters attached hereto from Leeway & Co.
and First Plaza Group Trust is intended only to permit a trans-
fer of Shares by the signatory thereto to certain signatories
hereto in satisfaction of such signatories' profit participa-
tion interests in certain limited partnerships.
Each of the undersigned has all necessary power and
authority to enter into this letter agreement. This agreement
is the legal, valid and binding agreement of the undersigned,
and is enforceable against the undersigned in accordance with
its terms.
This letter agreement may be terminated at the option
of any party at any time after the earlier of: (i) termination
of the Merger Agreement in accordance with its terms and (ii)
the day following the Closing Date (as defined in the Merger
Agreement). Please confirm that the foregoing correctly states
the understanding between us by signing and returning to us a
counterpart hereof.<PAGE>
3
Nothing herein shall be construed to require the
undersigned, or any company, trust or other entity controlled
by the undersigned, to take any action or fail to take any ac-
tion in violation of applicable law, rule or regulation.
Very truly yours,
The Morgan Stanley Leveraged Equity
Fund II, L.P.
By: Morgan Stanley Leveraged Equity
Fund II, Inc., its General Partner
By /s/ R. H. Niehaus
Morgan Stanley Group Inc.
By /s/ R. H. Niehaus
Fort Howard Equity Investors, L.P.
By: Morgan Stanley Equity Investors, Inc.,
its General Partner
By /s/ R. H. Niehaus
Fort Howard Equity Investors II, L.P.
By: Morgan Stanley Equity Investors, Inc.,
its General Partner
By /s/ R. H. Niehaus
Morgan Stanley Leveraged Equity Holdings,
Inc.
By /s/ R. H. Niehaus<PAGE>
Morgan Stanley Equity Investors, Inc.
By /s/ R. H. Niehaus
Morgan Stanley Leveraged Equity Fund II,
Inc.
By /s/ R. H. Niehaus
Confirmed as of the date
first above written:
/s/ Miles L. Marsh
for James River Corporation of Virginia
<PAGE>
SCHEDULE I
Morgan Stanley Interests
Direct Interest Through Limited
Partnerships
2,264,999 2,874,808*
Limited Partnerships' Interests
17,038,606 (including the 2,874,808 shares attributable to
Morgan Stanley Interests referred to above)**
_____________________
* Subject to increase to the extent shares are transferred to
certain of the undersigned pursuant to their profit partici-
pation interests in certain limited partnerships.
** Assumes no distribution pursuant to paragraph 2(a) of this
letter.
Exhibit 10.3
May 4, 1997
James River Corporation
of Virginia
120 Tredegar Street
Richmond, Virginia
Attention: Clifford Cutchins
Ladies and Gentlemen:
The undersigned understands that James River Corpora-
tion of Virginia ("Parent"), and Fort Howard Corporation (the
"Company") are entering into an Agreement and Plan of Merger,
dated as of May 4, 1997 (the "Merger Agreement"), providing
for, among other things, a merger between a wholly owned sub-
sidiary of Parent and the Company (the "Merger"), in which all
of the outstanding shares of common stock, par value $.01 per
share, of the Company (the "Company Common Stock") will be ex-
changed for shares of common stock, par value $.10 per share,
of Parent.
The undersigned is a stockholder of the Company and
is entering into this letter agreement to confirm its agreement
with you as follows:
1. The undersigned represents, warrants and agrees
that Schedule I annexed hereto sets forth the number of shares
of Company Common Stock of which the undersigned is the record
or beneficial owner and over which the AT&T Investment Manage-
ment Organization exercises investment discretion on the date
hereof (the "Shares") and that, as of the date hereof, the
undersigned owns such Shares, free and clear of all liens,
charges, encumbrances, voting agreements and commitments of
every kind, except as disclosed in Schedule I.
2. The undersigned agrees that the undersigned will
not contract to sell, sell or otherwise transfer or dispose of
any of the Shares, or any interest therein, or securities con-
vertible thereunto or any voting rights with respect thereto,
other than: (a) pursuant to the MSLEF II Agreement of Limited
Partnership, (b) pursuant to the Merger, (c) with your prior
written consent, (d) a transfer to a party who executes a coun-
terpart of this agreement to be bound by the terms and provi-
sions hereof, (e) Shares transferred to the Company in connec-
tion with the exercise of stock options to the extent that as
of the date<PAGE>
2
hereof the related option agreement permits Shares to be so
used in connection with the exercise of stock options or (f) a
transfer to a successor trust or the trust for a successor plan
(the "New Trust") in connection with or following the reorgani-
zation of the pension plans or trust of AT&T Corp. and Lucent
Technologies Inc., such New Trust to be bound by the terms of
this letter.
3. The undersigned agrees that all of the shares of
Company Common Stock, including the Shares and any shares of
Company Common Stock hereafter acquired over which the AT&T
Investment Management Organization exercises investment discre-
tion, that are beneficially owned by the undersigned at the
record date for any meeting of stockholders of the Company
called to consider and vote to approve the Merger and the
Agreement and the Agreement and other transactions contemplated
thereby will be voted by the undersigned in favor thereof.
4. The undersigned agrees that the undersigned will
not initiate, solicit or encourage any discussions, inquiries
or proposals with any third party that constitute or may rea-
sonably be expected to lead to a Competing Transaction (as
defined in the Merger Agreement), or provide any such person
with information or assistance or negotiate with any such per-
son with respect to a possible Competing Transaction.
