<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 2000
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PLUM CREEK TIMBER COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 6798 91-1912863
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
999 THIRD AVENUE, SUITE 2300
SEATTLE, WASHINGTON 98104
(206) 467-3600
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------
JAMES A. KRAFT, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
PLUM CREEK TIMBER COMPANY, INC.
999 THIRD AVENUE, SUITE 2300
SEATTLE, WASHINGTON 98104
(206) 467-3600
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
WITH COPIES TO:
<TABLE>
<S> <C> <C>
JOSEPH J. GIUNTA, ESQ. RAYMOND W. WAGNER, ESQ. WILLIAM R. SPALDING, ESQ.
GREGG A. NOEL, ESQ. MARIO A. PONCE, ESQ. JOHN L. GRAHAM, ESQ.
Skadden, Arps, Slate, Meagher & Flom LLP Simpson Thacher & Bartlett King & Spalding
300 South Grand Avenue 425 Lexington Avenue 191 Peachtree Street
Los Angeles, California 90071 New York, New York 10017 Atlanta, Georgia 30303
(213) 687-5000 (212) 455-2000 (404) 572-4600
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective and all other
conditions to the merger of each of the six wholly owned subsidiaries of
Georgia-Pacific Corporation with and into Registrant pursuant to the merger
agreement, dated as of July 18, 2000, described in the enclosed joint proxy
statement/prospectus, have been satisfied or waived.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.01
per share..................... 119,322,523 shares(1) N/A $85,000,000(2) $22,440(3)
</TABLE>
(1) Based upon the maximum number of shares of Plum Creek common stock, par
value $.01 per share, that may be issued in connection with the Agreement
and Plan of Merger.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2) of the Securities Act, which is based on the book
value of the securities to be received by the Registrant.
(3) This fee has been calculated pursuant to Section 6(b) of the Securities Act,
as .0264 of one percent of $85,000,000, the proposed maximum aggregate
offering price.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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--------------------------------------------------------------------------------
<PAGE>
[LOGO]
[LOGO]
JOINT PROXY STATEMENT/PROSPECTUS
MERGERS PROPOSED--YOUR VOTE IS VERY IMPORTANT
Plum Creek Timber Company, Inc. and Georgia-Pacific Corporation have agreed
to combine Georgia-Pacific's timber and timberlands business, which we will
refer to as "The Timber Company," with Plum Creek through a merger of six wholly
owned subsidiaries of Georgia-Pacific, which we will refer to individually as a
"Subsidiary" and collectively as the "Subsidiaries," with and into Plum Creek.
The mergers, more fully described below, will be accomplished in accordance with
the terms of a merger agreement dated as of July 18, 2000 entered into among
Plum Creek, Georgia-Pacific and each of the Subsidiaries.
The merger agreement provides that each of the Subsidiaries, which will
collectively own all of the assets and liabilities attributed to The Timber
Company immediately prior to the time of the mergers, will merge with and into
Plum Creek. The mergers will become effective upon the opening of business on
the first business day following the redemption by Georgia-Pacific of each
outstanding share of Georgia-Pacific Corporation-Timber Group Common Stock,
which we will refer to as "Timber Company common stock." In connection with the
redemption, each outstanding share of Timber Company common stock will be
exchanged for a unit, which will represent one outstanding share of common stock
of each of the Subsidiaries and which we will refer to individually as a "Unit"
and collectively as "Units." The Units will represent all of the issued and
outstanding common stock of each of the Subsidiaries.
If the mergers are completed, the holders of Units will receive 1.37 shares
of Plum Creek common stock for each Unit that they own. The Plum Creek common
stock to be issued in the mergers will be listed on the New York Stock Exchange
and the Pacific Exchange, subject to official notice of issuance, under the
symbol "PCL."
Plum Creek is asking its stockholders to approve the merger agreement and
the transactions contemplated by the merger agreement. Plum Creek cannot
complete the mergers without the approval of a majority of the outstanding
shares of Plum Creek common stock and special voting common stock of Plum Creek,
voting together as a class, and a majority of the outstanding shares of Plum
Creek special voting common stock, voting separately as a class.
Georgia-Pacific is asking holders of Timber Company common stock to approve
the merger agreement, although Georgia-Pacific, as the sole stockholder of each
of the Subsidiaries, has already approved the mergers for purposes of Delaware
law. It is a condition of the merger agreement that a majority of the
outstanding shares of Timber Company common stock approve the merger agreement.
Georgia-Pacific does not intend to waive this condition.
Plum Creek is also asking Plum Creek stockholders to approve an amendment to
Plum Creek's certificate of incorporation to eliminate the classification of
Plum Creek's board of directors so that all elected directors will serve one
year terms. Approval of the proposal to amend Plum Creek's certificate of
incorporation to eliminate the classified board of directors will require the
affirmative vote of 66 2/3% of the outstanding shares of Plum Creek common stock
and Plum Creek special voting common stock, voting together as a single class.
Approval of the amendment to Plum Creek's certificate of incorporation to
eliminate the classified board of directors is not a condition to completing the
mergers. Approval of the merger agreement and the transactions contemplated by
the merger agreement is not a condition to eliminating the classified board of
directors.
<PAGE>
The holders of all of the outstanding shares of Plum Creek special voting
common stock, who also own approximately 24% of the outstanding shares of Plum
Creek common stock and approximately 25% of the outstanding shares of Plum Creek
common stock and Plum Creek special voting common stock voting together as a
class, have agreed, subject to specified exceptions, to vote their shares of
each class of stock in favor of the merger agreement and the transactions
contemplated by the merger agreement, and in favor of the amendment to Plum
Creek's certificate of incorporation to eliminate Plum Creek's classified board
of directors.
Plum Creek has scheduled a special meeting of its stockholders to vote on
the merger agreement and the transactions contemplated by the merger agreement
and the proposed amendment to the certificate of incorporation to eliminate Plum
Creek's classified board of directors.
Georgia-Pacific has scheduled a special meeting of the holders of Timber
Company common stock to vote on the merger agreement.
The date, time and place of the special meetings are as follows:
For Plum Creek stockholders:
, 2001
A.M.
For holders of Timber Company common stock:
, 2001
A.M.
This joint proxy statement/prospectus provides Plum Creek stockholders and
holders of Timber Company common stock with detailed information about the
merger agreement and the transactions contemplated by the merger agreement.
Additionally, this joint proxy statement/prospectus provides Plum Creek
stockholders with detailed information about the proposed amendment to Plum
Creek's certificate of incorporation to eliminate the classified board of
directors. This joint proxy statement/ prospectus also serves as the prospectus
of Plum Creek for the holders of Units who will be issued shares of Plum Creek
common stock in connection with the mergers. We encourage you to read this
entire document carefully. IN PARTICULAR, YOU SHOULD CONSIDER THE MATTERS
DISCUSSED UNDER THE "RISK FACTORS" SECTION BEGINNING ON PAGE 14 BEFORE VOTING.
Whether or not you plan to attend your special meeting, please take the time
to vote your shares by either completing and mailing the enclosed proxy card to
us, calling the toll-free telephone number or using the Internet as described in
the instructions provided on your proxy card.
<TABLE>
<S> <C>
A.D. Correll
Rick R. Holley Chairman, Chief Executive Officer and
President and Chief Executive Officer President
Plum Creek Timber Company, Inc. Georgia-Pacific Corporation
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This joint statement/proxy statement is dated , 2001 and is being
first mailed
to the Plum Creek stockholders and holders of Timber Company common stock
on or about , 2001.
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2001
------------------------
To the stockholders of Plum Creek Timber Company, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of Plum
Creek Timber Company, Inc., a Delaware corporation, will be held at a.m.,
local time, on , 2001, at , for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger, dated as of July 18, 2000, among Plum Creek, Georgia-Pacific
Corporation and six wholly owned subsidiaries of Georgia-Pacific, and the
transactions contemplated by the merger agreement.
2. To consider and vote upon a proposal to amend Plum Creek's certificate
of incorporation to eliminate the classification of Plum Creek's board of
directors.
3. To transact such other business as may properly come before the special
meeting or any adjournment or postponement thereof.
PLUM CREEK'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE ADVISABLE AND FAIR TO,
AND IN THE BEST INTERESTS OF, PLUM CREEK AND ITS STOCKHOLDERS AND RECOMMENDS
THAT ITS STOCKHOLDERS VOTE FOR THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT. PLUM CREEK'S BOARD OF DIRECTORS ALSO
RECOMMENDS THAT PLUM CREEK STOCKHOLDERS VOTE FOR THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION TO ELIMINATE THE CLASSIFIED BOARD OF DIRECTORS.
The accompanying joint proxy statement/prospectus contains important
information with respect to the proposed mergers and proposed amendment to Plum
Creek's certificate of incorporation to eliminate the classified board of
directors, and we urge you to read it carefully.
Stockholders of record at the close of business on , 2001 are entitled
to notice of, and to vote at, the special meeting and any adjournment or
postponement thereof. Approval of the merger agreement and the transactions
contemplated by the merger agreement will require the affirmative vote of a
majority of the outstanding shares of Plum Creek common stock and Plum Creek
special voting common stock, voting together as a class, and a majority of the
outstanding shares of Plum Creek special voting common stock, voting separately
as a class. Approval of the proposal to amend Plum Creek's certificate of
incorporation to eliminate the classified board of directors will require the
affirmative vote of 66 2/3% of the outstanding shares of Plum Creek common stock
and Plum Creek special voting common stock, voting together as a single class.
Approval of the amendment to Plum Creek's certificate of incorporation to
eliminate the classified board of directors is not a condition to completing the
mergers. Approval of the merger agreement and the transactions contemplated by
the merger agreement is not a condition to eliminating the classified board of
directors.
