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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT
Under
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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FORT JAMES CORPORATION
(Name of subject company)
FORT JAMES CORPORATION
(Name of person filing statement)
COMMON STOCK, $.10 PAR VALUE
(Including the associated preferred share purchase rights)
(Title of class of securities)
347471104
(CUSIP Number of class of securities)
Clifford A. Cutchins IV
Senior Vice President,
General Counsel and Corporate Secretary
Fort James Corporation
1650 Lake Cook Road
Deerfield, Illinois 60015-4753
(847) 317-5000
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of the person filing statement)
Copy to:
Patricia A. Vlahakis, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is Fort James Corporation, a Virginia
corporation ("Fort James"). The address of the principal executive offices of
Fort James is 1650 Lake Cook Road, Deerfield, Illinois 60015-4753. The
telephone number of Fort James at its principal executive offices is (847)
317-5000.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Statement")
relates is the common stock, par value $.10 per share, of Fort James (the
"Common Stock") and the associated preferred share purchase rights (the
"Rights" and, together with the Common Stock, the "Shares") issued under the
Rights Agreement, dated as of February 26, 1999, between Fort James and
Norwest Bank Minnesota, N.A. (the "Rights Agreement"), as amended by Amendment
No. 1 thereto, dated as of July 16, 2000, between Fort James and Wells Fargo
Bank Minnesota N.A. (successor to Norwest Bank Minnesota, N.A.). As of
September 29, 2000, there were 204,769,587 shares of Common Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The filing person is the subject company. Fort James' name, business address
and business telephone number are set forth in Item 1 above.
This Statement relates to the offer by Fenres Acquisition Corp. (the
"Purchaser"), a Virginia corporation and a wholly owned subsidiary of Georgia-
Pacific Corporation, a Georgia corporation ("Georgia-Pacific"), to exchange
for each issued and outstanding Share (a) $29.60, net to the seller in cash,
and (b) .2644 shares of Georgia-Pacific Group common stock, par value $.80 per
share (the "Exchange Ratio"), including the preferred share purchase rights
associated therewith (together, the "Georgia-Pacific Common Stock"), subject
to the limitation described below, upon the terms and subject to the
conditions set forth in the prospectus relating to the exchange offer, dated
October 13, 2000 (the "Prospectus"), and in the related Letter of Transmittal
(the "Letter of Transmittal" which, together with the Prospectus, as amended
or supplemented from time to time, constitute the "Offer"). The Offer is
described in a Tender Offer Statement on Schedule TO (as amended or
supplemented from time to time, the "Schedule TO"), filed by Georgia-Pacific
and the Purchaser with the Securities and Exchange Commission on October 13,
2000.
The Exchange Ratio will be adjusted in the event that the value of the stock
component of the consideration would exceed $10.40. This would occur when the
Average Price (as defined below) exceeds $39.33, in which event the Exchange
Ratio will be equal to $10.40 divided by the Average Price. For purposes of
the Offer and this Statement, the "Average Price" means the average (rounded
to the nearest 1/10,000) of the volume weighted averages (rounded to the
nearest 1/10,000) of the trading prices of Georgia-Pacific Common Stock on the
New York Stock Exchange, as reported by Bloomberg Financial Markets, for the
ten consecutive trading days ending on the third trading day immediately
preceding the date on which the Purchaser accepts for payment all of the
Shares validly tendered and not withdrawn pursuant to the Offer (the
"Acceptance Date").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 16, 2000, among Fort James, Georgia-Pacific and the Purchaser (the
"Merger Agreement"). The Merger Agreement provides, among other things, that
as soon as practicable following the satisfaction or waiver of the conditions
set forth in the Merger Agreement, including the completion of the Offer, the
Purchaser will be merged with and into Fort James (the "Merger"), with Fort
James continuing as the surviving corporation (the "Surviving Corporation")
and as a wholly owned subsidiary of Georgia-Pacific. At the effective time of
the Merger (the "Effective Time"), each Share then outstanding (other than
treasury Shares and Shares that are owned by Georgia-Pacific, the Purchaser or
any subsidiary of Georgia-Pacific) will be converted into the right to receive
the same amount of cash and the same number of shares of Georgia-Pacific
Common Stock as is being paid in the Offer. A copy of the Merger Agreement is
filed herewith as Exhibit (e)(1) and is incorporated herein by reference.
As set forth in the Schedule TO, the principal executive offices of Georgia-
Pacific and the Purchaser are located at 133 Peachtree Street, N.E., Atlanta,
Georgia 30303.
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ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
The information contained in the Information Statement attached hereto as
Schedule II is incorporated herein by reference. Each material agreement,
arrangement or understanding and any actual or potential conflict of interest
between Fort James or its affiliates and (a) Fort James' executive officers,
directors or affiliates or (b) Georgia-Pacific, the Purchaser or their
respective executive officers, directors or affiliates, is either incorporated
herein by reference as a result of the previous sentence or set forth below.
THE MERGER AGREEMENT. The summary of the Merger Agreement and the
description of the conditions of the Offer contained in the Prospectus, which
is filed as Exhibit (a)(1) to this Statement and which is being mailed to
shareholders together with this Statement, are incorporated herein by
reference. Such summary and description are qualified in their entirety by
reference to the Merger Agreement, which has been filed as Exhibit (e)(1)
hereto and is incorporated herein by reference.
TREATMENT OF EQUITY AWARDS. The Merger Agreement provides that not less than
five business days prior to a change of control of Fort James, each holder of
an option to purchase Shares shall have the right to elect to have, in whole
or in part, their options cashed out or to elect to have, in whole or in part,
their options exchanged for options to purchase shares of Georgia-Pacific
Common Stock (See "The Merger Agreement--Treatment of Fort James Stock
Options, Performance Shares and Restricted or Performance Share Units" in the
Prospectus). A change of control will occur upon the consummation of the
Offer. Also upon consummation of the Offer, each outstanding option to
purchase Shares will, by its terms, to the extent not already vested, become
immediately fully vested and exercisable and each outstanding share of
restricted stock and outstanding performance share will, by its terms, to the
extent not already vested or free of restrictions, become immediately fully
vested and the restrictions thereon will lapse. In addition, upon consummation
of the Offer, each restricted stock unit will, by its terms, immediately vest
and become payable in cash. In addition, if, during the three-year period
following consummation of the Offer, an employee's employment is terminated by
Fort James, without cause, or the employee terminates his employment for "good
reason" (as defined in the employee's employment agreement), the option
exercise period for each outstanding option held by this employee shall
continue until the earlier of three years following the date the Offer is
completed or the last day of the option's original scheduled term.
As of September 29, 2000, the executive officers of Fort James held an
aggregate of 1,144,250 options, 100,000 shares of restricted stock, 386,837
performance shares and 475,000 restricted stock units that were unvested or
subject to restrictions and which will become fully vested and exercisable or
free of restrictions on the consummation of the Offer. In addition, as of
September 29, 2000, non-employee directors held an aggregate of 9,915 shares
of restricted stock that were unvested and subject to restrictions and would
become vested and free of restrictions if the non-employee director ceased to
be a member of the Board as a result of a change of control of Fort James.
EMPLOYMENT AGREEMENT AND INDIVIDUAL SUPPLEMENTAL RETIREMENT PLAN. Fort James
has employment agreements with each of its named executive officers (Messrs.
Cutchins, Haberli, Lundgren, Marsh and Neil) and with eight of its other
executive officers that provide for severance benefits in the event of a
termination of the executive's employment by Fort James other than for cause
(as defined in the employment agreements) or disability, or a termination of
the executive's employment by the executive with good reason (as defined in
the employment agreements) during the three-year period following completion
of the Offer (in the case of Mr. Neil and three of the other executive
officers, during the remainder of the three-year term of their respective
employment agreements).
If Fort James terminates an executive's employment other than for cause or
disability, or if the executive terminates his employment for good reason, the
executive will be entitled to receive a lump sum cash severance payment equal
to the sum of (1) any accrued unpaid salary, plus a prorated annual bonus
based on the executive's highest bonus in the immediately preceding five years
(three years for Mr. Neil and four of the other executive officers) ("Annual
Bonus"); (2) three times the executive's base salary and Annual Bonus; and (3)
if the executive is not age 55, a supplemental retirement payment based on the
additional pension amounts (under both
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qualified defined benefit plans and supplemental plans, including Mr. Marsh's
Supplemental Retirement Plan described below) that the executive would have
accrued had he remained employed for three additional years, assuming that the
executive's compensation for the three additional years is his final base
salary and Annual Bonus. Upon termination of employment for the reasons stated
above, each executive will also be automatically vested in any unvested shares
of restricted stock, stock options, performance shares and other equity-based
awards, and the executive and his family will receive continued coverage under
certain Fort James welfare benefit plans for three years. Each employment
agreement also provides that the executive will be made whole on an after-tax
basis with respect to certain excise taxes which may be imposed upon payments
under the employment agreement.
In addition to the supplemental retirement payment described above, each
executive (other than Mr. Neil and four of the other executive officers) will
be entitled to the following retirement benefits in the event of a termination
of his employment other than for cause or disability, or the executive's
termination of his employment for good reason: (1) three years of additional
age and service credit for purposes of determining the executive's retirement
benefits under both qualified defined benefit plans and supplemental plans,
using the executive's final base salary and Annual Bonus to calculate the
additional retirement benefit amount as a result of the additional age and
service credit (other than for Mr. Marsh); (2) eligibility for retiree medical
plan coverage; and (3) a lump-sum cash payment of $50,000.
Under Mr. Marsh's Supplemental Retirement Plan, upon termination following
consummation of the Offer, (1) he will be credited with up to two years
additional service if necessary to provide him with six years and ten months
service, (2) the basic benefit under the plan will be increased by 5% if he
retires at age 54, and 10% if he retires on or after the first day of the
month coinciding with or next following the date he attains age 55,
(3) reduction factors for payments beginning before age 55 will not apply, (4)
the value of retirement benefits will be paid in a lump sum, and (5) if he is
terminated for cause (as defined in the plan), his rights under the plan will
be determined as if the termination were not for cause. For purposes of the
benefits under the plan, Mr. Marsh will be credited with the additional years
of service that he is entitled to receive under his employment agreement upon
a termination of employment (as described above).
SPLIT DOLLAR LIFE INSURANCE PLAN. Under the Fort James Split Dollar Life
Insurance Plan, each executive officer whose employment terminates within two
years following consummation of the Offer will be permitted to continue in the
plan, and the Fort James premium payment obligation will continue for a period
of 15 years from the effective date of the executive officer's participation
in the plan.
APPOINTMENT TO THE GEORGIA-PACIFIC BOARD OF DIRECTORS. Under the terms of
the Merger Agreement, at the Effective Time, three individuals from among the
present directors of Fort James will be appointed to Georgia-Pacific's board
of directors.
DIRECTORS' AND OFFICERS' INSURANCE; INDEMNIFICATION. The Merger Agreement
provides that for a period of six years from the Effective Time, the surviving
corporation in the Merger will maintain in effect Fort James' existing
directors' and officers' liability insurance covering those persons who were
covered under the respective directors' and officers' liability insurance on
July 16, 2000 (the "Indemnified Parties"); provided that Georgia-Pacific is
not required to expend an amount in excess of 200% of the annual premiums
currently paid by Fort James for the respective directors' and officers'
liability insurance. If insurance coverage is not otherwise available,
Georgia-Pacific will cause its directors' and officers' liability insurance
then in effect to cover those persons who are covered on July 16, 2000 with
respect to those matters covered by Fort James' directors' and officers'
liability policy.
The Surviving Corporation will also indemnify all Indemnified Parties to the
fullest extent permitted by applicable law with respect to all acts and
omissions arising out of the respective Indemnified Parties' service as
officers, directors, employees or agents of Fort James or any of its
subsidiaries or as trustees or fiduciaries of any plan for the benefit of
employees of Fort James or any of its subsidiaries occurring prior to the
Effective Time, including the transactions contemplated by the Merger
Agreement. In the event that any Indemnified Party
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becomes involved in any action, proceeding or investigation in connection with
any matter occurring prior to the Effective Time, the Surviving Corporation
will pay, as incurred, the respective Indemnified Party's reasonable legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection with the relevant action, proceeding or investigation.
If expenses are advanced, however, prior to receiving the advance, if required
by applicable law, the Indemnified Party shall provide Georgia-Pacific with an
undertaking to repay the advance in full after it is ultimately determined
that party who received the advance was not entitled to indemnification.
Subject to certain notice and cooperation provisions, the surviving
corporation in the Merger will pay all reasonable expenses, including
attorneys' fees, that may be incurred by any Indemnified Party in enforcing
the indemnification provisions of the Merger Agreement or any action involving
an Indemnifying Party resulting from the transactions contemplated by the
Merger Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of Fort James (the "Board" or the "Board of
Directors"), at a meeting held on July 16, 2000, determined that the Merger
Agreement and the transactions contemplated by the Merger Agreement, including
the Offer and the Merger, are in the best interests of Fort James and Fort
James' shareholders. At this meeting, the Board approved the Merger Agreement
and the transactions contemplated by the Merger Agreement, including the Offer
and the Merger. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
(b)(i) BACKGROUND
As part of its long-term strategy to strengthen its portfolio of businesses
by divesting or exiting commodity and non-strategic businesses and by
acquiring businesses which are high value-added and that position Georgia-
Pacific closer to its customers, and to continue to build and strengthen its
tissue business, Georgia-Pacific has, from time to time, considered various
strategic transactions with various parties, including Fort Howard Corporation
(a predecessor to Fort James).
Similarly, from time to time over the past several years, Fort James'
management and Board have reviewed strategic alternatives, including remaining
an independent public company, the possibility of acquisitions or mergers with
other companies and other transactions.
On May 1, 2000, Alston D. Correll, Georgia-Pacific's Chairman, Chief
Executive Officer and President, approached Miles L. Marsh, Fort James'
Chairman and Chief Executive Officer, to request a meeting to discuss the
merits of a possible transaction between Georgia-Pacific and Fort James. This
meeting was scheduled for May 4, 2000.
On May 4, 2000, Mr. Correll and Mr. Marsh met in Chicago, Illinois. During
that meeting, Mr. Correll indicated that Georgia-Pacific would be interested
in acquiring Fort James on friendly terms provided that the acquisition was
given the full support of Mr. Marsh and the Board. Mr. Correll explained the
potential value and strategic benefits that he believed would be recognized by
the shareholders of Fort James and the shareholders of Georgia-Pacific as a
result of the combination of Fort James and Georgia-Pacific. Following that
meeting Mr. Correll and Mr. Marsh briefed members of their respective senior
management teams and each management team began a more detailed review.
During May, 2000, Georgia-Pacific retained the investment banking firm of
Merrill Lynch and the law firm of Shearman & Sterling to advise on the
transaction. During May 2000, Fort James also retained outside financial and
legal advisors.
