<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 1998
REGISTRATION NO. 333-45519
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
Pre-Effective Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FORT JAMES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
COMMONWEALTH OF VIRGINIA 54-0848173
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
</TABLE>
------------------------
75 TRI-STATE INTERNATIONAL OFFICE CENTER
SUITES 100 AND 175
LINCOLNSHIRE, ILLINOIS 60069
(847) 317-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CLIFFORD A. CUTCHINS, IV, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
FORT JAMES CORPORATION
75 TRI-STATE INTERNATIONAL OFFICE CENTER
SUITES 100 AND 175
LINCOLNSHIRE, ILLINOIS 60069
(847) 317-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
WITH A COPY TO:
<TABLE>
<S> <C> <C>
MARSHALL H. EARL, JR., ESQ. PATRICIA A. VLAHAKIS, ESQ. FAITH D. GROSSNICKLE, ESQ.
MCGUIRE, WOODS, BATTLE & WACHTELL, LIPTON, ROSEN & KATZ SHEARMAN & STERLING
BOOTHE LLP 51 WEST 52ND STREET 599 LEXINGTON AVENUE
ONE JAMES CENTER NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10022
901 EAST CARY STREET (212) 403-1206 (212) 848-4000
RICHMOND, VIRGINIA 23219
(804) 775-1000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFER-
BE REGISTERED(1) REGISTERED(2) PER SHARE(3) ING PRICE(2)(3)
<S> <C> <C> <C>
Common Stock,
$.10 par value............ 12,250,000 Shares $42.625 $522,156,250.00
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO REGISTRATION
BE REGISTERED(1) FEE(2)(3)(4)
<S> <C>
Common Stock,
$.10 par value............ $154,036.10
</TABLE>
(1) Includes one attached preferred share purchase right per share of Common
Stock. Prior to the occurrence of certain events, the preferred share
purchase rights will not be exercisable and will not be evidenced separately
from the Common Stock.
(2) Includes 1,000,000 shares subject to an over-allotment option granted by the
Selling Stockholders to the U.S. Underwriters.
(3) Pursuant to Rule 457(c) under the Securities Act of 1933, the proposed
maximum offering price per share and the registration fee is based on the
average of the high and low prices per share of Fort James Corporation
Common Stock on the New York Stock Exchange Composite Transactions Tape on
January 27, 1998 ($42.625).
(4) The registration fee was paid on February 3, 1998.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
The prospectus relating to the Common Stock being registered hereby to be
used in connection with a United States offering (the "U.S. Prospectus") is set
forth following this page. The prospectus to be used in a concurrent
international offering (the "International Prospectus") will consist of an
alternate cover page set forth following the U.S. Prospectus and the balance of
the pages included in the U.S. Prospectus. The alternate page for the
International Prospectus is separately designated.
<PAGE>
[redherring language]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED FEBRUARY 6, 1998
[FORT JAMES LOGO]
11,250,000 SHARES
FORT JAMES CORPORATION
COMMON STOCK
------------------------
ALL OF THE 11,250,000 SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE ("COMMON
STOCK"), OF FORT JAMES CORPORATION, A VIRGINIA CORPORATION ("FORT JAMES" OR THE
"COMPANY"), BEING OFFERED HEREBY ARE BEING SOLD BY CERTAIN STOCKHOLDERS OF THE
COMPANY (COLLECTIVELY THE "SELLING STOCKHOLDERS"). SEE "SELLING STOCKHOLDERS."
THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF
COMMON STOCK BY THE SELLING STOCKHOLDERS. OF THE 11,250,000 SHARES OF
COMMON STOCK BEING OFFERED HEREBY, 9,562,500 SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND
1,687,500 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES
AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITING." THE
COMMON STOCK IS LISTED ON THE NEW YORK STOCK EXCHANGE (THE "NYSE")
UNDER THE SYMBOL "FJ." ON FEBRUARY 5, 1998, THE REPORTED LAST SALES
PRICE OF THE COMMON STOCK ON THE NYSE COMPOSITE TRANSACTIONS TAPE
WAS $42 1/8 PER SHARE.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS (1) STOCKHOLDERS (2)
------------------------ ------------------------ ------------------------
<S> <C>
PER SHARE............................................. $ $ $
TOTAL(3).............................................. $ $ $
</TABLE>
- ---------------
(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."
(2) TOTAL EXPENSES (EXCLUSIVE OF UNDERWRITING DISCOUNTS AND COMMISSIONS) IN
CONNECTION WITH THE OFFERING OF SHARES HEREUNDER ARE ESTIMATED TO BE
APPROXIMATELY $695,000, ALL OF WHICH WILL BE PAID BY THE COMPANY.
(3) THE SELLING STOCKHOLDERS HAVE GRANTED TO THE U.S. UNDERWRITERS A 30-DAY
OPTION TO PURCHASE UP TO 1,000,000 ADDITIONAL SHARES OF COMMON STOCK SOLELY
TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE
TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS
TO SELLING STOCKHOLDERS WILL BE $ , $ AND $ ,
RESPECTIVELY. SEE "UNDERWRITING."
------------------------
THE SHARES OF COMMON STOCK ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS,
AND IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL
MATTERS BY SHEARMAN & STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED
THAT THE DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1998, AT
THE OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, NEW YORK, AGAINST
PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
------------------------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
, 1998
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON STOCK OR
ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH COMMON STOCK IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY, BY THE SELLING STOCKHOLDERS OR BY ANY
UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
STOCKHOLDERS AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
RESTRICTIONS AS TO THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION OF THIS
PROSPECTUS.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................................................................. 1
Incorporation of Certain Documents by Reference........................................................................ 1
Cautionary Statement Concerning
Forward-Looking Statements........................................................................................... 2
Prospectus Summary..................................................................................................... 3
Risk Factors........................................................................................................... 9
The Company............................................................................................................ 10
Use of Proceeds........................................................................................................ 15
Price Range of Common Stock and Dividend Policy........................................................................ 15
Capitalization......................................................................................................... 16
Selected Historical and Unaudited Consolidated Financial and Other Data................................................ 17
Management's Discussion and Analysis of Results of Operations and Financial Condition.................................. 19
Description of Common Stock............................................................................................ 22
Management............................................................................................................. 25
Selling Stockholders................................................................................................... 26
Certain United States Tax Consequences to Non-U.S. Holders of Common Stock............................................. 27
Underwriting........................................................................................................... 29
Legal Matters.......................................................................................................... 31
Experts................................................................................................................ 32
</TABLE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
AVAILABLE INFORMATION
Fort James is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements, and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following Regional Offices of the Commission: Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and New York Regional Office, 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such information may also be accessed electronically
by means of the Commission's website on the Internet (HTTP://WWW.SEC.GOV) . The
Common Stock is listed on the NYSE, and such reports, proxy and information
statements, and other information concerning the Company can be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
This Prospectus does not contain all the information set forth in the
registration statement to which this Prospectus relates (the "Registration
Statement") and the exhibits thereto which the Company has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby incorporated
by reference into this Prospectus:
(a) the Annual Report of the Company on Form 10-K for the fiscal year ended
December 29, 1996;
(b) the Quarterly Reports of the Company on Form 10-Q for the quarters
ended March 30, 1997, June 29, 1997 and September 28, 1997;
(c) the Current Reports of the Company on Form 8-K dated May 4, 1997 (2
reports), June 29, 1997, July 2, 1997, August 7, 1997, August 8, 1997, August
12, 1997, August 13, 1997 (4 reports), September 15, 1997, October 23, 1997 and
February 3, 1998; and
(d) the description of the Rights to Purchase Series M Cumulative
Participating Preferred Stock included in the Company's Registration Statement
on Form 8-A dated March 3, 1989, as amended by Amendment No. 1 to Application or
Report on Form 8 dated July 28, 1992.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act subsequent to the date of the Registration
Statement on Form S-3 of which this Prospectus is a part and prior to the
effectiveness thereof or subsequent to the date of the final prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. As used herein, the
terms "Prospectus" and "herein" mean this Prospectus, including the documents
incorporated by reference, as the same may be amended, supplemented, or
otherwise modified from time to time. Statements contained in this Prospectus as
to the contents of any contract or other document referred to herein do not
purport to be complete and are qualified in all respects by reference to all of
the provisions of such contract or other document.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents which are not specifically incorporated by reference in such
documents. Requests for such copies should be directed to Celeste Gunter, Vice
President, Investor Relations, Fort James Corporation, 120 Tredegar Street,
Richmond, Virginia 23219 (telephone (804) 649-4307 or (888) 649-4362).
1
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference herein contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. These statements are based on
management's beliefs and assumptions, relying on information currently available
to management, and are subject to risks and uncertainties. Forward-looking
statements include the information concerning possible or assumed future results
of operations of the Company set forth (1) under "Prospectus Summary -- Recent
Developments," "The Company," "Risk Factors," "Selected Historical and Unaudited
Consolidated Financial and Other Data" and "Management's Discussion and Analysis
of Results of Operations and Financial Condition" herein, (2) under "Business"
and "Management's Discussion and Analysis" in the Company's Annual Report on
Form 10-K and in each Quarterly Report on Form 10-Q and certain Current Reports
on Form 8-K incorporated by reference herein and (3) in this Prospectus and the
documents incorporated by reference herein preceded by, followed by or that
include the words "believes," "expects," "anticipates," "intends," "plans,"
"estimates" or similar expressions.
Forward-looking statements are not guarantees of performance as they
involve risks, uncertainties and assumptions. The future results of the Company
may differ materially from those expressed in these forward-looking statements.
Many of the factors that will determine these results are beyond the Company's
ability to control or predict. Purchasers of Common Stock are cautioned not to
put undue reliance on any forward-looking statements. The Company claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Purchasers of Common Stock should understand that the following important
factors, in addition to those discussed herein and elsewhere in the documents
which are incorporated by reference herein, could affect the future results of
the Company and could cause results to differ materially from those expressed in
such forward-looking statements: (1) the effect of economic conditions; (2) the
ability of the former James River Corporation of Virginia and the former Fort
Howard Corporation to successfully integrate their operations; (3) the impact of
competitive products and pricing; (4) product development; (5) changes in laws
and regulations, including changes in accounting standards and environmental
regulations affecting the paper and pulp industry; (6) customer demand; (7)
changes in raw material, energy and other costs; and (8) opportunities that may
be presented to and pursued by the Company.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" REFER TO FORT JAMES CORPORATION
AND ITS CONSOLIDATED SUBSIDIARIES. THE OFFERING HEREBY OF 9,562,500 SHARES OF
COMMON STOCK IN THE UNITED STATES AND CANADA (THE "U.S. OFFERING") AND THE
CONCURRENT OFFERING OF 1,687,500 SHARES OF COMMON STOCK OUTSIDE OF THE UNITED
STATES AND CANADA (THE "INTERNATIONAL OFFERING"), ARE COLLECTIVELY REFERRED TO
AS THE "OFFERING." THE CLOSING OF EACH OF THE U.S. OFFERING AND THE
INTERNATIONAL OFFERING IS CONDITIONED UPON THE CLOSING OF THE OTHER. UNLESS
OTHERWISE INDICATED, THE MARKET SHARE INFORMATION AND THE INDUSTRY STATISTICAL
INFORMATION PRESENTED IN THIS PROSPECTUS ARE BASED ON REVENUES AND REFLECT THE
COMPANY'S ESTIMATES. NO ASSURANCE CAN BE GIVEN REGARDING THE ACCURACY OF SUCH
ESTIMATES AND STATISTICS.
THE COMPANY
Fort James is a preeminent worldwide manufacturer and marketer of
paper-based consumer products, including towel and tissue products as well as
disposable tabletop and foodservice products. The Company's principal towel and
tissue products include bathroom tissue, paper towels, table napkins, boxed
facial tissue and wipers. Disposable tabletop and foodservice products include
paper and plastic cups, paper plates, and plastic cutlery. Fort James also
produces and markets paper-based packaging for food and pharmaceuticals and
communications papers. Consumer products, packaging and communications papers
products accounted for 84%, 10% and 6%, respectively, of consolidated revenues
in 1997. In 1997, the Company reported net sales of $7,259.0 million, income
from operations of $602.7 million and a net loss of $27.0 million. Fort James
reported income from operations before restructuring and other unusual items in
1997 of $1,057 million; and net income before restructuring and other unusual
items and extraordinary items of $439 million, or $1.97 per diluted share.
Fort James is the result of the merger of a subsidiary of James River
Corporation of Virginia ("James River") into Fort Howard Corporation ("Fort
Howard") in August 1997 (the "Merger"). In connection with the Merger, James
River was renamed "Fort James Corporation."
Fort James is the world's second largest producer of tissue products, with
over three million tons of worldwide capacity. In the United States, Fort James
ranks number one in tissue-making, with 2.1 million tons of annual capacity,
representing approximately 30% of the U.S. tissue industry capacity. In Europe,
where Fort James has 860,000 tons of annual tissue capacity, representing
approximately 17% of the European tissue industry capacity, the Company believes
it is tied for the number two position in the European tissue industry.
The Company's consumer tissue and tabletop products are sold through both
retail (at-home) and commercial (away-from-home) distribution channels. In North
America, approximately 60% of the Company's sales of consumer tissue and
tabletop products are into retail distribution channels and the remaining
approximately 40% are into away-from-home distribution channels.
In the U.S. retail channel, Fort James produces both branded and private
label products. The Company's principal U.S. retail tissue brands include
QUILTED NORTHERN bathroom tissue (the number two domestic bathroom tissue
brand), BRAWNY paper towels (the number two domestic paper towel brand), MARDI
GRAS printed napkins (the leading domestic paper napkin brand) and paper towels,
VANITY FAIR premium dinner napkins (the number three domestic paper napkin
brand), NORTHERN paper napkins, SOFT'N GENTLE bath and facial tissue, SO-DRI
paper towels, and GREEN FOREST, the leading domestic line of environmentally
positioned, recycled tissue products. The Company's principal retail tabletop
brand is its number two-ranked DIXIE brand of disposable cups and plates. Fort
James also believes it is the leading supplier of private label tissue products
and the leading supplier of both tissue and disposable tabletop products to the
growing warehouse club channel.
The U.S. away-from-home channel, where the Company sells its products to
foodservice, janitorial supply and sanitary paper distributors for use in
restaurants, offices, factories, hospitals, schools and hotels, is also an
important distribution channel for the Company. Fort James believes it is the
top producer of tissue products for the 2.2 million ton U.S. away-from-home
channel, where it estimates its share at approximately 40% of total industry
revenues. The Company is also one of the largest producers of disposable cups,
plates and related products for the away-from-home foodservice industry.
In Europe, approximately 75% of Fort James' sales of consumer products are
into retail distribution channels and the remaining approximately 25% are into
away-from-home distribution channels. Sales into retail channels are supported
by both branded and private label product offerings. With production facilities
located in 10 countries, Fort James has a broad,
3
<PAGE>
pan-European base, and is among the category leaders in most western European
countries, with the exception of Germany, Austria and Switzerland, where the
Company has no operations. European branded products include LOTUS bathroom
tissue and VANIA feminine hygiene products, both of which hold leading positions
in France, COLHOGAR, a leading Spanish bathroom tissue, TENDERLY bathroom tissue
sold in Italy, and KITTENSOFT, a leading Irish bathroom tissue.
The Company believes that it is among the lowest-cost producers of tissue
products in North America. Fort James' operating margins in its North American
Consumer Products Business have increased steadily over the last several years,
rising to 19.4% for 1997, excluding restructuring charges. The Company believes
its cost advantage in North America is derived from a number of factors,
including the size and scale of certain of its manufacturing plants, the
competitive state of its tissue-making manufacturing assets and the benefits it
realizes from the Fort Howard proprietary deinking technology.
Fort James' near-term business initiatives are focused in three primary
areas: leveraging revenue growth opportunities, pursuing aggressive cost
reduction and achieving financing cost savings through both refinancing
activities and debt reduction.
The Company's principal executive offices are currently located at 75
Tri-State International Office Center, Suites 100 and 175, Lincolnshire,
Illinois 60069, telephone (847) 317-5000. In the spring of 1998, the Company's
principal executive offices will be located at 1650 Lake Cook Road, Deerfield,
Illinois 60015-4753.
RECENT DEVELOPMENTS
FOURTH QUARTER RESULTS
Excluding non-recurring items, Fort James reported earnings for the fourth
quarter of 1997 of $.48 per diluted share, compared to $.30 per diluted share in
1996, an improvement of 60%. Including a restructuring charge of $1.53 per
diluted share and an extraordinary charge on the early extinguishment of debt of
$.41 per diluted share, the Company reported a net loss of $1.46 per diluted
share for the fourth quarter of 1997. The restructuring and debt extinguishment
charges were both related to the Merger.
Compared with the fourth quarter of 1996, income from operations in the
fourth quarter of 1997 increased 15% to $242.3 million from $210.9 million and
net income increased 48% to $106.5 million from $71.9 million, excluding
restructure and debt extinguishment charges and a 1996 tax benefit. Net sales
for the quarter declined approximately 1% to $1,761.5 million from $1,785.6
million, primarily due to the impact of foreign currency translation. Excluding
this impact, sales increased approximately 1%. Operating margins for the fourth
quarter of 1997 increased to 13.8%, from 11.8% in the fourth quarter of 1996,
excluding restructuring charges.
NON-RECURRING ITEMS
Results for the fourth quarter of 1997 reflect a pretax charge of $458.0
million ($317.6 million net of taxes, or $1.53 per diluted share) for
restructuring and other unusual items and an extraordinary charge on the early
extinguishment of debt of $138.2 million ($84.4 million net of taxes, or $.41
per diluted share). In the fourth quarter of 1996, Fort James reported a
non-recurring charge of $10.6 million ($8.2 million net of taxes, or $.04 per
diluted share). The Company also recorded a $36 million tax benefit ($.19 per
diluted share) in 1996 as a result of a U.S. Tax Court decision allowing the
Company to deduct certain expenses relating to the former Fort Howard's 1988
leveraged buy-out. Additionally, the fourth quarter of 1996 included a loss on
the early extinguishment of debt of $7.9 million ($4.8 million net of taxes, or
$.03 per diluted share).
FULL YEAR RESULTS
For the full year, excluding non-recurring items, net income increased 44%
to $439.5 million, or $1.97 per diluted share, in 1997 from $304.9 million, or
$1.35 per diluted share, in 1996. Including the non-recurring items, Fort James
reported a net loss of $27.0 million, or a loss of $.28 per diluted share, in
1997, compared to net income of $319.9 million, or $1.43 per diluted share, in
1996. Net sales of $7,259.0 million in 1997 were 5.8% below the $7,707.1 million
reported in 1996, due to divestitures and foreign currency translation. Net
sales increased approximately 1% excluding these items.
FOURTH QUARTER RESULTS BY BUSINESS SEGMENT
The following fourth quarter operating results by business segment exclude
non-recurring items.
The North American Consumer Products Business posted operating profits of
$189.8 million in the fourth quarter of 1997, compared to the $173.7 million
reported in the fourth quarter of 1996, while sales increased slightly to
$1,046.2 million in 1997 versus $1,039.5 million in 1996. Results for the prior
year's quarter included an $18 million charge for revised
4
<PAGE>
estimates of costs for certain environmental matters. The fourth quarter 1997
performance of this business was impacted by a number of transition issues
related to the Merger. The former Fort Howard operations were converted to the
James River 52/53-week fiscal year cut-off, resulting in a loss of three days of
shipments in the quarter. Additionally, discretionary downtime was taken at
selected tissue mills to adjust inventory levels and to perform maintenance
originally scheduled for 1998. Volumes in both the retail tissue and retail
DIXIE tabletop businesses improved over the prior year levels and aggregate
market shares have strengthened. Volumes declined in the away-from-home tissue
business, principally as a result of the early year-end cut-off for the Fort
Howard operations. Volumes also declined in the away-from-home DIXIE foodservice
business. Pricing in Fort James' retail tissue and DIXIE businesses was
generally unchanged from the prior year's quarter, before the effect of modestly
higher promotional spending in response to competitive activity. Away-from-home
tissue prices were moderately higher reflecting a fourth quarter 1997 price
increase.
The European Consumer Products Business reported operating profits of $48.8
million in the fourth quarter of 1997, a 14% improvement over the $42.7 million
reported in the prior year, while sales declined 6.2%, from $481.5 million in
1996 to $451.6 million in 1997. Changes in foreign currency translation
associated with the strengthening of the dollar caused the decline in sales and
also impacted operating profits. Absent these changes, fourth quarter 1997 sales
would have increased 2.5% and operating profits would have increased 22%
compared to the prior year's quarter. The improvement in profits resulted from a
2.3% increase in finished goods volumes, partially offset by slightly lower
pricing and higher raw material costs. In addition, the fourth quarter of 1996
was adversely impacted by a two-month strike at the Company's Spanish tissue
facility.
The Packaging Business reported fourth quarter 1997 operating profits of
$13.6 million on sales of $187.9 million, down from the $15.2 million of profits
on $198.8 million of sales in the prior year's fourth quarter. Transition issues
associated with a significant change in its customer base negatively impacted
the Packaging Business' sales and profits.