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
EITHER COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENVELOPE PROVIDED, CALL THE TOLL-FREE TELEPHONE NUMBER OR USE THE INTERNET
AS DESCRIBED IN THE INSTRUCTIONS PROVIDED ON YOUR PROXY CARD. ANY EXECUTED BUT
UNMARKED PROXY CARDS WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND FOR THE PROPOSED AMENDMENT
TO PLUM CREEK'S CERTIFICATE OF INCORPORATION TO ELIMINATE THE CLASSIFIED BOARD
OF DIRECTORS. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS BEFORE IT HAS BEEN VOTED AT THE
SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE SPECIAL MEETING MAY VOTE IN
PERSON EVEN IF THE STOCKHOLDER HAS SUBMITTED A PROXY.
By order of the Board of Directors
James A. Kraft
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Seattle, Washington
, 2001
<PAGE>
GEORGIA-PACIFIC CORPORATION
----------------
NOTICE OF SPECIAL MEETING OF HOLDERS OF GEORGIA-PACIFIC
CORPORATION-TIMBER GROUP COMMON STOCK
TO BE HELD ON , 2001
------------------------
To the holders of Timber Company common stock:
NOTICE IS HEREBY GIVEN that a special meeting of the holders of Timber
Company common stock, will be held at a.m., local time, on , 2001,
at , for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger, dated as of July 18, 2000, among Plum Creek Timber
Company, Inc., Georgia-Pacific and six wholly owned subsidiaries of
Georgia-Pacific.
2. To transact such other business as may properly come before the special
meeting or any adjournment or postponement thereof.
GEORGIA-PACIFIC'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE
ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, GEORGIA-PACIFIC AND ITS
SHAREHOLDERS, TAKEN AS A WHOLE, AND RECOMMENDS THAT THE HOLDERS OF TIMBER
COMPANY COMMON STOCK VOTE FOR THE MERGER AGREEMENT.
The accompanying joint proxy statement/prospectus contains important
information with respect to the proposed mergers and we urge you to read it
carefully.
Holders of record of Timber Company common stock at the close of business on
, 2001, are entitled to notice of, and to vote at, the special
meeting and any adjournment or postponement thereof. It is a condition of the
merger agreement that a majority of the outstanding shares of Timber Company
common stock approve the merger agreement. Georgia-Pacific does not intend to
waive this condition. Georgia-Pacific, as the sole stockholder of each of the
six Georgia-Pacific subsidiaries to be merged with Plum Creek, has approved the
mergers for purposes of Delaware law at a meeting of the sole stockholder.
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
EITHER COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENVELOPE PROVIDED, CALL THE TOLL-FREE TELEPHONE NUMBER OR USE THE INTERNET
AS DESCRIBED IN THE INSTRUCTIONS PROVIDED ON YOUR PROXY CARD. ANY EXECUTED BUT
UNMARKED PROXY CARDS WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT. YOU MAY
REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS BEFORE IT HAS BEEN VOTED AT THE SPECIAL MEETING. ANY HOLDER
OF TIMBER COMPANY COMMON STOCK ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON
EVEN IF THE HOLDER HAS SUBMITTED A PROXY.
Please do not send Timber Company stock certificates in your proxy envelope.
We will send you written instructions for exchanging your stock certificates,
which will represent the Units as described herein, for Plum Creek stock
certificates after the completion of the mergers.
By order of the Board of Directors
Kenneth F. Khoury
VICE PRESIDENT, DEPUTY GENERAL COUNSEL
AND SECRETARY
Atlanta, Georgia
, 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGERS..................... 1
SUMMARY..................................................... 2
The Companies........................................... 2
What You Will Receive in the Mergers.................... 3
Record Date for Voting; Required Votes.................. 3
Recommendation to Plum Creek Stockholders............... 4
Recommendation to Holders of Timber Company Common
Stock.................................................. 4
Plum Creek's Reasons for the Mergers.................... 4
Georgia-Pacific's Reasons for the Mergers............... 4
Opinion of Plum Creek's Financial Advisor............... 5
Opinion of Georgia-Pacific's Financial Advisor.......... 5
Ownership of Shares of Plum Creek Common Stock After the
Completion of the Mergers.............................. 5
No Dissenters' Rights of Appraisal...................... 5
Amendment to Plum Creek's Certificate of
Incorporation.......................................... 5
Conditions to the Notice of Redemption and Mergers...... 6
Termination of the Merger Agreement; Fees Payable....... 7
Comparison of Rights of Holders of Plum Creek Common
Stock and Timber Company Common Stock.................. 9
Income Tax Consequences of the Mergers.................. 9
Accounting Treatment.................................... 9
Selected Historical Financial Data of Plum Creek........ 9
Selected Historical Financial Data of The Timber
Company................................................ 10
Selected Unaudited Pro Forma Combined Financial Data.... 11
Selected Unaudited Comparative Per Share Information.... 12
RISK FACTORS................................................ 14
Risk Factors Applicable to the Mergers.................. 14
Risk Factors Applicable to the Business of Plum Creek
after the Completion of the Mergers.................... 15
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 20
THE PLUM CREEK SPECIAL MEETING.............................. 21
Date, Time and Place of the Plum Creek Special
Meeting................................................ 21
Purposes of the Plum Creek Special Meeting.............. 21
Record Date and Quorum.................................. 21
Required Votes.......................................... 21
Proxies; Voting and Revocation.......................... 22
Adjournments............................................ 23
Solicitation of Proxies................................. 23
SPECIAL MEETING OF HOLDERS OF TIMBER COMPANY COMMON STOCK... 24
Date, Time and Place of the Special Meeting............. 24
Purposes of the Special Meeting; the Mergers............ 24
Record Date and Quorum.................................. 24
Required Votes.......................................... 24
Proxies; Voting and Revocation.......................... 24
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Adjournments............................................ 25
Solicitation of Proxies................................. 25
THE MERGERS................................................. 26
Background of the Mergers............................... 26
Recommendation of Plum Creek's Board of Directors; Plum
Creek's Reasons for the Mergers........................ 31
Recommendation of Georgia-Pacific's Board of Directors;
Georgia-Pacific's Reasons for the Mergers.............. 34
Opinion of Financial Advisor to Plum Creek.............. 38
Opinion of Financial Advisor to Georgia-Pacific......... 47
Certain Tax Consequences of the Mergers................. 53
Accounting Treatment.................................... 55
Dividend Policy......................................... 55
Interests of Directors and Officers in the Mergers...... 55
Regulatory Approvals.................................... 59
No Appraisal Rights..................................... 59
Stock Exchange Listing.................................. 59
Federal Securities Laws Consequences.................... 59
THE REDEMPTION.............................................. 60
THE MERGER AGREEMENT........................................ 60
Terms of the Mergers.................................... 60
Exchange of New Stock Certificates...................... 61
Representations and Warranties.......................... 62
Covenants............................................... 64
Conditions to the Notice of Redemption and Mergers...... 68
Termination............................................. 72
Expenses................................................ 74
ANCILLARY ARRANGEMENTS...................................... 75
Separation Agreement.................................... 75
Voting Agreement and Consent............................ 75
Human Resources Agreement............................... 76
Noncompete Agreement.................................... 76
Tax Matters Agreement................................... 77
Timber Supply Agreements................................ 77
Transition Services Agreement........................... 78
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION............................................... 78
PLUM CREEK TIMBER COMPANY, INC. UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS................... 79
THE TIMBER COMPANY--SELECTED FINANCIAL DATA................. 90
MANAGEMENT'S DISCUSSION AND ANALYSIS--THE TIMBER COMPANY.... 92
BUSINESS OF PLUM CREEK...................................... 99
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
BUSINESS OF THE TIMBER COMPANY.............................. 101
DIRECTORS DESIGNATED BY GEORGIA-PACIFIC TO BE ADDED TO PLUM
CREEK'S BOARD OF DIRECTORS................................ 102
COMPARISON OF RIGHTS OF HOLDERS OF PLUM CREEK COMMON STOCK
AND TIMBER COMPANY COMMON STOCK........................... 103
DESCRIPTION OF CAPITAL STOCK................................ 129
FEDERAL INCOME TAXATION OF PLUM CREEK AND ITS
STOCKHOLDERS.............................................. 133
Taxation of Plum Creek as a REIT........................ 133
Taxation of Taxable U.S. Holders........................ 140
Taxation of Tax-Exempt U.S. Stockholders................ 142
Taxation of Non-United States Stockholders.............. 142
Tax Aspects of Plum Creek's Ownership of Interests In
the Operating Partnership.............................. 144
Other Taxes............................................. 145
Legislative or Other Actions Affecting REITs............ 145
AMENDMENT TO PLUM CREEK'S CERTIFICATE OF INCORPORATION TO
ELIMINATE THE CLASSIFICATION OF THE PLUM CREEK BOARD OF
DIRECTORS................................................. 146
LEGAL MATTERS............................................... 146
EXPERTS..................................................... 146
SUBMISSION OF STOCKHOLDER PROPOSALS......................... 147
WHERE YOU CAN FIND MORE INFORMATION......................... 147
ANNEXES
Annex A.............................. Agreement and Plan of Merger
Annex B........................... Opinion of Goldman, Sachs & Co.
Annex C.............. Opinion of Morgan Stanley & Co. Incorporated
Annex D.............................. Voting Agreement and Consent
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGERS
Q. HOW WILL THE REDEMPTION OF SHARES OF TIMBER COMPANY COMMON STOCK OCCUR?
A. At the time of the redemption of all of the outstanding shares of Timber
Company common stock, all of the assets and liabilities of Georgia-Pacific
attributed to The Timber Company will be held by six wholly owned
subsidiaries of Georgia-Pacific. One business day prior to the completion of
the mergers, Georgia-Pacific will redeem all of the outstanding shares of
Timber Company common stock in exchange for all of the outstanding shares of
common stock of each of the six subsidiaries by issuing one Unit for each
share of Timber Company common stock. Each Unit will represent one share of
common stock of each Subsidiary. The Units will be evidenced by the
certificates formerly representing shares of Timber Company common stock and
new certificates representing the Units will not be issued.