On May 5, 2000, during a special telephonic meeting of the Board, Mr. Marsh
informed the Board as to the status of the discussions with Georgia-Pacific.
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On May 12, 2000, Fort James and Georgia-Pacific executed a Confidentiality
Agreement to facilitate the exchange of information.
On May 14, 2000, during a special telephonic meeting of the Georgia-Pacific
board of directors, Mr. Correll updated the Georgia-Pacific board of directors
with respect to the proposed acquisition of Fort James and Fort James'
business and operations and explained the merits of an acquisition of Fort
James by Georgia-Pacific. The Georgia-Pacific board of directors strongly
supported the proposed acquisition and authorized Mr. Correll to continue
negotiating with Fort James.
Throughout mid-to late May, management of each company met periodically with
their respective financial and legal advisors to review the merits of and
issues regarding a possible transaction between the companies.
On June 1, 2000, senior officers of Georgia-Pacific and Fort James and their
respective financial and legal advisers met in New York, New York to begin
discussing the terms of a possible transaction. On June 8, 2000, Mr. Correll,
Mr. Marsh, and senior officers of both Georgia-Pacific and Fort James, met in
Chicago, Illinois to continue discussing the terms of a possible transaction.
On June 9, 2000, at a special meeting of the Board, Mr. Marsh briefed the
Board on the status of discussions with Georgia-Pacific. Later that day, Mr.
Marsh contacted Mr. Correll to further discuss the potential terms of the
proposed transaction.
On June 15, 2000, the Board held a regularly scheduled meeting at which
members of its senior management and its outside financial and legal advisors
provided the Board with advice on the financial and legal issues presented by
the transaction.
On June 16, 2000, Mr. Correll, Mr. Marsh and members of their senior
management teams met in New York, and Fort James' officers made due diligence
presentations of its Dixie and European lines of businesses. An additional due
diligence meeting that included officers of the two companies and
representatives of Morgan Stanley & Co. Incorporated and Merrill Lynch was
held on June 20, 2000 during which further operational, legal and financial
due diligence was conducted.
On June 29, 2000, at a special meeting of the Georgia-Pacific board of
directors, Mr. Correll updated the Georgia-Pacific board of directors on the
status of discussions with Fort James. Georgia-Pacific's senior management and
Merrill Lynch made presentations to the Georgia-Pacific board of directors
concerning various financial aspects of the transaction and the Georgia-
Pacific board of directors discussed the business, financial and legal issues
which would be presented by an acquisition of Fort James. The Georgia-Pacific
board of directors authorized Mr. Correll to continue to seek to reach an
agreement with Fort James.
On June 30, 2000, Mr. Correll contacted Mr. Marsh and indicated that
Georgia-Pacific proposed to acquire all outstanding Shares for a price of $36
per Share, representing a 54% premium over the then-current market price for
each Share. Mr. Correll proposed that the price would be paid 80% in cash and
20% in shares of Georgia-Pacific Common Stock, subject to a collar on the
stock portion of the consideration. Mr. Correll also proposed that the
transaction would be structured as an exchange offer by Georgia-Pacific for
all outstanding Shares, to be followed by a merger of Fort James with a
subsidiary of Georgia-Pacific and discussed other terms of the proposed
transaction.
Mr. Marsh immediately convened a telephonic meeting of the Board and fully
summarized Georgia-Pacific's proposal. Mr. Marsh indicated that the proposal
would be discussed further at a special meeting of the Board on July 6, 2000.
From July 2, 2000 through July 5, 2000, Mr. Marsh and members of the Fort
James management team reviewed Georgia-Pacific's proposal with Morgan Stanley
and representatives of Morgan Stanley and Merrill Lynch discussed various
aspects of Georgia-Pacific's proposal.
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On July 5, 2000, Messrs. Correll and Marsh discussed the proposed
transaction by telephone. During this conversation, Mr. Correll and Mr. Marsh
discussed a price consisting of $29.00 in cash and .2861 shares of Georgia-
Pacific Common Stock, subject to a cap on the value of the total consideration
of $40 per Share.
On July 6, 2000, the Board met in Chicago, Illinois to discuss the proposed
business combination. Present at that meeting were representatives of Fort
James' outside legal advisors and Morgan Stanley, which provided financial
analyses relating to the proposed transaction.
On July 7, 2000 representatives of Georgia-Pacific and Fort James met in
Northbrook, Illinois to discuss financial and business information about both
companies and to continue their due diligence examination of the business and
operations of both companies. Fort James' officers made a presentation of its
North American tissue business. Representatives of Morgan Stanley and Merrill
Lynch were present at the meeting.
On July 11, 2000, senior officers of Fort James and Georgia-Pacific met in
New York City to continue discussions with respect to the proposed
transaction.
On July 12, 2000, Merrill Lynch, acting on instructions from Georgia-
Pacific, contacted Morgan Stanley to indicate that Georgia-Pacific was
proposing to adjust the proportion of cash and stock consideration to $29.60
in cash and .2644 shares of Georgia-Pacific Common Stock for each outstanding
Share, subject to the same cap on the total value of the consideration of $40
per Share. This adjustment reflected a desire on the part of both companies to
maximize the proportion of the total offer price to be paid in cash. However,
Georgia-Pacific could not make an all-cash offer without jeopardizing the
investment grade ratings of its corporate debt. The $29.60 cash amount was
agreed upon by both companies to achieve both objectives. The closing price
per Share on July 12, 2000 was $24.00.
During the period from July 11 to July 16, 2000, representative of Georgia-
Pacific and Fort James and their respective outside counsels negotiated the
specific terms of the Merger Agreement, including the conditions to the Offer,
the interim covenants, the circumstances under which the break-up fee would be
payable, the non-solicitation provisions, the efforts required to obtain
regulatory approvals and the circumstances in which the parties could
terminate the Merger Agreement.
On July 16, 2000, the Georgia-Pacific board of directors met telephonically.
After discussion, which included updates regarding the financial and legal
aspects of the proposed transaction from members of the senior management of
Georgia-Pacific and representatives of Georgia-Pacific's outside legal and
financial advisors, the Georgia-Pacific board of directors unanimously
approved the Merger Agreement.
Also on July 16, 2000, Fort James held a special meeting of its Board. After
discussion, which included updates regarding the financial and legal aspects
of the proposed transaction from members of the senior management of Fort
James and its outside legal advisers, Morgan Stanley delivered its opinion to
the effect that as of that date the consideration to be received by holders of
Shares pursuant to the Merger Agreement was fair from a financial point of
view to those holders and the Board unanimously approved the Merger Agreement.
Later that day, Georgia-Pacific and Fort James executed the Merger Agreement.
On July 17, 2000, the companies issued a joint press release announcing the
transaction.
(ii) REASONS FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS
In reaching its recommendations described above in this Item 4, the Board
considered a number of factors, including the following:
1. TRANSACTION FINANCIAL TERMS/PREMIUM TO MARKET PRICE. The relationship of
the consideration to be paid in the Offer and the Merger to recent and
historical market prices of the Shares. Based on the closing price of
Georgia-Pacific Common Stock of $28.625 on July 14, 2000 (the last
trading day prior to the announcement of the Merger Agreement), the per
share consideration totaled $37.17 per Share, representing a 51% premium
over the $24.56 closing price of the Shares on July 14, 2000. The Board
also considered the form of consideration to be paid to holders of
Shares in the Offer and the Merger,
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taking into account the certainty of the value of the cash component of
the Offer as compared to the stock component, as well as the fact that
the stock component permits Fort James shareholders to become holders of
Georgia-Pacific Common Stock and participate in the future prospects of
the combined businesses of Georgia-Pacific and Fort James. The Board
further believed that the total consideration was the highest per Share
consideration that could be negotiated with Georgia-Pacific. The Board
was aware that the consideration received by holders of Shares in the
Offer and the Merger would be taxable to the holders of Shares for
federal income tax purposes.
2. MORGAN STANLEY ANALYSES. Presentations from and the opinion delivered by
Morgan Stanley dated July 16, 2000, that, based upon and subject to the
considerations and assumptions as stated in the opinion, the
consideration to be received by holders of Shares pursuant to the Merger
Agreement is fair from a financial point of view to the holders of
Shares. The analyses performed by Morgan Stanley are described below
under "Opinion of Financial Advisor." A copy of the opinion delivered by
Morgan Stanley to the Board, setting forth the procedures followed, the
matters considered and the assumptions made by Morgan Stanley in
arriving at its opinion, is attached to this Statement as Schedule I and
incorporated in this Statement by reference. SHAREHOLDERS ARE URGED TO
READ THIS OPINION IN ITS ENTIRETY. The Board was aware that Morgan
Stanley becomes entitled to certain fees described below in Item 5 upon
the consummation of the Offer.
3. FORT JAMES OPERATING AND FINANCIAL CONDITION. The current and historical
financial condition and results of operations of Fort James, as well as
the prospects and strategic objectives of Fort James, including the
risks involved in achieving those prospects and objectives, and the
current and expected conditions in the industries in which Fort James'
businesses operate.
4. GEORGIA-PACIFIC OPERATING AND FINANCIAL CONDITION. The current and
historical financial condition and results of operations of Georgia-
Pacific, as well as the prospects and strategic objectives of Georgia-
Pacific, including the risks involved in achieving those prospects and
objectives, and the current and expected conditions in the industries in
which Georgia-Pacific's businesses operate.
5. BENEFITS OF THE COMBINATION. The fact that the combination of the
businesses of Fort James with those of Georgia-Pacific are expected to
lead to potential cost savings and other synergies.
6. NO FINANCING CONDITION. The fact that the Offer would not be subject to
a financing condition and that Georgia-Pacific has the financial
capacity to consummate the Offer and the Merger.
7. STRATEGIC ALTERNATIVES. The presentations of Fort James' management,
Morgan Stanley and the Board's review with respect to trends in the
industries in which Fort James' businesses operate and the strategic
alternatives available to Fort James, including Fort James' remaining an
independent public company, the possibility of acquisitions or mergers
with other companies in these industries and other transactions, as well
as the risks and uncertainties associated with the strategic
alternatives available to Fort James. The Board considered management's
belief that Fort James and Georgia-Pacific have similar corporate
cultures, the complementary nature of the two companies' products, and
the experience, reputation and financial strength of Georgia-Pacific.
8. TIMING AND MANNER OF COMPLETION. The anticipated timing of consummation
of the transactions contemplated by the Merger Agreement, including the
structure of the transactions as an exchange offer for all of the
Shares, followed by a merger in which shareholders will receive the same
consideration as received by shareholders who tender their Shares in the
Offer.
9. CONDITIONS TO CONSUMMATION. Georgia-Pacific's obligation to consummate
the Offer and the Merger is subject to customary conditions, with no
financing condition. The Board also considered the likelihood of
obtaining required regulatory approvals, and Georgia-Pacific's
commitment in the Merger Agreement to use its best efforts to obtain the
required regulatory approvals for the Offer and the Merger, except to
the extent that the actions necessary to fulfill the conditions to the
Offer and the Merger would have a material adverse effect on the
combined companies.
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10. ALTERNATIVE TRANSACTIONS. The Board considered that under the terms of
the Merger Agreement, while Fort James is prohibited from soliciting
acquisition proposals from third parties, Fort James may furnish
information to and participate in negotiations with third parties in
response to an unsolicited written acquisition proposal if a majority
of the Board (a) reasonably determines in good faith, after
consultation with its financial advisors, that furnishing information
to and participating in negotiations with third parties would be
reasonably likely to lead to the delivery to Fort James of a superior
proposal and (b) determines in good faith, after receiving the advice
of outside legal counsel, that it is necessary to furnish information
to and participate in negotiations with third parties in order to
comply with its fiduciary duties under applicable law.
11. ABILITY TO TERMINATE FOR A SUPERIOR PROPOSAL. The fact that the Board
is permitted, subject to the payment to Georgia-Pacific of a $125
million termination fee, to terminate the Merger Agreement if, prior to
consummation of the Offer, a superior proposal is received by Fort
James and the Board reasonably determines in good faith, after
receiving the advice of outside legal counsel, that it is necessary to
terminate the Merger Agreement and enter into a new agreement to effect
the superior proposal in order to comply with its fiduciary duties
under applicable law.
12. REVERSE TERMINATION FEE. The fact that Fort James has the protection of
a $125 million reverse termination fee in the event that the Merger
Agreement is terminated primarily due to the required regulatory
approvals not being received prior to February 28, 2001.
13. POTENTIAL CONFLICTS OF INTERESTS. The Board was aware of the potential
conflicts of interest between Fort James on the one hand, and, on the
other hand, certain of Fort James' officers, directors or affiliates in
the Offer and the Merger, all as described above in Item 3.
In addition, the Board considered potentially negative factors in its
deliberations, including the following:
1. IMPACT OF THE TRANSACTION ON INTERIM OPERATIONS OF FORT JAMES. The
possible negative impact on the business of Fort James between signing
and closing due to announcement of the Offer and the interim covenants
relating to the operation of Fort James' business between signing of the
Merger Agreement and closing of the Merger.
2. RISK FACTORS. The Board considered the following matters (which are
discussed in more detail in the Prospectus under the heading "Risk
Factors Relating to the Offer and the Merger"):
. The Exchange Ratio could work to the disadvantage of Fort James
stockholders, because a decline in the price of Georgia-Pacific
Common Stock would cause the value of the consideration to be paid
for the Shares to decline, but if the price of the Georgia-Pacific
Common Stock were to increase, Fort James shareholders might not
realize the full value of the increase due to the agreed upon
procedure for adjusting the Exchange Ratio so that a maximum of
$10.40 per Share is paid in stock.
. The expected benefits of the combination may not be realized.
. The business of Georgia-Pacific and the trading price of Georgia-
Pacific Common Stock may be affected by factors different from those
which affect the business of Fort James and the price of the Shares,
which could adversely affect Fort James shareholders to the extent
the Georgia-Pacific Common Stock received in the transaction
declines for reasons unexpected by the Fort James shareholders.
. The potential decrease in earnings from those shown in the pro forma
financial information since increases in depreciation and
amortization expense over preliminary estimates reflected in the pro
forma financial information are likely to occur after the purchase
consideration is finally allocated to Fort James' assets.
. The need for governmental approvals may delay consummation of the
Offer and the Merger.
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. The fact that the building products and pulp and paper industries
are highly competitive and that the combined Georgia-Pacific and
Fort James will face intense competition, following the Merger, in
those industries.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive, but includes the material factors
considered by the Board. In view of the variety of factors considered in
connection with its evaluation of the Offer and the Merger, the Board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination and
recommendation. In addition, individual directors may have given differing
weights to different factors. After weighing all of the different factors, the
Board unanimously determined to recommend that Fort James' shareholders tender
their Shares in the Offer.