Operating profits for the Communications Papers Business increased modestly
to $12.0 million in the fourth quarter of 1997, compared to $10.0 million in the
fourth quarter of 1996. Sales increased by 3.6%, to $118.6 million in 1997
compared to $114.5 million in 1996. Increased sales and profits were principally
the result of a small increase in volumes and average pricing for uncoated free
sheet papers.
General corporate expenses declined to $21.9 million compared to $30.7
million in 1996, primarily as a result of reduced spending on new, integrated
management information systems.
FULL YEAR RESULTS BY BUSINESS SEGMENT
The following full-year operating results by business segment exclude
non-recurring items.
Compared to 1996, operating profits for the North American Consumer
Products Business improved 12.2% to $845.4 million in 1997. Operating profits
for the European Consumer Products Business increased to $202.4 million in 1997,
a 22% increase over the prior year, excluding the effects of changes in foreign
currency translation. The Packaging Business posted operating profits of $81.3
million in 1997, a decrease of 5% from the prior year, excluding divested
operations. The Communications Papers Business reported 1997 operating profits
of $19.8 million, an 11% decline over 1996 profits, despite a steady improvement
in results during 1997.
RESTRUCTURING CHARGE
In conjunction with the Merger integration, Fort James recorded a $458
million pretax restructuring charge in the fourth quarter of 1997. This charge
covers activities which will integrate the operations of James River and Fort
Howard and enable the Company to realize Merger-related savings estimated to
ultimately total $200 million annually. The restructuring charge includes
approximately $235 million of costs associated with planned plant closures and
the write-off of redundant assets. On January 20, 1998, the Company announced it
will permanently close its two smallest U.S. tissue facilities, in Ashland,
Wisconsin, and Carthage, New York, in the spring of 1998. Production from these
two mills, which produce approximately 84,000 tons per year of away-from-home
tissue products, will be transferred to other, more modern Fort James tissue
mills. Also included in the reserve are amounts for additional rationalization
of Fort James' manufacturing operations planned in North America and Europe. The
restructuring charge includes severance and other employee-related costs in
excess of $100 million associated with a planned net headcount reduction of
approximately 2,500 employees, representing 8% of Fort James' current worldwide
workforce. Cash costs of the restructure program are estimated to total
approximately $150 million, net of tax benefits. An additional estimated $60
million of Merger-related costs, which could not be recognized in 1997 under
applicable accounting regulations, will be recorded in 1998 as incurred.
5
<PAGE>
CASH FLOW AND REFINANCING ACTIVITIES
Cash provided by operations totaled $764.2 million for the year in 1997.
Total debt was reduced by $244.3 million during the year. In addition, $98.1
million of cash was used to redeem the Company's Series O 8 1/4% Cumulative
Preferred Stock ("Series O Preferred Stock") and $152.3 million of cash premiums
were paid on the early extinguishment of debt. Lower average debt levels,
combined with the benefits from the Company's refinancing activities allowed
Fort James to reduce interest expense by 17%, from $424.4 million in 1996 to
$351.8 million in 1997. In early October, the Company completed the refinancing
of a total of approximately $2.1 billion of debt. The Company estimates these
debt refinancings will reduce annual interest expense by more than $50 million.
An extraordinary charge of $215.0 million ($131.5 million net of taxes, or $.63
per diluted share) was recorded in the third and fourth quarters of 1997
associated with the refinancings.
SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary historical consolidated statements of operations data, per
share data and other data for each of the two years in the period ended December
29, 1996, have been derived from, and should be read in conjunction with, the
Company's audited consolidated financial statements included in its Current
Report on Form 8-K dated August 13, 1997 (filed February 3, 1998), incorporated
by reference herein. The unaudited summary historical consolidated statement of
operations data, per share data and other data for the 39-week periods ended
September 28, 1997, and September 29, 1996, have been derived from the Company's
unaudited interim consolidated financial statements incorporated by reference
herein. The unaudited summary historical consolidated financial and other data
for the year ended December 28, 1997 have been derived from the unaudited
financial information set forth in the Company's Current Report on Form 8-K
dated February 3, 1998, incorporated by reference herein. The unaudited summary
historical consolidated financial and other data have been prepared on the same
basis as the audited consolidated financial statements incorporated by reference
herein, and in the opinion of management reflect all adjustments necessary to
fairly state results of operations and cash flows for such periods. Such
adjustments are of a normal recurring nature.
The consolidated financial statements give retroactive effect to the Merger
in a transaction accounted for as a pooling of interests. The pooling of
interests method of accounting requires the restatement of all periods presented
as if Fort Howard and James River had always been combined. All fees and
transaction expenses related to the Merger and the restructuring of the combined
companies have been expensed as required under the pooling of interests
accounting method.
The summary historical consolidated financial and other data should be read
in conjunction with the consolidated financial statements of Fort James included
in the Current Reports on Form 8-K dated August 13, 1997 (filed February 3,
1998) and February 3, 1998 and its Quarterly Report on Form 10-Q for the quarter
ended September 28, 1997. See "Incorporation of Certain Documents by Reference"
and "Available Information."
6
<PAGE>
FORT JAMES AND CONSOLIDATED SUBSIDIARIES
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
------------------------------------- ----------------------
UNAUDITED UNAUDITED UNAUDITED
1995(A) 1996(B) 1997 1996 1997
-------- -------- --------- --------- ---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $8,887.9 $7,707.1 $7,259.0 $5,921.5 $5,497.5
Restructure and other unusual items (income)
expense (c)........................................ 51.9 10.7 454.2 .1 (3.8)
Income from operations............................... 783.4 909.3 602.7 709.0 818.4
Interest expense..................................... 536.3 424.4 351.8 (h) 327.3 277.6
Income (loss) before
extraordinary item................................. 159.9 328.0(d) 104.5 (h) 228.3 315.6
Net income (loss) (e)................................ 141.1 319.9 (27.0) 225.0 268.5
Preferred dividend requirements...................... 58.5 58.5 30.5 (h) 43.9 24.4
Weighted average number of common shares and common
share equivalents.................................. 164.1 183.1 207.6 181.0 206.9
PER SHARE DATA:
Income (loss) before extraordinary item (c).......... $ .62(f) $ 1.47(d)(f) $ .35 (h) $ 1.02(f) $ 1.41
Net income (loss) (e)................................ .50(f) 1.43(f) (.28) 1.00(f) 1.18
Cash dividends....................................... .60 .60 .60 .45 .45
OTHER DATA:
EBITDA (g)........................................... $1,462.6 $1,459.7 $1,572.4 $1,116.9 $1,209.8
</TABLE>
- ---------------
(a) In August 1995, Fort James completed the spin-off of Crown Vantage which had
annual net sales of approximately $1 billion.
(b) In August 1996, Fort James completed the sale of its Flexible Packaging and
related Inks divisions which had annual net sales of approximately $500
million.
(c) The after-tax impact of the restructure and other unusual items was $32.1
million, or $.19 per diluted share in 1995; $12.9 million, or $.07 per
diluted share in 1996; and $335.0 million, or $1.62 per diluted share in
1997. For the first nine months of 1996, the after-tax impact of such
charges was $4.7 million, or $.03 per diluted share. For the first nine
months of 1997, the after-tax impact of the net restructure and other
unusual items was a loss of $17.4 million, or $.08 per diluted share,
primarily due to certain non-tax-deductible Merger transaction costs.
(d) Includes a credit of $36 million (or $.20 per diluted share) for the
reversal of previously accrued income taxes related to 1988 financing
transactions.
(e) Includes after tax extraordinary losses related to the early retirement of
debt.
(f) In 1995 and 1996, the Company issued 34.7 million and 14.5 million shares of
Common Stock, respectively. Net proceeds of the offerings of $284 million in
1995 and $204 million in 1996 were used to reduce debt.
(g) EBITDA is defined as income from operations before restructure and other
unusual items, depreciation and amortization, and including other income and
minority interests. Fort James believes that EBITDA is a measure commonly
used by analysts and investors. Accordingly, this information has been
disclosed herein to permit a more complete analysis of operating
performance. EBITDA should not be considered in isolation or as a substitute
for net income or other consolidated statement of operations or cash flow
data prepared in accordance with generally accepted accounting principles as
a measure of profitability or liquidity. EBITDA does not take into account
debt service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
uses.
(h) On a pro forma basis giving effect to (i) the purchase of Fort Howard debt
securities in the Tender Offers; (ii) borrowings under the New Bank Credit
Facility; (iii) the sale of $720 million aggregate principal amount of
Senior Notes in the Senior Notes Offering; (iv) the repurchase of all of the
Company's outstanding 9.77% Senior Notes; (v) the Series P Conversion; and
(vi) the Series O Redemption, as if these transactions had occurred at the
beginning of the year ended December 28, 1997, interest expense would have
been approximately $317.8 million, income before extraordinary item would
have been $125.3 million (or an increase in income before extraordinary item
of $.10 per diluted share) and preferred dividends would have been $24.4
million (or an increase in income before extraordinary item of $.03 per
diluted share). The unaudited pro forma financial and other data presented
are not necessarily indicative of actual results that would have been
achieved had the above transactions been completed on the date assumed and
do not purport to project the Company's financial position at any future
date or its results of operations for any future period.
7
<PAGE>
SELLING STOCKHOLDERS
All of the shares of Common Stock being offered hereby are being sold by
the Selling Stockholders. The Selling Stockholders are (1) Mellon Bank, N.A., as
Trustee for First Plaza Group Trust and (2) Morgan Stanley, Dean Witter,
Discover & Co. ("Morgan Stanley") and certain of its affiliates. The Selling
Stockholders acquired the shares of Common Stock offered hereunder pursuant to
the Merger. See "Selling Stockholders."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling Stockholders:
U.S. Offering............................................ 9,562,500 shares
International Offering................................... 1,687,500 shares
Total............................................... 11,
250,000 shares (1)
Common Stock outstanding after the Offering................ 209,667,511 shares (2)
Use of Proceeds............................................ The Company will not receive any proceeds from the sale of the
shares of Common Stock sold by the Selling Stockholders.
NYSE Symbol................................................ "FJ"
</TABLE>
- ---------------
(1) Assumes no exercise of the over-allotment option granted to the U.S.
Underwriters to purchase up to 1,000,000 additional shares of Common Stock
solely to cover over-allotments, if any. See "Selling Stockholders."
(2) Based upon the number of shares of Common Stock outstanding as of February
2, 1998 and excludes 6,090,683 shares of Common Stock issuable upon exercise
of outstanding options.
8
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS IN THE SHARES OF COMMON STOCK OFFERED HEREBY SHOULD
CONSIDER THE FOLLOWING RISK FACTORS, TOGETHER WITH THE OTHER INFORMATION SET
FORTH IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, WHEN EVALUATING
SUCH AN INVESTMENT.
RISKS ASSOCIATED WITH INTEGRATION
The Merger was completed in August 1997 and Fort James is in the process of
combining the operations of James River and Fort Howard. As a result of its
integration efforts, Fort James expects to realize cost savings estimated to be
at a $150 million annual run rate by the end of 1998, increasing to $200 million
per year over time. While the Company's rationalization plans are proceeding as
planned, there can be no assurance that Fort James will not encounter
difficulties in the integration process or that the benefits expected from such
integration will be realized. Any material delays or unexpected costs incurred
in connection with such integration could have an adverse effect on the
Company's ability to achieve the expected benefits of integration. See "The
Company -- Business Initiatives."
COMPETITION
Fort James experiences intense competition in both North America and
Europe. Fort James' competitors include a number of large diversified paper and
consumer products companies, such as The Procter & Gamble Company,
Kimberly-Clark Corporation and Georgia-Pacific Corporation. Fort James also
competes with smaller low-cost regional producers that seek to displace the
Company's private label products mainly through price competition. The Company
competes on the basis of price, product quality and performance, product
development effectiveness, service and sales and distribution support.
Aggressive competitive pricing actions, which may become more intense due to
changing industry conditions (see " -- Industry Conditions"), could reduce
revenues and could adversely affect the Company's operating results or financial
condition. Increased marketing expenditures by manufacturers of competing
branded products could prompt the Company to increase its advertising
expenditures for key branded products.
INDUSTRY CONDITIONS
Finished product prices in all of the Company's segments are significantly
affected by the relationships among, and changes in, industry conditions in
North America and Europe, including industry capacity and operating rates,
prices for raw materials and levels of demand. Based upon historical demand
growth in the U.S. tissue industry (which generally averages between 2% and 2.5%
per annum) and upon the Company's current expectations for industry-wide
capacity and operating rates during 1998 and 1999 (which are in part derived
from information published by the American Forest and Paper Association and
public announcements by competitors and in part from internal estimates), the
Company believes that supply and demand for tissue products in the United States
should be in approximate balance during 1998 and 1999. In Europe, where
increases in demand for tissue products are expected to average slightly higher
than in the United States, the Company believes that supply could modestly
outpace demand in 1998 and 1999. Capacity expansion or increased run rates on
existing machines within the tissue industry in the United States or Europe, or
lower than expected demand growth in either the United States or Europe, could
prompt intensified price competition and could adversely affect the Company's
operating results.
Changes in the cost of wastepaper and pulp, the Company's primary raw
materials, also affect the Company's finished goods pricing. Significant
reductions in the cost of these raw materials from the middle of 1995 through
the middle of 1996 and higher industry operating rates contributed to the
Company's positive operating results during that period. Although wastepaper and
pulp prices have remained relatively stable since the middle of 1996, decreasing
wastepaper or pulp prices under different industry conditions could result in
lower product prices. There can be no assurance that any future reductions in
the cost of raw materials would have a positive impact on the Company's
operating results. Historically, sales price increases for finished products
generally have lagged increases in raw material costs. There can be no assurance
that any future increases in the cost of wastepaper or pulp would be recovered
through product price increases, and any such increased raw materials costs
could adversely impact the Company's operating results.
9
<PAGE>
THE COMPANY
Fort James is a preeminent worldwide manufacturer and marketer of
paper-based consumer products, including towel and tissue products as well as
disposable tabletop and foodservice products. The Company's principal towel and
tissue products include bathroom tissue, paper towels, table napkins, boxed
facial tissue and wipers. Disposable tabletop and foodservice products include
paper and plastic cups, paper plates, and plastic cutlery. Fort James also
produces and markets paper-based packaging for food and pharmaceuticals and
communications papers. Consumer products, packaging and communications papers
products accounted for 84%, 10% and 6%, respectively, of consolidated revenues
in 1997. In 1997, the Company reported net sales of $7,259.0 million, income
from operations of $602.7 million and a net loss of $27.0 million. Fort James
reported income from operations before restructuring and other unusual items in
1997 of $1,057 million; and net income before restructuring and other unusual
items and extraordinary items of $439 million, or $1.97 per diluted share.
Fort James is the result of the Merger of a subsidiary of James River into
Fort Howard in August 1997. In connection with the Merger, James River was
renamed "Fort James Corporation."
Fort James is the world's second largest producer of tissue products, with
over three million tons of worldwide capacity. In the United States, Fort James
ranks number one in tissue-making, with 2.1 million tons of annual capacity,
representing approximately 30% of the U.S. tissue industry capacity. In Europe,
where Fort James has 860,000 tons of annual tissue capacity, representing
approximately 17% of European tissue industry capacity, the Company believes it
is tied for the number two position in the European tissue industry.
The Company's consumer tissue and tabletop products are sold through both
retail (at-home) and commercial (away-from-home) distribution channels. In North
America, approximately 60% of the Company's sales of consumer tissue and
tabletop products are into retail distribution channels and the remaining
approximately 40% are into away-from-home distribution channels.
In the U.S. retail channel, Fort James produces both branded and private
label products. The Company's principal U.S. retail tissue brands include
QUILTED NORTHERN bathroom tissue (the number two domestic bathroom tissue
brand), BRAWNY paper towels (the number two domestic paper towel brand), MARDI
GRAS printed napkins (the leading domestic paper napkin brand) and paper towels,
VANITY FAIR premium dinner napkins (the number three domestic paper napkin
brand), NORTHERN paper napkins, SOFT'N GENTLE bath and facial tissue, SO-DRI
paper towels, and GREEN FOREST, the leading domestic line of environmentally
positioned, recycled tissue products. The Company's principal retail tabletop
brand is its number two-ranked DIXIE brand of disposable cups and plates. Fort
James also believes it is the leading supplier of private label tissue products
and the leading supplier of both tissue and disposable tabletop products to the
growing warehouse club channel.
The U.S. away-from-home channel, where the Company sells its products to
foodservice, janitorial supply and sanitary paper distributors for use in
restaurants, offices, factories, hospitals, schools and hotels, is also an
important distribution channel for the Company. Fort James believes it is the
top producer of tissue products for the 2.2 million ton U.S. away-from-home
channel, where it estimates its share at approximately 40% of total industry
revenues. The Company is also one of the largest producers of disposable cups,
plates and related products for the away-from-home foodservice industry.
In Europe, approximately 75% of Fort James' sales of consumer products are
into retail distribution channels and the remaining approximately 25% are into
away-from-home distribution channels. Sales into retail channels are supported
by both branded and private label product offerings. With production facilities
located in 10 countries, Fort James has a broad, pan-European base, and is among
the category leaders in most western European countries, with the exception of
Germany, Austria and Switzerland, where the Company has no operations. European
branded products include LOTUS bathroom tissue and VANIA feminine hygiene
products, both of which hold leading positions in France, COLHOGAR, a leading
Spanish bathroom tissue, TENDERLY bathroom tissue sold in Italy, and KITTENSOFT,
a leading Irish bathroom tissue.
The Company believes that it is among the lowest-cost producers of tissue
products in North America. Fort James' operating margins in its North American
Consumer Products Business have increased steadily over the last several years,
rising to 19.4% for 1997, excluding restructuring charges. The Company believes
its cost advantage in North America is derived from a number of factors,
including the size and scale of certain of its manufacturing plants, the
competitive state of its tissue-making manufacturing assets and the benefits it
realizes from the Fort Howard proprietary deinking technology.
10
<PAGE>
BUSINESS INITIATIVES
Fort James' near-term business initiatives focus on three areas: leveraging
revenue growth opportunities, pursuing aggressive cost reduction and achieving
financing cost savings through both refinancing activities and debt reduction.
LEVERAGING REVENUE GROWTH OPPORTUNITIES
The Company believes it has revenue growth opportunities in all of its
primary target markets. As a result of the Merger, Fort James has a larger
manufacturing and customer base upon which to grow, greater critical mass and an
improved geographic balance. Additionally, the Company has attractive
international growth opportunities through which it can take advantage of less
developed, faster growing markets.
Fort James has a broader, more complete product line offering than did
either James River or Fort Howard separately. With the majority of its tissue
capacity based on virgin pulp-based products, James River had focused its
product offerings primarily in the near-premium to premium end of the product
quality spectrum. Conversely, Fort Howard, because of its use of wastepaper for
substantially all of its fiber requirements, had focused its product offerings
primarily in the value and economy end of the product quality spectrum. The
combination of these two targeted product lines has given Fort James a more
complete range of product offerings, expanding revenue growth opportunities
across a broader line of products and a broader customer base.
The Merger has also enabled the Company to improve its geographical
balance. Although James River's eight domestic tissue manufacturing facilities
are located across the U.S., its away-from-home tissue sales are more highly
concentrated in the western U.S., from its three northwestern mills. The former
Fort Howard, on the other hand, concentrated both its away-from-home and retail
tissue sales primarily in mid-western and eastern markets surrounding its mills
in Wisconsin, Georgia and Oklahoma. Fort James' broader geographical balance has
created revenue growth opportunities, as premium product offerings can be more
fully developed in the east and mid-west, and value and economy product
offerings can be more fully developed in the west.
Fort James also has attractive international revenue growth opportunities
both in Europe and in selected emerging markets. In Europe, the Company believes
it has greater than average growth opportunities resulting from a combination of
factors. Geographically, Fort James has a strong presence in southern European
countries such as Spain, Italy, Greece and Turkey, where per capita consumption
of tissue products is growing faster than in the northern and western European
regions. Additionally, the Company is well-positioned to take advantage of the
less-developed, faster growing away-from-home channel in Europe through the
former Fort Howard's away-from-home expertise and proprietary deinking
technology. The Company is also pursuing growth opportunities for tissue sales
in selected emerging markets. In 1997, Fort James opened a tissue converting
plant in Russia, and in 1995, the Company formed a joint venture for a tissue
converting operation in Shanghai, China.
Finally, the Company believes it is well-positioned to support these
revenue growth activities. Prior to the Merger, Fort Howard had begun
construction of a new world-class tissue machine at its Rincon, Georgia, site
and James River was aggressively pursuing incremental tissue capacity growth
through streamlined operations. This additional capacity, augmented by
productivity gains expected to occur from technology sharing between James River
and the former Fort Howard on product formation and tissue machine optimization,
will provide a broader manufacturing base to support additional revenue growth.
AGGRESSIVE COST REDUCTION
Fort James believes the Merger will enable it to achieve significant cost
reductions that were not available to either Fort Howard or James River
individually. By combining complementary technologies, optimizing product
manufacturing and logistics across the combined system, increasing purchasing
efficiencies, eliminating redundant overhead costs and consolidating work forces
where duplication exists, Fort James expects to reduce costs and increase
productivity. As a result of these integration efforts, Fort James expects to
realize cost savings estimated to be at a $150 million annual run rate by the
end of 1998, increasing to $200 million per year over time.