Q. WHEN AND WHERE ARE THE SPECIAL MEETINGS?
A. Plum Creek's special meeting and the special meeting of the holders of Timber
Company common stock will each take place on . The location of
each special meeting is indicated on page 21 and 24.
Q. WHEN DO YOU EXPECT THE MERGERS TO BE COMPLETED?
A. We are working towards completing the mergers as quickly as possible. We hope
to complete the mergers during the first quarter of 2001.
Q. ARE THE MERGERS SUBJECT TO THE FULFILLMENT OF CERTAIN CONDITIONS?
A. Yes. Before the completion of the mergers, Plum Creek and Georgia-Pacific
must either fulfill or waive several closing conditions. If these conditions
are not satisfied or waived, the mergers will not be completed.
Q. WHAT DO I NEED TO DO NOW?
A. Just mail your signed proxy card in the enclosed envelope or vote by
telephone or the Internet, as soon as possible, so that your shares may be
represented at your meeting. To ensure that your vote is obtained, please
give your proxy as instructed on your proxy card even if you currently plan
to attend your meeting in person.
Q. WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A. Just send in a later-dated, signed proxy card to your company's Secretary or
vote again by telephone or the Internet before your special meeting. Or, you
can attend your special meeting in person and vote. You may also revoke your
proxy by sending a notice of revocation to your company's Secretary before
your special meeting.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME WITHOUT MY INSTRUCTIONS?
A. No. If you do not provide your broker with instructions on how to vote your
shares held in "street name," your broker will not be permitted to vote your
shares on the proposals presented at your special meeting. Any such broker
non-votes will have the effect of a vote against the proposals presented at
your special meeting. You should therefore instruct your broker to vote your
shares, following the directions provided by your broker.
Q. SHOULD THE HOLDERS OF TIMBER COMPANY COMMON STOCK SEND IN THEIR STOCK
CERTIFICATES NOW?
A. No. After the mergers are completed, we will send holders of Units written
instructions for exchanging the Timber Company stock certificates, which
will represent the Units, for Plum Creek stock certificates.
WHO CAN HELP ANSWER YOUR QUESTIONS?
You may call for information about the proposals presented at
your special meeting.
1
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGERS FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGERS, YOU SHOULD READ CAREFULLY THIS
JOINT PROXY STATEMENT/ PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE
REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" (PAGE 147). WE HAVE
INCLUDED PAGE REFERENCES DIRECTING YOU TO A MORE COMPLETE DESCRIPTION OF EACH
ITEM PRESENTED IN THIS SUMMARY.
THE COMPANIES (PAGE 99)
Plum Creek Timber Company, Inc.
999 Third Avenue, Suite 2300
Seattle, Washington 98104
(206) 467-3600
Plum Creek's principal business is the growing, harvesting and marketing of
timber and the management and operation of its timberlands. Plum Creek owns
approximately 3.2 million acres and is one of the largest owners of private
timberlands in the United States. These timberlands are located in four distinct
regions of the United States.
Generally, Plum Creek strives to enhance the value of its forest resources
by:
- improving the productivity of its timberlands through implementation of
advanced forestry management practices;
- promptly reforesting harvested timberlands and employing scientific and
silvicultural advances that promote the growth of its trees;
- being dedicated to environmental stewardship of its timberlands and
subscribing to the principles and objectives of the American Forest and
Paper Association's Sustainable Forestry Initiative(SM);
- controlling harvesting costs;
- sorting and merchandising logs to capture the highest value from each log;
and
- identifying and selling timberland properties with potentially higher
value for purposes other than long-term timber production (such as
conservation, residential or recreational uses).
Plum Creek also engages in the manufacture of forest products such as
lumber, high-grade plywood, and high-quality medium density fiberboard. Plum
Creek's lumber products are targeted to domestic lumber retailers, such as
retail home centers, for use in repair and remodeling projects, and also to the
home construction, industrial and export markets. The company sells its
high-grade plywood primarily in specialized industrial markets, including
recreational boat, recreational vehicle and fiberglass-reinforced panels. Its
plywood products are generally of higher quality than commodity construction
grade products and command higher prices in these specialty markets. Plum Creek
also supplies high-quality medium density fiberboard to markets in North America
and the Pacific Rim. Medium density fiberboard products are sold primarily to
distributors and door, molding, fixture and furniture manufacturers.
2
<PAGE>
Georgia-Pacific Corporation--Timber Group
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 652-4000
The Timber Company's primary business is the growing, harvesting and
marketing of timber and logs and the management and operation of its
timberlands. The Timber Company, with access to approximately 4.7 million acres,
is one of the largest owners of timberland in the United States. These
timberlands are located in the southern United States, Oregon and the
Appalachian and north central regions of the United States.
Additionally, The Timber Company operates six world-class nurseries and
manages hunting leases and mineral rights. The Timber Company also sells or
exchanges timberlands that are marginally productive or more valuable for uses
other than long-term timber production.
WHAT YOU WILL RECEIVE IN THE MERGERS (PAGE 60)
If the redemption of all of the outstanding shares of Timber Company common
stock and the mergers are completed, holders of Timber Company common stock will
receive 1.37 shares of Plum Creek common stock in exchange for each Unit issued
in connection with the redemption. No fractional shares of Plum Creek common
stock will be issued. Instead, holders of Timber Company common stock will have
the right to receive cash equal to the value of the fractional shares.
Shares of Plum Creek common stock held by Plum Creek stockholders before the
mergers will continue to remain outstanding after the mergers.
RECORD DATE FOR VOTING; REQUIRED VOTES (PAGE 21)
If you are a Plum Creek stockholder, you may vote at your special meeting if
you owned shares of Plum Creek common stock or Plum Creek special voting common
stock at the close of business on , 2001. As of the close of business on
that day, shares of Plum Creek common stock and 634,566 shares of Plum
Creek special voting common stock were outstanding.
If you are a holder of Timber Company common stock, you may vote at your
special meeting if you owned shares of Timber Company common stock at the close
of business on , 2001. As of the close of business on that day,
shares of Timber Company common stock were outstanding.
Approval of the merger agreement and the transactions contemplated by the
merger agreement requires the affirmative vote of a majority of the outstanding
shares of Plum Creek common stock and Plum Creek special voting common stock,
voting together as a class, and a majority of the outstanding shares of special
voting common stock, voting separately as a class. Approval of the proposed
amendment to the certificate of incorporation to eliminate the classified board
of directors requires the affirmative vote of 66 2/3% of the outstanding shares
of Plum Creek common stock and Plum Creek special voting common stock, voting
together as a class. Plum Creek stockholders will have one vote for each share
of Plum Creek stock owned on the Plum Creek record date.
The holders of all of the outstanding shares of Plum Creek special voting
common stock, who also own approximately 24% of the outstanding shares of Plum
Creek common stock and approximately 25% of the outstanding shares of Plum Creek
common stock and Plum Creek special voting common stock voting together as a
class, have agreed, subject to specified exceptions, to vote their shares of
each class of stock in favor of the merger agreement and the transactions
contemplated by the merger agreement, and in favor of the amendment to Plum
Creek's certificate of incorporation to eliminate Plum Creek's classified board
of directors.
3
<PAGE>
To satisfy a condition of the merger agreement, an affirmative vote of a
majority of the outstanding shares of Timber Company common stock is required to
approve the merger agreement. Georgia-Pacific does not intend to waive this
condition. Holders of Timber Company common stock will have one vote for each
share of Timber Company common stock owned on The Timber Company record date.
RECOMMENDATION TO PLUM CREEK STOCKHOLDERS (PAGE 31)
Plum Creek's board of directors believes that the merger agreement and the
transactions contemplated by the merger agreement are advisable and fair to, and
in the best interest of, Plum Creek and its stockholders and recommends that the
Plum Creek stockholders vote FOR the merger agreement and the transactions
contemplated by the merger agreement.
RECOMMENDATION TO HOLDERS OF TIMBER COMPANY COMMON STOCK (PAGE 34)
Georgia-Pacific's board of directors believes that the redemption of all of
the outstanding shares of Timber Company common stock and the mergers are
advisable and fair to, and in the best interest of, Georgia-Pacific and its
shareholders, taken as a whole, and recommends that holders of Timber Company
common stock vote FOR the merger agreement.
PLUM CREEK'S REASONS FOR THE MERGERS (PAGE 31)
Plum Creek's board of directors considered a number of factors in both
approving the merger agreement and the transactions contemplated by the merger
agreement and recommending it to Plum Creek stockholders, including the
following factors:
- the acquisition of The Timber Company will create the second largest
private timberland owner in the United States;
- the acquisition of The Timber Company will enhance Plum Creek's strategic
and market position to a level that Plum Creek might not have been able to
achieve alone; and
- the acquisition of The Timber Company will encourage growth by expanding
Plum Creek's customer base and creating new revenue sources.
To review Plum Creek's reasons for the mergers in more detail, see pages 31
through 34.
GEORGIA-PACIFIC'S REASONS FOR THE MERGERS (PAGE 34)
Georgia-Pacific's board of directors considered a number of factors in both
approving the merger agreement and recommending it to the holders of Timber
Company common stock, including the following factors:
- the exchange ratio in relation to the historical and market trading prices
for Timber Company common stock and Plum Creek common stock;
- the mergers will create the second largest United States private
timberland owner; and
- the board of directors' conclusion that the mergers would provide holders
of Timber Company common stock the opportunity for continued equity
participation in a larger entity with potentially increased market
liquidity.
To review Georgia-Pacific's reasons for the mergers in more detail, see
pages 34 through 37.
4
<PAGE>
OPINION OF PLUM CREEK'S FINANCIAL ADVISOR (PAGE 38)
In deciding to approve the merger agreement and the transactions
contemplated by the merger agreement, Plum Creek's board of directors considered
the opinion of Goldman Sachs & Co., its financial advisor. Goldman Sachs
delivered an opinion to Plum Creek's board of directors that, as of July 18,
2000, based upon and subject to the various considerations set forth in the
opinion, the exchange ratio pursuant to the merger agreement was fair from a
financial point of view to Plum Creek. THIS OPINION IS ATTACHED AS ANNEX B OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. YOU SHOULD READ IT IN ITS ENTIRETY.