(iii) OPINION OF FINANCIAL ADVISOR
Fort James engaged Morgan Stanley to provide it with financial advisory
services and a financial fairness opinion in connection with the Offer and the
Merger. The Board selected Morgan Stanley based on Morgan Stanley's
qualifications, expertise and reputation and its knowledge of the business and
affairs of Fort James. At the meeting of the Board on July 16, 2000, Morgan
Stanley rendered its oral opinion, subsequently confirmed in writing, that as
of July 16, 2000, and based on and subject to the considerations in its
opinion, the consideration to be received by the holders of Shares pursuant to
the Merger Agreement is fair from a financial point of view to those holders.
THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED JULY 16, 2000, WHICH SETS
FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY MORGAN STANLEY IN
RENDERING ITS OPINION, IS ATTACHED AS SCHEDULE I TO THIS STATEMENT AND
INCORPORATED IN THIS STATEMENT BY REFERENCE. WE URGE YOU TO READ THIS OPINION
CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE
BOARD, ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE
HOLDERS OF THE SHARES PURSUANT TO THE MERGER AGREEMENT FROM A FINANCIAL POINT
OF VIEW TO THOSE HOLDERS AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE OFFER
OR THE MERGER OR CONSTITUTE A RECOMMENDATION AS TO WHETHER HOLDERS OF SHARES
SHOULD TENDER THEIR SHARES IN THE OFFER OR AS TO HOW HOLDERS OF SHARES SHOULD
VOTE AT ANY SHAREHOLDERS' MEETING HELD IN CONNECTION WITH THE MERGER. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
. reviewed certain publicly available financial statements and other
information of Fort James and Georgia-Pacific;
. reviewed certain internal financial statements and other financial and
operating data concerning Fort James prepared by the management of Fort
James;
. reviewed certain internal financial statements and other financial and
operating data concerning Georgia-Pacific prepared by the management of
Georgia-Pacific;
. reviewed certain financial projections prepared by the management of Fort
James;
. reviewed certain financial projections prepared by the management of
Georgia-Pacific;
. discussed the past and current operations and financial condition and the
prospects of Fort James, including information relating to strategic,
financial and operational benefits anticipated from the Offer and the
Merger, with senior executives of Fort James;
. discussed the past and current operations and financial condition and the
prospects of Georgia-Pacific, including information relating to strategic,
financial and operational benefits anticipated from the Offer and the
Merger, with senior executives of Georgia-Pacific;
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<PAGE>
. reviewed the pro forma impact of the Offer and the Merger on Georgia-
Pacific's earnings per share, cash flow, consolidated capitalization and
financial ratios;
. reviewed the reported prices and trading activity for the Shares and
Georgia-Pacific Common Stock;
. compared the financial performance of Fort James and the prices and trading
activity of the Shares with that of other comparable publicly-traded
companies and their securities;
. compared the financial performance of Georgia-Pacific and the prices and
trading activity of Georgia-Pacific Common Stock with that of other
comparable publicly-traded companies and their securities;
. reviewed the financial terms, to the extent publicly available, of
comparable acquisition transactions;
. participated in discussions and negotiations among representatives of Fort
James, Georgia-Pacific and their financial and legal advisors;
. reviewed the Merger Agreement, and related documents; and
. performed other analyses and considered other factors that Morgan Stanley
deemed appropriate.
Morgan Stanley assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the
purposes of its opinion. With respect to the financial projections, including
information relating to strategic, financial and operational benefits
anticipated from the Offer and the Merger, Morgan Stanley assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of Fort James and
Georgia-Pacific. In addition, Morgan Stanley assumed that the Offer and the
Merger will be consummated in accordance with the terms set forth in the
Merger Agreement. Morgan Stanley assumed that, in connection with the receipt
of all the necessary regulatory approvals for the Offer and the Merger, no
restrictions will be imposed that would have a material adverse effect on the
contemplated benefits expected to be derived in the Offer and the Merger.
Morgan Stanley has not made any independent valuation or appraisal of the
assets or liabilities of Fort James, nor has it been furnished with any
appraisals regarding the assets or liabilities. Morgan Stanley's opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to it as of July 16, 2000.
The following is a summary of all the material financial analyses performed
by Morgan Stanley in connection with its oral opinion and the preparation of
its written opinion. These summaries of financial analyses include information
presented in tabular format. To fully understand the financial analyses used
by Morgan Stanley, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses.
HISTORICAL SHARE PRICE PERFORMANCE. Morgan Stanley noted that the purchase
price per Share of $29.60 in cash and .2644 shares, subject to adjustment in
the circumstances provided in the Merger Agreement, of Georgia-Pacific Common
Stock (collectively, the "Consideration"), equated to $37.17 per Share, based
on the closing price of Georgia-Pacific Common Stock as of Friday, July 14,
2000 (the last full trading day prior to the announcement of the Merger
Agreement), representing a 51.3% premium to the closing price of a Share of
$24.56.
Morgan Stanley reviewed the historical performance of the Shares and
Georgia-Pacific Common Stock based on a historical analysis of closing prices
and trading volumes for the last twelve months ending July 3, 2000. The table
below shows the twelve-month high and low losing prices during that period,
compared with a closing price on July 14, 2000 of $24.56 per Share and $28.63
per share of Georgia-Pacific Common Stock:
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1999
through through
July 3, 2000 July 3, 2000
High Low
------------- -------------
<S> <C> <C>
Fort James.......................................... $42.00 $16.94
Georgia-Pacific..................................... $52.13 $26.06
</TABLE>
10
<PAGE>
Morgan Stanley compared the historical trading performance of Shares with
that of a group of selected paper and forest product companies. The group of
selected paper and forest product companies included Boise Cascade
Corporation, Bowater Incorporated, Champion International Corporation,
Georgia-Pacific, International Paper Company, The Mead Corporation, Smurfit-
Stone Container Corporation, Westvaco Corporation and Weyerhaeuser Company.
These companies were selected because they participate in the paper and forest
products industry and possess financial and operating characteristics that
have similarities to those of Fort James. However, none of the companies
utilized in this analysis as a comparison is identical to Fort James.
This analysis showed that the closing market prices during the period from
July 12, 1999 through July 13, 2000 depreciated as follows:
<TABLE>
<CAPTION>
Depreciation
------------
<S> <C>
Fort James.................................................... (39.2%)
Georgia-Pacific............................................... (43.1%)
Selected paper and forest products companies (including
Georgia-Pacific): Mean....................................... (25.8%)
</TABLE>
Morgan Stanley also reviewed the distribution of the closing prices of
Shares from January 1, 1996 through July 5, 2000. Morgan Stanley noted that
the Consideration, based on a range of closing share prices for Georgia-
Pacific Common Stock, exceeded most of the closing share prices of Shares over
the period.
<TABLE>
<CAPTION>
% of Shares Traded within
Share Price Price Range from
Range 1/1/1996-7/5/2000
----------- -------------------------
<S> <C>
$28.75-41.13 50%
25.94-44.56 75%
16.94-52.25 100%
32.75 Median
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS OF FORT JAMES. Morgan Stanley analyzed
financial projections prepared by the management of Fort James for the fiscal
year 2000 (the "Fort James Management Projections") and financial projections
contained in publicly available Morgan Stanley research estimates for the
fiscal year 2001 (the "Fort James Research Estimates"). The Fort James
Management Projections consisted of the following: projections of fiscal year
2000 sales of $7,272 million, fiscal year 2000 EBITDA of $1,462 million and
fiscal year 2000 net income of $485 million. The Fort James Management
Projections were prepared in early 2000 and reflected management's view as of
that time and were provided solely to Morgan Stanley for use in its analysis
in connection with the Offer and the Merger. Fort James has no duty to update,
and has not updated, those projections. Projections for 2002 and beyond were
extrapolated by assuming annual revenue growth of 3.5% and flat EBITDA
margins. Morgan Stanley performed a discounted cash flow analysis of Fort
James based on those projections. Morgan Stanley discounted the unlevered free
cash flows of Fort James at a range of discount rates of 10.0% to 11.0%,
representing an estimated weighted average cost of capital range for Fort
James, and terminal values based on a range of multiples of 6.0-7.0 times
estimated 2009 earnings before interest, taxes, depreciation and amortization
("EBITDA") to arrive at a range of present values for Fort James. The present
values were then adjusted for Fort James' debt (net of cash), preferred stock,
if any, and proceeds from the exercise of outstanding options to arrive at an
implied equity value per share. Based on this analysis, Morgan Stanley
calculated values representing an implied equity value per Share ranging from
approximately $27 to $31.
DISCOUNTED CASH FLOW ANALYSIS OF GEORGIA-PACIFIC. Morgan Stanley analyzed
financial projections contained in publicly available Morgan Stanley research
estimates for the fiscal years 2000 and 2001 (the "Georgia-Pacific Research
Estimates"), which were not confirmed by Georgia-Pacific. Projections for 2002
and beyond were extrapolated by assuming annual revenue growth of 2.5% and
mid-cycle EBITDA margins. Morgan Stanley performed a discounted cash flow
analysis of Georgia-Pacific based on those projections. Morgan Stanley
discounted the unlevered free cash flows of Georgia-Pacific at a range of
discount rates of 10.0% to 11.0%, representing an estimated weighted average
cost of capital range for Georgia-Pacific, and terminal values based
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<PAGE>
on a range of multiples of 5.0-6.0 times estimated 2009 EBITDA to arrive at a
range of present values for Georgia-Pacific. The present values were then
adjusted for Georgia-Pacific's debt (net of cash), preferred stock and
proceeds from the exercise of outstanding options to arrive at an implied
equity value per share. Based on this analysis, Morgan Stanley calculated
values representing an implied equity value per share of Georgia-Pacific
Common Stock ranging from approximately $45 to $53.
COMPARABLE COMPANY ANALYSIS OF FORT JAMES AND GEORGIA-PACIFIC. Morgan
Stanley reviewed the current valuation of publicly traded companies in the
paper and forest products sector and the consumer products sector considered
to be comparable to Fort James and Georgia-Pacific. Morgan Stanley reviewed
measures of valuation including historical and projected price to earnings
ratios and historical and projected aggregate value to EBITDA ratios. The
group of selected paper and forest products companies included Boise Cascade
Corporation, International Paper Company, Svenska Cellulosa Aktiebolaget SCA
("SCA"), Weyerhaeuser Company and Willamette Industries, Inc. These companies
were selected because they participate in the paper and forest products
industry, and possess financial and operating characteristics that have
similarities to those of Fort James and Georgia-Pacific. Morgan Stanley
observed a price to 2000 estimated earnings multiple mean of 9.3 times and an
aggregate value to 2000 estimated EBITDA multiple mean of 5.4 times for
comparable publicly traded paper and forest products companies. The group of
selected consumer products companies included The Procter & Gamble Company and
Kimberly-Clark Corporation. These companies were selected because they are
engaged in the manufacture and sale of branded tissue products, as well as
other paper and forest products, and possess financial and operating
characteristics that have similarities to those of Fort James and Georgia-
Pacific. Morgan Stanley observed a price to 2000 estimated earnings multiple
mean of 17.7 times and an aggregate value to 2000 estimated EBITDA multiple
mean of 9.3 times for comparable publicly traded consumer products companies.
Morgan Stanley selected a multiple range of 5.5-6.5 times 2000 estimated
EBITDA for Fort James. Applying this multiple to the forecast of 2000 EBITDA
in Fort James Management Projections implied a range of equity value per Share
between approximately $22 and $29.
Morgan Stanley selected a multiple range of 4.5-5.5 times 2000 estimated
EBITDA for Georgia-Pacific. Applying this multiple to the forecast of 2000
EBITDA in Georgia-Pacific Research Estimates implied a range of equity value
per share of Georgia-Pacific Common Stock between approximately $29 and $44.
No company utilized in the publicly traded comparable company analysis is
identical to Fort James or Georgia-Pacific. Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond
the control of Fort James and Georgia-Pacific. Mathematical analysis (such as
determining the mean or median) is not itself a meaningful method of using
publicly traded comparable company data.
PRECEDENT TRANSACTIONS ANALYSIS OF FORT JAMES AND GEORGIA-PACIFIC. Using
publicly available information, Morgan Stanley reviewed recent precedent
transactions that were considered to be comparable to this transaction. These
transactions were selected because they involved the sale of companies that
participate in the paper and forest products industry. These transactions
included (but were not limited to):
. SCA / Metsa-Tissue (Metsa-Seria Oyj's stake) (2000)
. SCA / AM Paper Group (1999)
. SCA / Metsa-Tissue (11% stake) (1999)
. Kimberly-Clark Corporation / Attisholtz Tissue Business (1999)
. Plainwell Inc. / Pope & Talbot Inc.--Tissue (1998)
. Wausau Paper Mills Company / Mosinee Paper Corporation (1997)
. The Procter & Gamble Company / Ssangyong Paper Co. (1997)
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<PAGE>
. Copamex Industries SA / Kimberly-Clark de MX-Regio Tissue (1997)
. Kruger Inc. / Scott Paper Ltd. (1997)
Morgan Stanley observed the following precedent transactions to be most
comparable to this transaction because they involved the sale of companies
that participate in the paper and forest products industry with a focus on the
manufacture and sale of tissue products:
. Georgia-Pacific Corporation / Wisconsin Tissue Mills Inc. (1999)
. James River Corporation / Fort Howard Corporation (1997)
. Kimberly-Clark Corporation / Scott Paper Company (1995)
Morgan Stanley reviewed publicly available financial information including
the aggregate value to the latest twelve-month ("LTM") EBITDA. Morgan Stanley
observed an aggregate value to LTM EBITDA range of approximately 6.4--11.3
times and a mean of 8.6 times for the precedent transactions.
Based on 1999 Fort James EBITDA, and using a multiple range of 7.5--9.5
times 1999 EBITDA, a range of implied equity values per Share was between
approximately $31 and $44.
Based on 1999 Georgia-Pacific EBITDA, and using a multiple range of 7.0--8.0
times 1999 EBITDA, a range of implied equity values per share of Georgia-
Pacific Common Stock was between approximately $58 and $72.
SEGMENT BREAK-UP ANALYSIS. Morgan Stanley performed segment valuation
analysis, which included the tax impact of the divestiture of certain Fort
James operations on the value of Fort James. The analysis incorporated
assumptions regarding tax bases and the corporate tax rate. Based on Fort
James EBITDA, and using a multiple range of 8.0--10.0 times 1999 EBITDA for
Fort James' European tissue operations and a multiple range of 7.5--9.5 times
1999 EBITDA for the rest of Fort James, a range of implied equity values per
Share was between approximately $29 and $39.
LEVERAGED BUYOUT ANALYSIS. Morgan Stanley analyzed a scenario, using Fort
James Management Projections, Fort James Research Estimates and extrapolated
projections, whereby each Share was purchased at a price that would result in
a five-year internal rate of return of approximately 27.5% upon disposition
assuming a five-year EBITDA exit multiple of 5.5--6.5 times. This analysis
implied an equity price of $21 to $24 per Share.