Approximately 30% of the synergy savings opportunities are expected to be
derived from technology transfers between the former Fort Howard and James
River. These opportunities include the benefits of applying Fort Howard's
proprietary deinking technology in James River's deinked-based mills, both
domestically and in Europe. This proprietary deinking process has historically
allowed Fort Howard to incur lower raw material costs than its competitors.
Additional technology transfer benefits are expected to accrue from transferring
James River product formation and development technologies to
11
<PAGE>
former Fort Howard products, including the application of James River's
"multi-layer" technology in Fort Howard multi-ply tissue products.
An additional approximately 30% of the synergy savings opportunities are
expected to result from savings in logistics, distribution and transportation
costs. These savings will be achieved through increased mill-to-customer
shipments, improved geographic coverage, reduced outside warehouse needs and
increased opportunities to back-haul.
Purchasing cost savings are expected to account for another approximately
30% of total synergy savings. Historically, both Fort Howard and James River
purchased significant amounts of similar raw materials, including commodities
such as waste paper, chemicals and packaging materials. Opportunities are
arising to lower the cost of these purchased raw materials by not only comparing
current purchasing costs and moving to the low-cost supplier, but also by taking
advantage of increased economies of scale. The remaining synergy savings are
expected to accrue from eliminating organizational redundancies and making
staffing reductions.
FINANCING COST SAVINGS
Fort James is focusing on reducing financing costs, both through
refinancing of higher-cost debt and through aggressive debt reduction. In
connection with the Merger, Fort James refinanced an aggregate of approximately
$2.1 billion principal amount of its $4 billion of total debt.
At the time of the Merger, the Company entered into a new $2.5 billion bank
credit facility (the "New Bank Credit Facility") and borrowed $666 million
thereunder to replace certain pre-Merger bank credit facilities, which were
canceled. On the same date, the Company repurchased and retired $200 million
principal amount of James River 9.77% Senior Notes due 2014 (the "9.77% Senior
Notes"), principally using cash on hand. As a second step in its refinancing
activities, on September 8, 1997, Fort Howard commenced cash tender offers (the
"Tender Offers") for approximately $1.47 billion aggregate principal amount of
Fort Howard outstanding public debt securities. A total of $1.28 billion
aggregate principal amount of debt securities was tendered in these offers and
was retired. These repurchases and retirements pursuant to the Tender Offers
were funded principally with borrowings under the New Bank Credit Facility and
proceeds received from the issuance of $720 million of Fort James senior notes
on September 29, 1997 (the "Senior Notes Offering"). On a combined basis, these
debt refinancing activities are expected to result in an annual reduction in
interest expense in excess of $50 million. In addition, Fort James plans to
continue to reduce interest costs through an aggressive focus on debt reduction,
which will be the primary use of the Company's free cash flow in the near-term
future.
Following the Merger, the Company also simplified its capital structure and
reduced cash dividend requirements by (1) converting its Series P 9% Cumulative
Convertible Preferred Stock, with a face value of $287.5 million, into 15.3
million shares of Common Stock (the "Series P Conversion") and (2) redeeming its
Series O Preferred Stock for $98.1 million in cash (the "Series O Redemption").
On a combined basis, this conversion and redemption reduced the Company's annual
dividend requirements by approximately $25 million while increasing interest
expense by only $7 million. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition -- Financial Condition."
BUSINESS
Fort James operates in three principal business segments: (1) consumer
products, which includes towel and tissue products such as bathroom and facial
tissue and paper towels and napkins, and disposable tabletop and foodservice
products, such as paper and plastic cups, paper plates and plastic cutlery; (2)
packaging, which includes paper-based folding cartons for food and
pharmaceuticals; and (3) communications papers, which includes uncoated
printing, publishing and office copy papers. In 1997, consumer products,
packaging and communications papers products accounted for 84%, 10%, and 6%,
respectively, of consolidated revenues. These businesses accounted for 91%, 7%
and 2%, respectively, of 1997 income from operations before general corporate
expenses and restructuring and other unusual items.
CONSUMER PRODUCTS BUSINESS
Fort James' Consumer Products Business is currently conducted primarily in
North America and Europe. In 1997, the North American Consumer Products Business
had sales of $4.4 billion, representing 59% of consolidated total sales, and the
European Consumer Products Business had sales of $1.8 billion, representing 25%
of consolidated total sales. The North American Consumer Products Business
reported operating profits, before restructuring and other unusual items, of
$845.4 million in 1997, and the European Consumer Products Business reported
operating profits, before restructuring and other unusual items, of $202 million
in 1997.
12
<PAGE>
NORTH AMERICAN CONSUMER PRODUCTS BUSINESS. Within Fort James' North
American Consumer Products Business, tissue-based products account for
approximately 76% of current annual sales, tabletop products account for
approximately 18% of sales, and sales of virgin and recycled pulp and fiber
account for the remaining 6% of sales. The Company's consumer tissue and
tabletop products are each sold through both retail and away-from-home
distribution channels. Sales into retail channels are supported by both branded
and private label product offerings. In North America, approximately 60% of the
Company's sales of consumer tissue and tabletop products are into retail
distribution channels and the remaining approximately 40% are into
away-from-home distribution channels.
In the U.S. retail channel, Fort James believes that its well-known brand
names have contributed to its products achieving leading competitive positions.
The following data is based on information provided by Information Resources
Inc. for the 52-week period ending December 21, 1997, based on revenues derived
from sales to grocery stores, drug stores and mass merchandisers. Of $3.5
billion in U.S. industry bathroom tissue sales, Fort James' brands held a 19.5%
share, representing the overall number three ranking. The Company's bathroom
tissue brands include QUILTED NORTHERN (the number two ranked individual brand),
SOFT'N GENTLE and GREEN FOREST. Of $2.3 billion in U.S. industry paper towel
sales, Fort James' brands held an 18.2% share, representing the overall number
two ranking. The Company's paper towel brands include BRAWNY (the number two
ranked individual brand), MARDI GRAS, SO-DRI and GREEN FOREST. Of $570 million
in U.S. industry paper napkin sales, Fort James' brands held a 35.9% share,
representing the overall number one ranking. The Company's paper napkins brands
include MARDI GRAS (the number one ranked individual brand), VANITY FAIR (the
number three ranked individual brand), NORTHERN, ZEE, and GREEN FOREST. Of $400
million in U.S. industry disposable cup sales, Fort James' brands held a 23.2%
share, representing the overall number two ranking. Of $920 million in U.S.
industry disposable plate sales, Fort James' brands held a 16.5% share,
representing the overall number two ranking. The Company's disposable cups and
plates are both sold under the DIXIE brand name.
Fort James believes it is also the leading supplier of private label tissue
products, where it estimates its share in excess of 40% of U.S. private label
tissue sales. The Company's private label customers include retailers such as
Wal-Mart, Kroger, Aldi and Federated Stores. Additionally, the Company believes
it is the leading supplier of both tissue and disposable tabletop products to
the warehouse club channel, which includes Price/Costco and Sam's Clubs.
The U.S. away-from-home channel, where the Company sells its tissue and
tabletop products to foodservice, janitorial supply and sanitary paper
distributors for use in restaurants, offices, factories, hospitals, schools and
hotels, is also an important distribution channel for the Company. Fort James
believes it is the top producer of tissue products for the 2.2 million ton U.S.
away-from-home channel, where it estimates its share at approximately 40% of
total industry revenues. Based on internal Company estimates, Fort James
believes it holds the leading position in the sale of away-from-home towels,
bathroom tissue, and napkins and the number two position in away-from-home
wipers and facial tissue. Fort James is also one of the largest producers of
disposable cups, plates and related products for the away-from-home foodservice
industry.
EUROPEAN CONSUMER PRODUCTS BUSINESS. Within Fort James' European Consumer
Products Business, tissue-based products account for approximately 85% of
current annual sales, feminine hygiene products account for 6% of sales,
ancillary products, such as health care and pharmacy items, account for 5% of
sales, and unconverted tissue parent rolls account for the remaining 4% of
sales. Fort James sells its tissue products through both retail and
away-from-home distribution channels in Europe. Sales into retail channels are
supported by both branded and private label product offerings. In Europe,
approximately 75% of sales of consumer products are into retail distribution
channels and the remaining approximately 25% are into away-from-home channels.
With production facilities in 10 countries, Fort James has a broad,
pan-European base, and is among the category leaders in most European countries,
with the exception of Germany, Austria and Switzerland, where the Company has no
operations. The Company's largest European operations are in France and the
United Kingdom, which account for approximately 40% and 30%, respectively, of
the European Consumer Products Business' sales. Based on its estimates, the
Company believes it holds the leading position in French tissue sales, with a
share greater than 35%, and the number two position in the British Isles, with a
share greater than 30%. Fort James is also well-represented in the
faster-growing southern European and Mediterranean regions including Spain,
Italy, Greece and Turkey, where the Company believes its shares of tissue sales
approximate 13%, 10%, 16% and 57%, respectively.
The Company's principal European brands include LOTUS bathroom tissue and
VANIA feminine hygiene products, both of which hold leading positions in France,
COLHOGAR, a leading Spanish bathroom tissue, TENDERLY bathroom tissue sold in
Italy, and KITTENSOFT, a leading Irish bathroom tissue.
PRODUCTION FACILITIES. The Company believes that it is among the lowest
cost producers of tissue products in North America. Fort James' operating
margins in its North American Consumer Products Business have increased steadily
over the last several years, rising to 19.4% for 1997, excluding restructuring
charges. The Company believes its cost advantage in
13
<PAGE>
North America is derived from a number of factors, including the size and scale
of certain of its manufacturing plants, the competitive state of its
tissue-making manufacturing assets and the benefits it realizes from the Fort
Howard proprietary deinking technology. In North America, Fort James currently
produces tissue products at eleven mills located across the United States. In
the spring of 1998, the Company will permanently close its two smallest domestic
tissue facilities, in Ashland, Wisconsin, and Carthage, New York. Production
from these two mills will be transferred to other, more modern Fort James tissue
mills, which the Company believes will further reduce operating costs. The
Company's four largest domestic tissue mills, located in Green Bay, Wisconsin,
Muskogee, Oklahoma, Rincon, Georgia, and Pennington, Alabama, each have tissue
capacity in excess of 300,000 tons, and together account for approximately
two-thirds of the Company's total U.S. capacity. Ten of the world's eleven
largest tissue machines (270 inch wide) are located in the Company's U.S. mills,
and more than 600,000 tons of its domestic tissue-making capacity have been
built in the last 13 years. Fort James produces disposable tabletop and
foodservice products at 10 converting plants located across the United States
and three converting plants in Canada. Approximately three-quarters of the
paperboard utilized in the Company's cup and plate-making operations is supplied
by Fort James' 300,000 ton per year bleached paperboard operation in Alabama,
which also supplies paperboard to the Company's Packaging Business. The North
American Consumer Products Business currently employs approximately 17,100
workers.
The Company's European Consumer Products Business currently has 26
operating facilities, employing approximately 7,000 workers. In 1997 the Company
opened a tissue converting plant in Russia, and in 1995 the Company formed a
joint venture for a tissue converting operation in Shanghai, China.
Following the Merger, Fort James' raw material base is fairly evenly split
between virgin pulp and recycled pulp. The Company believes this combination
reduces the cyclical impact that raw material price changes can have on
profitability. In North America, the Company's tissue operations are largely
on-site integrated to either virgin or deinked pulp. In Europe, where Fort James
has no virgin pulping capacity, approximately one-third of the Company's fiber
requirements are provided by integrated deinked pulp, with the balance provided
by purchased market pulp.
MARKETING. The Company's North American Consumer Products Business has
organized its marketing efforts along distribution channels and by product line.
Fort James' consumer products are marketed directly to customers both through
national and regional sales organizations. The Company's retail sales force
markets both consumer tissue and tabletop products directly to grocery stores,
drug stores and mass merchandisers. Separate sales forces market the Company's
away-from-home tissue products and its away-from-home foodservice products.
Away-from-home tissue products are largely sold through outside distributors,
who generally focus on specific market segments. Regional distribution centers
located throughout the United States are utilized to minimize inventories and
transportation costs.
Marketing of Fort James' products within Europe is generally similar to
such efforts in the United States. However, national (individual country) sales
organizations are necessary due to customer preferences and language and
cultural differences among countries. Additionally, logistics and distribution
costs remain much higher in Europe than in the United States, and thus, the
majority of products are produced and sold within national or regional markets.
PACKAGING BUSINESS
The Packaging Business is conducted primarily in North America. In 1997,
the Packaging Business had sales of $783 million, representing 10% of
consolidated sales, and operating profits before restructuring and other unusual
items of $81.3 million. During 1996, the Company downsized this business through
the sale of the plastic-based Flexible Packaging and the related Inks Divisions,
which had combined annual sales of approximately $500 million. Following these
divestitures, the Packaging Business is concentrated primarily on the sale of
paper-based folding cartons for packaging food, health care products and other
consumer products. Folding cartons account for more than 80% of the business'
current annual sales, with the balance represented by sales of unconverted
paperboard.
Fort James produces its folding cartons at 15 carton manufacturing and
supporting plants located across the United States, employing approximately
3,400 workers. The Company's carton operations are backward integrated to a
300,000 ton per year bleached paperboard operation in Alabama and a 320,000 ton
per year coated recycled paperboard operation in Michigan. The Alabama bleached
paperboard mill also provides cup and plate stock for the Company's DIXIE line
of disposable tabletop products. The Company estimates it is currently ranked
number three in sales of folding cartons in the United States, and it believes
it holds leading positions in the sale of cartons for ice cream, cereal, meats,
frozen foods and microwave packaging. Transition issues associated with a
significant change in its customer base negatively impacted this business' sales
and profits in the fourth quarter of 1997 and are expected to create challenges
for this business in the near term.
14
<PAGE>
COMMUNICATIONS PAPERS BUSINESS
The Communications Papers Business is conducted primarily in the western
United States. In 1997, the Communications Papers Business had sales of $468
million, representing 6% of total consolidated sales, and operating profits
before restructuring and other unusual items of $19.8 million. In 1995, the
Company spun off Crown Vantage Inc. ("Crown Vantage"), which represented a large
part of the Company's Communications Papers Business, thus decreasing its
exposure to the cyclical printing and publishing papers market. Following the
spin-off, the Communications Papers Business is concentrated on the sale of
printing and publishing papers used in brochures, catalogs, manuals, direct mail
and advertising inserts, and on cut-size office printing and copying papers used
in high-speed printers, copiers and offset duplicators. Stabilized pricing and
an improved balance between demand and capacity growth expected in 1998 could be
impacted by any future weakening in the pulp markets or wood cost increases. See
"Risk Factors -- Industry Conditions."
Fort James produces business and printing papers at two manufacturing
sites, located in Oregon and Washington, employing approximately 1,100 workers.
The Company has the capacity to produce approximately 520,000 tons per year of
uncoated free-sheet papers and 150,000 tons per year of uncoated groundwood
papers.
USE OF PROCEEDS
All of the shares offered hereby are being sold by the Selling
Stockholders. The Company will not receive any proceeds from such sale of such
shares of Common Stock. The Company will pay certain expenses relating to the
Offering, estimated to be approximately $695,000.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed on the NYSE under the symbol "FJ." The following
table sets forth, for the periods indicated, which correspond to the Company's
quarterly fiscal periods for financial reporting purposes, the high and low
reported sale prices per share of the Common Stock on the NYSE Composite
Transactions Tape (the "NYSE Composite Tape") and cash dividends paid per share
of Common Stock.
<TABLE>
<CAPTION>
MARKET PRICE
---------------------------- DIVIDENDS
PERIOD HIGH LOW ---------
- ------------------------------------------------------------------------ ------------ ------------
<S> <C>
1995
First Quarter......................................................... $ 25 5/8 $ 20 $ .15
Second Quarter........................................................ 28 5/8 23 1/4 .15
Third Quarter......................................................... 37 3/8 25 3/8 .15
Fourth Quarter........................................................ 33 3/4 22 1/4 .15
1996
First Quarter......................................................... 28 1/8 22 3/8 .15
Second Quarter........................................................ 27 3/8 24 3/4 .15
Third Quarter......................................................... 27 1/4 24 5/8 .15
Fourth Quarter........................................................ 34 1/4 27 5/8 .15
1997
First Quarter......................................................... 36 1/4 29 1/4 .15
Second Quarter........................................................ 38 7/8 27 1/4 .15
Third Quarter......................................................... 45 1/1 36 5/8 .15
Fourth Quarter........................................................ 47 1/8 36 1/16 .15
1998
First Quarter (through February 5, 1998).............................. 43 7/8 34 .15
</TABLE>
On February 5, 1998, the reported last sales price of the Common Stock on
the NYSE Composite Tape was $42 1/8 per share. Prospective purchasers of shares
of Common Stock are urged to obtain current quotations for the market price of
the Common Stock.
The Company currently pays regular quarterly cash dividends and, while
future dividends will be subject to the discretion of the Company's Board of
Directors, the Board of Directors currently intends to continue this policy.
Future dividends will depend on the Company's results of operations, financial
condition, capital expenditure program, debt repayment requirements and other
factors, some of which are beyond the Company's control. There can be no
assurance as to whether or when the Company's Board of Directors will change the
current policy regarding dividends.
15
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
Fort James as of December 28, 1997.
<TABLE>
<CAPTION>
DECEMBER
28, 1997
--------
<S> <C>
(IN
MILLIONS)
CURRENT MATURITIES OF LONG-TERM DEBT:
Total current maturities of long-term debt....................................... $ 34.4
LONG-TERM DEBT:
New Bank Credit Facility......................................................... 1,312.0
Revolving credit facilities...................................................... 452.6
New Senior Notes................................................................. 718.3
Fort James notes and debentures.................................................. 1,230.7
Fort Howard Notes................................................................ 188.2
Revenue bonds.................................................................... 107.7
Capital lease obligations........................................................ 180.4
--------
Total debt.................................................................... 4,189.9
Less current maturities of long-term debt..................................... 34.4
--------
Total long-term debt, net of current maturities............................. 4,155.5
--------
MINORITY INTERESTS................................................................. 10.4
SHAREHOLDERS' EQUITY:
Preferred stock:
Series K......................................................................... 100.0
Series L......................................................................... 199.9
Series N......................................................................... 52.8
--------
Total preferred stock....................................................... 352.7
Common stock -- $.10 par value -- 209.3 million shares issued and outstanding.... 20.9
Additional paid-in capital....................................................... 2,807.9
Retained deficit................................................................. (2,597.2)
--------
Total shareholders' equity.................................................. 584.3
--------
Total capitalization................................................... $ 4,784.6
--------
--------
</TABLE>
16
<PAGE>
SELECTED HISTORICAL AND UNAUDITED CONSOLIDATED FINANCIAL
AND OTHER DATA
The following sets forth selected historical and unaudited consolidated
financial and other data for Fort James for the dates and periods indicated. The
selected historical consolidated balance sheet data as of December 29, 1996, and
December 31, 1995, and the historical statements of operations data, per share
data and other data for each of the two years in the period ended December 29,
1996, have been derived from, and should be read in conjunction with, the
Company's audited consolidated financial statements included in its Current
Report on Form 8-K dated August 13, 1997 (filed February 3, 1998), incorporated
by reference herein. The selected unaudited historical consolidated financial
and other data as of September 28, 1997, and for the 39-week periods ended
September 28, 1997, and the unaudited historical statement of operations data,
per share data and other data for the 39 weeks ended September 29, 1996, have
been derived from the Company's unaudited interim consolidated financial
statements incorporated by reference herein. The selected unaudited historical
consolidated financial and other data as of December 28, 1997, and for the year
then ended have been derived from the unaudited financial information set forth
in the Company's Current Report on Form 8-K dated February 3, 1998, incorporated
by reference herein. The balance sheet data as of September 29, 1996, have been
derived from the Company's unaudited financial statements. The unaudited
consolidated financial and other data have been prepared on the same basis as
the audited consolidated financial statements incorporated by reference herein,
and in the opinion of management reflect all adjustments necessary to fairly
state results of operations and cash flows for such periods. Such adjustments
are of a normal recurring nature.
The consolidated financial statements give retroactive effect to the Merger
in a transaction accounted for as a pooling of interests. The pooling of
interests method of accounting requires the restatement of all periods presented
as if Fort Howard and James River had always been combined. All fees and
transaction expenses related to the Merger and the restructuring of the combined
companies have been expensed as required under the pooling of interests
accounting method.
The following selected historical and unaudited consolidated financial and
other data should be read in conjunction with the consolidated financial
statements of Fort James included in the Current Reports on Form 8-K dated
August 13, 1997 (filed February 3, 1998) and February 3, 1998 and its Quarterly
Report on Form 10-Q for the quarter ended September 28, 1997. See "Incorporation
of Certain Documents by Reference" and "Available Information."