OPINION OF GEORGIA-PACIFIC'S FINANCIAL ADVISOR (PAGE 47)
In deciding to approve the merger agreement, Georgia-Pacific's board of
directors considered the opinion of Morgan Stanley & Co. Incorporated, its
financial advisor. Morgan Stanley delivered an opinion to Georgia-Pacific's
board of directors that, as of July 18, 2000, based upon and subject to the
various considerations set forth in the opinion, (1) the redemption of all of
the outstanding shares of Timber Company common stock and the mergers pursuant
to the merger agreement were fair from a financial point of view to
Georgia-Pacific and (2) the exchange ratio pursuant to the merger agreement was
fair from a financial point of view to the holders of Timber Company common
stock. THIS OPINION IS ATTACHED AS ANNEX C OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. YOU SHOULD READ IT IN ITS ENTIRETY.
OWNERSHIP OF SHARES OF PLUM CREEK COMMON STOCK AFTER THE COMPLETION OF THE
MERGERS (PAGE 32)
After the completion of the mergers, the former holders of Timber Company
common stock will hold approximately % of the outstanding shares of Plum Creek
common stock on a fully diluted basis, based on the number of outstanding shares
of Plum Creek common stock as of , 2001.
The holders of all of the outstanding shares of Plum Creek special voting
common stock have agreed to convert all of their shares of Plum Creek special
voting common stock into shares of Plum Creek common stock, immediately prior to
the completion of the mergers.
NO DISSENTERS' RIGHTS OF APPRAISAL (PAGE 59)
Under Delaware law, Plum Creek stockholders will not have appraisal or
dissenters' rights in connection with the mergers.
Under Georgia law, Georgia-Pacific shareholders will not have appraisal or
dissenters' rights in connection with the mergers.
AMENDMENT TO PLUM CREEK'S CERTIFICATE OF INCORPORATION (PAGE 146)
In addition to the vote on the merger agreement and the transactions
contemplated by the merger agreement, Plum Creek's board of directors has
proposed, and requests that the Plum Creek stockholders approve, an amendment to
Plum Creek's certificate of incorporation which provides that Plum Creek's board
of directors be classified. Currently, the certificate of incorporation requires
that the nine members of Plum Creek's board of directors be divided equally into
three classes serving three-year staggered terms, with one class of directors
elected each year at Plum Creek's annual stockholders' meeting. The proposed
amendment to the certificate of incorporation will eliminate this requirement,
but will not affect the current term of any of the current members of Plum
Creek's board of directors.
Approval of the proposal to amend Plum Creek's certificate of incorporation
to eliminate the classified board of directors requires the affirmative vote of
66 2/3% of the outstanding shares of Plum Creek common stock and Plum Creek
special voting common stock, voting together as a single class.
5
<PAGE>
Plum Creek's board of directors recommends that the Plum Creek stockholders
vote FOR the proposed amendment to the certificate of incorporation to eliminate
the classified board of directors.
Approval of this amendment to eliminate Plum Creek's classified board of
directors is not a condition to completing the mergers and, conversely, approval
of the merger agreement and the transactions contemplated by the merger
agreement is not a condition to eliminating the classified board of directors.
CONDITIONS TO THE NOTICE OF REDEMPTION AND MERGERS (PAGE 68)
CONDITIONS TO BE SATISFIED OR WAIVED ON OR PRIOR TO THE NOTICE OF REDEMPTION
DATE
The obligations of Plum Creek and Georgia-Pacific to effect the notice of
redemption and the mergers are subject to satisfaction or waiver of a number of
conditions on or prior to the notice of redemption date, including the
following:
- the receipt of a private letter ruling from the Internal Revenue Service
concluding that the redemption of Timber Company common stock, followed by
the mergers, will continue to be tax-free to Georgia-Pacific and the
holders of Timber Company common stock;
- the approval by the Plum Creek stockholders of the merger agreement and
the transactions contemplated by the merger agreement;
- the approval by the holders of Timber Company common stock of the merger
agreement;
- the absence of legal prohibitions to the mergers;
- the continued effectiveness of the registration statement relating to the
Plum Creek shares to be issued in the mergers and approval of those shares
for listing on the New York Stock Exchange and the Pacific Exchange;
- the expiration or termination of the relevant waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
- our respective counsel advising us that there is not a substantial risk
that principles that are similar to section 1374 of the Internal Revenue
Code would apply to the cutting of timber transferred by the Subsidiaries
to Plum Creek pursuant to the mergers during the ten-year period following
the mergers; and
- the receipt of assurances from Southeastern Asset Management, Inc. with
respect to its intent concerning the shares of Timber Company common stock
that it owns prior to the redemption and the shares of Plum Creek common
stock that it will own as a result of the mergers so that any future
transactions involving such stock will not cause section 355(e) of the
Internal Revenue Code to apply to the transactions contemplated by the
merger agreement.
In addition, Plum Creek's obligation to effect the notice of redemption and
the mergers depends on the satisfaction or waiver of a number of conditions,
including the following:
- the receipt by Plum Creek of the opinion of its counsel that the mergers
will qualify as tax-free reorganizations and that Plum Creek will be
subject to tax as a real estate investment trust, or REIT, after the
mergers;
- the Subsidiaries' earnings and profits not exceeding an agreed upon amount
immediately prior to the redemption of all of the outstanding shares of
Timber Company common stock;
- the execution by Georgia-Pacific of the ancillary agreements contemplated
by the merger agreement; and
6
<PAGE>
- the absence of an event which would reasonably be expected to have a
material adverse effect on The Timber Company since the date of the merger
agreement.
In addition, Georgia-Pacific's obligation to effect the notice of redemption
and the mergers depends on the satisfaction or waiver of a number of conditions,
including the following:
- the receipt by Plum Creek of an opinion from its counsel that Plum Creek
will continue to be subject to tax as a REIT after the completion of the
mergers;
- the receipt by Georgia-Pacific of the opinion of its counsel that the
mergers will qualify as tax-free reorganizations;
- the execution by Plum Creek of the ancillary agreements contemplated by
the merger agreement; and
- the absence of an event which would reasonably be expected to have a
material adverse effect on Plum Creek since the date of the merger
agreement.
CONDITIONS TO BE SATISFIED OR WAIVED ON OR PRIOR TO THE COMPLETION OF THE
MERGERS
Plum Creek's obligation to effect the mergers depends on the satisfaction or
waiver of the following conditions:
- the segregation of all of the assets and liabilities of The Timber Company
in the Subsidiaries and the redemption of all of the outstanding shares of
Timber Company common stock shall have occurred;
- the absence of legal prohibitions to the mergers;
- Southeastern Asset Management confirming the assurances it made with
respect to its intent concerning the shares of Timber Company common stock
it owns prior to the redemption and the shares of Plum Creek common stock
that it will own as a result of the mergers; and
- the termination of the rights granted pursuant to the Georgia-Pacific
rights agreement with respect to Timber Company common stock.
Georgia-Pacific's obligation to effect the mergers depends on the
satisfaction or waiver of the following conditions:
- the absence of legal prohibitions to the mergers; and
- Southeastern Asset Management confirming the assurances it made with
respect to its intentions concerning its shares of Timber Company common
stock it owns prior to the redemption and the shares of Plum Creek common
stock that it will own as a result of the mergers.
TERMINATION OF THE MERGER AGREEMENT; FEES PAYABLE (PAGES 72 AND 73)
Plum Creek and Georgia-Pacific may agree to terminate the merger agreement
at any time by written consent of both parties. In addition, either Plum Creek
or Georgia-Pacific may terminate the agreement if:
- a decree or order from a court or governmental authority prevents
completion of the mergers;
- the mergers are not completed by July 18, 2001, provided that:
- the date may be extended three months by either Plum Creek or
Georgia-Pacific if the reason for not closing by July 18, 2001 is that
the private letter ruling has not been received from the Internal
Revenue Service; and
7
<PAGE>
- Georgia-Pacific may extend the July 18, 2001 date up to six months if a
specified tax condition exists;
- the Plum Creek stockholders fail to approve the merger agreement and the
transactions contemplated by the merger agreement; or
- the holders of Timber Company common stock fail to approve the merger
agreement.
Plum Creek may terminate the merger agreement:
- on or prior to the notice of redemption date, based on (1) a material
breach by Georgia-Pacific of a representation or covenant, (2) the
inability to obtain the private letter ruling from the Internal Revenue
Service or (3) the occurrence of an event which would reasonably be
expected to have a material adverse effect on The Timber Company;
- on or prior to the notice of redemption date, if Georgia-Pacific's board
of directors has not recommended or has modified its recommendation of the
mergers, the merger agreement or the transactions contemplated by the
merger agreement in a manner adverse to Plum Creek; or
- upon its payment of a $100 million termination fee to Georgia-Pacific if
Plum Creek's board of directors determines that approving and entering
into an agreement with a third party to acquire any interest in Plum Creek
would result in a more favorable transaction to its stockholders.
Georgia-Pacific may terminate the merger agreement:
- on or prior to the notice of redemption date, based on (1) a material
breach by Plum Creek of a representation or covenant, (2) the inability to
obtain the private letter ruling from the Internal Revenue Service or
(3) the occurrence of an event which would reasonably be expected to have
a material adverse effect on Plum Creek;
- on or prior to the notice of redemption date, if Plum Creek's board of
directors has not recommended or has modified its recommendation of the
mergers, the merger agreement or the transactions contemplated by the
merger agreement in a manner adverse to Georgia-Pacific;
- upon its payment of a $100 million termination fee to Plum Creek if
Georgia-Pacific's board of directors determines that approving and
entering into an agreement with a third party to acquire any interest of
The Timber Company would result in a more favorable transaction to its
shareholders; or
- upon its payment of a $100 million termination fee to Plum Creek if
Georgia-Pacific is unable to obtain an opinion of a nationally recognized
investment banking or appraisal firm that, after the redemption of all of
the outstanding shares of Timber Company common stock, Georgia-Pacific
will be able to pay its debt when they come due and its assets will exceed
the sum of its liabilities.