STAND-ALONE EQUITY VALUE. Morgan Stanley evaluated the implied current stock
price by estimating the stock price in 2000 based on a multiple of 2001
earnings of 12.0--13.0 times. Morgan Stanley used 2001 earnings estimates
based on Fort James Research Estimates and Fort James Management Projections.
The implied stock price in 2001 was then discounted to a current price at an
equity discount rate of 13.9%. This analysis implied a valuation of
approximately $26 to $32 per Share.
PRO FORMA COMBINATION ANALYSIS. Morgan Stanley analyzed the pro forma impact
of the Offer and the Merger on Georgia-Pacific's cash and book earnings per
share, consolidated capitalization and financial ratios, using Fort James
Management Projections, Fort James Research Estimates, Georgia-Pacific
Research Estimates and extrapolated projections. Incorporating assumptions
with respect to various structural considerations, transaction costs and Fort
James management estimated synergies, the combination was accretive to
Georgia-Pacific's cash earnings per share and dilutive to its book earnings
per share in 2000, 2001 and 2002.
In connection with the review of the Offer and the Merger by the Board,
Morgan Stanley performed a variety of financial and comparative analyses for
purposes of rendering its opinion. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. In arriving at its opinion, Morgan Stanley considered the
results of all of its analyses as a whole and did not attribute
13
<PAGE>
any particular weight to any analysis or factor considered by it. Morgan
Stanley believes that the summary provided and the analyses described above
must be considered as a whole and that selecting portions of these analyses,
without considering all of them, would create an incomplete view of the
process underlying its analyses and opinion. In addition, Morgan Stanley may
have given various analyses and factors more or less weight than other
analyses or factors, and may have deemed various assumptions more or less
probable than other assumptions, so that the range of valuations resulting
from any particular analysis described above should therefore not be taken to
be Morgan Stanley's view of the actual value of Fort James.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition
of Fort James or any of its assets, nor did Morgan Stanley negotiate with any
party other than Georgia-Pacific.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Fort James and Georgia-
Pacific. Any estimates contained in Morgan Stanley's analysis are not
necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by these estimates.
The analyses performed were prepared solely as a part of Morgan Stanley's
analysis of the fairness of the consideration to be received by holders of
Shares pursuant to the Merger Agreement from a financial point of view to
those holders and were conducted in connection with the delivery of its
opinion dated July 16, 2000, to the Board. Morgan Stanley's analyses do not
purport to be appraisals or to reflect the prices at which Shares might
actually trade. The consideration in the Offer and the Merger was determined
through arm's length negotiations between Fort James and Georgia-Pacific and
was approved by the Board. Morgan Stanley did not recommend the consideration
to be paid by Georgia-Pacific or that any consideration to be paid by Georgia-
Pacific constituted the only appropriate consideration for the Offer and the
Merger.
In addition, Morgan Stanley's opinion and presentation to the Board was one
of the many factors taken into consideration by the Board in making its
determination to recommend the Offer and the Merger. Consequently, the
analyses described above should not be viewed as determinative of the opinion
of the Board with respect to the consideration paid in connection with the
Offer and the Merger or of whether the Board would have been willing to agree
to a different consideration.
(c) INTENT TO TENDER
To the best knowledge of Fort James, each executive officer, director,
affiliate or subsidiary of Fort James who owns Shares presently intends to
tender in the Offer all Shares that they own of record or beneficially, other
than Shares, if any, that they may have the right to purchase by exercising
stock options and Shares, if any, that if tendered would cause them to incur
liability under the short-swing profits provisions of the Securities Exchange
Act of 1934, as amended.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED
Pursuant to an engagement letter, Fort James formally retained Morgan
Stanley to act as its financial advisor in connection with the proposed sale
of Fort James. The Board of Directors retained Morgan Stanley based upon
Morgan Stanley's qualifications, experience and expertise. Morgan Stanley is
an internationally recognized investment banking and advisory firm. Morgan
Stanley, as part of its investment banking and financial advisory business, is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In
addition, Morgan Stanley is a full-service securities firm engaged in
securities trading, brokerage and financing activities. In the ordinary course
of Morgan Stanley's trading and brokerage activities, Morgan Stanley or its
affiliates may at any time hold long or short positions, and may trade or
otherwise effect transactions, for its own account or the accounts of
customers, in debt or equity securities or senior loans of Fort James or
Georgia-Pacific. In the past, Morgan Stanley and its
14
<PAGE>
affiliates have provided financial advisory and financing services for Fort
James and for Georgia-Pacific, and have received fees for the rendering of
these services. Since August 1998, Morgan Stanley has received approximately
$2.5 million in fees from Fort James in respect of its services. In connection
with the Offer and the Merger, Morgan Stanley may provide financing services
for Georgia-Pacific. In addition, Miles L. Marsh, Chairman and Chief Executive
Officer of Fort James serves on the board of directors of the parent of Morgan
Stanley.
Pursuant to the Morgan Stanley engagement letter, upon the consummation of
the Offer, Morgan Stanley will receive a fee of $30 million for its services.
In the event the Offer is not consummated, Morgan Stanley will receive an
advisory fee estimated between $200,000 and $300,000. Fort James has also
agreed to indemnify Morgan Stanley and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Morgan Stanley, or any of its affiliates against specified liabilities and
expenses, including liabilities under federal securities laws, related to or
arising out of Morgan Stanley's engagement.
Except as described above, neither Fort James, nor any person acting on its
behalf, has employed, retained or agreed to compensate any person or class of
persons to make solicitations or recommendations in connection with the Offer
or the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
Other than as set forth on Schedule IV, and except for Shares allocated in
Fort James' 401(k) plan, no discretionary transactions in Shares have been
effected during the past 60 days by Fort James or, to the knowledge of Fort
James, by any executive officer, director, affiliate or subsidiary of Fort
James other than in the ordinary course of business in connection with Fort
James' employee benefit plans.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
Except as set forth in this Statement, Fort James is not currently
undertaking or engaged in any negotiations in response to the Offer that
relate to (a) a tender offer for or other acquisition of Fort James'
securities by Fort James, any subsidiary of Fort James or any other person;
(b) any extraordinary transaction, such as a merger, reorganization or
liquidation, involving Fort James or any subsidiary of Fort James; (c) any
purchase, sale or transfer of a material amount of assets of Fort James or any
subsidiary of Fort James; or (d) any material change in the present dividend
rate or policy, or indebtedness or capitalization of Fort James.
Except as set forth in this Statement, there are no transactions,
resolutions of the Board of Directors, agreements in principle, or signed
contracts entered into in response to the Offer that relate to one or more of
the events referred to in the preceding paragraph.
ITEM 8. ADDITIONAL INFORMATION
(a) RIGHTS AGREEMENT
On July 16, 2000, Fort James and Wells Fargo Bank Minnesota, N.A., as
successor to Norwest Bank Minnesota, N.A ., amended the Rights Agreement to
provide, among other things, that the execution and delivery of the Merger
Agreement and the consummation of transactions contemplated thereby shall not
cause (a) Georgia-Pacific or any affiliate or associate of Georgia-Pacific to
be deemed an Acquiring Person (as defined in the Rights Agreement), (b) the
occurrence of a Shares Acquisition Date (as defined in the Rights Agreement),
(c) the occurrence of a Distribution Date (as defined in the Rights
Agreement), or (d) activation of "flip over" rights under Section 13 of the
Rights Agreement. The amendment also provides that the Rights will expire
immediately prior to the Acceptance Date. A copy of the amendment to the
Rights Agreement is filed herewith as Exhibit (e)(6) and is incorporated
herein by reference.
15
<PAGE>
(b) VIRGINIA STOCK CORPORATION ACT
As a Virginia corporation, Fort James is subject to Section 13.1-725.1 etc.
of the Virginia Stock Corporation Act. In general, Section 13.1-725.1 would
prevent an "interested shareholder" (generally defined as a person
beneficially owning 10% or more of a corporation's voting stock or any
affiliate of that corporation) from engaging in an "affiliated transaction"
(as defined in (S) 13.1-725.1) with a Virginia corporation for three years
following the date such person became an interested shareholder unless: (a)
before such person became an interested shareholder, a majority of the
disinterested directors on the board of directors of the corporation approved
the transaction in which the interested shareholder became an interested
shareholder or (b) following the transaction in which such person became an
interested shareholder, the affiliated transaction is (i) approved by a
majority of the disinterested directors of the corporation and (ii) authorized
at a meeting of shareholders by the affirmative vote of the holders of at
least 66 2/3% of the outstanding voting shares of the corporation not owned by
the interested shareholder. In accordance with the provisions of the Section
13.1-725.1, the Board of Directors has approved the Merger Agreement, as
described in Item 4 above and, therefore, the restrictions of Section 13.1-
725.1 are inapplicable to the Merger.
(c) REGULATORY APPROVALS
Except as set forth in this Statement, we are not aware of any licenses or
regulatory permits that appear to be material to the business of Fort James
and its subsidiaries, taken as a whole, and that might be adversely affected
by the acquisition of the Shares in the Offer. In addition, except as set
forth in this Statement, we are not aware of any filings, approvals or other
actions by or with any governmental authority or administrative or regulatory
agency that would be required for the acquisition or ownership of the Shares.
Should any approval or other action be required, we and Georgia-Pacific expect
to seek that approval or action, except as described under "State Takeover
Laws." Should any approval or other action be required, we cannot be certain
that we and Georgia-Pacific would be able to obtain the approval or action
required without substantial conditions or that adverse consequences might not
result to Fort James' or its subsidiaries' businesses, or that parts of Fort
James', Georgia-Pacific's or any of their respective subsidiaries' businesses
might not have to be disposed of or held separate in order to obtain the
required approval or action. In that event, Georgia-Pacific and the Purchaser
may not be required to purchase any Shares in the Offer.
STATE TAKEOVER LAWS. A number of states have adopted takeover laws and
regulations that purport to be applicable to attempts to acquire securities of
corporations that are incorporated in those states or that have substantial
assets, shareholders, principal executive offices or principal places of
business in those states. To the extent that these state takeover statutes
purport to apply to the Offer or the Merger, Georgia-Pacific and the Purchaser
believe that those laws conflict with U.S. federal law and are an
unconstitutional burden on interstate commerce. In 1982, the Supreme Court of
the United States, in Edgar v. Mite Corp., invalidated on constitutional
grounds the Illinois Business Takeovers Statute, which, as a matter of state
securities law, made takeovers of corporations meeting certain requirements
more difficult. The reasoning in that decision is likely to apply to certain
other state takeover statutes. In 1987, however, in CTS Corp. v. Dynamics
Corp. Of America, the Supreme Court of the United States held that the State
of Indiana could as a matter of corporate law and, in particular, those
aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining shareholders, as long
as those laws were applicable only under certain conditions. Subsequently, in
TLX Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma
ruled that the Oklahoma statutes were unconstitutional insofar as they apply
to corporations incorporated outside Oklahoma, because they would subject
those corporations to inconsistent regulations. Similarly, in Tyson Foods,
Inc. v. McReynolds, a federal district court in Tennessee ruled that four
Tennessee takeover statutes were unconstitutional as applied to corporations
incorporated outside Tennessee. This decision was affirmed by the United
States Court of Appeals for the Sixth Circuit. In December 1988, a federal
district court in Florida held, in Grand Metropolitan Plc v. Butterworth, that
the provisions of the Florida Affiliated Transactions Act and Florida Control
Share Acquisition Act were unconstitutional as applied to corporations
incorporated outside of Florida.
16
<PAGE>
Section 13.1-725 through Section 13.1-727 of the VSCA prohibit a Virginia
corporation from engaging in an "affiliated transaction" (defined to include a
variety of transactions, including mergers, share exchanges, transactions not
in the ordinary course involving sales of assets, sales of voting shares,
dissolution of the corporation or any reclassifications of securities) with an
"interested shareholder" (defined generally as any person who is (1) the
beneficial owner of more than 10% of any class of outstanding voting shares of
a Virginia corporation or (2) an affiliate of the Virginia corporation) for a
period of three years following the date the interested shareholder became an
interested shareholder unless the transaction is approved by a majority of the
disinterested directors and two-thirds of the shares not owned by the
interested shareholder. After this three-year period, an affiliated
transaction between a Virginia corporation and the interested shareholder is
prohibited unless (1) it is approved by a majority of disinterested directors,
(2) it is approved by two-thirds of the shares not owned by the interested
shareholder or (3) the affiliated transaction complies with certain "fair
price" provisions. The foregoing restrictions do not apply when the
transaction pursuant to which the interested shareholder becomes an interested
shareholder has been approved in advance by a majority of the disinterested
directors.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations that are incorporated, or have
substantial assets, shareholders, or whose business operations otherwise have
substantial economic effects, in these states. Fort James, directly or through
subsidiaries, conducts business in a number of states throughout the United
States, some of which may have enacted takeover laws as described above.
Except for those provisions of the VSCA set forth above, Georgia-Pacific and
the Purchaser do not believe that any of these takeover statutes are
applicable to the Offer or the Merger and have not attempted to comply with
any of these state takeover statutes in connection with the Offer or the
Merger.
Fort James has taken all actions necessary to ensure that Section 13.1-725
through Section 13.1-727 of the VSCA will not apply in connection with the
Offer or the Merger. Georgia-Pacific and the Purchaser reserve the right to
challenge the validity or applicability of any state law allegedly applicable
to the Offer or the Merger, and nothing in this Statement nor any action that
Georgia-Pacific and the Purchaser take in connection with the Offer is
intended as a waiver of that right. In the event that it is asserted that one
or more takeover statutes apply to the Offer or the Merger, and it is not
determined by an appropriate court that the statutes in question do not apply
or are invalid as applied to the Offer or the Merger, as applicable, Georgia-
Pacific and the Purchaser may be required to file certain documents with, or
receive approvals from, the relevant state authorities, and Georgia-Pacific
and the Purchaser might be unable to accept for payment or purchase Shares
tendered in the Offer or be delayed in continuing or consummating the Offer.
In that case, Georgia-Pacific and the Purchaser may not be obligated to accept
for purchase, or pay for, any Shares tendered.
ANTITRUST. Under the HSR Act and the rules that have been promulgated under
the HSR Act by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The purchase of Shares pursuant to the Offer is subject to
these requirements.
Private parties (including individual states) may also bring legal actions
under the antitrust laws. We do not believe that the consummation of the Offer
will result in a violation of any applicable antitrust laws. However, there
can be no assurance that a challenge to the Offer on antitrust grounds will
not be made, or if a challenge on antitrust grounds is made, what the result
will be. For a description of certain conditions to the Offer, including
conditions with respect to litigation and certain governmental actions and for
certain termination rights in connection with antitrust suits, see "Conditions
to the Offer" in the Prospectus.