17
<PAGE>
FORT JAMES AND CONSOLIDATED SUBSIDIARIES
SELECTED HISTORICAL AND UNAUDITED CONSOLIDATED FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
------------------------------------- ------------------------
UNAUDITED UNAUDITED UNAUDITED
1995(A) 1996(B) 1997 1996 1997
-------- -------- --------- --------- ---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $8,887.9 $7,707.1 $7,259.0 $5,921.5 $5,497.5
Restructure and other unusual items (income)
expense (c)........................................ 51.9 10.7 454.2 .1 (3.8)
Income from operations............................... 783.4 909.3 602.7 709.0 818.4
Interest expense..................................... 536.3 424.4 351.8 (h) 327.3 277.6
Income (loss) before extraordinary item.............. 159.9 328.0(d) 104.5 (h) 228.3 315.6
Net income (loss) (e)................................ 141.1 319.9 (27.0) 225.0 268.5
Preferred dividend requirements...................... 58.5 58.5 30.5 (h) 43.9 24.4
Weighted average number of common shares and common
share equivalents.................................. 164.1 183.1 207.6 181.0 206.9
PER SHARE DATA:
Income (loss) before extraordinary item (c).......... $ .62(f) $ 1.47(d)(f) $ .35 (h) $ 1.02 (f) $ 1.41
Net income (loss) (e)................................ .50(f) 1.43(f) (.28) 1.00 (f) 1.18
Cash dividends....................................... .60 .60 .60 .45 .45
BALANCE SHEET DATA:
Total assets......................................... $8,911.3 $8,156.9 $7,733.2 $8,212.4 $7,832.2
Long-term debt....................................... 5,406.3(f) 4,305.3(f) 4,155.5 4,534.3(f) 3,879.9
Preferred stock...................................... 740.3 738.4 352.7 738.4 450.4
Common shareholders' equity (deficit)................ (324.5)(f) 113.1(f) 231.6 11.7(f) 530.7
OTHER DATA:
EBITDA (g)........................................... $1,462.6 $1,459.7 $1,572.4 $1,116.9 $1,209.8
Capital spending..................................... 488.5 499.5 505.9 328.7 313.5
Depreciation and amortization........................ 586.7 525.6 497.9 398.0 375.5
Ratio of earnings to fixed charges................... 1.45x 2.06x 1.65x(h) 2.08x 2.77x
Ratio of EBITDA to interest expense.................. 2.73x 3.44x 4.47x(h) 3.41x 4.36x
</TABLE>
- ---------------
(a) In August 1995, Fort James completed the spin-off of Crown Vantage which had
annual net sales of approximately $1 billion.
(b) In August 1996, Fort James completed the sale of its Flexible Packaging and
related Inks divisions which had annual net sales of approximately $500
million.
(c) The after-tax impact of the restructure and other unusual items was $32.1
million, or $.19 per diluted share in 1995; $12.9 million, or $.07 per
diluted share in 1996; and $335.0 million, or $1.62 per diluted share in
1997. For the first nine months of 1996, the after-tax impact of such
charges was $4.7 million or $.03 per diluted share. For the first nine
months of 1997, the after-tax impact of the net restructure and other
unusual items was a loss of $17.4 million, or $.08 per diluted share,
primarily due to certain non-tax-deductible Merger transaction costs.
(d) Includes a credit of $36 million (or $.20 per diluted share) for the
reversal of previously accrued income taxes related to 1988 financing
transactions.
(e) Includes after tax extraordinary losses related to the early retirement of
debt.
(f) In 1995 and 1996, the Company issued 34.7 million and 14.5 million shares of
Common Stock, respectively. Net proceeds of the offerings of $284 million in
1995 and $204 million in 1996 were used to reduce debt.
(g) EBITDA is defined as income from operations before restructure and other
unusual items, depreciation and amortization, and including other income and
minority interests. Fort James believes that EBITDA is a measure commonly
used by analysts and investors. Accordingly, this information has been
disclosed herein to permit a more complete analysis of operating
performance. EBITDA should not be considered in isolation or as a substitute
for net income or other consolidated statement of operations or cash flow
data prepared in accordance with generally accepted accounting principles as
a measure of profitability or liquidity. EBITDA does not take into account
debt service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
uses.
(h) On a pro forma basis giving effect to (i) the purchase of Fort Howard debt
securities in the Tender Offers; (ii) borrowings under the New Bank Credit
Facility; (iii) the sale of $720 million aggregate principal amount of
Senior Notes in the Senior Notes Offering; (iv) the repurchase of all of the
Company's outstanding 9.77% Senior Notes; (v) the Series P Conversion; and
(vi) the Series O Redemption, as if these transactions had occurred at the
beginning of the year ended December 28, 1997, interest expense would have
been approximately $317.8 million, income before extraordinary item would
have been $125.3 million (or an increase in income before extraordinary item
of $.10 per diluted share) and preferred dividends would have been $24.4
million (or an increase in income before extraordinary item of $.03 per
diluted share). In addition, the ratio of earnings to fixed charges would
have increased to 1.80x and the ratio of EBITDA to interest expense would
have increased to 4.95x. The unaudited pro forma financial and other data
presented are not necessarily indicative of actual results that would have
been achieved had the above transactions been completed on the date assumed
and do not purport to project the Company's financial position at any future
date or its results of operations for any future period.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997
OVERVIEW
Fort James reported net income of $268.5 million, or $1.18 per share, for
the nine months ended September 28, 1997, compared with $225.0 million, or $1.00
per share in 1996. Net sales for the first nine months of 1997 were $5,498
million compared to $5,922 million in 1996. The comparability of these results
was impacted by nonrecurring charges, extraordinary loss on early extinguishment
of debt, the 1996 divestitures of the Flexible Packaging and related Inks
divisions, as well as several small domestic Consumer Products facilities, and
the estimated impact of foreign currency translation.
ITEMS AFFECTING COMPARABILITY
Nonrecurring charges for the nine months ended September 28, 1997, and
September 29, 1996, were as follows (in millions, except per share amounts):
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996
------------------------- -------------------------
NET NET
INCOME PER INCOME PER
GROSS IMPACT SHARE GROSS IMPACT SHARE
------ ------ ----- ------ ------ -----
<S> <C>
Severance costs and asset write-downs................................... $ 47.0 $ 28.9 $ .16
Transaction costs....................................................... $ 53.9 $ 53.9 $ .25
Net gain on asset divestitures.......................................... (57.7) (35.2) (.17) (46.9) (24.2) (.14)
------ ------ ----- ------ ------ -----
Total (income) expense........................................... $ (3.8) $ 18.7 $ .08 $ .1 $ 4.7 $ .02
------ ------ ----- ------ ------ -----
------ ------ ----- ------ ------ -----
</TABLE>
Net income for the nine months ended September 28, 1997, excluding
nonrecurring items and extraordinary loss on early extinguishment of debt, was
$334.3 million, or $1.49 per share, compared with $233.0 million, or $1.04 per
share in the same period of 1996. Net sales for the nine month period, excluding
divested operations and the estimated impact of foreign currency translation,
were $5,611 million in 1997, compared with $5,537 million for the comparable
period in 1996.
Fort James' net sales and income from operations by business segment were
as follows for the nine months ended September 28, 1997, and September 29, 1996
(in millions):
<TABLE>
<CAPTION>
CONSUMER PRODUCTS
-------------------- COMMUNI- INTERSEGMENT
NORTH CATIONS P ELIMINATION/
AMERICA EUROPE PACKAGING PAPERS CORPORATE TOTAL
-------- -------- --------- -------- ------------ --------
<S> <C>
Nine months ended September 1997
Net sales.......................................... $3,313.8 $1,376.5 $ 595.0 $349.1 $ (136.9) $5,497.5
Segment results before restructure and other
unusual items................................... 655.6 153.6 67.7 7.8 (70.1) 814.6
Restructure and other unusual items income
(expense)....................................... 57.7 (53.9) 3.8
-------- -------- --------- -------- ------------ --------
Income from operations............................. 713.3 153.6 67.7 7.8 (124.0) 818.4
Nine months ended September 1996
Net sales.......................................... $3,322.5 $1,498.7 $ 941.1 $342.2 $ (183.0) $5,921.5
Segment results before restructure and other
unusual items................................... 579.6 134.4 76.7 12.2 (93.8) 709.1
Restructure and other unusual items income
(expense)....................................... (31.8) (4.7) 37.6 (1.2) (0.1)
-------- -------- --------- -------- ------------ --------
Income from operations............................. 547.8 129.7 114.3 12.2 (95.0) 709.0
</TABLE>
NORTH AMERICAN CONSUMER PRODUCTS BUSINESS
For the nine months ended September 28, 1997, operating profits before
restructuring and other unusual items, excluding results from divestitures, for
the North American Consumer Products Business were $655.6 million, an increase
of 13% over the comparable nine months in 1996. Excluding divestitures, revenues
for the first nine months of 1997 increased 1%
19
<PAGE>
over the prior year. The increase in profitability for the first nine months of
1997 as compared to the prior year was attributable to strong sales volumes, and
reduced wood costs, combined with continued cost reduction benefits.
EUROPEAN CONSUMER PRODUCTS BUSINESS
Operating profits for the European Consumer Products Business for the nine
months ended September 28, 1997 were $153.6 million, 14% above the $134.4
million reported in the same period of the prior year. This improvement was
attributable to a combination of stronger finished goods volumes of
approximately 2% and lower raw material costs and other cost reductions,
partially offset by the strengthening of the U.S. dollar and lower average
pricing. The net impact of foreign currency translation to the U.S. dollar for
the nine months ended September 28, 1997, was a reduction in operating profits
of approximately 8%. Net sales adjusted for the effects of foreign currency
translation were comparable in the first nine months of 1997 and 1996. While
finished product sales volumes improved compared to the first nine months of
1996, revenues continued to be negatively impacted by the strengthening of the
U.S. dollar and a decline in average pricing.
PACKAGING BUSINESS
Excluding the results attributable to the divested Flexible Packaging and
Inks divisions in 1996, operating profits before restructuring and other unusual
items for the Packaging Business for the first nine months of 1997 decreased 4%
to $67.7 million from $70.7 million in the same period of the prior year. Net
sales, adjusted for the Flexible Packaging and Inks divestitures, for the first
nine months of 1997 were $595 million compared to $613 million in 1996. The 1997
results reflected benefits of increased volumes for folding cartons and
paperboard and cost reductions, offset by lower average selling prices,
increased wastepaper costs and transition costs incurred in connection with new
customers.
COMMUNICATIONS PAPERS BUSINESS
Operating profits for the Communications Papers Business for the first nine
months decreased to $7.8 million in 1997 from $12.2 million for the same period
in 1996 due to lower average selling prices, partly offset by increased volumes,
lower wood costs and cost reduction initiatives. Net sales for the nine months
improved 2% to $349 million from $342 million in the prior year reflecting the
volume gains offset by lower average pricing.
OTHER INCOME AND EXPENSE ITEMS
General corporate expenses, before restructuring and other unusual items,
totaled $70.1 million in the first nine months of 1997, compared to $93.8
million for the same period in the prior year. The majority of the decrease was
related to reductions in spending on new integrated management information
systems, as design and installation projects were completed and systems became
operational. Interest expense decreased from $327.3 million for the first nine
months of 1996 to $277.6 million for the first nine months of 1997. This
decrease was attributable to the reduction in average outstanding debt combined
with the initial benefits from the Company's debt refinancing activities in the
1997 nine-month period. Other income increased to $22.3 million in the nine
months ended September 28, 1997 from $12.4 million for the same period in 1996,
principally due to improved earnings of unconsolidated affiliates and gains on
sales of assets. The Company's effective income tax rate was 43.5% for the nine
months ended September 28, 1997, compared to 41.4% for the first nine months of
1996. The increase in the effective tax rate from the prior year was primarily
due to certain non-tax-deductible Merger transaction costs in 1997, partially
offset by the reduced relative size of non-tax-deductible permanent differences
to pretax income. The extraordinary loss on early extinguishment of debt of
$47.1 million, net of taxes, for the nine months ended September 28, 1997,
primarily relates to the debt refinancings described below.
ADOPTION OF ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130") which is effective for
periods beginning after December 15, 1997, including interim periods. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements, either in the
statement of operations or a separate statement. Additionally, SFAS 130 requires
the display of the accumulated balance of other comprehensive income. On a pro
forma basis, comprehensive income for the nine months ended September 28, 1997
was $146.5 million, compared to $206.7 million for the nine months ended
September 29, 1996. Pro forma comprehensive income for the first nine months of
1997 included a loss on foreign currency translation of $135.9 million, compared
to a loss on foreign currency translation of $27.2 million included in pro forma
comprehensive income for the first nine months of 1996.
20
<PAGE>
In June 1997, the Financial Accounting Standards Board also issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") which is effective for periods beginning after
December 15, 1997, including interim periods after the year of initial adoption.
SFAS 131 established standards for the way public companies report information
about operating segments in both interim and annual financial statements,
including related disclosures about products and services, geographic areas, and
major customers. The Company has not determined what, if any, impact SFAS 131
will have on the operating segments reported nor the impact SFAS 131 will have
on the related disclosures.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS 128"), which is effective for periods
ending after December 15, 1997, including interim periods. SFAS 128 establishes
standards for computing and presenting earnings per share ("EPS") by replacing
primary EPS with the presentation of basic EPS and requiring dual presentation
of basic and diluted EPS on the face of the income statement. On a pro forma
basis, basic EPS per share and diluted EPS per share as reported would have been
$1.21 and $1.18, respectively, for the nine months ended September 28, 1997, and
$1.01 and $1.00, respectively, for the nine months ended September 29, 1996.
YEAR 2000
The Company has developed plans to address the possible exposure related to
the impact on its computer systems of the year 2000. Key financial information
and operational systems have been assessed, and the Company is in the process of
executing the plans to modify systems prior to December 31, 1999. The financial
impact of making the required system changes has not been quantified and is not
expected to be material to the Company's consolidated financial position or
results of operations.
FINANCIAL CONDITION
Cash provided by operating activities totaled $564.5 million in the first
nine months of 1997, compared with the $803.9 million provided in the prior
year. This decrease in cash provided by operating activities resulted from a
payment for the unwinding of the Company's foreign currency hedge (described
below) and increases in accounts receivable and inventory. Inventory increases
occurred in anticipation of the possible retirement of older, less efficient
machines. The Company's current ratio was 1.2 as of September 28, 1997, and
December 29, 1996. Capital expenditures decreased to $313.5 million for the nine
months ended September 28, 1997, from $328.7 million in the first nine months of
1996 due to divested operations. This decrease was partially offset by spending
on a new tissue machine at the Savannah, Georgia mill scheduled for completion
in late 1998.
Total indebtedness decreased by $415 million from $4,434 million as of
December 29, 1996, to $4,019 million as of September 28, 1997. As of September
28, 1997, the Company had outstanding borrowings of approximately $885 million
supported by revolving credit facilities. These borrowings included $793 million
outstanding under such facilities, $69 million of commercial paper and $23
million of money market notes. Total outstanding debt as of September 28, 1997,
included approximately $2,977 million of fixed rate and $1,042 million of
floating rate obligations.
The Company held $1,138 million and $1,286 million in notional amount of
interest rate swaps with fair value liabilities of $8 million and $15 million as
of September 28, 1997, and December 29, 1996, respectively. In the third quarter
of 1997, the Company entered into $500 million in notional amount of interest
rate swaps to hedge the New Bank Credit Facility. During the first quarter of
1997, the Company effectively unwound $648 million in notional amount of
interest rate swaps at a cost of approximately $8 million. The cost of unwinding
the interest rate swaps is being amortized to interest expense through January
1999. The Company is also party to LIBOR-based interest rate cap agreements
which limit the interest cost to the Company with respect to $500 million of
floating rate obligations. The fair value of these cap agreements was $.1
million compared to a carrying value of $5 million as of September 28, 1997.
During the first quarter of 1997, the Company unwound all $470 million in
notional amount of foreign exchange contracts, along with interest rate
agreements, at a cost of $31 million, net of tax benefits. The foreign exchange
contracts were designated as hedges of a portion of the Company's net investment
in its European Consumer Products Business. The net termination cost was
recorded as a component of equity. The Company terminated such contracts prior
to their original expiration in September 1998.
In connection with the Merger, Fort James refinanced an aggregate of
approximately $2.1 billion principal amount of debt of Fort James and Fort
Howard (the "Debt Refinancing"). The Debt Refinancing is expected to result in a
reduction of interest expense in excess of $50 million annually. In connection
with the Debt Refinancing, the Company incurred a $47.1 million, net of taxes,
extraordinary loss for prepayment penalties.
21
<PAGE>
At the time of the Merger, as the first step in the Debt Refinancing, Fort
James and Fort Howard entered into the New Bank Credit Facility and borrowed
$666 million thereunder to replace certain of the pre-Merger bank credit
facilities. As of September 28, 1997, the Company had $661 million outstanding
under the New Bank Credit Facility. Additionally, on August 13, 1997, prior to
the effectiveness of the Merger, Fort James repurchased and retired $200 million
in aggregate principal amount of its 9.77% Senior Notes with proceeds from
previous divestitures and excess cash from operations. As the second step in the
Debt Refinancing, on September 8, 1997, Fort Howard commenced cash tender offers
for approximately $1.47 billion of its outstanding public debt securities and,
upon expiration of the Tender Offers, on October 8, 1997 purchased a total of
$1.28 billion of such debt securities as follows: (i) $89.9 million of 8 1/4%
Senior Notes due 2002; (ii) $395.0 million of 9 1/4% Senior Notes due 2001;
(iii) $559.3 million of 9% Senior Subordinated Notes due 2006 and (iv) $234.2
million of 10% Subordinated Notes due 2003. The Tender Offers were funded
through a combination of borrowings under the New Bank Credit Facility and the
issuance of $720 million aggregate principal amount of Senior Notes in the
Senior Notes Offering. The Senior Notes were issued subsequent to the end of the
third quarter, on September 29, 1997, as follows: (i) $100 million 6 1/2% Senior
Notes due 2002, (ii) $320 million 6 5/8% Senior Notes due 2004 and (iii) $300
million 6 7/8% Senior Notes due 2007.
During the third quarter of 1997, all outstanding shares of the Company's
Series P 9% Cumulative Convertible Preferred Stock, having a face value of
$287.5 million, were converted into approximately 15.3 million shares of Common
Stock. On October 1, 1997, subsequent to the end of the third quarter, the
Company redeemed all outstanding shares of its Series O 8 1/4% Cumulative
Preferred Stock for a redemption price of approximately $98.1 million. This
conversion and redemption will reduce aggregate cash dividends by approximately
$25 million annually.
As part of the Company's ongoing program of timberland divestitures, on
April 29, 1997, pursuant to an offering memorandum dated September 12, 1996,
Fort James completed the sale of approximately 95,000 acres of timberlands
located in Alabama and Mississippi for cash proceeds of $111 million. The
Company recorded a second quarter after-tax gain of $35.2 million on this sale.
DESCRIPTION OF COMMON STOCK
The following summary of certain provisions of the Company's Articles of
Incorporation, as amended (the "Articles"), the Company's Bylaws (the "Bylaws")
and the Rights Agreement (as defined below) does not purport to be complete and
is qualified in its entirety by reference to such instruments, each of which is
an exhibit to the Registration Statement of which this Prospectus is a part.
AUTHORIZED CAPITAL
The authorized capital stock of the Company consists of 500,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock, par value $10 per share
(the "Preferred Stock"). Each outstanding share of Common Stock currently has
attached to it one preferred share purchase right, as described under
" -- Rights Plan" below. The Board of Directors is authorized, without
shareholder approval, to designate classes or series of shares of Preferred
Stock and to determine the relative rights, preferences and limitations of any
such class or series.
As of February 2, 1998, there were 209,667,511 shares of Common Stock
issued and outstanding and an aggregate of 3,966,241 shares of Preferred Stock
had been designated, of which 3,263,512 shares were issued and outstanding.
GENERAL
Subject to the prior rights of the holders of any Preferred Stock then
outstanding, holders of Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor and, in the event of liquidation or dissolution, to receive the net
assets of the Company remaining after payment of all liabilities and after
payment to holders of all shares of Preferred Stock of the full preferential
amounts to which such holders are respectively entitled, in proportion to their
respective holdings.
Subject to the rights of the holders of any Preferred Stock then
outstanding, all voting rights are vested in the holders of the shares of Common
Stock, each share being entitled to one vote on all matters requiring
stockholder action and in the election of directors. Holders of Common Stock
have no preemptive, subscription or conversion rights. All of the outstanding
shares of Common Stock, including the shares being sold by the Selling
Stockholders in the Offering, are fully paid and nonassessable.
22
<PAGE>
RIGHTS PLAN
Fort James has adopted the Amended and Restated Rights Agreement, dated as
of May 12, 1992, as amended, between the Company and NationsBank of Virginia,
N.A., as Rights Agent (the "Rights Agreement"). Wachovia Bank of North Carolina,
N.A., became successor Rights Agent as of June 8, 1992, by an amendment to the
Rights Agreement.
The following description of the Rights Agreement is qualified in its
entirety by reference to the terms of the Rights Agreement. See "Incorporation
of Certain Documents by Reference."
Pursuant to the Rights Agreement, a right (a "Right") is attached to each
share of Common Stock outstanding and entitles the registered holder thereof to
purchase from Fort James a unit (a "Unit") consisting of one one-thousandth of a
share of Series M Cumulative Participating Preferred Stock ("Series M Preferred
Stock"), at an initial purchase price of $150 per Unit (the "Purchase Price"),
subject to adjustment.
Each share of Series M Preferred Stock, when issued will have a minimum
preferential quarterly dividend of $1.00 per share, but will be entitled to an
aggregate dividend of 1,000 times the Common Stock dividend. In the event of any
merger, consolidation or other transaction in which the Common Stock is
exchanged for other securities or assets, each share of Series M Preferred Stock
will be entitled to receive 1,000 times the amount received per share of Common
Stock. Each share of Series M Preferred Stock will have 1,000 votes, voting
together with the Common Stock and such other voting rights provided by law.