Plum Creek has agreed to pay Georgia-Pacific a termination fee in the amount
of $100 million if:
- Georgia-Pacific terminates the merger agreement based upon Plum Creek's
board of directors not recommending or modifying its recommendation of the
mergers, the merger agreement and the transactions contemplated by the
merger agreement in a manner adverse to Georgia-Pacific; or
- either Georgia-Pacific or Plum Creek terminates the merger agreement based
upon the Plum Creek stockholders not approving the merger agreement and
the transactions contemplated by the merger agreement and
(1) Georgia-Pacific is not in material breach of the merger agreement,
(2) a bona fide proposal to acquire Plum Creek has been publicly announced
prior to the Plum Creek stockholder meeting and (3) Plum Creek enters into
an agreement with respect to a bona fide proposal within nine months of
such termination.
8
<PAGE>
Georgia-Pacific has agreed to pay Plum Creek a termination fee in the amount
of $100 million if:
- Plum Creek terminates the merger agreement based upon Georgia-Pacific's
board of directors not recommending or modifying its recommendation of the
mergers, the merger agreement and the transactions contemplated by the
merger agreement in a manner adverse to Plum Creek; or
- either Georgia-Pacific or Plum Creek terminates the merger agreement based
upon the holders of Timber Company common stock not approving the merger
agreement and (1) Plum Creek is not in material breach of the merger
agreement, (2) a bona fide proposal involving The Timber Company has been
publicly announced prior to the meeting of the holders of Timber Company
common stock and (3) Georgia-Pacific enters into an agreement with respect
to a bona fide proposal within nine months of such termination.
COMPARISON OF RIGHTS OF HOLDERS OF PLUM CREEK COMMON STOCK AND TIMBER COMPANY
COMMON STOCK (PAGE 103)
Plum Creek's certificate of incorporation and bylaws and Georgia-Pacific's
articles of incorporation and bylaws vary. In particular, Timber Company common
stock is a "letter stock" of Georgia-Pacific, which tracks the performance of
The Timber Company, while Plum Creek does not have a letter stock structure, and
after the mergers, will have only one class of common stock. Plum Creek is
incorporated under the laws of the State of Delaware and Georgia-Pacific is
incorporated under the laws of the State of Georgia. As a result of the above
factors, the holders of Timber Company common stock will have different rights
as Plum Creek stockholders.
INCOME TAX CONSEQUENCES OF THE MERGERS (PAGE 53)
We expect that the mergers will qualify as tax-free reorganizations for
United States Federal income tax purposes. In general, the mergers are intended
to be tax-free to the holders of Timber Company common stock, except to the
extent that they receive cash instead of fractional shares as merger
consideration. It is a condition to the obligations of Plum Creek and
Georgia-Pacific to effect the mergers that each receive a legal opinion from its
outside counsel that the mergers will be tax-free reorganizations for United
States Federal income tax purposes.
The Federal income tax consequences described above may not apply to some
holders of Timber Company common stock in light of their individual
circumstances. You should consult your tax advisor for a full understanding of
the tax consequences of the mergers to you.
ACCOUNTING TREATMENT (PAGE 55)
The mergers will be accounted for using the purchase method of accounting.
SELECTED HISTORICAL FINANCIAL DATA OF PLUM CREEK
Plum Creek is providing the following information to aid you in your
analysis of the financial aspects of the mergers. Plum Creek derived the
information for each of the years in the period ending December 31, 1999 from,
and should be read in conjunction with, its historical audited financial
statements. Plum Creek derived the financial information for the six months
ended June 30, 2000, and as of June 30, 2000, from its unaudited financial
statements that include, in the opinion of management, all normal and recurring
adjustments that management considers necessary for a fair statement of results.
The operating results for the six months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000. This information is only a summary and you should read it in conjunction
with Plum Creek's consolidated/combined
9
<PAGE>
financial statements and notes thereto contained in Plum Creek's 1999 annual
report on Form 10-K which has been incorporated into this joint proxy
statement/prospectus by reference.
<TABLE>
<CAPTION>
AS OF AND
FOR THE SIX AS OF AND FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ------------------------------------------------------
JUNE 30, 2000 1999(1)(2) 1998(3) 1997 1996(4) 1995
------------- ---------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE/LP UNIT)
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 112.1 $ 460.6 $ 699.4 $ 725.6 $ 633.7 $ 585.1
Income before Cumulative Effect
of Accounting Change.......... 101.6 113.4 75.4 111.7 223.6 110.7
Income before Cumulative Effect
of Accounting Change per
Share/LP Unit................. 1.47 1.72 0.90 1.72 4.71 2.17
Cash Distributions Declared per
Share/LP Unit................. 1.14 2.28 2.28 2.20 2.02 1.96
Total Assets.................... 1,222.3 1,250.8 1,438.2 1,330.9 1,336.4 826.1
Total Debt...................... 634.2 649.1 961.0 763.4 780.8 531.4
</TABLE>
------------------------
(1) Revenues, Total Assets and Total Debt are not comparable with the prior
years as a result of Plum Creek's July 1, 1999 conversion to a REIT. See
Note 1 of the Notes to Financial Statements.
(2) During 1999, Plum Creek changed its accounting policy for reforestation
costs. See Note 1 of the Notes to Financial Statements.
(3) Results include the impact of an acquisition of 905,000 acres of timberland
in Maine on November 12, 1998.
(4) Included in 1996 results of operations was a gain of $105.7 million related
to the sale of 107,000 acres of timberlands in northeast Washington and
northern Idaho and the impact from that sale from October 12, 1996. Results
also include the impact of the acquisition from Riverwood International
Corporation of 538,000 acres of timberland and related assets in Louisiana
and Arkansas from October 19, 1996.
SELECTED HISTORICAL FINANCIAL DATA OF THE TIMBER COMPANY
The Timber Company is providing the following information to aid you in your
analysis of the financial aspects of the mergers. The Timber Company derived the
information for each of the years in the period ending January 1, 2000 from, and
should be read in conjunction with, its audited financial statements for these
fiscal years contained elsewhere in this joint proxy statement/prospectus. The
Timber Company derived the financial information for the six months ended
July 1, 2000, and as of July 1, 2000, from its unaudited financial statements
that include, in the opinion of management, all normal and recurring adjustments
that management considers necessary for a fair statement of results. The
operating results for the six months ended July 1, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 30,
2000. This information is only a summary and
10
<PAGE>
you should read it in conjunction with The Timber Company's historical audited
financial statements and related notes contained on pages F-1 through F-31 of
this joint proxy statement/prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
AS OF AND --------------------------------------------
FOR THE SIX JANUARY 1, DECEMBER 31,
MONTHS ENDED ----------- ------------------------------
JULY 1, 2000 2000(1) 1998(2) 1997(3) 1996
------------ ----------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 205.0 $ 522.0 $ 541.0 $ 551.0 $ 547.0
Income before Extraordinary Items........ 75.0 398.0 182.0 215.0 127.0
Income before Extraordinary Items Basic
Pro Forma per Share.................... 0.69 3.65
Income before Extraordinary Items Diluted
Pro Forma per Share.................... 0.69 3.63
Cash Distributions Declared per
Share(4)...............................
Total Assets............................. 1,546.0 1,521.0 1,173.0 1,171.0 1,326.0
Total Debt............................... 1,027.0 970.0 983.0 971.0 1,316.0
</TABLE>
------------------------
(1) During 1999, The Timber Company sold approximately 390,000 acres of
timberlands in New Brunswick, Canada, approximately 440,000 acres of
timberlands in Maine and 194,000 acres in California for a purchase price of
$489 million and recognized a pretax gain of $355 million ($215 million
after taxes).
(2) During 1998, The Timber Company sold its real estate development properties
located in South Carolina and Florida for $18 million, resulting in a pretax
gain of $1 million. Also in 1998, The Timber Company completed the sale of
approximately 61,000 acres of timberlands located in West Virginia,
resulting in a pretax gain of $24 million ($14 million after taxes).
(3) During 1997, The Timber Company sold 127,000 acres of timberlands located in
California for $270 million, resulting in pretax gain of $114 million
($71 million after taxes).
(4) Because The Timber Company was a division of Georgia-Pacific, historically
it has paid no dividends. However, Timber Company common stock, a letter
stock of Georgia-Pacific that tracked the performance of The Timber Company,
paid an annual dividend of $1.00 per share.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA (PAGE 78)
The following selected unaudited pro forma combined financial information
has been derived from and should be read with the Unaudited Pro Forma Condensed
Combined Financial Statements and related notes on pages 78 through 88. This
information is based on the historical consolidated balance sheets and related
historical consolidated statements of income of Plum Creek and The Timber
Company, giving effect to the redemption and the mergers using the purchase
method of accounting for business combinations. This information is for
illustrative purposes only. The companies may have performed differently had
they always been combined. You should not rely on the selected unaudited pro
forma combined financial information as being indicative of the historical
results that would have
11
<PAGE>
been achieved had the companies always been combined or the future results that
Plum Creek will experience after the mergers.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS OF AND FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
----------------- -----------------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C>
Revenues............................................. $ 344.5 $ 794.9
Income before Extraordinary Items.................... 212.7 570.6
Income before Extraordinary Items Pro Forma per
Share.............................................. 1.19 3.20
Total Assets......................................... 4,066.0
Total Debt........................................... 1,678.4
</TABLE>
SELECTED UNAUDITED COMPARATIVE PER SHARE INFORMATION
Presented below are the income from continuing operations, cash dividends
and book value per common share data for Plum Creek on a pro forma combined
basis, for The Timber Company on a pro forma historical basis and equivalent
basis giving effect to the split off and recapitalization to reflect the merger
with Plum Creek, and for Plum Creek on an historical basis.