The undersigned has all necessary power and authority
to enter into this letter agreement. This agreement is the
legal, valid and binding agreement of the undersigned, and is
enforceable against the undersigned in accordance with its
terms. It is understood and agreed that the undersigned's obli-
gations are limited solely to those contained in this letter,
and that the undersigned has no liability with respect to the
Merger Agreement or the transactions contemplated thereby other
than as specifically described herein.
This letter agreement may be terminated at the option
of any party at any time after the earlier of: (i) termination
of the Merger Agreement in accordance with its terms, (ii) the
day following the Closing Date (as defined in the Merger Agree-
ment) and (iii) March 31, 1998. Please confirm that the fore-
going correctly states the understanding between us by signing
and returning to us a counterpart hereof.<PAGE>
3
Nothing herein shall be construed to require the
undersigned, or any company, trust or other entity controlled
by the undersigned, to take any action or fail to take any
action in violation of applicable law, rule or regulation.
Very truly yours,
Leeway & Co., as Nominee for the
Long-Term Investment Trust
Leeway & Co. by State Street
Bank and Trust Co., a Partner
By /s/ Lisa M. Lane
State Street Bank & Trust
Company, Trustee
Name: Lisa Lane
Title: Assistant Secretary
Confirmed as of the date
first above written:
/s/ Miles L. Marsh
for James River Corporation of Virginia
<PAGE>
SCHEDULE I
2,738,789 shares directly owned on the date hereof over which
the AT&T Investment Management Organization exercises invest-
ment discretion.
2,194,432 shares owned indirectly through limited partnerships
over which, if distributed, the AT&T Investment Management
Organization will exercise investment discretion.*
_____________________
* To be removed from this Schedule I upon agreement by Par-
ent and Company that removal will not jeopardize pooling
accounting treatment.
Exhibit 10.4
May 4, 1997
James River Corporation
of Virginia
120 Tredegar Street
Richmond, Virginia
Attention: Clifford Cutchins
Ladies and Gentlemen:
The undersigned understands that James River Corpora-
tion of Virginia ("Parent"), and Fort Howard Corporation (the
"Company") are entering into an Agreement and Plan of Merger,
dated as of May 4, 1997 (the "Merger Agreement"), providing
for, among other things, a merger between a wholly owned sub-
sidiary of Parent and the Company (the "Merger"), in which all
of the outstanding shares of common stock, par value $.01 per
share, of the Company (the "Company Common Stock") will be
exchanged for shares of common stock, par value $.10 per share,
of Parent.
The undersigned is a stockholder of the Company and
is entering into this letter agreement to induce you to enter
into the Merger Agreement and to consummate the transactions
contemplated thereby.
The undersigned confirms its agreement with you as
follows:
1. The undersigned represents, warrants and agrees
that Schedule I annexed hereto sets forth the number of shares
of Company Common Stock of which the undersigned is the record
or beneficial owner (the "Shares") and that, as of the date
hereof, the undersigned owns such Shares, free and clear of all
liens, charges, encumbrances, voting agreements and commitments
of every kind, except as disclosed in Schedule I.
2. The undersigned agrees that the undersigned will
not contract to sell, sell or otherwise transfer or dispose of
any of the Shares, or any interest therein, or securities con-
vertible thereunto or any voting rights with respect thereto,
other than: (a) pursuant to the MSLEF II Agreement of Limited
Partnership (b) pursuant to the Merger, (c) with your prior
written consent, (d) a transfer to a party who executes a
counterpart of this agreement to be bound by the terms and
provisions hereof or (e) Shares transferred to<PAGE>
2
the Company in connection with the exercise of stock options to
the extent that as of the date hereof the related option agreement
permits Shares to be so used in connection with the exercise of
stock options.
3. The undersigned agrees that all of the shares of
Company Common Stock, including the Shares and any shares of
Company Common Stock hereafter acquired, that are beneficially
owned by the undersigned at the record date for any meeting of
stockholders of the Company called to consider and vote to ap-
prove the Merger and the Agreement and the Agreement and other
transactions contemplated thereby will be voted by the under-
signed in favor thereof.
4. The undersigned agrees that the undersigned will
not initiate, solicit or encourage any discussions, inquiries
or proposals with any third party that constitute or may rea-
sonably be expected to lead to a Competing Transaction (as de-
fined in the Merger Agreement), or provide any such person with
information or assistance or negotiate with any such person
with respect to a possible Competing Transaction.
The undersigned has all necessary power and authority
to enter into this letter agreement. This agreement is the
legal, valid and binding agreement of the undersigned, and is
enforceable against the undersigned in accordance with its
terms.
This letter agreement may be terminated at the option
of any party at any time after the earlier of: (i) termination
of the Merger Agreement in accordance with its terms and (ii)
the day following the Closing Date (as defined in the Merger
Agreement). Please confirm that the foregoing correctly states
the understanding between us by signing and returning to us a
counterpart hereof.<PAGE>
3
Nothing herein shall be construed to require the
undersigned, or any company, trust or other entity controlled
by the undersigned, to take any action or fail to take any
action in violation of applicable law, rule or regulation.
Very truly yours,
Mellon Bank, N.A., solely in its capacity
as Trustee for FIRST PLAZA GROUP TRUST,
(as directed by General Motors Investment
Management Corporation), and not in its
individual capacity
By /s/ Laurie A. Adams
Name: Laurie A. Adams
Title: Trust Officer
Confirmed as of the date
first above written:
/s/ Miles L. Marsh
for James River Corporation of Virginia
<PAGE>
SCHEDULE I
Direct Interest Through Limited
Partnerships
5,477,586 3,389,473*
_____________________
* Subject to reduction to the extent transferred to the gen-
eral partners pursuant to the general partners' profit partici-
pation interests.