Additionally, in the event of liquidation, each share of Series M Preferred
Stock will entitle the holder thereof to receive a preferential liquidation
payment equal to the greater of $150,000 or 1,000 times the liquidation value of
a share of Common Stock, plus accrued and unpaid dividends, or a ratable
distribution in the event that the assets of Fort James are insufficient to pay
the liquidation preferences in full.
The Rights will separate from the corresponding shares of Common Stock upon
the earlier of (1) ten days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or has obtained the right to acquire, beneficial ownership of 15 percent or more
of the outstanding shares of Common Stock and (2) ten business days after the
date of commencement of, or first public announcement of the intent of any
person (other than Fort James and certain related entities) to commence, a
tender or exchange offer, the consummation of which would result in a person or
group beneficially owning 15 percent or more of outstanding shares of Common
Stock (the earlier of (1) and (2), the "Distribution Date"). Until the
Distribution Date, (1) Rights will be evidenced by one or more certificates held
by the rights agent under the Rights Agreement, and will be represented by the
related Common Stock certificates (2) may be transferred with and only with such
Common Stock certificates, (3) new Common Stock certificates will contain a
notation incorporating the Rights Agreement by reference and (4) the surrender
for transfer of any certificates for Common Stock outstanding will also
constitute the transfer of Rights associated with the Common Stock represented
by such certificate. As soon as practicable after the Distribution Date, rights
certificates (the "Rights Certificates") will be mailed to holders of record of
the Common Stock as of the close of business on the Distribution Date and,
thereafter, the separate Rights Certificates alone will represent the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on March 1, 1999, unless earlier exercised by the
holder thereof or redeemed by Fort James as described below. Until a Right is
exercised, the holder thereof, as such, will have no rights as a shareholder of
Fort James, including without limitation, the right to vote or to receive
dividends. While the distribution of Rights will not be taxable to Fort James or
to its shareholders, shareholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights become exercisable.
Each holder of a Right will have the right to receive, upon exercise of a
Right, Common Stock (or, in certain circumstances, cash, property or other
securities of Fort James) having a value equal to two times the Purchase Price
then in effect, if after the Distribution Date, (1) Fort James is the surviving
company in a merger with an Acquiring Person and the shares of Common Stock are
not changed or exchanged, (2) an Acquiring Person consummates, with Fort James
or any subsidiary, any one of a number of transactions listed in the Rights
Agreement, examples of which include acquiring stock or convertible securities
except on a pro rata basis with other shareholders, obtaining any assets except
on an arm's-length basis, obtaining any assets having a fair market value of
more than $5 million or receiving certain financial benefits such as loans,
guarantees, tax benefits or compensation except as a full-time employee at
normal rates, (3) while there is an Acquiring Person, an event occurs which
results in such Acquiring Person's ownership interest being increased by more
than 1 percent (e.g. a reverse stock split), or (4) an Acquiring Person becomes
the beneficial owner of 15 percent or more of the Common Stock except pursuant
to a cash tender offer for all outstanding shares which is determined to be fair
by the Continuing Directors (as defined below) (each of which events is
popularly termed a "flip-in" event). Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in
23
<PAGE>
the Rights Agreement) were, beneficially owned by an Acquiring Person will be
null and void. The "Continuing Directors" are the directors on the Distribution
Date or new directors elected or nominated by a majority of the Continuing
Directors in office on the date of such election or nomination.
For example, if the Purchase Price is $150, upon exercise of a Right and
the payment of $150, a Right holder would receive $300 worth of Common Stock (or
other consideration, as noted above).
Each holder of a Right will have the right to receive, upon exercise,
common stock (or equivalent securities) of the acquiring entity having a value
equal to two times the Purchase Price then in effect, if after an announcement
that a person or group has become an Acquiring Person, (1) Fort James is
acquired in a merger or other business combination transaction (other than a
merger of the type described pursuant to certain flip-in events), or (2) 50
percent or more of Fort James' assets or earning power is sold or transferred
(each of which events is popularly termed a "flip-over" event).
If Fort James is not able to issue the Series M Preferred Stock or Common
Stock because of the absence of necessary regulatory approval, restrictions
contained in the Articles or for any other reason, a person exercising Rights
will be entitled to receive a combination of cash or property or other
securities having a value equal to the value of the Series M Preferred Stock or
the Common Stock which would otherwise have been issued upon exercise of the
Rights.
At any time until ten days after the announcement that a person or group
has become an Acquiring Person, Fort James may redeem the Rights in whole, but
not in part, at a price of $.01 per Right, payable in cash or Common Stock. When
the Board of Directors of Fort James orders a redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price.
After a person or group becomes an Acquiring Person and before the
Acquiring Person acquires 50 percent or more of the outstanding Common Stock,
Fort James, with the approval of a majority of the Continuing Directors, may
require a holder to exchange all or any portion of his Rights for one share of
Common Stock or one one-thousandth of a share of Series M Preferred Stock (or a
share of a class or series of Preferred Stock having equivalent rights), per
Right.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the Fort
James Board of Directors prior to the Distribution Date. After the Distribution
Date, the Rights Agreement may still be amended by the Board of Directors (under
certain circumstances only with the approval of a majority of the Continuing
Directors) in order to cure any ambiguity, defect or inconsistency, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement (including the time period for redeeming
the Rights); PROVIDED, HOWEVER, that no amendment to adjust the time period
governing redemption shall be made if the Rights are not redeemable.
The Rights will not prevent a takeover of the Company. The Rights, however,
may cause substantial dilution to a person or group that acquires 15 percent or
more of Common Stock unless the Rights are first redeemed or terminated by the
Board of Directors of the Company. Nevertheless, the Rights should not interfere
with a transaction that is in the best interests of the Company and its
shareholders because the Rights can be redeemed or terminated, as hereinabove
described, before the consummation of such transaction.
The complete terms of the Rights are set forth in the Rights Agreement. The
Rights Agreement is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part, and the foregoing description is
qualified in its entirety by reference thereto.
OTHER PROVISIONS
In addition to the Rights Plan, the Articles and Bylaws of the Company
contain a number of provisions which may be deemed to have the effect of
discouraging or delaying attempts to gain control of the Company, including
certain provisions of the Articles. The Articles provide generally that
amendments to the Articles must be approved, subject to the rights of holders of
Preferred Stock, by a majority of the outstanding shares entitled to vote on
such an amendment. An amendment which has the effect of reducing the vote
required to approve a merger or certain other extraordinary transactions,
however, requires a two-thirds vote.
The Bylaws provide for "constitutive resolutions" of the Board of Directors
of the Company, which must be designated by the Board of Directors as such and
which must be adopted by a unanimous vote of the directors present and voting
when a quorum is present. Constitutive resolutions may be rescinded, revoked,
amended or modified only by the vote of all of the directors then in office
(subject to overriding action by the shareholders of the Company).
24
<PAGE>
The Bylaws also include provisions setting forth specific conditions under
which: (1) business may be transacted at an annual or special meeting of
shareholders; and (2) persons may be nominated for election as directors of the
Company at an annual meeting of shareholders.
The Virginia "control share acquisition" statute allows corporations to
elect to either be covered or not be covered by such statute. The Company
elected not to be covered by such statute.
In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of Common Stock or Preferred Stock may have an
anti-takeover effect.
The existence of the foregoing provisions could result in the Company being
less attractive to a potential acquiror, and the Company's shareholders
receiving less for their shares of Common Stock than otherwise might be
available in the event of a take-over attempt.
REGISTRAR AND TRANSFER AGENT
Norwest Bank Minnesota, N.A. is the Registrar and Transfer Agent for the
Common Stock.
MANAGEMENT
The following table sets forth certain information concerning the executive
officers and other key personnel of the Company.
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Miles L. Marsh............................... Chairman and Chief Executive Officer
Michael T. Riordan........................... President and Chief Operating Officer
James K. Goodwin............................. President, North American Consumer Business
John F. Lundgren............................. President, Consumer Products Business, Europe
Joe R. Neil.................................. President, Communications Papers
Timothy G. Reilly............................ President, North American Commercial Business
B. Gregory Stroh............................. President, Packaging
Ernst A. Haberli............................. Executive Vice President and Chief Financial Officer
John F. Rowley............................... Executive Vice President, Operations and Logistics
Clifford A. Cutchins, IV..................... Senior Vice President and General Counsel
Daniel J. Girvan............................. Senior Vice President, Human Resources
R. Michael Lempke............................ Senior Vice President and Treasurer
Joseph W. McGarr............................. Senior Vice President, Strategy
William A. Paterson.......................... Senior Vice President and Controller
</TABLE>
25
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of the date of this
Prospectus with respect to the Selling Stockholders' holdings of Common Stock.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK OWNED SHARES TO BE
PRIOR TO OWNED AFTER
THE OFFERING THE OFFERING
NAME AND ADDRESS --------------------- --------------------
OF SELLING STOCKHOLDERS NUMBER %(1) NUMBER %(1)
- -------------------------------------------------------------------------- --------- ------ --------- -----
<S> <C>
First Plaza Group Trust, Mellon Bank, N.A.,
as Trustee (2).......................................................... 8,070,882 3.8 0 --
c/o General Motors Investment Management Corporation
767 Fifth Avenue
New York, New York 10153
Morgan Stanley Entities (3)............................................... 6,345,356 3.0 3,166,238 1.5(4)
1585 Broadway
New York, New York 10036
</TABLE>
- ---------------
(1) Based on 209,667,511 shares of Common Stock outstanding on February 2, 1998.
(2) Mellon Bank, N.A. acts as trustee for First Plaza Group Trust, a trust under
and for the benefit of certain employee benefit plans of General Motors
Corporation.
(3) Includes 3,114,372 shares of Common Stock held directly by Morgan Stanley
and 2,470,396 shares of Common Stock held directly by Morgan Stanley
Leveraged Equity Fund II, Inc. ("MSLEF II"), a wholly owned subsidiary of
Morgan Stanley. Also includes an additional 760,588 shares of Common Stock
held by Morgan Stanley Leveraged Equity Holdings, Inc. ("MSLEH") and Morgan
Stanley Equity Investors, Inc. ("MSEI"), wholly owned subsidiaries of Morgan
Stanley. Morgan Stanley, MSLEF II, MSLEH and MSEI are referred to as the
"Morgan Stanley Entities." Morgan Stanley, MSLEF II, MSLEH and MSEI intend
to sell , , and shares, respectively, in the Offering.
Following the Offering, Morgan Stanley will not own any shares of Common
Stock, and MSLEF II, MSLEH and MSEI will own (representing % of the
outstanding shares of Common Stock), and shares of Common Stock,
respectively, assuming the overallotment option is not exercised.
(4) Assumes that the overallotment option is not exercised. If the overallotment
option is exercised, the Morgan Stanley Entities will own approximately 1.0%
of the outstanding shares of Common Stock.
The Company and the Selling Stockholders (with respect to any unsold shares
of Common Stock) have agreed, with certain exceptions, that, for the period
beginning 14 days prior to the effective date of the Registration Statement of
which this Prospectus is a part until 90 days after the date of this Prospectus,
they will not, without the prior consent of Morgan Stanley & Co. Incorporated
("MS&Co."), offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock. See "Underwriting."
The Selling Stockholders acquired their shares of Common Stock in the
Merger. In connection with the Merger, Morgan Stanley and certain of its
subsidiaries (collectively, the "Director Nominating Stockholders") entered into
a stockholders agreement with the Company (the "Stockholders Agreement")
providing for the appointment of four individuals specified in the merger
agreement as members of the Fort James Board of Directors immediately following
the effectiveness of the Merger and granting the Director Nominating
Stockholders the right to nominate for election at subsequent annual or special
meetings up to two members. Under the Stockholders Agreement, so long as the
Director Nominating Stockholders and their affiliates (other than MS&Co. and
Dean Witter Reynolds Inc. ("Dean Witter")) continue to own at least 5 million
shares of Common Stock issued to them in the Merger (including as a result of
certain specified transfers to such stockholders), Morgan Stanley will be
entitled to nominate two individuals for election as directors. Further, until
such time as the Director Nominating Stockholders and their affiliates (other
than MS&Co. and Dean Witter) no longer hold 2 million shares of Common Stock
issued to them in the Merger (including as a result of certain specified
transfers), Morgan Stanley will be entitled to nominate one director. The 5
million and two million share thresholds described above will be appropriately
adjusted in the event of any stock dividend, stock split, reclassification or
similar change with respect to the Common Stock.
The four individuals specified in the merger agreement who became directors
of the Company immediately following the effectiveness of the Merger are Michael
T. Riordan, Dr. James L. Burke, Robert H. Niehaus and Frank V. Sica. Messrs.
Niehaus and Sica are officers of MS&Co. The terms of such directors expire in
1998.
26
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person that, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership, a
foreign estate or a foreign trust, in each case not subject to United States
federal income tax on a net income basis in respect of income or gain from
Common Stock (a "non-U.S. holder"). This discussion does not consider the
specific facts and circumstances that may be relevant to particular holders and
does not address the treatment of non-U.S. holders of Common Stock under the
laws of any state, local or foreign taxing jurisdiction. Further, the discussion
is based on provisions of the United States Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations thereunder, and administrative and
judicial interpretations thereof, all as in effect on the date hereof and all of
which are subject to change on a possibly retroactive basis. Each prospective
holder is urged to consult a tax advisor with respect to the United States
federal tax consequences of acquiring, holding and disposing of Common Stock, as
well as any tax consequences that may arise under the laws of any state, local
or foreign taxing jurisdiction.
DIVIDENDS
Dividends paid to a non-U.S. holder of Common Stock will be subject to
withholding of United States federal income tax at a 30 percent rate or such
lower rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business
within the United States (and are attributable to a United States permanent
establishment of such holder, if an applicable income tax treaty so requires as
a condition for the non-U.S. holder to be subject to United States income tax on
a net income basis in respect of such dividends). Such "effectively connected"
dividends are subject to tax at rates applicable to United States citizens,
resident aliens and domestic United States corporations, and are not generally
subject to withholding. Any such effectively connected dividends received by a
non U.S. holder that is a corporation may also, under certain circumstances, be
subject to an additional "branch profits tax" at a 30 percent rate or such lower
rate as may be specified by an applicable income tax treaty.
Under currently effective United States Treasury regulations, dividends
paid to an address in a foreign country are presumed to be paid to a resident of
that country (unless the payor has knowledge to the contrary) for purposes of
the withholding discussed above and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. Under United States Treasury regulations released on October 6,
1997 (the "New Regulations") and effective for payments made after December 31,
1998, however, a non-U.S. holder of Common Stock who wishes to claim the benefit
of an applicable treaty rate would be required to satisfy applicable United
States Internal Revenue Service certification requirements. Certification and
disclosure requirements relating to the exemption from withholding under the
effectively connected income exemption discussed above are slightly modified
under the New Regulations with respect to payments made after December 31, 1998.
A non-U.S. holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the United States Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of Common Stock except
in the following circumstances: (1) the gain is effectively connected with a
trade or business conducted by the non-U.S. holder in the United States (and is
attributable to a permanent establishment maintained in the United States by
such non-U.S. holder if an applicable income tax treaty so requires as a
condition for such non-U.S. holder to be subject to United States taxation on a
net income basis in respect of gain from the sale or other disposition of the
Common Stock); (2) in the case of a non-U.S. holder who is an individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale and certain other
conditions are met; or (3) the Company is or has been a "United States real
property holding corporation" for federal income tax purposes and, assuming that
the Common Stock continues to be "regularly traded on an established securities
market" for federal income tax purposes, the non-U.S. holder held, directly or
indirectly at any time during the five-year period ending on the date of
disposition, more than 5 percent of the Common Stock (and is not eligible for
any treaty exemption). Effectively connected gains realized by a corporate
non-U.S. holder may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30 percent rate or such lower rate as may
be specified by an applicable income tax treaty. The
27
<PAGE>
Company has not been, is not, and does not anticipate becoming a "United States
real property holding corporation" for federal income tax purposes.
FEDERAL ESTATE TAXES
Common Stock held by an individual that is a non-resident for United States
federal estate tax purposes at the time of death will be included in such
holder's gross estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Internal Revenue Service and to
each non-U.S. holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. These information reporting
requirements apply regardless of whether withholding is required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the non-U.S. holder
resides under the provisions of an applicable income tax treaty.
Under current law, United States backup withholding tax generally will not
apply to dividends paid to non-U.S. holders that are either subject to the 30
percent withholding discussed above or that are not so subject because an
applicable tax treaty reduces such withholding. Otherwise, backup withholding of
United States federal income tax at a rate of 31 percent may apply to dividends
paid with respect to Common Stock to holders that are not "exempt recipients"
and that fail to provide certain information (including the holder's United
States taxpayer identification number). Generally, unless the payor of dividends
has definite knowledge that the payee is a United States person, the payor may
treat dividend payments to a payee with a foreign address as exempt from backup
withholding. However, under the New Regulations, dividend payments made after
December 31, 1998 generally will be subject to information reporting and backup
withholding unless applicable United States Internal Revenue Service
certification requirements are satisfied.
In general, United States information reporting and backup withholding
requirements will not apply to a payment made outside the United States of the
proceeds of a sale of Common Stock through an office outside the United States
of a non-United States broker. However, United States information reporting (but
not backup withholding) requirements will apply to a payment made outside the
United States of the proceeds of a sale of Common Stock through an office
outside the United States of a broker that is a United States person, a foreign
person that derives 50 percent or more of its gross income for certain periods
from the conduct of a trade or business in the United States, a "controlled
foreign corporation" as to the United States, or, effective after December 31,
1998, through a foreign office of certain other persons unless the broker has
documentary evidence in its records that the holder or beneficial owner is a
non-United States person or the holder or beneficial owner otherwise establishes
an exemption. Payment of the proceeds of the sale of Common Stock to or through
a United States office of a broker is currently subject to both United States
backup withholding and information reporting unless the holder certifies its
non-United States status under penalties of perjury or otherwise establishes an
exemption.
A non-United States holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the United States Internal Revenue Service.
28
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below for whom MS&Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Smith Barney Inc. ("Smith Barney") are acting
as U.S. Representatives, and the International Underwriters named below for whom
Morgan Stanley & Co. International Limited, Merrill Lynch International and
Smith Barney are acting as International Representatives, have severally agreed
to purchase, and the Selling Stockholders have agreed to sell to them,
severally, the respective number of shares of Common Stock set forth opposite
the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------------------------------------- -----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................................................
Smith Barney Inc. ...........................................................................................
-----------
Subtotal................................................................................................ 9,562,500
-----------
International Underwriters:
Morgan Stanley & Co. International Limited...................................................................
Merrill Lynch International..................................................................................
Smith Barney Inc.............................................................................................
-----------
Subtotal................................................................................................ 1,687,500
-----------
Total.............................................................................................. 11,250,000
-----------
-----------
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken. All shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions, (1)
it is not purchasing any shares of Common Stock for the account of anyone other
than a United States or Canadian Person (as defined herein), and (2) it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute any prospectus relating to the shares of Common
Stock outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions: (1) it is not purchasing any shares of
Common Stock for the account of any United States or Canadian Person, and (2) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
shares of Common Stock or distribute any prospectus relating to the shares of
Common Stock in the United States or Canada or to any United States or Canadian
Person. With respect to any Underwriter that is a U.S. Underwriter and an
International Underwriter, the foregoing representations and agreements (1) made
by it in its capacity as a U.S. Underwriter apply only to it in its capacity as
a U.S. Underwriter and (2) made by it in its capacity as an International
Underwriter apply only to it in its capacity as an International Underwriter.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement between U.S. and
International Underwriters. As used herein, "United States or Canadian Person"
means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares
29
<PAGE>
sold shall be the public offering price set forth on the cover page hereof, in
United States dollars, less an amount not greater than the per share amount of
the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (1) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (2) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom and (3) it has only issued or passed on and will only issue
or pass on in the United Kingdom any document received by it in connection with
the offering of the Shares to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.
The Underwriters initially propose to offer part of the Shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
$ per share under the public offering price. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
other Underwriters or to certain dealers. After the initial offering of the
Shares, the offering price and other selling terms may from time to time be
varied by the Representatives.
Pursuant to the Underwriting Agreement, the Selling Stockholders have
granted to the U.S. Underwriters an option, exercisable for 30 days from the
date of this Prospectus, to purchase up to an aggregate of 1,000,000 additional
shares of Common Stock at the public offering price set forth on the cover page
of this Prospectus, less underwriting discounts and commissions. The U.S.
Underwriters may exercise such option to purchase additional shares of Common
Stock solely for the purpose of covering over-allotments, if any, made in
connection with the Offering. To the extent such option is exercised, each U.S.
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite such U.S. Underwriter's name in the preceding
Underwriters' table bears to the total number of shares in the preceding table.