We derived the pro forma data for Plum Creek by combining the historical
consolidated financial information of Plum Creek and The Timber Company using
the purchase method of accounting for business combinations as described under
"Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page
78.
You should read the information below together with our respective
historical financial statements and related notes contained in the annual
reports, quarterly reports and other information that we have filed with the
Securities and Exchange Commission. To obtain copies of these documents, see
"Where You Can Find More Information" on page 147. We have provided the
unaudited pro forma combined information below for illustrative purposes only.
The companies may have performed differently had they always been combined. You
should not rely on this information as being indicative of the historical
12
<PAGE>
results that we would have achieved had our companies always been combined or
the future results that Plum Creek will experience after the mergers.
<TABLE>
<CAPTION>
AS OF AND
FOR THE SIX
MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
----------- --------------
<S> <C> <C>
PRO FORMA COMBINED
Income from Continuing Operations:
Combined Pro Forma........................................ $ 1.19 $ 3.20
Dividends:
Combined Pro Forma........................................ $ 1.14 $ 2.28
Book Value:
Combined Pro Forma........................................ $11.68
THE TIMBER COMPANY
Income from Continuing Operations:
Historical Pro Forma(1)................................... $ 0.94 $ 5.00
Equivalent Pro Forma(2)................................... $ 0.69 $ 3.65
Dividends:(3)
Book Value:
Historical Pro Forma(1)................................... $ 1.07
Equivalent Pro Forma(2)................................... $ 0.78
PLUM CREEK TIMBER COMPANY, INC.
Income from Continuing Operations:
Historical................................................ $ 1.47 $ 1.72
Dividends:
Historical................................................ $ 1.14 $ 2.28
Book Value:
Historical................................................ $ 8.02
</TABLE>
------------------------------
(1) Historical pro forma amounts give effect to the redemption of the
outstanding shares of Timber Company common stock to the holders of Timber
Company common stock on a one-for-one basis. Historical pro forma
calculations are based on 79,619,482 shares.
(2) Based on 109,078,690 shares giving effect to the redemption of all of the
outstanding shares of Timber Company common stock and the mergers. The
calculation of the 109,078,690 shares assumes the exchange of 1.37 shares of
Plum Creek common stock for each share of Timber Company common stock.
(3) Because The Timber Company was a division of Georgia-Pacific, historically
it has paid no dividends. However, Timber Company common stock, a letter
stock of Georgia-Pacific that tracked the performance of The Timber Company,
paid an annual dividend of $1.00 per share ($0.73 per share if adjusted for
the redemption and the mergers).
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION THAT WE HAVE INCLUDED AND INCORPORATED
BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS, YOU SHOULD READ AND
CONSIDER THE INFORMATION BELOW AS WELL AS ALL OTHER INFORMATION PROVIDED TO YOU
IN THIS JOINT PROXY STATEMENT/PROSPECTUS, INCLUDING INFORMATION IN THE SECTION
OF THIS JOINT PROXY STATEMENT/PROSPECTUS ENTITLED "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS," IN EVALUATING THE PROPOSALS TO BE VOTED ON AT YOUR
SPECIAL MEETING.
RISK FACTORS APPLICABLE TO THE MERGERS
HOLDERS OF UNITS WILL RECEIVE 1.37 SHARES OF PLUM CREEK COMMON STOCK DESPITE
CHANGES IN THE MARKET VALUE OF PLUM CREEK COMMON STOCK OR TIMBER COMPANY COMMON
STOCK
Each Unit will be exchanged for 1.37 shares of Plum Creek common stock upon
completion of the mergers. This exchange ratio is a fixed number and will not be
adjusted for changes in the market price of either Timber Company common stock
or Plum Creek common stock. Neither Georgia-Pacific nor Plum Creek is permitted
to terminate the merger agreement solely because of changes in the market price
of Plum Creek common stock. Consequently, the specific dollar value of Plum
Creek common stock to be received by the holders of Units will depend on the
market value of Plum Creek common stock at the time the mergers are completed
and may increase or decrease from the date of this joint proxy
statement/prospectus or the date you submit your proxy. You are urged to obtain
recent market quotations for Plum Creek common stock and Timber Company common
stock. We cannot predict or give any assurances as to the market price of Plum
Creek common stock at any time before or after the mergers. The price of Plum
Creek common stock and Timber Company common stock may vary because of factors
such as:
- possible changes in the business, operating results or prospects of Plum
Creek or The Timber Company;
- market assessments of the likelihood that the mergers will be completed
and that The Timber Company will be integrated effectively into Plum
Creek;
- the timing of the completion of the mergers;
- market assessments of the prospects of post-merger operations and
synergies;
- potential changes in the regulatory environment; and
- general market and economic conditions.
THE EXPECTED BENEFITS OF INTEGRATING THE OPERATIONS OF PLUM CREEK AND THE
TIMBER COMPANY MAY NOT BE REALIZED
Plum Creek, as the surviving corporation in the mergers, expects to maintain
the existing business of Plum Creek and The Timber Company and to realize modest
cost savings and other synergies from the mergers. Nevertheless, Plum Creek's
success in maintaining its business and in realizing these cost savings and
synergies, and the timing of this realization, depends on the quality and speed
of the integration process. There are numerous systems that must be integrated,
including information systems, purchasing, accounting and finance, sales,
billing, payroll and regulatory compliance. Plum Creek, as the surviving
corporation, may experience difficulty maintaining its business and may not
realize the cost savings and synergies from integrating the operations of Plum
Creek and The Timber Company following completion of the mergers as fully or as
quickly as it expects for a number of reasons, including:
- Plum Creek's increased size and the resulting complexity of its
organization;
- potential errors in planning or executing the integration; and
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- the occurrence of unexpected events such as changes in the markets in
which Plum Creek operates.
If Plum Creek is unable to integrate effectively the operations of Plum
Creek and The Timber Company in a timely and efficient manner, then some or all
of the benefits of the mergers may be delayed or may not be realized and, as a
result, Plum Creek's operating results and the market price of Plum Creek common
stock may be adversely affected. In particular, if the integration is not done
in a timely and efficient manner:
- key personnel may be lost; and
- current customers may not be retained.
In addition, the attention and effort devoted to integrating the businesses
of Plum Creek and The Timber Company could have the effect of diverting
management's attention from other matters, and could potentially harm the
business and operating results of Plum Creek.
RISK FACTORS APPLICABLE TO THE BUSINESS OF PLUM CREEK AFTER THE COMPLETION OF
THE MERGERS
THE CYCLICAL NATURE OF THE FOREST PRODUCTS INDUSTRY COULD ADVERSELY AFFECT
RESULTS OF OPERATIONS OF PLUM CREEK
Plum Creek's results of operations are affected by the cyclical nature of
the forest products industry. Prices and demand for logs and manufactured wood
products are subject to cyclical fluctuations. The demand for logs and wood
products is primarily affected by the level of new residential construction
activity and, to a lesser extent, repair and remodeling activity and other
industrial uses. The demand for logs is also affected by the demand for wood
chips in the pulp and paper markets. These activities are, in turn, subject to
fluctuations due to, among other factors:
- changes in domestic and international economic conditions;
- interest rates;
- population growth and changing demographics; and
- seasonal weather cycles (e.g., dry summers, wet winters).
Decreases in the level of residential construction activity generally reduce
demand for logs and wood products. This results in lower revenues, profits and
cash flows. In addition, Plum Creek's results of operations may be subject to
global economic changes as global supplies of wood fiber shift in response to
changing economic conditions. Such changes in global economic conditions that
could affect Plum Creek's results of operations include, but are not limited to,
new timber supply sources and changes in currency exchange rates, foreign and
domestic interest rates and foreign and domestic trade policies.
Also, industry-wide increases in the supply of logs and wood products has
led to recent downward pressure on prices. In response to a favorable price
environment during much of fiscal year 1999, many timber companies increased
production volumes for logs and wood products. However, this increased
production, coupled with an unchanged demand for these products in general, has
led to oversupply and lower recent prices. This condition may continue to impact
Plum Creek's business after the completion of the mergers.
Historically, Canada has been a significant source of lumber for the United
States market, particularly in the new home construction market. However, in
1995, the United States and Canadian governments entered into a five-year lumber
trade agreement that became effective April 1, 1996. This agreement was intended
to limit the volume of Canadian lumber exported into the United States through
the assessment of an export tariff on annual lumber exports to the United States
in excess of
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certain levels from the four major producing Canadian provinces. The agreement
expires in April 2001, and it is uncertain whether it will be renewed or whether
a similar agreement will be entered into between the two countries. If the
agreement is not renewed, or if a similar agreement is not executed, then a
significant increase in the supply of lumber to U.S. markets from Canadian
sources could result, which could increase downward pressure on lumber and log
prices.
THE FOREST PRODUCTS INDUSTRY IS HIGHLY COMPETITIVE
The forest products industry is highly competitive in terms of price and
quality. Wood products are subject to increasing competition from a variety of
substitute products, including non-wood and engineered wood products. For
example, plywood markets are subject to competition from oriented strand board,
and U.S. lumber and log markets are subject to competition from other worldwide
suppliers.
PLUM CREEK'S CASH DISTRIBUTIONS ARE NOT GUARANTEED AND MAY FLUCTUATE
On July 1, 1999, Plum Creek converted from a master limited partnership to a
REIT. REITs are required to distribute 95% of their net taxable ordinary income,
decreasing to 90% beginning in fiscal year 2001. However, unlike ordinary income
such as rent, the Internal Revenue Code does not require REITs to distribute
capital gain income. Accordingly, Plum Creek does not believe that the Internal
Revenue Code will require Plum Creek to distribute any material amounts of cash
given that the majority of its income comes from timber sales, which are treated
as capital gains. Plum Creek's board of directors, in its sole discretion,
determines the amount of the quarterly distributions to be provided to Plum
Creek stockholders based on Plum Creek's results of operations, cash flow and
capital requirements, economic conditions, tax considerations and other factors,
including future acquisitions, harvest levels and changes in the price and
demand for Plum Creek's products. Consequently, Plum Creek's distribution levels
may fluctuate.