Pursuant to the requirements of the HSR Act, Georgia-Pacific filed a
Notification and Report Form with respect to the Offer with the DOJ and the
FTC. Georgia-Pacific received a request for additional information and
documentary material and are currently complying with the request. Once the
parties have complied with this request, the HSR Act provides for a 20
calendar day waiting period before the Purchaser can purchase any Shares.
17
<PAGE>
FOREIGN APPROVALS. Fort James owns assets and conducts business in a number
of foreign countries and jurisdictions. In connection with the acquisition of
the Shares in the Offer or the Merger, the laws of some of those foreign
countries and jurisdictions may require the filing of information with, or the
obtaining of the approval or consent of, governmental authorities in these
countries and jurisdictions. The governments in those countries and
jurisdictions might attempt to impose additional conditions on Fort James'
operations conducted in those countries and jurisdictions as a result of the
acquisition of the Shares in the Offer or the Merger. If foreign approvals or
consents are found to be required, Georgia-Pacific intends to make the
appropriate filings and applications. In the event a filing or application is
made for the requisite foreign approvals or consents, Georgia-Pacific cannot
be certain that these approvals or consents will be granted and, if these
approvals or consents are received, Georgia-Pacific cannot be certain as to
the date of those approvals or consents. In addition, Georgia-Pacific cannot
be certain that Georgia-Pacific will be able to cause Fort James or its
subsidiaries to satisfy or comply with those laws or that compliance or
noncompliance will not have adverse consequences for Fort James or any
subsidiary of Fort James after purchase of the Shares pursuant to the Offer or
the Merger.
(d) THE PURCHASER'S DESIGNATION OF PERSONS TO BE ELECTED TO THE BOARD OF
DIRECTORS
The Information Statement attached as Schedule II to this Statement is being
furnished in connection with the possible designation by Georgia-Pacific,
pursuant to the terms of the Merger Agreement, of certain persons to be
elected to the Board of Directors other than at a meeting of Fort James'
shareholders and such information is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
(a)(1) Prospectus, dated October 13, 2000 (incorporated by reference to the
prospectus included in the Registration Statement on Form S-4 of
Georgia-Pacific filed on October 13, 2000 (the "Georgia-Pacific S-
4")).
(a)(2) Form of Letter of Transmittal (incorporated by reference to Exhibit
99.1 to the Georgia-Pacific S-4).
(a)(3) Chairman's Letter to Shareholders of Fort James, dated October 13,
2000.*
(a)(4) Joint Press Release of Georgia-Pacific and Fort James, dated July 17,
2000 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed
by Fort James on July 17, 2000).
(e)(1) Agreement and Plan of Merger, dated as of July 16, 2000, among
Georgia-Pacific, the Purchaser and Fort James (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed by Fort James on July
17, 2000).
(e)(2) Opinion of Morgan Stanley & Co. Incorporated, dated July 16, 2000
(included as Schedule I hereto).*
(e)(3) The Information Statement of Fort James (included as Schedule II
hereto).*
(e)(4) Amendment, effective as of July 13, 2000, to James River Corporation
of Virginia 1987 Stock Option Plan (1993 Amended and Restatement).
(e)(5) Amendment, effective as of July 13, 2000, to Fort James Corporation
1996 Stock Incentive Plan (as Amended).
(e)(6) Employment Agreement between Fort James and William Schultz.
(e)(7) Form of Amendment to Employment Agreement between Fort James and
executive officers of Fort James (other than Messrs. Marsh, Neil and
Schultz).
(e)(8) Form of Amendment to Employment Agreement between Fort James and Miles
L. Marsh.
(e)(9) Amendment No. 1 to the Rights Agreement, dated as of July 16, 2000,
between Fort James and Wells Fargo Bank Minnesota, N.A. (successor to
Norwest Bank Minnesota, N.A.) (incorporated by reference to Exhibit
4.1 to the Form 8-K filed by Fort James on July 17, 2000).
</TABLE>
--------
* Included with the Statement mailed to shareholders.
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
FORT JAMES CORPORATION
/s/ Clifford A. Cutchins
By: _________________________________
Clifford A. Cutchins
Senior Vice President, General
Counsel and Corporate Secretary
Dated: October 13, 2000
19
<PAGE>
SCHEDULE I
[LETTERHEAD OF MORGAN STANLEY & CO. INCORPORATED]
July 16, 2000
Board of Directors
Fort James Corporation
1650 Lake Cook Road
Deerfield, Illinois 60015-4753
Members of the Board:
We understand that Fort James Corporation (the "Company"), Georgia-Pacific
Corporation (the "Buyer") and Fenres Acquisition Corp., a wholly owned
subsidiary of the Buyer ("Acquisition Sub"), propose to enter into an
Agreement and Plan of Merger, dated July 16, 2000 (the "Merger Agreement"),
which provides, among other things, for (i) the commencement by Acquisition
Sub of an exchange offer (the "Exchange Offer") to purchase all outstanding
shares of common stock, par value $.10 per share, including the associated
Company Rights as defined in the Merger Agreement, of the Company (the "Common
Stock") for $29.60 per share of Common Stock, net to the seller in cash, and
.2644 shares, subject to adjustment in certain circumstances as provided for
in the Merger Agreement, of common stock, par value $.80 per share, including
the associated Parent Rights as defined in the Merger Agreement, of the Buyer
(the "Buyer Common Stock") per share of Common Stock (collectively, the
"Consideration"); and (ii) the subsequent merger (the "Merger") of Acquisition
Sub with and into the Company. Pursuant to the Merger, the Company will become
a wholly owned subsidiary of the Buyer and each outstanding share of Common
Stock of the Company, other than shares held in treasury or held by the Buyer
or any affiliate of the Company or the Buyer, will be converted into the right
to receive the Consideration. The terms and conditions of the Exchange Offer
and the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration to be
received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and the Buyer;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of
the Company;
(iii) reviewed certain internal financial statements and other financial
and operating data concerning the Buyer prepared by the management of
the Buyer;
(iv) reviewed certain financial projections prepared by the management of
the Company;
(v) reviewed certain financial projections prepared by the management of
the Buyer;
(vi) discussed the past and current operations and financial condition and
the prospects of the Company, including information relating to
certain strategic, financial and operational benefits anticipated from
the Exchange Offer and the Merger, with senior executives of the
Company;
(vii) discussed the past and current operations and financial condition and
the prospects of the Buyer, including information relating to certain
strategic, financial and operational benefits anticipated from the
Exchange Offer and the Merger, with senior executives of the Buyer;
(viii) reviewed the pro forma impact of the Exchange Offer and the Merger
on the Buyer's earnings per share, cash flow, consolidated
capitalization and financial ratios;
<PAGE>
[LETTERHEAD OF MORGAN STANLEY & CO. INCORPORATED]
(ix) reviewed the reported prices and trading activity for the Common Stock
and the Buyer Common Stock;
(x) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(xi) compared the financial performance of the Buyer and the prices and
trading activity of the Buyer Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(xii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xiii) participated in discussions and negotiations among representatives
of the Company, the Buyer and their financial and legal advisors;
(xiv) reviewed the Merger Agreement, and certain related documents; and
(xv) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial projections, including
information relating to certain strategic, financial and operational benefits
anticipated from the Exchange Offer and the Merger, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company and
the Buyer. In addition, we have assumed that the Exchange Offer and the Merger
will be consummated in accordance with the terms set forth in the Merger
Agreement. We have assumed that, in connection with the receipt of all the
necessary regulatory approvals for the Exchange Offer and the Merger, no
restrictions will be imposed that would have a material adverse effect on the
contemplated benefits expected to be derived in the Exchange Offer and the
Merger. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on financial, economic, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the
Company or any of its assets, nor did we negotiate with any of the parties,
other than the Buyer, which expressed interest to us in the possible
acquisition of the Company or certain of its constituent businesses.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services.
In the past, Morgan Stanley & Co. Incorporated ("Morgan Stanley") and its
affiliates have provided financial advisory and financing services for the
Company and the Buyer and have received fees for the rendering of these
services. In connection with the Exchange Offer and the Merger, Morgan Stanley
may provide certain financing services for the Buyer. In addition, an officer
of the Company serves on the Board of Directors of the parent of Morgan
Stanley.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its
entirety in any filing made by the Company with the Securities and Exchange
Commission in connection with the Exchange Offer or the Merger. In addition,
this opinion does not in any manner address the prices at which the Buyer
Common Stock will trade at any time or after the consummation of the Exchange
Offer or the Merger, and we express no opinion or recommendation as to whether
holders of Common Stock should tender their shares in the Exchange Offer or as
to how holders of Common Stock should vote at any shareholders' meeting held
in connection with the Merger.
I-2
<PAGE>
[LETTERHEAD OF MORGAN STANLEY & CO. INCORPORATED]
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Consideration to be received by the holders of shares of
Common Stock pursuant to the Merger Agreement is fair from a financial point
of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ William H. Strong
By: _________________________________
William H. Strong
Vice Chairman and Managing
Director
I-3
<PAGE>
SCHEDULE II
FORT JAMES CORPORATION
1650 Lake Cook Road
Deerfield, Illinois 60015-4753
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER
BACKGROUND INFORMATION
This information statement (this "Information Statement") is being mailed on
or about October 13, 2000 as part of the Solicitation/Recommendation Statement
on Schedule 14D-9 (the "Schedule 14D-9") of Fort James Corporation ("Fort
James"). You are receiving this Information Statement in connection with the
possible election of persons designated by Georgia-Pacific Corporation
("Georgia-Pacific") to a majority of seats on the board of directors of Fort
James (the "Board of Directors" or the "Board"). There will be no vote or
other action by shareholders of Fort James in connection with this Information
Statement. Voting proxies regarding shares of the Common Stock (as defined
below) are not being solicited from any shareholder. You are urged to read
this Information Statement carefully. You are not, however, required to take
any action in connection with this Information Statement.
On July 16, 2000, Fort James entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Georgia-Pacific and Fenres Acquisition Corp., a
Virginia corporation and a wholly owned subsidiary of Georgia-Pacific (the
"Purchaser"), pursuant to which the Purchaser has commenced an offer to
exchange for each share of common stock, par value $0.10 per share, of Fort
James (the "Common Stock") and the associated preferred share purchase rights
(the Common Stock and any associated preferred share purchase rights are
referred to in this Information Statement as the "Shares"), for (a) $29.60,
net to the seller in cash, and (b) .2644 shares of Georgia-Pacific Group
common stock, par value $.80 per share (the "Exchange Ratio"), including the
preferred share purchase rights associated therewith (together, the "Georgia-
Pacific Common Stock"), subject to the limitation described below, upon the
terms and subject to the conditions set forth in the prospectus relating to
the exchange offer, dated October 13, 2000 (the "Prospectus"), and in the
related Letter of Transmittal (which, together with the Prospectus, as amended
or supplemented from time to time, constitute the "Offer"). Copies of the
Prospectus and the Letter of Transmittal have been mailed to shareholders of
Fort James and are filed as Exhibits (a)(1) and (a)(2) respectively, to the
Tender Offer Statement on Schedule TO (as amended from time to time, the
"Schedule TO"), filed by Georgia-Pacific and the Purchaser with the Securities
and Exchange Commission (the "SEC") on October 13, 2000.
The Exchange Ratio will be adjusted in the event that the value of the stock
component of the consideration would exceed $10.40. This would occur when the
Average Price (as defined below) exceeds $39.33, in which event the Exchange
Ratio will be equal to $10.40 divided by the Average Price. For purposes of
the Offer and the Statement, "Average Price" means the average (rounded to the
nearest 1/10,000) of the volume weighted averages (rounded to the nearest
1/10,000) of the trading prices of Georgia-Pacific Common Stock on the New
York Stock Exchange, as reported by Bloomberg Financial Markets, for the ten
consecutive trading days ending on the third trading day immediately preceding
the date on which the Purchaser accepts for payment all of the Shares validly
tendered and not withdrawn pursuant to the Offer.
The Merger Agreement provides that, subject to the satisfaction or waiver of
certain conditions, following completion of the Offer, and in accordance with
the Virginia Stock Corporation Act, the Purchaser will be merged with and into
Fort James (the "Merger"). Following consummation of the Merger, Fort James
will continue as the surviving corporation and will be a wholly owned
subsidiary of Georgia-Pacific. At the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than treasury
Shares and Shares that are owned by Georgia-Pacific, the Purchaser or any
subsidiary of Georgia-Pacific) will be converted into the right to receive the
same amount of cash and the same number of shares of Georgia-Pacific Common
Stock as is paid in the Offer.
<PAGE>
This Information Statement is being mailed to you in accordance with Section
14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-1
promulgated thereunder. The information set forth herein supplements certain
information set forth in the Schedule 14D-9. Information set forth herein
related to Georgia-Pacific, the Purchaser or the Georgia-Pacific Designees (as
defined below) has been provided by Georgia-Pacific. You are urged to read
this Information Statement carefully. You are not, however, required to take
any action in connection with the matters set forth herein.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
October 13, 2000. The Offer is currently scheduled to expire at 12:00
midnight, New York City time, on November 9, 2000; however, Georgia-Pacific
currently intends to extend the Offer from time to time as necessary until all
the conditions to the Offer have been satisfied or waived.
THE GEORGIA-PACIFIC DESIGNEES
The Merger Agreement provides that, upon the acceptance for payment of the
Shares by the Purchaser pursuant to the Offer, Georgia-Pacific will be
entitled to designate the number of directors on the Board of Directors (the
"Georgia-Pacific Designees") equal to the product of (a) the total number of
directors on the Board by (b) the ratio of (1) the percentage that the number
of Shares so purchased and paid for bears to (2) the total number of Shares
then outstanding. The Merger Agreement provides that Fort James will take all
action necessary to cause the Georgia-Pacific Designees to be elected or
appointed to the Board of Directors, including increasing the size of the
Board of Directors, and seeking and accepting resignations of incumbent
directors. At such time, Fort James will also use its best efforts to cause
the Georgia-Pacific Designees to constitute the same percentage of (a) each
committee of the Board of Directors and (b) each board of directors of each
subsidiary identified by Georgia-Pacific (and each committee thereof).
Notwithstanding the foregoing, the parties have agreed to use their
respective best efforts to ensure that at least two of the members of the
Board of Directors shall, at all times prior to the Effective Time, be
directors of Fort James who were directors on the date of the Merger Agreement
(the "Continuing Directors"). If the number of Continuing Directors is reduced
below two for any reason, the remaining Continuing Director will be entitled
to designate the person to fill such vacancy, who shall be deemed to be a
Continuing Director for purposes of the Merger Agreement. If no Continuing
Directors then remain, the other directors of Fort James then in office will
designate two persons to fill such vacancies who will not be officers or
employees of affiliates of Fort James, Georgia-Pacific or the Purchaser or any
of their respective subsidiaries, and such persons will be deemed to be
Continuing Directors for purposes of the Merger Agreement.