30
<PAGE>
The Company has agreed (without the prior written consent of MS&Co. on
behalf of the Underwriters) (1) that it will not effect any public sale or
distribution of any Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock (together with the Common Stock,
"Securities") (other than any such sale or distribution of such Securities
pursuant to registration of such Securities on Form S-4 or S-8 or any successor
forms or any such sale or distribution of such Securities in connection with any
merger or consolidation involving the Company or a subsidiary of the Company or
the acquisition by the Company or a subsidiary of the Company of the capital
equity or substantially all of the assets of any other person or entity), during
the 14 days prior to, and during the 90 days beginning on, the effective date of
the Registration Statement of which this Prospectus is a part, except as part of
such Registration Statement and (2) that any agreement entered into after the
date of the Underwriting Agreement pursuant to which the Company issues or
agrees to issue any privately placed Securities will contain a provision under
which holders of such Securities agree not to effect any public sale or
distribution of any such Securities during the periods described in (1) above,
in each case including a sale pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act. The restrictions described above do not
apply to the conversion or exchange of any Securities pursuant to their terms
into or for other Securities.
In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
shares of Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the shares of Common
Stock for their own account. In addition, to cover over-allotments or to
stabilize the price of the shares of Common Stock, the Underwriters may bid for,
and purchase, shares of Common Stock in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an Underwriter
or a dealer for distributing the shares of Common Stock in the Offering, if the
syndicate repurchases previously distributed shares of Common Stock in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the shares of Common Stock above independent market levels. The Underwriters
are not required to engage in these activities, and may end any of these
activities at any time.
Because affiliates of MS&Co. are receiving more than 10% of the proceeds of
the Offering, not including underwriting compensation, the Offering is being
conducted in compliance with the National Association of Securities Dealers
(NASD) Conduct Rule 2710(c)(8).
Certain of the Underwriters and their respective affiliates have, from time
to time, performed various investment banking and financial advisory services
for the Company for which they have received usual and customary fees. MS&Co.
acted as financial advisor to Fort Howard, and Merrill Lynch and Salomon
Brothers Inc ("Salomon Brothers") acted as financial advisors to the Company, in
connection with the Merger. MS&Co. acted as Dealer Manager and Consent
Solicitation Agent in connection with the Tender Offers, which were completed in
October 1997 and as Consent Solicitation Agent in connection with Fort Howard's
solicitation of consents with respect to the Participation Agreements governing
certain sale-lease back transactions.
Merrill Lynch, Salomon Brothers and MS&Co. acted as underwriters in
connection with the Senior Notes Offering, which was completed in September
1997.
In connection with the Merger, Morgan Stanley and certain of its
subsidiaries entered into the Stockholders Agreement with the Company. See
"Selling Stockholders."
Upon consummation of the Offering, affiliates of MS&Co. will own
approximately 1.5% of the outstanding shares of Common Stock, assuming the
over-allotment option granted to the U.S. Underwriters is not exercised.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act. The Company has agreed to pay the expenses of the Selling
Stockholders (excluding underwriting discounts and commissions) in connection
with the Offering.
LEGAL MATTERS
Certain legal matters relating to the validity of the Shares offered hereby
will be passed upon for the Company by McGuire, Woods, Battle & Boothe LLP,
Richmond, Virginia. Certain legal matters relating to the Offering will be
passed upon for the Underwriters by Shearman & Sterling, New York, New York.
Anne M. Whittemore, a director of the Company, is a partner of McGuire, Woods,
Battle & Boothe LLP. Lawyers of such firm who have performed services in
connection with the offering made hereby own an aggregate of approximately 350
shares of the Common Stock. Shearman & Sterling has represented Fort Howard in
various matters, including in connection with the Merger.
31
<PAGE>
EXPERTS
The consolidated balance sheets of James River and subsidiaries as of
December 29, 1996 and December 31, 1995, and the related consolidated statements
of operations, cash flows and changes in capital accounts for each of the three
years in the period ended December 29, 1996, included in James River's 1996
Annual Report on Form 10-K, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon included therein,
and incorporated by reference herein. The supplemental consolidated balance
sheets of the Company as of December 29, 1996, and December 31, 1995, and the
supplemental consolidated statements of operations, cash flows and changes in
capital accounts for each of the three years in the period ended December 29,
1996, contained in the Company's Current Report on Form 8-K dated August 13,
1997 (filed on August 27, 1997), have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon included therein
and incorporated by reference herein. The consolidated balance sheets of Fort
James as of December 29, 1996, and December 31, 1995, and the consolidated
statements of operations, cash flows and changes in capital accounts for each of
the three years in the period ended December 29, 1996, contained in the
Company's Current Report on Form 8-K dated August 13, 1997 (filed February 3,
1998) have been audited by Coopers & Lybrand L.L.P., independent accountants, as
set forth in their report thereon included therein and incorporated herein. Such
consolidated financial statements and supplemental consolidated financial
statements have been incorporated herein by reference in reliance on such
reports given on the authority of such firm as experts in accounting and
auditing.
The consolidated balance sheets of Fort Howard and subsidiaries as of
December 31, 1996 and December 31, 1995, and the related consolidated statements
of operations, cash flows and changes in capital accounts for each of the three
years in the period ended December 31, 1996, included in the Company's Current
Report on Form 8-K dated August 13, 1997 (filed on August 25, 1997), have been
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements have been incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
32
<PAGE>
(This page intentionally left blank)
<PAGE>
(This page intentionally left blank)
<PAGE>
(This page intentionally left blank)
<PAGE>
[FORT JAMES LOGO]
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
(ALTERNATE COVER PAGE FOR INTERNATIONAL PROSPECTUS)
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED FEBRUARY 6, 1998
[FORT JAMES LOGO]
11,250,000 SHARES
FORT JAMES CORPORATION
COMMON STOCK
------------------------
ALL OF THE 11,250,000 SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE ("COMMON
STOCK"), OF FORT JAMES CORPORATION, A VIRGINIA CORPORATION ("FORT JAMES" OR THE
"COMPANY"), BEING OFFERED HEREBY ARE BEING SOLD BY CERTAIN STOCKHOLDERS OF THE
COMPANY (COLLECTIVELY THE "SELLING STOCKHOLDERS"). SEE "SELLING
STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE
SALE OF SHARES OF COMMON STOCK BY THE SELLING STOCKHOLDERS. OF THE
11,250,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 1,687,500 SHARES
ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND 9,562,500 SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS.
SEE "UNDERWRITING." THE COMMON STOCK IS LISTED ON THE NEW YORK
STOCK EXCHANGE (THE "NYSE") UNDER THE SYMBOL "FJ." ON FEBRUARY 5,
1998, THE REPORTED LAST SALES PRICE OF THE COMMON
STOCK ON THE NYSE COMPOSITE TRANSACTIONS
TAPE WAS $42 1/8 PER SHARE.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS (1) STOCKHOLDERS (2)
------------------------ ------------------------ ------------------------
<S> <C>
PER SHARE............................................. $ $ $
TOTAL(3).............................................. $ $ $
</TABLE>
- ---------------
(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."
(2) TOTAL EXPENSES (EXCLUSIVE OF UNDERWRITING DISCOUNTS AND COMMISSIONS) IN
CONNECTION WITH THE OFFERING OF SHARES HEREUNDER ARE ESTIMATED TO BE
APPROXIMATELY $695,000, ALL OF WHICH WILL BE PAID BY THE COMPANY.
(3) THE SELLING STOCKHOLDERS HAVE GRANTED TO THE U.S. UNDERWRITERS A 30-DAY
OPTION TO PURCHASE UP TO 1,000,000 ADDITIONAL SHARES OF COMMON STOCK SOLELY
TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE
TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS
TO SELLING STOCKHOLDERS WILL BE $ , $ AND $ ,
RESPECTIVELY. SEE "UNDERWRITING."
------------------------
THE SHARES OF COMMON STOCK ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS,
AND IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL
MATTERS BY SHEARMAN & STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED
THAT THE DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1998, AT
THE OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, NEW YORK, AGAINST
PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
------------------------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH INTERNATIONAL
SALOMON SMITH BARNEY
, 1998
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration Statement filing fee.............................................................................. $154,036
Legal fees and expenses........................................................................................ 425,000*
Blue Sky fees and expenses..................................................................................... 15,000*
Accounting fees and expenses................................................................................... 75,000*
Printing and engraving costs................................................................................... 25,000*
Miscellaneous.................................................................................................. 964*
---------
Total................................................................................................... $695,000
=========
</TABLE>
- --------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Virginia Stock Corporation Act (the "VSCA") sets forth
conditions and limitations governing the indemnification of officers, directors,
and other persons of the Registrant.
The Registrant's Restated Articles of Incorporation (the "Registrant
Charter") provide as follows:
(a) In every instance permitted by the VSCA, the liability of a director or
officer of the Registrant to the Registrant or its shareholders arising out of a
single transaction, occurrence or course of conduct is limited to one dollar.
(b) The Registrant will indemnify any individual who is, was or is
threatened to be made a party to a proceeding (including a proceeding by or in
the right of the Registrant) because he is or was a director or officer of the
Registrant or because he is or was serving the Registrant or any other legal
entity in any capacity at the request of the Registrant while a director or
officer of the Registrant, against all liabilities and reasonable expenses
incurred in the proceeding except such liabilities and expenses as are incurred
because of his willful misconduct or knowing violation of the criminal law.
Service as a director or officer of a legal entity controlled by the Registrant
is deemed service at the request of the Registrant. The determination that
indemnification under this provision of the Registrant Charter is permissible
and the evaluation as to the reasonableness of expenses in a specific case will
be made, in the case of a director, as provided by law, and in the case of an
officer, as provided in paragraph (c) below, provided, however, that if a
majority of the directors of the Registrant has changed after the date of the
alleged conduct giving rise to a claim for indemnification, such determination
and evaluation shall, at the option of the person claiming indemnification, be
made by special legal counsel agreed upon by the board of directors and such
person. Unless a determination has been made that indemnification is not
permissible, the Registrant will make advances and reimbursements for expenses
incurred by a director or officer in a proceeding upon receipt of an undertaking
from him to repay the same if it is ultimately determined that he is not
entitled to indemnification. Such undertaking will be an unlimited, unsecured
general obligation of the director or officer and shall be accepted without
reference to his ability to make repayment. The termination of a proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent will not of itself create a presumption that a director or
officer acted in such a manner as to make him ineligible for indemnification.
The Registrant is authorized to contract in advance to indemnify and make
advances and reimbursements for expenses to any of its directors or officers to
the same extent provided in this paragraph (b).
(c) The Registrant may, to a lesser extent or to the same extent that it is
required to provide indemnification and make advances and reimbursements for
expenses to its directors and officers pursuant to paragraph (b) above, provide
indemnification and make advances and reimbursements for expenses to its
employees and agents, the directors, officers, employees and agents of its
subsidiaries and predecessor entities, and any person serving any other legal
entity in any capacity at the request of the Registrant and, if authorized by
general or specific action of the Board of Directors of the Registrant, may
contract in advance to do so. The determination that indemnification under the
provisions described in this paragraph (c) is permissible, the authorization of
such indemnification and the evaluation as to the reasonableness of expenses in
a specific case shall be made as authorized from time to time by general or
specific action of the Board of Directors of the Registrant, which action may be
taken before or after a claim for indemnification is made or as otherwise
provided by law. No person's rights under paragraph (b) above shall be limited
by the provisions in this paragraph (c).
(d) Every reference in the provisions described above to persons who are or
may be entitled to indemnification includes all persons who formerly occupied
any of the positions referred to and their respective heirs, executors and
administrators.
II-1
<PAGE>
Special legal counsel selected to make determinations under these provisions may
be counsel for the Registrant. Indemnification pursuant to these provisions
shall not be exclusive of any other right of indemnification to which any person
may be entitled, including indemnification pursuant to a valid contract,
indemnification by legal entities other than the Registrant and indemnification
under policies of insurance purchased and maintained by the Registrant or
others. However, no person will be entitled to indemnification by the Registrant
to the extent he is indemnified by another, including an insurer. The Registrant
is authorized to purchase and maintain insurance against any liability it may
have under these provisions or to protect any of the persons named above against
any liability arising from their service to the Registrant or any other legal
entity at the request of the Registrant regardless of the Registrant's power to
indemnify against such liability.
(e) The provisions described above apply to indemnification, advances and
reimbursement for expenses made after the Registrant Charter's adoption whether
arising from conduct or events occurring before or after such adoption. No
amendment, modification or repeal of these provisions will diminish the rights
provided thereunder to any person arising from conduct or events occurring
before the adoption of such amendment, modification or repeal.
The Registrant has insurance to indemnify its directors and officers,
within the limits of the Registrant's insurance policies, for those liabilities
in respect of which such indemnification insurance is permitted under the laws
of the State of Virginia.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
<S> <C>
1 Form of Underwriting Agreement.
4.1 Articles of Incorporation of the Registrant, as amended. (Incorporated by reference to Exhibits 3(a) through
3(d) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 28, 1997.)
4.2 By-laws of the Corporation, as amended. (Incorporated by reference to Exhibit 3(e) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 28, 1997.)
4.3 Amended and Restated Rights Agreement. (Incorporated by reference to Exhibits 2 and 3, respectively, to the
Registrant's filing of Amendment 1 dated July 28, 1992, to its Registration Statement on Form 8-A dated March
3, 1989.)
*5.1 Opinion of McGuire, Woods, Battle & Boothe LLP
23.1 Consent of McGuire, Woods, Battle & Boothe LLP (Included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Arthur Andersen LLP.
24.1 Power of Attorney. (Included on signature page.)
</TABLE>
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(b) The undersigned Registrant hereby undertakes that:
(1) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise (other than
insurance), the Registrant has been advised that in the opinion of the
Securities and Exchange Commission (the "Commission") such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than insurance or the payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Fort James Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond, Commonwealth of Virginia, as of
February 6, 1998.
FORT JAMES CORPORATION
By: /s/ R. MICHAEL LEMPKE
--------------------------
R. MICHAEL LEMPKE
SENIOR VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
Know All Men and Women By These Presents that each individual whose
signature appears below constitutes and appoints Ernst A. Haberli, Clifford A.
Cutchins, IV and R. Michael Lempke, and each of them, such individual's true and
lawful attorneys-in-fact and agents with full power of substitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
registration statement and any registration statement related to the offering
contemplated by this registration statement, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his or her substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C>
/s/ MILES L. MARSH* Chairman of the Board, Chief Executive February 6, 1998
---------------------------------- Officer and Director
MILES L. MARSH
/s/ MICHAEL T. RIORDAN* President and Chief Operating Officer and February 6, 1998
---------------------------------- Director
MICHAEL T. RIORDAN
/s/ ERNST A. HABERLI* Executive Vice President and Chief Financial February 6, 1998
---------------------------------- Officer (Principal Financial and
ERNST A. HABERLI Accounting Officer)
/s/ DR. JAMES L. BURKE* Director February 6, 1998
----------------------------------
DR. JAMES L. BURKE
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C>
/s/ GARY P. COUGHLAN* Director February 6, 1998
----------------------------------
GARY P. COUGHLAN
/s/ WILLIAM V. DANIEL* Director February 6, 1998
----------------------------------
WILLIAM V. DANIEL
/s/ ROBERT M. O'NEIL* Director February 6, 1998
----------------------------------
ROBERT M. O'NEIL
/s/ RICHARD L. SHARP* Director February 6, 1998
----------------------------------
RICHARD L. SHARP
/s/ ANNE MARIE WHITTEMORE* Director February 6, 1998
----------------------------------
ANNE MARIE WHITTEMORE
*By /s/ R. MICHAEL LEMPKE February 6, 1998
----------------------------------
R. MICHAEL LEMPKE, ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
1 Form of Underwriting Agreement.
4.1 Articles of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibits 3(a) through 3(d) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 28, 1997.)
4.2 By-laws of the Registrant, as amended. (Incorporated by reference
to Exhibit 3(e) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 28, 1997.)
4.3 Amended and Restated Rights Agreement. (Incorporated by reference
to Exhibits 2 and 3, respectively, to the Registrant's filing of
Amendment 1 dated July 28, 1992, to its Registration Statement on
Form 8-A dated March 3, 1989.)
*5.1 Opinion of McGuire, Woods, Battle & Boothe LLP
23.1 Consent of McGuire, Woods, Battle & Boothe LLP (Included in
Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Arthur Andersen LLP.
24.1 Power of Attorney. (Included on signature page.)
* Previously filed.
II-6
Exhibit 1
__________ Shares
FORT JAMES CORPORATION
Common Stock
(par value $.10 per share)
UNDERWRITING AGREEMENT
February __, 1998
<PAGE>
Morgan Stanley & Co. Incorporated
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Merrill Lynch International
Smith Barney Inc.
c/o Morgan Stanley & Co. International Limited
25 Cabot Street
Canary Wharf
London E14 4QA
England
Ladies and Gentlemen:
Certain shareholders (the "Selling Shareholders") of Fort
James Corporation (formerly James River Corporation of Virginia), a Virginia
corporation (the "Company"), named in Schedule I hereto severally propose to
sell to the several Underwriters (as defined below), an aggregate of __________
shares of common stock, par value $.10 per share (the "Firm Shares"), of the
Company, each Selling Shareholder selling the number of Firm Shares set forth
opposite such Selling Shareholder's name in Schedule I hereto.
It is understood that, subject to the conditions hereinafter
stated, __________ Firm Shares (the "U.S. Firm Shares") will be sold to the
several U.S. Underwriters named in Schedule II hereto (the "U.S. Underwriters")
in connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and __________ Firm Shares (the "International Shares") will be
sold to the several International Underwriters named in Schedule III hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Smith Barney Inc. shall act as
representatives (the "U.S. Representatives") of the several U.S. Underwriters,
and Morgan Stanley & Co. International Limited, Merrill Lynch International and
Smith Barney Inc. shall act as representatives (the "International
Representatives"; and together with the U.S. Representatives, the
"Representatives") of the several International Underwriters. The U.S.
Underwriters and the International Underwriters are hereinafter collectively
referred to as the "Underwriters".
The Selling Shareholders also propose to sell to the several
U.S. Underwriters not more than an additional __________ shares of Common Stock
(as defined below), divided among the Selling Shareholders as set forth opposite
such Selling Shareholder's name on Schedule I hereto (collectively, the
"Additional Shares"; and, together with the Firm Shares, the "Shares"), if and
to the extent that the U.S. Representatives shall have determined to exercise,
on behalf of the U.S. Underwriters, the right to purchase such shares of Common
Stock granted to the U.S. Underwriters in Article III hereof. Any purchase of
<PAGE>
2
Additional Shares by the U.S. Underwriters shall be sold by the Selling
Shareholders pro rata in accordance with Firm Shares sold. The shares of common
stock, par value $.10 per share, of the Company are hereinafter referred to as
the "Common Stock".
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-45519) relating to the Shares. The registration statement contains two
prospectuses to be used in connection with the offering and sale of the Shares:
the U.S. prospectus, to be used in connection with the offering and sale of
Shares in the United States and Canada to United States and Canadian Persons,
and the international prospectus, to be used in connection with the offering and
sale of Shares outside the United States and Canada to persons other than United
States and Canadian Persons. The international prospectus is identical to the
U.S. prospectus except for the outside front cover page. The registration
statement as amended at the time it becomes effective, and including all
documents incorporated by reference therein, the exhibits thereto and the
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "Securities Act"), is hereinafter referred to as the "Registration
Statement"; the U.S. prospectus and the international prospectus in the
respective forms first used to confirm sales of Shares, including all documents
incorporated by reference therein, are hereinafter collectively referred to as
the "Prospectus". If the Company has filed an abbreviated registration statement
to register additional shares pursuant to Rule 462(b) under the Securities Act
(the "Rule 462(b) Registration Statement"), then any reference herein to the
"Registration Statement" shall be deemed to include the Rule 462(b) Registration
Statement. The terms "supplement", "amendment" and "amend" as used herein shall
include all documents deemed, pursuant to Item 12(b) of Form S-3 under the
Securities Act, to be incorporated by reference in the Prospectus that are filed
subsequent to the date of the Prospectus by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The term "Effective Date" shall mean each date that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement referred to below became or shall become
effective. For purposes of this Agreement, all references to the Registration
Statement, the Prospectus or any amendment or supplement to the foregoing shall
be deemed to include the copy filed with the Commission pursuant to the
Commission's Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
ARTICLE I
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to, and agrees with, each
Underwriter that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement under
the Securities Act is in effect, and no proceedings for that purpose
are pending before or, to the knowledge of the Company, have been
instituted or are contemplated by, the Commission.
(b) The Company meets the requirements for use of Form S-3
under the Securities Act. (i) Each document filed or to be filed
pursuant to the Exchange Act and incorporated by reference in the
<PAGE>
3
Prospectus complied when it was filed or will comply when so filed in
all material respects with the Exchange Act and the applicable rules
and regulations of the Commission thereunder, (ii) when the
Registration Statement became effective, the Registration Statement and
Prospectus, and, if applicable, any amendments or supplements thereto,
did, and on the Closing Date referred to below, will, in all material
respects conform to the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder, (iii)
the Registration Statement and, if applicable, any amendment or
supplement thereto at their respective effective dates and on the
Closing Date did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
(iv) the Prospectus at the time the Registration Statement became
effective or the Prospectus together with any supplement thereto at
their respective issue dates did not, and at the Closing Date referred
to below, will not, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Registration Statement or the Prospectus or any
supplement thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the U.S. Representatives specifically for use in connection
with the preparation of the Registration Statement or the Prospectus or
any supplement thereto. The Prospectus delivered to the Underwriters
for use in connection with the offering was identical to the
electronically transmitted copy thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change
in the condition (financial or other), earnings or business affairs of
the Company and its subsidiaries considered as one enterprise, whether
or not arising from transactions in the ordinary course of business (a
"Material Adverse Effect"), and (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise.