Notwithstanding the foregoing, Plum Creek will be required, in the year the
mergers are completed, to distribute the earnings and profits acquired from the
Subsidiaries. As a result of this requirement, a portion of the distribution
that would otherwise be a return of capital or capital gain to Plum Creek
stockholders will be ordinary income for Federal income tax purposes. If Plum
Creek fails to distribute an amount equal to the Subsidiaries' earnings and
profits on or before December 31, 2001, Plum Creek would not qualify as a REIT.
Based on the amounts anticipated to be distributed to stockholders after
consummation of the mergers in 2001, Plum Creek expects that, even if the
earnings and profits of the Subsidiaries were subsequently adjusted upward by
the Internal Revenue Service, the amounts distributed will exceed such earnings
and profits and Plum Creek will not be disqualified as a REIT. Nevertheless,
such an adjustment may give rise to the imposition of the 4% excise tax on the
excess of income required to be distributed and the amounts treated as
distributed after application of the earnings and profits rule. See "Federal
Income Taxation of Plum Creek and its Stockholders--Distribution of Acquired
Earnings and Profits."
PLUM CREEK'S ABILITY TO HARVEST TIMBER MAY BE SUBJECT TO LIMITATIONS WHICH
COULD ADVERSELY AFFECT ITS OPERATIONS
Weather conditions, timber growth cycles, access limitations and regulatory
requirements associated with the protection of wildlife and water resources may
restrict harvesting of timberlands, as may other factors, including damage by
fire, insect infestation, disease, prolonged drought and other natural
disasters. Although damage from such natural causes usually is localized and
affects only a limited percentage of the timber, there can be no assurance that
any damage affecting Plum Creek's timberlands will in fact be so limited. As is
common in the forest products industry, Plum Creek does not maintain insurance
coverage with respect to damage to its timberlands.
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Much of Plum Creek's Northwest timberlands are intermingled with sections of
Federal land managed by the United States Forest Service. In many cases, access
is only, or most economically, achieved through a road or roads built across
adjacent Federal land. In order to access these intermingled timberlands, Plum
Creek has obtained from time to time either temporary or permanent access rights
across Federal lands. This process has often been, and will likely continue to
be, affected by, among other things, the requirements of the Endangered Species
Act, the National Environmental Policy Act and the Clean Water Act. Access and
regulatory restrictions may delay or prevent Plum Creek from harvesting some of
its timberlands.
Plum Creek's revenues, net income and cash flow from its operations are
dependent to a significant extent on the pricing of its products and its
continued ability to harvest timber at adequate levels. In addition, Plum
Creek's ability to accelerate the harvest of significant amounts of timber in
order to fund distributions to stockholders may be limited by the terms of its
long-term debt agreements and lines of credit.
PROVISIONS IN PLUM CREEK'S CERTIFICATE OF INCORPORATION AND DELAWARE LAW MAY
PREVENT A CHANGE IN CONTROL
Some provisions of Plum Creek's certificate of incorporation may discourage
a third party from seeking to gain control of Plum Creek. For example, the
ownership limitations described in its certificate of incorporation could have
the effect of delaying, deferring, or limiting a change of control in which
holders of common stock might receive a premium for their shares over the then
prevailing market price. The following is a summary of provisions of Plum
Creek's certificate of incorporation which may have this effect.
THE OWNERSHIP LIMIT
In order for Plum Creek to maintain its qualification as a REIT, not more
than 50% of the value of its outstanding shares of capital stock may be owned,
directly or indirectly, by five or fewer individuals, as defined in the Internal
Revenue Code. For the purpose of preserving its REIT qualification, Plum Creek's
certificate of incorporation prohibits ownership either directly or under the
applicable attribution rules of the Internal Revenue Code of more than 5% of the
lesser of the total number of shares of common stock outstanding or the value of
the outstanding shares of common stock by any stockholder other than by some
designated persons agreed to by Plum Creek or as set forth in Plum Creek's
certificate of incorporation (the "Ownership Limit"). The Ownership Limit may
have the effect of discouraging an acquisition of control of Plum Creek without
the approval of its board of directors.
The Ownership Limit in Plum Creek's certificate of incorporation also
restricts the transfer of Plum Creek common stock. For example, any transfer of
Plum Creek equity is null and void if the transfer would:
- result in any person owning, directly or indirectly, equity in excess of
the Ownership Limit;
- result in Plum Creek equity being owned, directly or indirectly, by fewer
than 100 persons;
- result in Plum Creek being "closely held" (as defined in the Internal
Revenue Code);
- result in Plum Creek failing to qualify as a "domestically controlled
REIT" (as defined in the Internal Revenue Code); or
- otherwise cause Plum Creek to fail to qualify as a REIT.
These transfer restrictions, however, allow specific persons designated in Plum
Creek's certificate of incorporation to beneficially own, in the aggregate, up
to 27% of Plum Creek's outstanding common stock. This exception will be
permanently reduced to the extent that these persons sell their shares of
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common stock or to the extent that new issuances of common stock reduce their
percentage of beneficial ownership. In addition, Plum Creek's board of directors
has agreed, subject to the receipt of acceptable undertakings, to waive the
Ownership Limitation with respect to shares of Plum Creek common stock held by
Southeastern Asset Management and Capital Research and Management.
THE PREFERRED STOCK
Plum Creek's certificate of incorporation authorizes its board of directors
to issue up to 75 million shares of preferred stock. Upon issuance, Plum Creek's
board of directors will establish the preferences and rights for this preferred
stock. These preferences and rights may include the right to elect additional
directors. The issuance of preferred stock could have the effect of delaying or
preventing a change in control of Plum Creek even if a change in control were in
its stockholders' best interests.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law generally prohibits Plum
Creek from engaging in business transactions with a person or entity that owns
15% or more of its voting stock for a period of three years following the time
such person or entity became an "interested stockholder," unless, prior to such
time, Plum Creek's board of directors approved either the business combination
or the transaction which resulted in such person or entity becoming an
interested stockholder. A business transaction may include mergers, asset sales
and other transactions resulting in financial benefit to the person or entity
that owns 15% or more of Plum Creek's voting stock.
IF PLUM CREEK FAILS TO QUALIFY AS A REIT, IT WOULD BE SUBJECT TO TAX AT
CORPORATE RATES AND WOULD NOT BE ABLE TO DEDUCT DISTRIBUTIONS TO STOCKHOLDERS
WHEN COMPUTING ITS TAXABLE INCOME
If in any taxable year Plum Creek fails to qualify as a REIT:
- Plum Creek would be subject to Federal and state income tax on its taxable
income at regular corporate rates of approximately 39%;
- Plum Creek would not be allowed to deduct distributions to stockholders in
computing taxable income; and
- unless Plum Creek was entitled to relief under the Internal Revenue Code,
Plum Creek would also be disqualified from treatment as a REIT for the
four taxable years following the year during which Plum Creek lost
qualification.
If Plum Creek fails to qualify as a REIT, it might need to borrow funds or
liquidate some investments in order to pay the additional tax liability.
Accordingly, funds available for investment or distribution to its stockholders
would be reduced for each of the years involved.
Qualification as a REIT involves the application of highly technical and
complex provisions of the Internal Revenue Code to Plum Creek's operations and
the determination of various factual matters and circumstances not entirely
within its control. There are only limited judicial or administrative
interpretations of these provisions. Although Plum Creek operates in a manner
consistent with the REIT qualification rules, there cannot be any assurance that
Plum Creek is or will remain so qualified.
In addition, the rules dealing with Federal income taxation are constantly
under review by persons involved in the legislative process and by the Internal
Revenue Service and the United States Department of the Treasury. Changes to the
tax law could adversely affect Plum Creek stockholders. Plum Creek cannot
predict with certainty whether, when, in what forms, or with what effective
dates, the tax laws applicable to Plum Creek or its stockholders may be changed.
See "Federal Income Taxation of Plum Creek and its Stockholders--Legislative or
Other Actions Affecting REITs."
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PLUM CREEK'S TIMBERLANDS ARE SUBJECT TO FEDERAL AND STATE ENVIRONMENTAL
REGULATIONS
Plum Creek is subject to regulation under, among other laws, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
National Environmental Policy Act, and the Endangered Species Act, as well as
similar state laws and regulations. Violations of various statutory and
regulatory programs that apply to the operations of Plum Creek could result in
civil penalties, remediation expenses, potential injunctions, cease and desist
orders and criminal penalties. Plum Creek engages in the following activities
which are subject to regulation:
- forest activities, including harvesting, planting and road building, use
and maintenance;
- the generation of air emissions;
- the discharge of industrial wastewater and storm water; and
- the generation and disposal of both hazardous and nonhazardous wastes.
Laws and regulations protecting the environment have generally become more
stringent in recent years and could become more stringent in the future. Some
environmental statutes impose strict liability, rendering a person liable for
environmental damage without regard to the person's negligence or fault. These
laws or future legislation or administrative or judicial action with respect to
protection of the environment may adversely affect Plum Creek's business.
The Endangered Species Act and similar state laws protect species threatened
with possible extinction. A number of species on Plum Creek's timberlands have
been and in the future may be protected under these laws, including the northern
spotted owl, marbled murrelet, gray wolf, grizzly bear, mountain caribou, bald
eagle, karner blue butterfly, red cockaded woodpecker, bull trout, and various
salmon species. Protection of threatened and endangered species may include
restrictions on timber harvesting, road building and other forest practices on
private, Federal and state land containing the affected species.