Georgia-Pacific has informed Fort James that it will choose the Georgia-
Pacific Designees from the directors and executive officers of Georgia-Pacific
listed in Schedule III to the Schedule 14D-9. Georgia-Pacific has informed
Fort James that each of the directors and executive officers of Georgia-
Pacific listed in Schedule III to the Schedule 14D-9 has consented to act as a
director of Fort James, if so designated. The information set forth on such
Schedule III is incorporated herein by reference. The name, address, principal
occupation or employment and five year employment history for each such person
is set forth in such Schedule III.
CERTAIN INFORMATION CONCERNING FORT JAMES
The Common Stock is the only class of equity securities of Fort James
outstanding which is entitled to vote at a meeting of the shareholders of Fort
James. Each share of Common Stock is entitled to one vote. As of the close of
business on September 29, 2000, there were 204,769,587 outstanding shares of
Common Stock, of which Georgia-Pacific and the Purchaser own no shares as of
the date hereof.
II-2
<PAGE>
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF FORT JAMES
TERMS OF DIRECTORS
Each elected director serves a one-year term, which runs until the next
Annual Meeting of Shareholders or until his or her successor has been elected.
DIRECTORS
<TABLE>
<CAPTION>
Business Experience and
Name Age Principal Occupation Directorships in Other Public Companies
---- --- -------------------- ----------------------------------------
<S> <C> <C> <C>
Barbara L. Bowles....... 53 Chairman and Chief Has held present position more than five
Executive Officer, years. Director of The Black & Decker
Kenwood Group, Inc. Corporation and Wisconsin Energy
(investment Corporation.
management firm)
William E. Bradford..... 65 Retired Chairman of Retired from Halliburton Company January
Halliburton Company 2000, where he had served as Chairman
(energy services and since 1998. Served Dresser Industries,
engineering and Inc. as Chairman of the Board from 1996
construction company) to 1998, as Chief Executive Officer from
1995 to 1998, and as President from 1992
to 1996. Director of Ultramar Diamond
Shamrock Corporation and Kerr-McGee
Corporation.
William T. Burgin....... 57 Partner, Bessemer Has held present position more than five
Venture Partners years.
(venture capital
partnership)
James L. Burke.......... 61 President and Chief Has held present position more than five
Executive Officer of years.
SP Newsprint Company
Worley H. Clark, Jr..... 68 President, W.H. Has held present position more than five
Clark Associates, years. Chairman Emeritus, Nalco Chemical
Ltd. (consulting Company. Retired from Nalco Chemical in
firm) 1994, where he served as Chairman and
Chief Executive Officer. Director of
Merrill Lynch & Co., Inc., USG
Corporation, Bethlehem Steel
Corporation, Ultramar Diamond Shamrock
Corporation and Millennium Chemicals,
Inc.
Gary P. Coughlan........ 56 Chief Financial Has held present position more than five
Officer and Senior years. Director of Arthur J. Gallagher &
Vice President, Co.
Finance, Abbott
Laboratories
(diversified health
care company)
William V. Daniel....... 72 Retired Managing Retired from First Union Securities,
Director, First Inc. in June 1999. Prior to that time,
Union Securities, served as Managing Director of First
Inc. (investment Union Securities, Inc. for more than
banking and five years.
financial services
company)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Business Experience and
Name Age Principal Occupation Directorships in Other Public Companies
---- --- -------------------- ----------------------------------------
<S> <C> <C> <C>
Ernst A. Haberli........ 52 President, North Has held present position since January
American Tissue 2000. Executive Vice President and Chief
Operations and Financial Officer of Fort James from
Technology of Fort 1997 through 1999, and Senior Vice
James President, Strategy from 1996 to 1997.
From 1990 to 1995 served as President of
Pet International. Director of American
Commercial Lines Holding LLC.
Miles L. Marsh.......... 53 Chairman and Chief Has held present position of Chief
Executive Officer of Executive Officer since 1995, position
Fort James of Chairman since 1996, and position of
President from 1995 to 1997, and from
1998 to present. From 1991 to 1995,
served as Chairman and Chief Executive
Officer of Pet, Inc. Director of GATX
Corporation, Whirlpool Corporation and
Morgan Stanley Dean Witter & Co.
Robert M. O'Neil........ 65 Director, The Thomas Has held present position more than five
Jefferson Center for years.
the Protection of
Free Expression
Anne Marie Whittemore... 54 Partner, Has held present position more than five
McGuireWoods LLP years. Director of Owens & Minor, Inc.,
(law firm)/1/ T. Rowe Price Associates, Inc. and
Albemarle Corporation.
</TABLE>
--------
/1 /McGuireWoods LLP serves as outside legal counsel to Fort James.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met on nine occasions during 1999. Each member of the
Board, except Ms. Bowles, attended at least 75 percent, in the aggregate, of
the meetings of the Board and committees on which he or she served. Ms. Bowles
was unable to attend a meeting of the Board and a committee meeting due to a
conflict with the meeting of another board of directors on which she serves.
The following table shows certain committees of the Board of Directors and the
members who currently serve on those committees.
COMMITTEES
DIRECTOR
<TABLE>
<CAPTION>
Audit Compensation Executive Finance Nominating
----- ------------ --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Barbara L. Bowles............... x x
William E. Bradford............. x
William T. Burgin............... x x
James L. Burke.................. x x
Worley H. Clark, Jr. ........... x x x*
Gary P. Coughlan................ x x x* x
William V. Daniel............... x* x x
Ernst A. Haberli................
Miles L. Marsh.................. x*
Robert M. O'Neil................ x x* x
Anne Marie Whittemore........... x x
</TABLE>
--------
x Committee Member
* Committee Chair
II-4
<PAGE>
AUDIT COMMITTEE. This committee consists of only non-employee directors
("Outside Directors"). The Audit Committee met on three occasions during 1999.
The Audit Committee reviews accounting and auditing matters with management,
members of Fort James' internal audit staff, and representatives of Fort
James' independent accountants. The Audit Committee reviews the scope of
internal and external audit activities and the results of such audits and is
responsible for making the annual recommendation to the Board of Directors for
the firm of independent accountants to be retained by Fort James.
Compensation Committee. This committee consists of only Outside Directors.
The Compensation Committee met on five occasions during 1999 and is
responsible for recommending the salaries and compensation programs for
executive officers to the Board of Directors. This committee is also
responsible for administering Fort James' Management Incentive Plan, its 1996
Stock Incentive Plan, and other benefit programs. None of the members of the
Compensation Committee are entitled to participate in any of Fort James'
employee benefit plans.
Executive Committee. This committee can exercise most of the powers and
authorities of the full Board of Directors in the management of Fort James
between regularly scheduled meetings.
Finance Committee. This committee consists of only Outside Directors. The
Finance Committee meets periodically to review the financial strategy for Fort
James, including balance sheet structure and overall capitalization and
related matters.
Nominating Committee. This committee met on one occasion during 1999. The
Nominating Committee recommends candidates for election to the Board of
Directors. The Board of Directors also considers candidates recommended by
shareholders entitled to vote for the election of directors.
Director Compensation
Fees. Outside Directors receive an annual retainer of $40,000 for serving as
a director, plus reimbursement of expenses incurred in connection with
attending meetings. In addition, each director receives a fee of $2,000 for
each Board meeting attended and $1,000 for each committee meeting attended.
Directors who are employees of Fort James do not receive any additional
compensation for service as directors.
Director Stock Ownership Plan. Under this plan, 50 percent of the annual
retainer is paid to the Outside Directors in Common Stock ("Automatic Award").
Outside Directors may elect to receive the remaining 50 percent of the
retainer in Common Stock ("Elective Award"). The Automatic Award is paid as
the greater of (a) 250 shares of Common Stock or (b) the number of shares of
Common Stock that equals 50 percent of the retainer based on their fair market
value on the award date. Directors receiving the Elective Award receive the
number of shares of Common Stock that equal the remaining 50 percent of the
retainer based on their fair market value on the award date. These shares of
Common Stock generally are restricted until the end of the director's one-year
term. If a director elects to defer the receipt of Common Stock, cash
dividends and other distributions are credited to the director's deferred
stock account. Dr. Burke, Mr. Bradford and Mr. Coughlan each elected to
receive 100 percent of their retainer fee in Common Stock.
Stock Option Plan for Outside Directors. Under this plan, each Outside
Director is granted a one-time option to purchase 5,000 shares of Common
Stock. Prior to 2000, Outside Directors were granted a one-time option of
3,000 shares. The plan also grants an annual option to purchase 2,500 shares
of Common Stock to each director who has been an Outside Director for at least
nine months. All options are granted at exercise prices equal to the fair
market value of the Common Stock on the date of grant and are exercisable
immediately.
Director Retirement at Age 70
The By-Laws of Fort James provide that, among other qualifications to serve
as a director, a person must not have attained the age of 70, except that
directors who are 63 or over and serving on February 20, 1997 shall not be
eligible to be elected after age of 72.
II-5
<PAGE>
SECURITY OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
EXECUTIVE OFFICERS OF FORT JAMES
PRINCIPAL SHAREHOLDERS
The table below shows the shareholders that beneficially own more than five
percent of the outstanding Common Stock as of the most recent practicable
date.
<TABLE>
<CAPTION>
Number of Shares/1/
Name and Address of Beneficial Owner Beneficially Owned Percent of Class
------------------------------------ ------------------- ----------------
<S> <C> <C>
Barrow, Hanley, Mewhinney & Strauss,
Inc................................... 19,845,850/2/ 9.69%
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, Texas 75204-2429
Sanford C. Bernstein and Co. Inc. ..... 19,138,958/3/ 9.35%
1 North Lexington Avenue
White Plains, New York 10601
The Capital Research and Management
Company............................... 18,503,299/4/ 9.04%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
--------
/1 /Determined by reference to Forms 13F filed as of June 30, 2000.
/2 /Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow, Hanley") had sole
dispositive power for 19,845,850 shares, sole voting power for 4,975,250
shares and no voting power for 14,870,600 shares as of June 30, 2000. The
beneficial ownership reported by Barrow, Hanley includes 13,072,100 shares
for which the Vanguard Windsor Funds--Vanguard Windsor II Fund ("Windsor
II") also reported beneficial ownership as of June 30, 2000. Windsor II's
address is P.O. Box 2600, Valley Forge, Pennsylvania 19482.
/3 /Sanford C. Bernstein and Co. Inc. had sole dispositive power for
19,138,958 shares, sole voting power for 9,865,758 shares, shared voting
power for 2,132,019 shares and no voting power for 7,141,181 shares as of
June 30, 2000.
/4 /The Capital Research and Management Company ("Capital Research") is an
investment adviser that manages The American Funds Group of mutual funds.
The Capital Group Companies, Inc., of which Capital Research is a part,
disclaims beneficial ownership with respect to all 18,503,299 shares.
II-6
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below shows the number of shares of Common Stock beneficially
owned by each director, the executive officers named in the Summary
Compensation Table, and all directors and executive officers as a group as of
September 29, 2000.
<TABLE>
<CAPTION>
Included in Beneficially Owned
Shares
Number of Shares Percent of -------------------------------- 401(k)
Name Beneficially Owned/1/ Class/2/ Options/3/ DSOP/4/ Restricted/5/ Plan/6/
---- --------------------- ---------- ---------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Directors:
Barbara L. Bowles..... 10,414 * 9,000 -- -- --
William E. Bradford... 7,500 * 7,500 -- -- --
William T. Burgin..... 66,683/7/ * 13,080 826 -- --
James L. Burke........ 13,744 * 8,000 1,653 -- --
Worley H. Clark, Jr... 16,295 * 13,080 826 -- --
Gary P. Coughlan...... 14,607 * 10,000 -- -- --
William V. Daniel..... 13,934/8/ * 13,080 -- -- --
Ernst A. Haberli...... 257,310 * 156,500 -- 35,509 1,715
Miles L. Marsh........ 1,069,016 * 712,500 -- 198,467 2,469
Robert M. O'Neil...... 14,765 * 12,064 826 -- --
Anne Marie
Whittemore........... 12,564 * 12,064 -- -- --
Other Named Officers:
Clifford A. Cutchins,
IV................... 291,016/9/ * 194,587 -- 33,560 5,426
John F. Lundgren...... 273,998 * 174,500 -- 37,509 8,048
Joe R. Neil........... 194,803 * 116,028 -- 33,100 6,400
All directors and
executive officers as a
group (21 persons)..... 3,196,255/10/ 1.56% 2,023,670 4,131 486,834 46,860
</TABLE>
--------
* Less than 1% of class.
/1/Each person has sole voting and investment power over all of the shares of
Common Stock listed, except as set forth below. Excludes awards of
restricted stock units made on May 15, 2000, which represent hypothetical
shares of stock, have no voting or investment power, and will be paid only
in cash.
/2/Any Common Stock that can be acquired through the exercise of stock
options within 60 days of September 29, 2000 is deemed outstanding for the
purpose of computing the percentage of outstanding Common Stock owned by
the shareholder listed in the table. However, such Common Stock is not
deemed outstanding for the purpose of computing the percentage of Common
Stock owned by any other shareholder.
/3/Consists of Common Stock that may be acquired within 60 days of September
29, 2000 through the exercise of stock options.
/4/Consists of restricted stock issued under the Director Stock Ownership
Plan; shares deferred under this plan do not have voting rights and are
therefore excluded.
/5/Consists of performance and restricted shares issued under the 1996 Stock
Incentive Plan for which the officer has voting rights.
/6/The Fort James 401(k) Plan (formerly known as the "Stock Plus Plan" (the
"401(k) Plan") reports stock information on a unitized basis rather than a
per share basis. For purposes of calculating the number of shares
beneficially owned, an estimate of the number of shares held in the 401(k)
Plan has been calculated based on the closing stock price of $30.56 as of
September 29, 2000.
/7/Includes 3,000 shares held by his former spouse as custodian for their
children as to which he disclaims any beneficial interest.
/8/Includes 100 shares held by his spouse for which voting and investment
power is shared.
/9/Includes 450 shares held by his child for which voting and investment
power is shared.
/10/Includes 4,748 shares held by spouses and children for which voting and
investment power is shared.
II-7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, there were no Executive Compensation Committee interlocks or
other comparable relationships requiring disclosure under applicable rules of
the SEC.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934 requires Fort James' directors,
certain officers and shareholders who own more than ten percent of Fort James'
equity securities to file initial reports of ownership on Form 3 and changes
in ownership on Forms 4 or 5 with the SEC. SEC regulations require such
shareholders to furnish Fort James with copies of all Section 16(a) forms they
file.
Based on its review of such forms and on written representations from such
officers and directors, Fort James believes that during the fiscal year ended
December 26, 1999, all applicable Section 16(a) filing requirements were met.