(d) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The outstanding shares of Common Stock (including the
Shares to be sold by the Selling Shareholders) have been duly
authorized and are validly issued, fully paid and non-assessable.
(f) The authorized capital stock of the Company conforms in
all material respects as to legal matters to the description thereof
contained in the Prospectus.
(g) The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated herein and compliance by the Company with its obligations
hereunder have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice
<PAGE>
4
or passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company, Fort James Operating Company
(formerly James River Paper Company, Inc.) ("FJOC") or FORT JAMES N.V.
("FJNV"); and, together with FJOC, the "Significant Subsidiaries")
pursuant to any obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of the Significant Subsidiaries is a party or by which
it or any of them may be bound, or to which any of the property or
assets of the Company or any Significant Subsidiary is subject (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will any such action result in any violation of the provisions of the
charter or by-laws of the Company or any Significant Subsidiary, or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, known to the Company having jurisdiction over the Company
or any Significant Subsidiary or any of their respective assets,
properties or operations which would result in a Material Adverse
Effect. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or
a portion of such indebtedness by the Company or any subsidiary.
(h) Except as disclosed in the Registration Statement or the
Prospectus (including the documents incorporated therein by reference),
or as would not, individually or in the aggregate, have a Material
Adverse Effect:
(i) the Company and the Significant Subsidiaries (A)
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), (B) hold or have
applied for all Environmental Permits (as defined below) and
(C) are in compliance with their respective Environmental
Permits;
(ii) neither the Company nor any Significant
Subsidiary has received any written notice, demand, letter,
claim or request for information alleging that the Company or
any of its subsidiaries may be in violation of, or liable
under, any Environmental Law;
(iii) neither the Company nor any Significant
Subsidiary (A) 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 (B) 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
<PAGE>
5
(iv) none of the real property owned or leased by the
Company or any Significant 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 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
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.
(i) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency by or on behalf of the Company is
necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering or sale of the
Shares hereunder or the consummation by the Company of the transactions
contemplated by this Agreement, except such as have been already
obtained, and except for such that would not reasonably be expected to
have a Material Adverse Effect or as may be required under the
Securities Act or the applicable rules and regulations of the
Commission thereunder or state securities laws.
(j) The Company has not taken and will not take, directly or
indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the
price of the Common Stock (provided that the Company does not make any
representation as to any actions that may be taken by any Underwriter);
and the Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering
and sale of the Shares other than the Registration Statement, any
preliminary prospectus filed with the Commission or the Prospectus or
other material permitted by the Securities Act.
<PAGE>
6
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLING SHAREHOLDERS
Each of the Selling Shareholders, severally and not jointly
with the other Selling Shareholders as to itself only, represents and warrants
to, and agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Shareholder.
(b) Assuming the accuracy of the Company's representations in
paragraphs (a) and (b) of Article I, the execution and delivery by such
Selling Shareholder of, and the performance by such Selling Shareholder
of its obligations under, this Agreement, the Custody Agreement signed
by such Selling Shareholder and Norwest Bank, Minnesota, N.A., as
custodian (the "Custodian"), relating to the deposit of the Shares to
be sold by such Selling Shareholder (the "Custody Agreement") and the
Power of Attorney appointing certain individuals as such Selling
Shareholder's attorneys-in-fact to the extent set forth therein,
relating to the transactions contemplated hereby and by the
Registration Statement (the "Power of Attorney") will not contravene
any provision of applicable law (other than any state securities law or
Blue Sky law or any foreign law), or the certificate of incorporation
or by-laws of such Selling Shareholder (if such Selling Shareholder is
a corporation), or any agreement or other instrument binding upon such
Selling Shareholder or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required
for the performance by such Selling Shareholder of its obligations
under this Agreement or the Custody Agreement or Power of Attorney of
such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the various states or foreign
jurisdictions in connection with the offer and sale of the Shares.
(c) On the date hereof, such Selling Shareholder has valid
title to the Shares to be sold by such Selling Shareholder; on the
Closing Date, such Selling Shareholder will have valid title to the
Shares to be sold by such Selling Shareholder; and, on the date hereof,
such Selling Shareholder has the legal right and power, and, assuming
the accuracy of the Company's representations in paragraphs (a) and (b)
of Article I, all authorization and approval required by law, to enter
into this Agreement and to sell, transfer and deliver the Shares to be
sold by such Selling Shareholder.
(d) If the Selling Shareholder has executed and delivered a
Custody Agreement, such Custody Agreement has been duly authorized,
executed and delivered by such Selling Shareholder and is a valid and
binding agreement of such Selling Shareholder.
(e) Upon delivery of, and payment for, the Shares to be sold
<PAGE>
7
by such Selling Shareholder pursuant to this Agreement, the
Underwriters will acquire title to such Shares free and clear of any
security interests, claims, liens, equities and other encumbrances.
ARTICLE III
AGREEMENTS TO SELL
AND PURCHASE SHARES
Subject to the terms and conditions and on the basis of the
representations and warranties herein set forth, each Selling Shareholder,
severally and not jointly, agrees to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from such Selling
Shareholder, at $________ a share (the "Purchase Price") the number of Firm
Shares (subject to such adjustments to eliminate fractional shares as the U.S.
Representatives may determine) that bears the same proportion to the number of
Firm Shares to be sold by such Selling Shareholders as the aggregate number of
Firm Shares set forth in Schedules II and III opposite the name of such
Underwriter bears to the total number of Firm Shares.
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, each of the Selling
Shareholders agrees, severally and not jointly, to sell to the U.S. Underwriters
the Additional Shares, and the U.S. Underwriters shall have a one-time right to
purchase, severally and not jointly, up to __________ Additional Shares at the
Purchase Price. Additional Shares may be purchased as provided in Article V
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each U.S. Underwriter agrees, severally and not jointly, to purchase
the number of Additional Shares (subject to such adjustments to eliminate
fractional shares as the U.S. Representatives may determine) that bears the same
proportion to the total number of Additional Shares to be purchased as the
number of Shares set forth in Schedule II hereto opposite the name of such U.S.
Underwriter bears to the total number of U.S. Firm Shares.
The Company hereby agrees, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, (i) not to
effect any public sale or distribution of any Common Stock, or any securities
convertible into or exchangeable or exercisable for Common Stock (together with
the Common Stock, the "Securities") (other than any such sale or distribution of
such Securities pursuant to registration of such Securities on Form S-4 or S-8
or any successor forms or any such sale or distribution of such Securities in
connection with any merger or consolidation involving the Company or a
subsidiary of the Company or the acquisition by the Company or a subsidiary of
the Company of the capital equity or substantially all of the assets of any
other person or entity), during the 14 days prior to, and during the 90 days
beginning on the Effective Date of the Registration Statement, except as part of
such Registration Statement and (ii) that any agreement entered into after the
date of this Agreement pursuant to which the Company issues or agrees to issue
any privately placed Securities shall contain a provision under which holders of
such Securities agree not to effect any public sale or distribution of any such
Securities during the periods described in (i) above, in each case including a
sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act (except as part of any such registration, if permitted);
provided, however, that the provisions of this paragraph shall not (A) prevent
the conversion or exchange of any
<PAGE>
8
Securities pursuant to their terms into or for other Securities and (B) apply to
any issuance of Securities under the Rights Agreement (as defined in the
Registration Statement).
ARTICLE IV
TERMS OF PUBLIC OFFERING
The Selling Shareholders are advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Selling Shareholders are
further advised by you that the Shares are to be offered to the public initially
at $_______ a Share (the "public offering price") and to certain dealers
selected by you at a price that represents a concession not in excess of
$_______ a Share under the public offering price, and that any Underwriter may
allow, and such dealers may reallow, a concession, not in excess of $_________ a
Share, to any Underwriter or to certain other dealers.
Each U.S. Underwriter hereby makes to and with the Selling
Shareholders the representations and agreements of such U.S. Underwriter
contained in the fifth paragraph of Article III of the Agreement Between U.S.
and International Underwriters of even date herewith. Each International
Underwriter hereby makes to and with the Selling Shareholders the
representations and agreements for such International Underwriter contained in
the seventh, eighth and ninth paragraphs of Article III of such Agreement.
ARTICLE V
DELIVERY OF AND
PAYMENT FOR SHARES
Payment for the Firm Shares to be sold by each Selling
Shareholder shall be made by wire transfers payable to the order of the
Custodian in federal funds or other funds immediately available in New York City
against delivery of such Firms Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on ____________, 1998, or at
such other time on the same or such other date, not later than ____________,
1998, as shall be agreed to by you and the Selling Shareholders. The time and
date of each such payment are hereinafter referred to as the "Closing Date".
Payment for any Additional Shares shall be made by wire
transfers payable to the order of the Custodian in federal funds or other funds
immediately available in New York City against delivery of such Additional
Shares for the respective accounts of the several Underwriters at 10:00 A.M.,
New York City time, on such date (which may be the same as the Closing Date but
shall in no event be earlier than the Closing Date nor later than ten business
days after the giving of the notice hereinafter referred to) as shall be
designated in a written notice from the U.S. Representatives to the Selling
Shareholders and the Company of your determination, on behalf of the
Underwriters, to purchase a number, specified in said notice, of Additional
Shares, or on such other date, in any event not later than March __, 1998, as
shall be designated in writing by the U.S. Representatives. The time and date of
such payment are hereinafter referred to as the "Option Closing Date". The
<PAGE>
9
notice of the determination to exercise the option to purchase Additional Shares
and of the Option Closing Date may be given at any time within 30 days after the
date of this Agreement.
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing to the Company not later than 9:30 a.m., New York
City Time on the business day prior to the Closing Date or the Option Closing
Date, as the case may be. The certificates evidencing the Shares and Additional
Shares shall be delivered to you on the Closing Date or the Option Closing Date,
as the case may be, for the respective accounts of the several Underwriters,
with any transfer taxes payable in connection with the transfer of the Shares to
the Underwriters duly paid, against payment of the Purchase Price therefor.
ARTICLE VI
CONDITIONS TO OBLIGATIONS
OF SELLING SHAREHOLDERS
AND UNDERWRITERS
(a) The obligations of the Selling Shareholders and the
several obligations of the Underwriters hereunder are subject to the condition
that the Registration Statement shall have become effective not later than the
date hereof.
(b) The several obligations of the Underwriters hereunder are
subject to the following conditions:
(i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or threatened by the
Commission; if filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b) under the Securities Act, the
Prospectus, and any such supplement, shall have been filed in the
manner and within the time period required by Rule 424(b).
(ii) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman, Chief Executive
Officer, an Executive Vice President, a Senior Vice President or a Vice
President and by the principal financial or accounting officer or
treasurer, dated the Closing Date, to the effect that, to the best of
their knowledge, based upon reasonable investigation:
(A) the representations and warranties of the Company
in this Agreement are true and correct, as if made at and as
of the Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(B) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for
that purpose has been instituted or is threatened, by the
Commission; and
(C) since the date of the most recent financial
<PAGE>
10
statements included in the Prospectus (exclusive of any
supplement thereto), there has been no material adverse change
or development involving a prospective material adverse change
in the condition (financial or other), earnings or business of
the Company and its subsidiaries considered as one enterprise,
whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto).
(iii) The Underwriters shall have received on the Closing Date
a certificate dated the Closing Date from each Selling Shareholder to
the effect that, to the best knowledge of such Selling Shareholder,
after due inquiry, the representations and warranties of such Selling
Shareholder contained herein are true and correct in all respects as of
the Closing Date.
(iv) You shall have received on the Closing Date an opinion of
McGuire, Woods, Battle & Boothe LLP, Counsel for the Company, in form
and substance satisfactory to you and your counsel, dated the Closing
Date, to the effect that:
(A) The Company has been duly organized and is
validly existing and in good standing under the laws of the
Commonwealth of Virginia; FJOC has been duly organized and is
validly existing and in good standing under the laws of the
jurisdiction of its incorporation; each of the Company and
FJOC has corporate power and authority to conduct its business
as described in the Prospectus; each of the Company and FJOC
is, if applicable, duly qualified to do business and is, if
applicable, in good standing in each jurisdiction in which it
owns or leases a material amount of real property;
(B) The Shares have been duly authorized and are
validly issued, fully paid and non-assessable;
(C) All of the outstanding shares of capital stock of
the Significant Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and are
owned beneficially, directly or indirectly (except as
otherwise stated in the Prospectus), by the Company subject to
no perfected mortgage, pledge, lien, encumbrance, charge or
adverse claim and, to the knowledge of such counsel, any other
mortgage, pledge, lien, encumbrance, charge or adverse claim;
(D) This Agreement has been duly authorized, executed
and delivered by the Company;
(E) The descriptions in the Registration Statement
and the Prospectus of statutes, legal and governmental
proceedings, contracts and other documents are accurate in all
material respects and fairly present the information required
to be shown; and such counsel does not know of any statutes or
legal or governmental proceedings required to be described in
the Prospectus that are not described as required, or of any
contracts or documents of a character required to be described
in the Registration Statement or Prospectus (or required to be
filed under the Exchange Act if upon such filing they would be
incorporated, in whole or in part, by reference therein) or to
be filed as
<PAGE>
11
exhibits to the Registration Statement that are not described
and filed as required; and
(F) The Company's execution, delivery and performance
of this Agreement, or the consummation of the transactions
herein contemplated and the Company's compliance with its
obligations under this Agreement, will not result in a breach
or violation of any of the terms and provisions of, or
constitute a default under, any statute, any agreement or
instrument known to such counsel to which the Company or any
Significant Subsidiary is a party or by which it is bound or
to which any of the property of the Company or any Significant
Subsidiary is subject, the Company's or any Significant
Subsidiary's Articles of Incorporation, as amended to date, or
by-laws, or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any Significant Subsidiary or
any of their respective properties; and no consent, approval,
authorization or order of, or filing with, any court or
governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement, except
such as have been obtained under the Securities Act and such
as may be required under state securities laws in connection
with the purchase and distribution of the Shares by the
Underwriters; provided that no opinion is called for with
respect to any such consent, approval, authorization or order
required to be obtained under the Securities Act and the
applicable rules and regulations of the Commission thereunder
that have been obtained or as may be required under state
securities laws or Blue Sky Laws of the various states.
Such counsel shall also state that: they have no reason to believe that
at the Effective Date, the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus at the time the
Prospectus is issued or at the Closing Date includes any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the
documents from which information is incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Securities Act and of the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder; it being understood that such counsel need
express no belief as to the financial statements or other financial
information included in any of the documents mentioned in this
sentence.
References to the Prospectus in this paragraph (iv) include
any supplements thereto at the Closing Date.
(v) You shall have received on the Closing Date an opinion of
DeBrauw, Blackstone & Westbroek, Counsel for the FJNV, in form and
substance satisfactory to you and your counsel, dated the Closing Date,
to the effect that:
(A) FJNV has been duly organized and is validly
existing and, if applicable, in good standing under the laws
of the Netherlands; has corporate power and authority to
<PAGE>
12
conduct its business as described in the Prospectus; FJNV is,
if applicable, duly qualified to do business and is, if
applicable, in good standing in each jurisdiction in which it
owns or leases a material amount of real property;
(vi) The Company shall have furnished to the Representatives
the opinion of Wachtell, Lipton, Rosen & Katz, counsel for the Company,
dated the Closing Date, to the effect that:
(A) The authorized capital stock of the Company is as
set forth in the Prospectus; and the Shares conform to the
description of the Common Stock contained in the Prospectus;
(B) Such counsel has been advised by the staff of the
Commission that the Registration Statement has become
effective under the Securities Act on the date and at the time
specified in such opinion; the Prospectus was filed pursuant
to the subparagraph of Rule 424(b) under the Securities Act
specified in such opinion on the date specified therein in the
manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration
Statement under the Securities Act has been issued and, to
such counsel's knowledge, no proceeding has been instituted or
threatened;
(C) The Registration Statement, including any Rule
462(b) Registration Statement, and the Prospectus, and any
further amendments or supplements thereto (other than the
financial statements and other financial data therein, as to
which such counsel need express no opinion), comply as to form
in all material respects with the requirements of the
Securities Act and the rules and regulations of the Commission
thereunder; and
(D) The descriptions in the Registration Statement
and the Prospectus (excluding any documents incorporated
therein by reference) of contracts and other documents are
accurate in all material respects.
In rendering such opinion, such counsel may state that their opinion is
limited to matters governed by the federal laws of the United States of
America and the laws of the State of New York.
Such counsel shall also have furnished to the Representative,
a written statement, addressed to the U.S. Underwriters and dated the Closing
Date, to the effect that (i) no facts have come to their attention to lead them
to believe that at the Effective Date the Registration Statement contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus at the time the Prospectus is issued or at the
Closing Date includes any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (ii) the documents
from which information is incorporated by reference in the Prospectus, when they
became effective or were filed with the Commission, as the case may be, complied
as to form in all material respects with the requirements of the Securities Act
and of the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder; it being understood that such counsel need express no
<PAGE>
13
belief as to the financial statements or other financial information included in
any of the documents mentioned in this sentence.
References to the Prospectus in this paragraph (v) include any
supplements thereto at the Closing Date.
(vii) You shall have received on the Closing Date an opinion
of counsel for each of the Selling Shareholders, in form and substance
reasonably satisfactory to counsel to the Underwriters, dated the
Closing Date, to the effect that:
(A) this Agreement has been duly authorized, executed
and delivered by or on behalf of the Selling Shareholder;
(B) the execution and delivery by the Selling
Shareholder of, and the performance by such Selling
Shareholder of its obligations under, this Agreement and, if
applicable, the Custody Agreement and Power of Attorney of
such Selling Shareholder will not contravene any provision of
applicable law, or the certificate of incorporation or by-laws
of such Selling Shareholder (if such Selling Shareholder is a
corporation), or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon such Selling
Shareholder or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over such Selling Shareholder, and
no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is
required for the performance by such Selling Shareholder of
its obligations under this Agreement or, if applicable, the
Custody Agreement or Power of Attorney of such Selling
Shareholder, except such as may be required by the securities
or Blue Sky laws of the various states in connection with the
offer and sale of the Shares;
(C) the Selling Shareholder has valid title to the
Shares to be sold by such Selling Shareholder and has the
legal right and power, and all authorization and approval
required by law, to enter into this Agreement, and, if
applicable, the Custody Agreement and Power of Attorney of
such Selling Shareholder and to sell, transfer and deliver the
Shares to be sold by such Selling Shareholder;
(D) if applicable, the Custody Agreement of such
Selling Shareholder has been duly authorized, executed and
delivered by such Selling Shareholder and is a valid and
binding agreement of such Selling Shareholder; and
(E) delivery of the Shares to be sold by the Selling
Shareholder pursuant to this Agreement will pass title to such
Shares free and clear of any security interests, claims,
liens, equities and other encumbrances.
(viii) The Representatives shall have received from Shearman &
Sterling, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Shares,
the Registration Statement, the Prospectus (together with any
supplement thereto) and other related matters as the Representatives
may reasonably require, and such counsel shall have received such
<PAGE>
14
papers and information as they request for the purpose of enabling them
to pass upon such matters.
The opinions of McGuire, Woods, Battle & Boothe LLP and
Wachtell, Lipton, Rosen & Katz and each of the counsel described in
paragraph (vi) above shall be rendered to you at the request of the
Company or one or more of the Selling Shareholders, as the case may be,
and shall so state therein.
(ix) On the date hereof and on the Closing Date, Coopers &
Lybrand L.L.P. shall have furnished to the Representatives a letter or
letters, dated as of the date hereof and the Closing Date, in form and
substance satisfactory to the U.S. Representatives, which confirms that
they are independent certified public accountants with respect to the
Company within the meaning of the Securities Act and the applicable
rules and regulations of the Commission thereunder and containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference in the Registration Statement and Prospectus.
(x) Prior to the Closing Date, the Company shall have
furnished to the U.S. Representatives such further information,
certificates and documents as the U.S. Representatives may reasonably
request.
If any of the conditions specified in this Article VI shall
not have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above shall not
be in all material respects reasonably satisfactory in form and substance to the
U.S. Representatives and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the U.S. Representatives. Notice of such
cancellation shall be given to the Company and the Selling Shareholder in
writing or by telephone or facsimile transmission confirmed in writing.
ARTICLE VII
AGREEMENTS OF THE COMPANY
In further consideration of the agreements of the Underwriters
herein contained, the Company covenants with the several Underwriters as
follows:
(a) To use its best efforts to cause the Registration
Statement, if not effective at the date hereof, and any amendment
thereto, to become effective. Prior to the termination of the offering
of the Shares, the Company will not file any amendment of the
Registration Statement or supplement to the Prospectus (other than (A)
any document required to be filed under the Exchange Act that upon
filing is deemed to be incorporated by reference into the Prospectus
and (B) such documents required to be filed during the period from the
date hereof through the Closing Date) unless the Company has furnished
you a copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object.
<PAGE>
15
Subject to the foregoing sentence, the Company will cause the
Prospectus and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence reasonably satisfactory to
the U.S. Representatives of such timely filing. The Company will advise
the U.S. Representatives as promptly as practicable after it shall
<PAGE>
18
receive notice or obtain knowledge thereof (i) when the Registration
Statement, if not effective at the date hereof, and any amendment
thereto, shall have become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed with the Commission pursuant
to Rule 424(b), (iii) when, prior to termination of the offering of the
Shares, any amendment to the Registration Statement, including any Rule
462(b) Registration Statement, shall have been filed or become
effective, (iv) of any request by the Commission for any amendment of
the Registration Statement or supplement to the Prospectus or for any
additional information, (v) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or the institution or threatening of any proceeding for that purpose
and (vi) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the Shares
is required under the Securities Act, to be delivered in connection
with sales by an underwriter or dealer any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Securities Act or the Exchange Act or the
applicable rules and regulations of the Commission thereunder, the
Company as promptly as practicable will notify the U.S. Representatives
and prepare and file with the Commission, subject to the second
sentence of paragraph (a) of this Article VII, an amendment or
supplement which will correct such statement or omission or effect such
compliance.
(c) Commencing within three months after the Effective Date of
the Registration Statement, as soon as reasonably practicable, to make
generally available to its security holders and to the U.S.
Representatives an earning statement or statements of the Company and
its subsidiaries which will satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 under the Securities Act.
(d) To furnish to the U.S. Representatives and counsel for the
Underwriters, without charge, seven signed copies of the Registration
Statement (including exhibits thereto) and, so long as delivery of a
prospectus in connection with sales by an underwriter or dealer may be
required by the Securities Act, as many copies of the Prospectus and
any supplement thereto as the U.S. Representatives may reasonably
request. Copies of the Registration Statement and each amendment
thereto, and the Prospectus furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) To use its best efforts to qualify the Shares for sale
under the laws of such jurisdictions in the United States the U.S.
<PAGE>
16
Representatives may reasonably designate, to maintain such
qualifications in effect so long as required for the distribution of
the Shares and to pay all expenses (including fees and disbursements of
counsel) in connection with such qualification and in connection with
any review of the offering of the Shares by the National Association of
Securities Dealers, Inc. (the "NASD"), except that the Company shall
not be required in connection therewith to qualify as a foreign
corporation, to execute a general consent to service of process in any
state or otherwise to subject itself to taxation in connection with any
such qualification; and will arrange for the determination of the
legality of the Shares for purchase by institutional investors.
(f) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and
of each amendment thereto (including any post-effective amendment
thereto) and the preparation, the printing and delivery to the
Underwriters of copies of any preliminary prospectus and the Prospectus
and any amendments or supplements thereto, (ii) the preparation,
printing and delivery to the Underwriters of this Agreement, any
Agreement Among Underwriters to which the Company is a party, the
Custody Agreement and such other documents as may be required in
connection with the offering, purchase, sale or delivery of the Shares,
(iii) the preparation, issuance and delivery of certificates for the
Shares to the Underwriters, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors, (v) the
qualification of the Shares under securities laws in accordance with
the provisions of paragraph (e) of this Article VII, including filing
fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the
filing of trade reports in the provinces of Canada, if any, including
filing fees and fees and disbursements of Canadian counsel for the
Underwriters in connection therewith, (vii) the filing fees incident
to, and the reasonable fees and disbursements of counsel for the
Underwriters in connection with, the review, if any, by the NASD of the
terms of the sale of the Shares, (viii) the costs and expenses of the
Company relating to investor presentations or any "road show"
undertaken in connection with the marketing of the offering, including
without limitation, expenses associated with the production of road
show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations with the prior approval
of the Company, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered by the Company in connection with the road show,
(ix) the costs and charges of any transfer agent, registrar or
depositary, (x) costs and charges of the Custodian and (xi) fees and
disbursements of foreign counsel to the Company.
(g) If the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the
Underwriters set forth in Article VI hereof is not satisfied, because
of any termination pursuant to Article XI hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by
reason of a default by any of the Underwriters or the Selling
Shareholders, the Company will reimburse the Underwriters severally
<PAGE>
17
upon demand for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Shares.
(h) On the Closing Date, the Company shall deliver, or caused
to be delivered, to the Selling Shareholders the opinions and the
comfort letter, dated the Closing Date, referred to in Article VI. Such
opinions and the comfort letter shall be addressed to the Selling
Shareholders.
ARTICLE VIII
CERTAIN EXPENSES
Each Selling Shareholder, severally and not jointly, agrees to
pay or cause to be paid any underwriting discounts or commissions that may be
payable in connection with the sale of the Shares by such Selling Shareholder.
<PAGE>
18
ARTICLE IX
INDEMNIFICATION
<PAGE>
19
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Shares as originally filed or
in any amendment thereof (including any post-effective amendment), or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arise out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
Prospectus (or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; (ii) against any and all loss, liability, claim, damage and expense
whatsoever, as reasonably incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that any such
settlement is effected with the written consent of the Company in the Company's
sole discretion; and (iii) agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the U.S. Representatives
expressly for use in connection with the preparation thereof; and provided
further that the Company shall not be liable in any such case to any such
Underwriter to the extent that any such loss, claim, damage or liability results
from the fact that such Underwriter sold Shares to a person to whom there was
not given or sent, at or prior to the written confirmation of such sale, a copy
of the Prospectus, as then amended or supplemented (excluding the documents
incorporated by reference therein) if the Company has previously furnished
copies thereof to such Underwriter, and if the Company has sustained the burden
of proof that, with respect to statements or omissions, other than those made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the U.S. Representatives
specifically for use in connection with the preparation of the documents
referred to in the foregoing indemnity, such Prospectus, or any amendment or
supplement thereto (including the documents incorporated by reference therein)
corrected the untrue statement or alleged untrue statement or omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or alleged omission giving rise to such loss, claim,
damage or liability. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) The Company agrees to indemnify and hold harmless each
<PAGE>
20
Selling Shareholder, the directors, officers, employees and agents of each
Selling Shareholder and each person who controls any Selling Shareholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act as follows: (i) against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities
as originally filed or in any amendment thereof (including any post-effective
amendment), or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arise out of any untrue statement
or alleged untrue statement of a material fact included in any preliminary
prospectus or Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; (ii) against any and all loss, liability, claim,
damage and expense whatsoever, as reasonably incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that any such settlement is effected with the written consent of the
Company in the Company's sole discretion; and (iii) agrees to reimburse each
such indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading in
reliance upon and in conformity with information furnished to the Company in
writing by or on behalf of such Selling Shareholder expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus; and
provided further that the Company shall not be liable in any such case to any
such Selling Shareholder to the extent that any such loss, claim, damage or
liability results from the fact that an Underwriter sold Shares to a person to
whom there was not given or sent, at or prior to the written confirmation of
such sale, a copy of the Prospectus, as then amended or supplemented (excluding
the documents incorporated by reference therein) if the Company has previously
furnished copies thereof to such Underwriter, and if the Company has sustained
the burden of proof that, with respect to statements or omissions, other than
those made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Shareholder expressly for use in
the documents referred to in the foregoing indemnity, such Prospectus, or any
amendment or supplement thereto (including the documents incorporated by
reference therein) corrected the untrue statement or alleged untrue statement or
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading or alleged omission giving rise to such
loss, claim, damage or liability. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(c) Each Selling Shareholder agrees, severally and not
jointly, to indemnify and hold harmless each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person who controls
<PAGE>
21
any Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act as follows: (i) against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the registration statement for the registration
of the Shares as originally filed or in any amendment thereof (including any
post-effective amendment), or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arise out of any
untrue statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (ii) against any and
all loss, liability, claim, damage and expense whatsoever, as reasonably
incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that any such settlement is effected
with the written consent of each Selling Shareholder in such Selling
Shareholder's sole discretion; and (iii) agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however that each Selling
Shareholder will only be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of such Selling Shareholder
expressly for use in the Registration Statement, any preliminary prospectus or
the Prospectus; provided further that each Selling Shareholder shall not be
liable in any such case to any such Underwriter to the extent that any such
loss, claim, damage or liability results from the fact that such Underwriter
sold Shares to a person to whom there was not given or sent, at or prior to the
written confirmation of such sale, a copy of the Prospectus, as then amended or
supplemented (excluding the documents incorporated by reference therein) if the
Company has previously furnished copies thereof to such Underwriter, and if the
Company has sustained the burden of proof that, with respect to statements or
omissions, other than those made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling Shareholder
specifically for use in connection with the documents referred to in the
foregoing indemnity, such Prospectus, or any amendment or supplement thereto
(including the documents incorporated by reference therein) corrected the untrue
statement or alleged untrue statement or omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading or
alleged omission giving rise to such loss, claim, damage or liability.
Notwithstanding any other provision of this Article IX, the liability of each
Selling Shareholder to each Underwriter shall not exceed the net amount received
by each such Selling Shareholder (after deducting any underwriting discount)
from the sale of the Shares pursuant to this Agreement.
(d) Each Selling Shareholder severally agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers who signs
<PAGE>
22
the Registration Statement, and each person who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to each
Selling Shareholder, but only with respect to untrue statements or omissions, or
alleged untrue statements of a material fact required to be stated therein or
necessary to make the statements therein not misleading or omissions made in the
documents referred to in the foregoing indemnity in reliance on and in
conformity with written information relating to such Selling Shareholder
furnished to the Company in writing by or on behalf of such Selling Shareholder
expressly for use in the documents referred to in the foregoing indemnity, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which any Selling Shareholder may
otherwise have. Notwithstanding any other provision of this Article IX, the
liability of each Selling Shareholder to the Company shall not exceed the net
amount received by each such Selling Shareholder (after deducting any
underwriting discount) from the sale of the Shares pursuant to this Agreement.
(e) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with respect to untrue statements or omissions, or alleged
untrue statements of a material fact required to be stated therein or necessary
to make the statements therein not misleading or omissions made in the documents
referred to in the foregoing indemnity in reliance on and in conformity with
written information relating to such Underwriter furnished to the Company by or
on behalf of such Underwriter through the U.S. Representatives specifically for
use in connection with the preparation of the documents referred to in the
foregoing indemnity, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have.
(f) Each Underwriter severally agrees to indemnify and hold
harmless each of the Selling Shareholders, each of its directors and officers,
and each person who controls such Selling Shareholder within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, to
the same extent as the foregoing indemnity from each of the Selling Shareholders
to each Underwriter, but only with respect to untrue statements or omissions, or
alleged untrue statements of a material fact required to be stated therein or
necessary to make the statements therein not misleading or omissions made in the
documents referred to in the foregoing indemnity in reliance on and in
conformity with written information relating to such Underwriter furnished to
the Company by or on behalf of such Underwriter through the U.S. Representatives
specifically for use in connection with the preparation of the documents
referred to in the foregoing indemnity, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in addition
to any liability which any Underwriter may otherwise have.
<PAGE>
23
(g) Promptly after receipt by an indemnified party under this
Article IX of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Article IX, notify the indemnifying party in writing of the
commencement thereof, but the failure so to notify the indemnifying party (i)
will not relieve it from liability under the applicable provisions of paragraphs
(a) through (f) above, unless and to the extent it did not otherwise learn of
such action and such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification and reimbursement obligations provided in the applicable
paragraphs (a) through (f) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party and any others the indemnifying party
may designate in such proceeding in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including not more than two local
counsels), and the indemnifying party shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize in writing the
indemnified party to employ separate counsel at the expense of the indemnifying
party. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement. An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding and does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of any indemnified party.
(h) In the event that the indemnity provided in paragraph (a)
through (f) of this Article IX is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company, the Selling
Shareholders and the Underwriters agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively,
"Losses") to which the Company, one or more of the Selling Shareholders or one
<PAGE>
24
or more of the Underwriters may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company, the Selling
Shareholders and by the Underwriters from the offering of the Shares; provided,
however, that (i) no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission or alleged
omission and (ii) no Selling Shareholder shall be required to contribute any
amount in excess of the amount by which the net amount received by such Selling
Shareholder (after deducting any underwriting discount) exceeds the amount of
damages that any such Selling Shareholder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company, the Selling Shareholders and the
Underwriters shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company, the
Selling Shareholders and the Underwriters in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the Selling Shareholders,
respectively, shall be deemed to be equal to the total net proceeds, in the case
of the Company, and the respective net proceeds to each Selling Shareholder, in
the case of the Selling Shareholders, from the offering (before deducting
expenses), and benefits received by the Underwriters shall be deemed to be equal
to the total underwriting discounts and commissions, in each case as set forth
on the cover page and "Selling Stockholders" section of the Prospectus,
respectively. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by either the Company, the Selling Shareholders, or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company, the Selling Shareholders and the Underwriters agree that it would not
be just and equitable if contribution were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or any
other method of allocation which does not take account of the equitable
considerations referred to above. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this paragraph (h), notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder (other than under this paragraph (h)) or otherwise. Notwithstanding
the provisions of this paragraph (h), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Article IX, each person who
controls an Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and each director, officer,
employee and agent of an Underwriter shall have the same rights to contribution
as such Underwriter, and each person who controls the Company within the meaning
of either Section 15 the Securities Act or Section 20 of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (h).
The respective obligations of the U.S. Underwriters and the
International Underwriters to contribute pursuant to this Article IX are several
<PAGE>
25
in proportion to the principal amount of Shares set forth opposite their
respective names in Schedules II and III hereto and not joint.
ARTICLE X
DEFAULT BY AN
UNDERWRITER
If any one or more Underwriters shall fail to purchase and pay
for any of the Shares agreed to be purchased by such Underwriter or Underwriters
hereunder and such failure to purchase shall constitute a default in the
performance of its or their obligations under this Agreement, the remaining
Underwriters shall be obligated severally to take up and pay for (in the
respective proportions which the amount of Shares set forth opposite their names
in Schedules II and III hereto bears to the aggregate number of Shares set forth
opposite the names of all the remaining Underwriters) the Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase; provided,
however, that in the event that the aggregate number of Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate number of Shares set forth in Schedules II and III
hereto, the remaining Underwriters shall have the right to purchase all, but
shall not be under any obligation to purchase any, of the Shares, and if such
nondefaulting Underwriters do not purchase all the Shares, this Agreement will
terminate without liability to any nondefaulting Underwriter or the Company. In
the event of a default by any Underwriter as set forth in this Article X, the
Closing Date shall be postponed for such period, not exceeding seven days, as
the U.S. Representatives shall determine in order that the required changes in
the Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to the Company and any
nondefaulting Underwriter for damages occasioned by its default hereunder.
ARTICLE XI
TERMINATION OF AGREEMENT
This Agreement shall be subject to termination in the absolute
discretion of the Representatives, by notice given to the Company prior to
delivery of and payment for the Shares, if after the date hereof and prior to
such time (i) there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the Prospectus, a
material adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or in the earnings or
business affairs of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
there has occurred any material adverse change in the financial markets in the
United States, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Shares, or (iii) trading in any
securities of the Company has been suspended or materially limited by the
Commission or the New York Stock Exchange, or (iv) trading generally on the
American Stock Exchange or the New York Stock Exchange or in the NASDAQ National
<PAGE>
26
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (v) a banking moratorium has been declared by either federal or
New York authorities.
ARTICLE XII
SURVIVAL
The respective agreements, representations, warranties,
indemnities and other statements of the Company or its officers and of the
Underwriters and the Selling Shareholders set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter, Selling Shareholder or the Company or
any of the officers, directors or controlling persons referred to in Article IX
hereof, and will survive delivery of and payment for the Shares. The provisions
of paragraph (f) of Article VII, Article VIII and Article IX hereof shall
survive the termination or cancellation of this Agreement.
ARTICLE XIII
NOTICES
All communications hereunder will be in writing and effective
only on receipt, and, if sent to each of the Representatives, will be mailed,
delivered or telecopied and confirmed to them, at the address specified on the
first page of this Agreement; if sent to Morgan Stanley Leveraged Equity Fund
II, Inc., Morgan Stanley Leveraged Equity Holdings, Inc., Morgan Stanley
Leveraged Equity Investors, Inc. or Morgan Stanley, Dean Witter, Discover & Co.,
will be mailed, delivered or telegraphed and confirmed to it at 1585 Broadway,
New York, New York 10036, telefax number: (212) 762-6466, attention: Robert H.
Neihaus; if sent to Mellon Bank, N.A., solely in its capacity as Trustee for
First Plaza Group Trust (as directed by General Motors Investment Management
Corporation), will be mailed, delivered or telegraphed and confirmed to it at
767 Fifth Avenue, New York, New York 10153, telefax number: (212) 418-3665,
attention: Margaret M. Eisen; or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at 120 Tredegar Street, Richmond,
Virginia 23219, telefax number: (804) 343-4609, attention of the Senior Vice
President and General Counsel.
ARTICLE XIV
MISCELLANEOUS
This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Article IX hereof, and no other
person will have any right or obligation hereunder.
<PAGE>
27
In all dealings with the Company under this Agreement, you
shall act on behalf of each of the several Underwriters, and any action under
this Agreement taken by you or by any one of you designated in Schedules II or
III hereto will be binding upon all the Underwriters.
ARTICLE XV
GOVERNING LAW
This Agreement will be governed by and construed in accordance
with the laws of the State of New York.
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company, the Selling Shareholders and the several Underwriters.
Alternatively, the execution of this Agreement by the Company and the Selling
Shareholders and its acceptance by or on behalf of the Underwriters may be
evidenced by an exchange of telecopied or other written communications.
Very truly yours,
FORT JAMES CORPORATION
By:
Name:
Title:
FIRST PLAZA GROUP TRUST
By: Mellon Bank, N.A.,
as Trustee
By:
Name:
Title:
MORGAN STANLEY,
DEAN WITTER, DISCOVER & CO.
By:
Name:
Title:
MORGAN STANLEY LEVERAGED
EQUITY FUND II, INC.
By:
Name:
Title:
MORGAN STANLEY LEVERAGED
EQUITY HOLDINGS, INC.
By:
Name:
Title:
<PAGE>
MORGAN STANLEY EQUITY
INVESTORS, INC.
By:
Name:
Title:
Accepted, ________________, 1998
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
Acting severally on behalf of themselves and the several U.S. Underwriters named
in Schedule II hereto.
By: Morgan Stanley & Co. Incorporated
By:_______________________
Name:
Title:
<PAGE>
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
MERRILL LYNCH INTERNATIONAL
SMITH BARNEY INC.
Acting severally on behalf of themselves and the several International
Underwriters named in Schedule III hereto.
By Morgan Stanley & Co. International Limited
By:
Name:
Title:
<PAGE>
SCHEDULE I
Selling Shareholders
<TABLE>
<CAPTION>
Number of Maximum Number of
Selling Shareholder Firm Shares to be Sold Additional Shares to be Sold
- ------------------- ---------------------- ----------------------------
<S> <C>
First Plaza Group Trust................
Morgan Stanley, Dean
Witter, Discover & Co..................
Morgan Stanley Leveraged
Equity Fund II, Inc....................
Morgan Stanley Leveraged
Equity Holdings, Inc...................
Morgan Stanley Equity
Investors, Inc.........................
---------------------- ----------------------------
Total..................................
====================== ============================
<PAGE>
SCHEDULE II
U.S. Underwriters
Number of
U.S. Firm
Shares to
Underwriter be Purchased
----------- ------------
Morgan Stanley & Co. Incorporated......................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.....
Smith Barney Inc.......................................
------------
Total U.S. Firm Shares.................................
============
<PAGE>
SCHEDULE III
International Underwriters
Number of
International
Shares To
Underwriter Be Purchased
----------- -------------
Morgan Stanley & Co. International Limited........
Merrill Lynch International.......................
Smith Barney Inc..................................
-------------
Total International Shares........................
=============
</TABLE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 (the "Registration Statement"), of our report dated January 23, 1997,
except as to the information presented in Note 17, for which the date is
February 21, 1997, on our audits of the consolidated financial statements of
James River Corporation of Virginia and Subsidiaries ("James River") as of
December 29, 1996 and December 31, 1995, and for each of the three fiscal years
in the period ended December 29, 1996, which report is included in the Annual
Report on Form 10-K of James River for the year ended December 29, 1996.
We also consent to the incorporation by reference in the Registration Statement
of our report dated August 13, 1997, on our audits of the supplemental
consolidated financial statements of Fort James Corporation and Subsidiaries
("Fort James") as of December 29, 1996 and December 31, 1995, and for each of
the three fiscal years in the period ended December 29, 1996, which report is
included in the Current Report on Form 8-K filed on August 27, 1997. The
supplemental consolidated financial statements give retroactive effect to the
merger of James River and Fort Howard Corporation on August 13, 1997, which has
been accounted for as a pooling of interests as described in Notes 1 and 2 to
the supplemental consolidated financial statements. These financial statements
did not extend through the date of consummation and were prepared prior to the
issuance of financial statements of Fort James covering the date of consummation
of the business combination. However, generally accepted accounting principles
proscribe giving effect to a consummated business combination accounted for by
the pooling of interests method in financial statements that do not include the
date of consummation.
We also consent to the incorporation by reference in the Registration Statement
of our report dated August 13, 1997, on our audits of the consolidated financial
statements of Fort James as of December 29, 1996 and December 31, 1995, and for
each of the three fiscal years in the period ended December 29, 1996, which
report is included in the Current Report on Form 8-K dated August 13, 1997
(filed on February 3, 1998).
We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Richmond, Virginia
February 5, 1998