II-8
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The table below shows the compensation of the CEO and the four other most
highly compensated executive officers as of December 26, 1999, for the last
three years.
SUMMARY COMPENSATION TABLE/1/
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
----------------------------------- ----------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying All Other
Position Year Salary/1/ Bonus Compensation/2/ Award(s)/3/ Options Compensation/4/
------------------ ---- --------- --------- --------------- ----------- ---------- ---------------
($) ($) ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Miles L. Marsh ......... 1999 990,000 698,465 128,496 2,913,000 225,000 125,009
Chairman and 1998 1,014,615 1,329,606 198,473 -- 250,000 101,710
Chief Executive Officer 1997 923,846 1,673,050 105,137 5,520,043 -- 33,258
Ernst A. Haberli........ 1999 462,000 227,217 55,289 -- 53,000 68,323
President, North
American 1998 432,462 516,476 -- -- 80,000 44,169
Tissue Operations and
Technology 1997 346,539 501,552 112,001 2,289,276 -- 12,747
John F. Lundgren........ 1999 426,961 220,790 975,605 -- 49,000 43,937
President, European 1998 425,000 441,853 372,767 -- 80,000 35,235
Consumer Products 1997 362,077 537,192 126,566 2,289,276 -- 12,975
Joe R. Neil............. 1999 304,923 323,505 -- -- 29,500 83,699
President, 1998 298,385 137,029 184,006 -- 60,000 64,730
Communications Papers 1997 278,808 246,950 -- 1,638,360 -- 15,151
Clifford A. Cutchins,
IV..................... 1999 419,308 192,482 80,805 -- 40,000 53,761
Senior Vice President, 1998 402,923 406,624 138,358 -- 70,000 43,251
General Counsel and
Corporate Secretary 1997 329,808 470,270 96,084 2,001,456 -- 13,969
</TABLE>
--------
/1/Other than the long-term compensation awards which are reported on a
fiscal year basis, the compensation shown above reflects a calendar year
basis consistent with Fort James' pay cycle. Salary earned for 1998
included an additional pay cycle (for all employees).
/2/The amount disclosed for Mr. Marsh for 1999 includes a payment of $80,000
related to Fort James' buyout of future benefits under a car lease program.
This program had been available to certain executives, and is being
discontinued. The amounts for Mr. Marsh disclosed for 1998 and 1997 include
reimbursement of relocation costs of $136,862, and $78,623, respectively.
The amount disclosed for Mr. Haberli for 1999 includes $25,621 for a car
allowance. The amount disclosed for Mr. Haberli for 1997 includes
reimbursement for membership fees of $62,556 and commuting costs of
$34,357. The amounts disclosed for Mr. Lundgren for 1999, 1998 and 1997
include international assignment equalization payments of $940,564,
$278,556, and $111,535, respectively. The amount disclosed for Mr. Neil for
1998 includes $174,025 in relocation expenses. The amounts disclosed for
Mr. Cutchins for 1999 and 1998 include reimbursement for membership fees of
$49,295 and $91,117, respectively, and the amount disclosed for 1997
includes relocation expenses of $76,443.
/3/The number and value ($27.13 per share) as of December 26, 1999 of the
restricted and performance shares of Common Stock for the named executive
officers were: Miles L. Marsh, 251,955 shares, $6,835,539; Ernst A.
Haberli, 55,503 shares, $1,505,796; John F. Lundgren, 58,253 shares,
$1,580,404; Joe R. Neil, 50,291 shares, $1,364,395; and Clifford A.
Cutchins, IV, 51,984 shares, $1,410,326. In February 1999, Mr. Marsh
received a grant of 100,000 shares of restricted stock under Fort James'
1996 Stock Incentive Plan. In August 1997, Messrs. Marsh, Haberli,
Lundgren, Neil and Cutchins received a grant of 64,112, 25,850, 25,850,
18,500 and 22,600 shares of restricted stock, respectively, and a grant of
64,112, 25,850, 25,850, 18,500 and 22,600 performance shares, respectively,
under Fort James' 1996 Stock Incentive Plan. Except
II-9
<PAGE>
for Mr. Marsh, performance shares granted to the named executive officers
vest in three to eight years. Performance shares granted to Mr. Marsh vest,
and vesting of performance shares granted to others may be accelerated, if
Fort James' financial performance is in one of the top three quartiles of
Fort James' peer group. Annual vesting percentages, which vary by quartile,
range from zero to 40 percent. Fort James performance, for vesting
purposes, is defined as Total Shareholder Return ("TSR") quartile ranking
against the TSR ranking of each peer group company. Dividend equivalents
accrue on the performance shares and are paid as the shares vest. Shares of
restricted stock vest in equal amounts over the first three years after the
grant date. Dividends on shares of restricted stock are paid whether the
shares are vested or unvested. Restricted stock and performance share
vesting may be accelerated in certain circumstances, including a change in
control of Fort James or the participant's death or disability.
/4/For 1999, these amounts include Fort James contributions to the 401(k)
Plan, the Supplemental Deferral Plan, and the Split Dollar Life Insurance
Plan. Split Dollar Life Insurance amounts represent the actuarial value of
the benefit to the executive of the current year's insurance premium paid
by Fort James in excess of that required to fund the death benefit under
the policy. Fort James contributions allocated to the named executive
officers for 1999 under the 401(k) Plan, the Supplemental Deferral Plan,
and the Split Dollar Life Insurance Plan were: Miles L. Marsh, $6,000,
$53,400 and $65,609; Ernst A. Haberli, $4,001, $23,719 and $40,603; John F.
Lundgren, $6,000, $18,441 and $19,496; Joe R. Neil, $6,000, $12,295 and
$65,404; and Clifford A. Cutchins, IV, $6,000, $19,159 and $28,602,
respectively.
STOCK OPTIONS
The table below describes the stock options granted to each of the executive
officers named in the Summary Compensation Table during Fort James' fiscal
year ended December 26, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Total Stock
Securities Options Price Appreciation
Underlying Granted to Exercise For Option Term/2/
Options Employees in Price Expiration --------------------
Name Granted/1/ Fiscal Year Per Share Date 5% 10%
---- ---------- ------------ --------- ---------- --------- ----------
(#) (%) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Miles L. Marsh.......... 225,000 9.2 39.25 1/6/09 5,553,926 14,074,738
Ernst A. Haberli........ 53,000 2.2 39.25 1/6/09 1,308,258 3,315,383
John F. Lundgren........ 49,000 2.0 39.25 1/6/09 1,209,522 3,065,165
Joe R. Neil............. 29,500 1.2 39.25 1/6/09 728,181 1,845,355
Clifford A. Cutchins,
IV..................... 40,000 1.6 39.25 1/6/09 987,365 2,502,176
</TABLE>
--------
/1/The options were granted under the 1996 Stock Incentive Plan on January 6,
1999 and become exercisable in two equal amounts on the first and second
anniversary date of the grant date. The exercise price is equal to the fair
market value per share of the Common Stock on the grant date. Vesting may
be accelerated in certain circumstances, including a change in control of
Fort James or the participant's retirement, disability or death.
/2/The amounts disclosed are the result of calculations at five and ten
percent assumed rates of appreciation permitted by the SEC; therefore,
these amounts are not intended to forecast potential future appreciation of
Fort James' Common Stock price. The amounts disclosed are based on assumed
rates of appreciation of Fort James' Common Stock price over the option
term. A zero percent gain in stock price appreciation from the date of
grant will result in zero dollars for the optionee.
II-10
<PAGE>
TOTAL OPTION EXERCISES IN 1999 AND YEAR-END VALUES
The table below describes the options exercised by the executive officers
named in the Summary Compensation Table during fiscal 1999, and the year-end
value of those executives' unexercised stock options.
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised
Value of Unexercised In-the-Money
Options as of 12/26/99 Options as of 12/26/99/1/
Shares Acquired Value ------------------------- ----------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable/2/
---- --------------- -------- ----------- ------------- ----------- ----------------
(#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Miles L. Marsh.......... 0 0 475,000 350,000 69,000 N/A
Ernst A. Haberli........ 0 0 90,000 93,000 76,750 N/A
John F. Lundgren........ 1,524 13,289 113,566 89,000 24,754 N/A
Joe R. Neil............. 0 0 71,278 59,500 83,565 N/A
Clifford A. Cutchins,
IV..................... 0 0 139,587 75,000 392,361 N/A
</TABLE>
--------
/1/The value of unexercised in-the-money options as of December 26, 1999 is
equal to the fair market value of Common Stock on that date ($27.13) minus
the exercise price, times the number of shares subject to the options.
/2/As of December 26, 1999, the unexercisable options were not in-the-money,
meaning that the exercise price of the option exceeds the fair market value
of the Common Stock.
PENSION BENEFITS
RETIREMENT PLAN. During 1999, Fort James provided a defined benefit pension
plan (the "Retirement Plan") to most of its domestic salaried employees,
including executive officers.
Pensionable earnings include base salary, overtime compensation, bonuses and
commissions. Currently, pensionable earnings over $160,000 per year are not
taken into account for purposes of calculating Retirement Plan benefits. The
maximum annual benefit, which may be paid to any retiree from the Retirement
Plan, attributable to employer contributions, is $130,000 per year.
The Retirement Plan in effect during 1999 provided benefits equal to the
product of (a) the participant's years of service while participating in the
Plan (up to 35 years) and (b) the sum of (i) 1.05 percent of the participant's
"Average Pay" (the average of a participant's highest five consecutive years
of pensionable earnings) plus (ii) .65 percent of a participant's Average Pay
in excess of covered compensation (the average of the taxable Social Security
wage bases during a participant's work lifetime, up to 35 years). A
participant will be vested in the portion of benefits attributable to Fort
James contributions (a) after five years of service or (b) if the participant
had made contributions to the Retirement Plan which remained in the Retirement
Plan until retirement.
An alternative pension benefit formula may be used to calculate the pension
benefit for service through December 31, 1988, for employees who participated
in the Retirement Plan prior to January 1, 1989. However, if the above formula
provides a greater benefit at retirement for such service, that formula will
apply.
SUPPLEMENTAL BENEFIT PLANS. Fort James also maintains the Supplemental
Benefit Plan that provides eligible individuals, including executive officers,
with the difference between the benefits they actually accrue under the
Retirement Plan and the benefits they would have accrued under such Retirement
Plan but for the maximum benefit and compensation limitations imposed by law.
The Supplemental Benefit Plan also provides an additional benefit for certain
Fort James executives representing the benefit for the officer's service with
a predecessor company, reduced by the total benefit payable to the officer
from the Retirement Plan. Supplemental Benefit Plan distributions in either
annuity payments or as a lump sum are determined at Fort James' discretion.
Mr. Marsh participates in a separate supplemental benefit plan based on a
benefit formula of 50 percent of total compensation upon reaching age 55,
offset by Social Security and qualified pension plan benefits assuming the
earliest retirement age, which is currently estimated to be approximately
$1,000,000 at his seventh year of service. This benefit will be reduced for
service less than seven years.
II-11
<PAGE>
The table below shows the approximate annual pension benefit which would be
provided to salaried employees upon retirement at age 65, under the benefit
formula effective January 1, 1989 through December 31, 1998, assuming that a
single life annuity has been elected (except for Mr. Marsh). The table amounts
are not subject to reduction for Social Security or other offset amounts. The
table amounts include benefits under the Supplemental Benefit Plan, some of
which will be provided by annuities purchased in 1995.
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------------
Final Average Pay 15 20 25 30 35
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 48,000 $ 64,000 $ 80,000 $ 96,000 $112,000
400,000 99,000 132,000 165,000 198,000 231,000
600,000 150,000 200,000 250,000 300,000 350,000
800,000 201,000 268,000 335,000 402,000 469,000
1,000,000 252,000 336,000 420,000 504,000 588,000
1,200,000 303,000 404,000 505,000 606,000 707,000
1,400,000 354,000 472,000 590,000 708,000 826,000
</TABLE>
The pensionable earnings for each of the named executive officers are not
materially different from the amounts disclosed as salary and bonus under
annual compensation in the Summary Compensation Table. The estimated years of
benefit service, as of normal retirement at age 65, for the named executive
officers who participate in the pension plan are: Miles L. Marsh, 17 years;
Ernst A. Haberli, 18 years; John F. Lundgren, 34 years; Joe R. Neil, 18 years;
and Clifford A. Cutchins, IV, 23 years.
EMPLOYMENT AGREEMENTS
All individuals named in the Summary Compensation Table other than Mr. Neil
have employment agreements with Fort James that contain change of control
provisions. Mr. Neil has an employment agreement that provides for termination
payments that are substantially similar to the change of control severance
payments that the other named executive officers are entitled to receive
pursuant to their agreements. In connection with entering into the Merger
Agreement, Fort James and each of Messrs. Marsh, Haberli, Lundgren and
Cutchins entered into amendments to their respective employment agreements.
This section of this Information Statement describes the employment agreements
as they existed prior to the amendments made in connection with the entering
into of the Merger Agreement. For a description of the employment agreements
as amended, as well as a description of the other interests of the named
executive officers in the Merger that are different from those of shareholders
of Fort James generally that are not described in this section of this
Information Statement, see Item 3(b) of the Schedule 14D-9.
The executive officers named in the Summary Compensation Table have
employment agreements. The employment agreements were revised as of January 1,
2000, with the exception of Mr. Neil's employment agreement. Under the
agreements, the executive receives a base salary and an opportunity for a
bonus. The base salary, as of December 26, 1999, is shown on the Summary
Compensation Table. The named executives also participate along with peer
officers in Fort James' incentive, savings, retirement and other employee
benefits programs.
The revised employment agreements are effective for an initial three-year
period that began on January 1, 2000. Beginning January 1, 2001 and each year
thereafter, the revised agreements will be extended automatically for an
additional year to create a new three-year period unless either the executive
or Fort James gives six-months' notice that the agreement is not to be
renewed. Mr. Neil's agreement became effective on August 13, 1997 and will be
extended by its terms for an additional three years on August 13, 2000.
In the event of a "change of control," the revised agreements are extended
for a fixed three-year period with salary, bonus and other terms and
conditions no less favorable than those in effect before the change of
control. Additionally, the executives will be vested in all shares of
restricted stock, stock options and any other stock-based awards. The revised
agreements further provide that the executives will be made whole on an after-
tax basis with respect to certain excise taxes, which may be imposed after a
change of control.
II-12
<PAGE>
If an executive elects to retire at or after age 55 but prior to normal
retirement age with twelve-months' notice to Fort James, the executive will
receive additional retirement benefits. The benefits are: (a) three years of
additional age (but not beyond a deemed age of 65) and three years of
additional service credit for determining retirement benefits; (b) use of the
final salary and the highest annual bonus paid in the preceding five years to
calculate retirement benefits; (c) eligibility for retiree medical plan
coverage; and (d) a lump sum cash payment of $50,000 (the "Enhanced Early
Retirement Benefit"). This provision does not apply to Mr. Marsh (who has a
separate supplemental retirement plan) or Mr. Neil. Mr. Marsh's agreement
provides for: (a) eligibility for retiree medical plan coverage and (b) a
lump-sum cash payment of $50,000. Mr. Neil's agreement does not provide
additional retirement benefits in these circumstances.
If Fort James terminates an executive's employment other than for cause or
disability, or if the executive terminates his employment for good reason, the
executive receives a lump-sum cash payment. The payment equals the sum of (a)
any accrued unpaid salary plus a prorated annual bonus based on the highest
bonus in the last five (three for Mr. Neil) years (the "Annual Bonus"), (b)
three times the executive's salary and Annual Bonus (the "Termination
Payment"), and (c) if the Executive is not age 55, a supplemental retirement
payment based on additional amounts he would have accrued had he remained
employed for three additional years ("Retirement Payment"). If the executive
(other than Mr. Marsh or Mr. Neil) is age 55 or older, he also receives the
Enhanced Early Retirement Benefit. In addition, the executive will be
automatically vested in all shares of restricted stock, stock options and any
other stock-based awards. The executive and his family also will receive
continued coverage under certain Fort James welfare benefit plans for three
years. If the termination is after 2002 and before a change of control (or in
the case of Mr. Neil, if Fort James fails to renew his employment agreement),
the Termination Payment is two times salary and Annual Bonus, the Retirement
Payment is based on two additional years of employment and the welfare
benefits continue for only two years.
If Fort James terminates the executive for cause or if the executive
terminates without good reason, the executive receives only salary and
benefits earned to the date of termination. Upon termination due to disability
or death, the executive (or his estate) would be entitled to any salary and
benefits earned to the date of termination, and all shares of restricted
stock, stock options and any other stock-based awards would vest at that time.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee")
oversees the design and implementation of the Fort James' executive
compensation programs. The Committee's philosophy is that compensation should
be linked to performance, should be aligned with comparable peer groups, and
should ultimately serve the interests of the shareholders. In overseeing these
programs, the Committee ensures that key elements of compensation are linked
with objective performance measures at the corporate, business unit, and, in
the case of the Chief Executive Office (the "CEO"), at the individual level.
PRINCIPLES
. Executives will be rewarded for the achievement of financial and
individual results measured against clearly defined goals and
objectives.
. As executives assume increased responsibilities, their total
compensation packages will be subject to higher risk and, consequently,
greater leverage.
. The components of the executive compensation package should encourage
the executives to increase shareholder value.
. The various components of the executive compensation package must
attract, retain and motivate key executives, and aid in maintaining an
entrepreneurial spirit among members of the management team.
II-13
<PAGE>
STRATEGIES
. Generally, total compensation is aligned at a 75th percentile
compensation target for positions of similar scope at other consumer
products, and paper and forest products companies, assuming Fort James
meets the defined performance objectives.
. Annual incentives are used to align variable cash compensation with
short-term business objectives. Variable cash awards will increase as
business and individual results are above plan, and will decrease when
business and individual results fall below plan.
. Equity instruments (stock options, performance shares, and restricted
stock) are used to align a significant portion of the executives' total
compensation with Fort James' long-term goal/objective of increasing
shareholder value.
The executive compensation programs consist of specific elements which, in
the aggregate, are aligned with Fort James' short- and long-term business
strategies. For 1999, the executive compensation programs consisted of base
compensation, short-term cash incentives and stock options. Restricted stock
was granted in 1999 on a selective basis.
Section 162(m) of the Internal Revenue Code imposes a $1,000,000 limit on
the amount of compensation that is deductible by Fort James with respect to
the CEO and each of the executive officers named in the Summary Compensation
Table, unless specified plan design and administrative parameters are met.
Currently, Fort James' 1996 Stock Incentive Plan complies with Section 162(m).
The Compensation Committee continues to review design alternatives for the
Management Incentive Plan and the consequences of these alternatives.
To determine Fort James' comparative position on each of the specified
compensation elements, the Committee uses surveys and reports prepared by
independent compensation consultants. Many of the companies participating in
these surveys are included in the S&P 500 Stock Index. Several of these
companies are also included in Fort James' peer group described under the
section entitled "Performance Graph."
BASE COMPENSATION. Currently, the Committee evaluates executive officers'
base salaries by reviewing competitive market practices and by subjective
assessment of Fort James and individual performance. Base compensation is
reviewed annually and is adjusted periodically to be consistent with Fort
James' compensation strategy to maintain competitive market positioning.
SHORT-TERM CASH INCENTIVES. The Management Incentive Plan is the short-term
cash incentive component of the executive compensation program. This plan is
designed to provide an added incentive to participants to align each
executive's efforts with Fort James' business objectives. Eligibility is
determined by salary grade and compensation survey data. A target award is
assigned to each executive salary grade and consists of an individual
performance factor and a financial performance factor (generally weighted 50
percent each). In 1999, target awards ranged from 10 to 100 percent of base
compensation depending on a participant's salary grade. Participants may earn
awards of up to 100 percent of target if plan is achieved and up to 200
percent of target if maximum performance is achieved.
Financial performance goals for senior executives with corporate-wide
responsibilities generally is projected on corporate earnings-per-share
growth. Financial performance for executive officers with business unit
responsibility generally is based on a matrix that includes earnings-per-share
growth, income from operations, sales growth, and cost savings. In 1999, the
predetermined corporate growth in earnings-per-share goal was not achieved.
Business unit financial performance varied among units. Awards to corporate
and business unit executive officers reflected these considerations.
STOCK OPTIONS. Stock options granted under the 1996 Stock Incentive Plan are
designed to encourage Fort James' executives to enhance the value of Fort
James, as reflected in the price of the Common Stock and the shareholders'
return. Key employees, including executive officers, are eligible to receive
stock options. Stock options generally have been granted on an annual basis,
for a term of ten years, and generally vest in equal installments over a
period of two years.
II-14
<PAGE>
The size of an individual's grant is determined by each individual's
performance and salary grade, as well as by compensation survey data. Stock
options are granted on the basis of the Committee's assessment of merit.
PERFORMANCE SHARES AND RESTRICTED STOCK. The Committee, in its discretion,
may under the 1996 Stock Incentive Plan award restricted stock, performance
shares and incentive stock, in addition to stock options. Key employees,
including the executive officers, are eligible to receive such awards.
Performance shares and restricted stock are not granted on a frequent or
regular basis; and in 1999, none of the executive officers received a
performance share grant. As discussed in more detail below, Mr. Marsh received
a restricted stock grant.
MR. MARSH'S COMPENSATION
BASE COMPENSATION. The Committee determined that it was appropriate to
increase Mr. Marsh's base salary to $1,050,000 effective January 3, 2000, from
its April 1998 level of $990,000. The Committee, having reviewed comparative
salary information from published surveys representing consumer products and
paper and forest products industries, believes Mr. Marsh's salary is
comparable to other salaries of positions with similar scope and
responsibility found in the consumer products and paper and forest products
industries. Additional information about the terms and conditions of Mr.
Marsh's employment and compensation are further described under the subsection
entitled "Employment Agreements."
SHORT-TERM CASH INCENTIVES. Mr. Marsh's short-term compensation in 1999 was
based 50 percent on individual performance and 50 percent on growth in
corporate earnings per share. Mr. Marsh received an award of $698,465 under
the Management Incentive Plan, based on Fort James' having failed to achieve
its target earnings-per-share goal and the Committee's assessment of Mr.
Marsh's individual performance in 1999.
STOCK OPTIONS. In 1999, the Committee granted Mr. Marsh an option to
purchase 225,000 shares of Common Stock. Stock options were granted to Mr.
Marsh based on the same criteria as the Committee used in granting stock
options to other executive officers of Fort James.
RESTRICTED STOCK. Based on a competitive analysis of Mr. Marsh's total
compensation as compared to Chief Executive Officers of other consumer
products and paper and forest products industries, the Committee determined
that, in order to bring Mr. Marsh's total compensation in line with
competitive market practice, it was appropriate to award Mr. Marsh 100,000
restricted shares. The restricted shares vest when Mr. Marsh reaches age 55.
SUMMARY. As shown in the Executive Summary Compensation Table on page 12,
most bonuses for 1999 were significantly lower than those from 1998. This
reduction reflects one of the Compensation Committee's principles--"Executives
should be rewarded for the achievement of financial and individual results
measured against clearly defined goals and objectives." Since the projected
growth in corporate earnings in 1999 was not achieved, the Committee,
consistent with this principle, awarded only a portion of the bonuses that
could have been earned if the goal had been achieved.
Compensation Committee of the Board of Directors:
Robert M. O'Neil, Chairman
Barbara L. Bowles
William T. Burgin
Worley H. Clark, Jr.
William V. Daniel
Richard L. Sharp
II-15
<PAGE>
PERFORMANCE GRAPH
The graph below compares Fort James' five-year cumulative shareholder return
on its Common Stock with the Standard & Poor's ("S&P") 500 Stock Index and an
index of peer companies selected by Fort James. Fort James has selected a peer
group comprised of the following: American Greetings Inc., Boise Cascade
Corporation, Champion International Corporation, The Clorox Company, Colgate-
Palmolive Company, Georgia-Pacific Corporation, H.J. Heinz Company,
International Paper Corporation, Kimberly-Clark Corporation, Mead Corporation,
The Procter & Gamble Company, Sara Lee Corporation, Smurfit-Stone Container
Corporation and Westvaco Corporation. The graph presents a comparison of Fort
James' performance with the S&P 500 Stock Index and the Peer Group, assuming
investments of $100 were made on December 31, 1994 and that dividends were
reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
FORT JAMES CORPORATION, S&P 500 STOCK INDEX
AND THE PEER GROUP
[PERFORMANCE GRAPH OF FIVE-YEAR RETURN APPEARS HERE]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Fort James Corporation ($)..... $100.00 $121.79 $170.84 $200.53 $212.86 $148.58
S&P 500 ($).................... $100.00 $137.58 $169.17 $225.60 $290.08 $351.12
Peer Group Only ($)............ $100.00 $127.46 $156.59 $217.66 $248.22 $289.21
</TABLE>
II-16
<PAGE>
SCHEDULE III
GEORGIA-PACIFIC DESIGNEES
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the Georgia-Pacific
Designees. Unless otherwise indicated, each person identified below is a
United States citizen. The principal business address of Georgia-Pacific and,
unless otherwise indicated, the business address of each person identified
below is Georgia-Pacific Corporation, 133 Peachtree Street, N.E., Atlanta, GA
30303.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name Age Material Positions Held During the Past Five Years
---- --- ---------------------------------------------------
<C> <C> <S>
Alston D. Correll................ 59 Chief Executive Officer of Georgia-Pacific since
May 1993, Chairman since December 1993, and
President since May 1996, has been one of Georgia-
Pacific's directors since 1992 and his current
term as director of Georgia-Pacific ends in 2002.
Mr. Correll is also a director of The Southern
Company and SunTrust Banks, Inc.
Danny W. Huff.................... 49 Executive Vice President--Finance and Chief
Financial Officer of Georgia-Pacific since
November 1, 1999. Prior to that time, he served as
Vice President and Treasurer of Georgia-Pacific
from February, 1996 to November, 1999 and
Treasurer of Georgia-Pacific from October 23, 1993
to February 1, 1996.
James F. Kelley.................. 58 Executive Vice President and General Counsel of
Georgia-Pacific since August 1, 2000. Prior to
that time, he served as Senior Vice President--Law
and General Counsel of Georgia-Pacific from
December 1993 until July 2000.
Stephen E. Macadam............... 40 Executive Vice President--Containerboard and
Packaging/Purchasing of Georgia-Pacific since
August 1, 2000 and Senior Vice President--
Containerboard and Packaging of Georgia-Pacific
from March 1, 1998 to July 2000. Prior to that
time, Mr. Macadam was a Principal of McKinsey &
Company, Inc.
Ronald L. Paul................... 57 Executive Vice President--Wood Products and
Distribution of Georgia-Pacific since December 30,
1997. Prior to that time, he served as Executive
Vice President--Wood Products of Georgia-Pacific
from September 1997 until December 1997 and Vice
President--Structural Panels and Building Products
Engineering of Georgia-Pacific from May 1996 until
September 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name Age Material Positions Held During the Past Five Years
---- --- --------------------------------------------------
<C> <C> <S>
John F. Rasor.................... 57 Executive Vice President--Wood Procurement, Gypsum
and Industrial Wood Products of Georgia-Pacific
since December 16, 1997. Prior to that time, he
served as Executive Vice President--Forest
Resources of Georgia-Pacific from January 1997 to
December 1997 and Senior Vice President--Forest
Resources from February 1995 until December 1996.
Lee M. Thomas.................... 56 Executive Vice President--Packaged Products of
Georgia-Pacific since August 1, 2000. Prior to
that time, he served as Executive Officer of
Georgia-Pacific in the following positions: as
Executive Vice President--Paper and Chemicals from
December 1997 until July 2000, Executive Vice
President--Paper from January 1997 to December
1997 and Senior Vice President--Paper from
February 1995 until December 1996.
Michael C. Burandt............... 56 Mr. Burandt has served as Senior Vice President--
Packaged Products of Georgia-Pacific since May 5,
1998. Prior to that time, he served as Vice
President--Packaged Products of Georgia-Pacific
from February 1995 until May 1998.
James E. Terrell................. 51 Vice President of Georgia-Pacific since January
1991 and Controller of Georgia-Pacific since 1989.
</TABLE>
III-2
<PAGE>
SCHEDULE IV
TRANSACTIONS IN FORT JAMES COMMON STOCK
BY EXECUTIVE OFFICERS OF FORT JAMES CORPORATION
<TABLE>
<CAPTION>
Transaction
Name Date Shares Transaction Type
---- ----------- ------ ---------------------------------
<S> <C> <C> <C>
Ernst A. Haberli........ 8/13/00 8,616 Distribution of restricted stock*
Miles L. Marsh.......... 8/13/00 21,371 Distribution of restricted stock*
Clifford A. Cutchins,
IV..................... 8/13/00 7,534 Distribution of restricted stock*
Daniel J. Girvan........ 8/13/00 7,150 Distribution of restricted stock*
8/13/00 150 Disposed of by gift
George F. Hartmann,
Jr..................... 8/13/00 3,766 Distribution of restricted stock*
Gary Kurlancheek........ 8/13/00 4,034 Distribution of restricted stock*
John F. Lundgren........ 8/13/00 8,616 Distribution of restricted stock*
Joseph McGarr........... 8/13/00 6,466 Distribution of restricted stock*
Joe R. Neil............. 8/13/00 6,166 Distribution of restricted stock*
</TABLE>
--------
* Pursuant to the terms of the 1996 Stock Incentive Plan.