PLUM CREEK'S SETTLEMENT OF UNITHOLDER LITIGATION MAY RESULT IN A NON-CASH
EXPENSE WHICH COULD ADVERSELY AFFECT ITS INCOME STATEMENTS
On April 9, 1999, Plum Creek and its former general partner settled
litigation relating to its conversion to a REIT. Under this settlement
agreement, Plum Creek's former general partner has agreed to pay eligible
unitholders up to $30 million if Plum Creek does not meet specified five-year
financial targets. This payment would be made, if at all, on or about April 15,
2004. The Securities and Exchange Commission's Staff Accounting Bulletin No. 79
provides that any payment made by Plum Creek's former general partner as part of
this settlement will be accounted for as a deemed capital contribution by the
former general partner to Plum Creek, followed by a non-cash expense by Plum
Creek. The Staff Accounting Bulletin requires that payments made by a principal
shareholder of a corporation be expensed by the corporation if the corporation
receives any benefit as a result of such payment. Therefore, Plum Creek will
record a non-cash expense in the period in which, and to the extent that, it
appears probable that a payment is required. Although any payments by Plum
Creek's former general partner, as described above, will cause a corresponding
reduction in Plum Creek net income, it will have no impact on its cash flow.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Some of the forward-looking statements
can be identified by the use of forward-looking words such as "believes,"
"expects," "may," "will," "should," "seek," "approximately," "intends," "plans,"
"estimates," or "anticipates," or the negative of those words or other
comparable terminology. Forward-looking statements involve inherent risks and
uncertainties. A number of important factors could cause actual results to
differ materially from those in the forward-looking statements, including those
factors discussed in "Risk Factors." Some factors include fluctuations in
government regulations and economic conditions and competition in our domestic
and export markets. In addition, factors that could cause our actual results to
differ from those contemplated by our projected, forecasted, estimated, or
budgeted results as reflected in forward-looking statements relating to our
operations and business include:
- the failure of Plum Creek to qualify as a REIT or the failure of Plum
Creek to achieve the expected competitive advantages of operating as a
REIT;
- an unanticipated reduction in the demand for timber products and/or an
unanticipated increase in supply;
- the failure to make strategic acquisitions or to integrate such
acquisitions effectively;
- management's focus and resources being diverted from other strategic
opportunities and from operational matters during the integration process;
- the impact of the loss of employees following the completion of the
mergers; and
- the failure to meet our expectations with respect to the timing of the
mergers, our likely future performance and the desirability of the
mergers.
Accordingly, actual results may not conform to the forward-looking
statements contained in this joint proxy statement/prospectus.
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THE PLUM CREEK SPECIAL MEETING
DATE, TIME AND PLACE OF THE PLUM CREEK SPECIAL MEETING
Plum Creek is sending this joint proxy statement/prospectus to Plum Creek's
stockholders as part of the solicitation of proxies by Plum Creek's board of
directors for use at the Plum Creek special meeting to be held on ,
2001, at a.m., local time, at .
PURPOSES OF THE PLUM CREEK SPECIAL MEETING
At the Plum Creek special meeting, Plum Creek stockholders will consider and
vote upon:
- a proposal to approve the merger agreement and the transactions
contemplated by the merger agreement; and
- a proposal to amend the certificate of incorporation of Plum Creek to
eliminate the classification of Plum Creek's board of directors.
Plum Creek knows of no other matter to be brought before the Plum Creek
special meeting. If any other business should properly come before the Plum
Creek special meeting, the persons named in the proxy card will vote in their
discretion on such matter.
RECORD DATE AND QUORUM
Plum Creek's board of directors has fixed the close of business on
, 2001 as the record date for the Plum Creek special meeting. Only
holders of Plum Creek common stock and special voting common stock on the record
date will be entitled to vote at the Plum Creek special meeting and any
adjournments or postponements thereof. As of the record date, shares of
Plum Creek common stock and 634,566 shares of Plum Creek special voting common
stock were outstanding and entitled to vote. The presence, in person or by
proxy, of a majority of the outstanding shares of Plum Creek common stock and
special voting common stock entitled to vote as a single class and the presence,
in person or by proxy, of a majority of the outstanding shares of Plum Creek
special voting common stock entitled to vote as a separate class, in each case,
with respect to the merger agreement and the transactions contemplated by the
merger agreement are necessary to constitute a quorum at the special meeting
with respect to this proposal. The presence, in person or by proxy, of a
majority of the outstanding shares of Plum Creek common stock and Plum Creek
special voting common stock entitled to vote as a single class with respect to
the proposed amendment to Plum Creek's certificate of incorporation to eliminate
the classified board of directors is necessary to constitute a quorum at the
special meeting with respect to this proposal. Abstentions and broker non-votes
will be included in the determination of shares present at the Plum Creek
special meeting for purposes of determining whether a quorum is present. A
broker non-vote occurs on an item when a broker is not permitted to vote on that
item without instruction from the beneficial owner of the shares and no
instruction is given.
REQUIRED VOTES
Under Plum Creek's certificate of incorporation, the merger agreement and
the transactions contemplated by the merger agreement must be approved by the
affirmative vote of a majority of the outstanding shares of common stock and
special voting common stock, voting together as a class, and a majority of the
outstanding shares of special voting common stock, voting separately as a class.
Under Plum Creek's certificate of incorporation, the proposed amendment to
the certificate of incorporation to eliminate the classified board of directors
must be approved by the affirmative vote of 66 2/3% of the outstanding shares of
Plum Creek common stock and Plum Creek special voting common stock, voting
together as a class. Approval of the amendment to Plum Creek's certificate of
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incorporation to eliminate Plum Creek's classified board of directors is not a
condition to completing the mergers. Approval of the merger agreement and the
transactions contemplated by the merger agreement is not a condition to
eliminating the classified board of directors.
The holders of all of the outstanding shares of Plum Creek special voting
common stock, who also own approximately 24% of the outstanding shares of Plum
Creek common stock and a total of 25% of the outstanding shares of Plum Creek
common stock and special voting common stock voting together as a class, have
entered into a voting agreement and consent, which provides, among other things
and subject to specified exceptions, that each of them will vote their shares of
special voting common stock and common stock FOR the approval of the merger
agreement and the transactions contemplated by the merger agreement and FOR the
amendment to Plum Creek's certificate of incorporation to eliminate the
classified board of directors. As a result of this agreement and subject to
specified exceptions, the adoption of the merger agreement and the transactions
contemplated by the merger agreement by the holders of Plum Creek special voting
common stock, voting as a separate class, is assured.
As of the close of business on the record date, Plum Creek's directors,
executive officers and their affiliates beneficially owned and were entitled to
vote approximately shares of Plum Creek common stock and 634,566 shares of
Plum Creek special voting common stock, which represented approximately % of
the shares of Plum Creek common stock outstanding and 100% of the shares of Plum
Creek special voting common stock outstanding on that date. Plum Creek's
directors and officers holding an aggregate of approximately % of the shares
of Plum Creek common stock outstanding and 100% of the shares of Plum Creek
special voting common stock outstanding as of the record date have indicated
that they intend to vote their shares FOR the approval of the merger agreement
and the transactions contemplated by the merger agreement and FOR the proposed
amendment to Plum Creek's certificate of incorporation to eliminate the
classified board of directors.
Abstentions and broker non-votes will have the effect of a vote against the
adoption of the merger agreement and the transactions contemplated by the merger
agreement and against the proposed amendment to Plum Creek's certificate of
incorporation to eliminate the classified board of directors.
PROXIES; VOTING AND REVOCATION
Plum Creek stockholders may grant a proxy by any of the following three
methods:
- BY MAIL. Complete, sign and return the proxy card in the enclosed
envelope.
- BY TELEPHONE. Call the toll-free number listed on the proxy card and
follow the instructions provided on the proxy card.
- BY THE INTERNET. Go to the website listed on the proxy card and follow the
instructions provided on the proxy card.
Each share of Plum Creek common stock and Plum Creek special voting common
stock is entitled to one vote with respect to the proposals presented at the
Plum Creek special meeting.
All properly executed proxies delivered and not properly revoked will be
voted at the Plum Creek special meeting as specified in such proxies. If Plum
Creek stockholders do not specify a choice, their proxies will be voted FOR the
approval of the merger agreement and the transactions contemplated by the merger
agreement and FOR the proposed amendment to the certificate of incorporation to
eliminate Plum Creek's classified board of directors.
Plum Creek stockholders may revoke their proxies by filing an instrument of
revocation with the secretary of Plum Creek c/o Plum Creek Timber
Company, Inc., 999 Third Avenue, Suite 2300, Seattle, Washington 98104 prior to
the Plum Creek special meeting. Plum Creek stockholders may also revoke their
proxies by submitting a duly executed proxy bearing a later date, including a
proxy given by
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telephone or Internet, prior to the Plum Creek special meeting or by voting in
person at the Plum Creek special meeting.
ADJOURNMENTS
Adjournments of the Plum Creek special meeting may be made for the purpose
of, among other things, soliciting additional proxies. Any adjournment may be
made at any time by stockholders representing a majority of the votes present in
person or by proxy at the applicable Plum Creek special meeting, whether or not
a quorum exists, without further notice other than by an announcement made at
the meeting. Proxies to be voted against a specific proposal may not be used to
vote for an adjournment of the special meeting for the purpose of soliciting
additional votes in favor of that proposal.
SOLICITATION OF PROXIES
If the mergers are completed, Plum Creek will pay all of the expense of
printing and mailing this joint proxy statement/prospectus and the materials
used in this solicitation of proxies. In addition to solicitation by mail, the
directors, officers and employees of Plum Creek may also solicit proxies from
Plum Creek stockholders by telephone, facsimile or in person. Plum Creek will
also make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send the proxy materials to beneficial owners of Plum Creek
common stock. Upon request, Plum Creek will reimburse these brokerage houses and
custodians for their reasonable expenses in forwarding these proxy materials.
will assist Plum Creek in the solicitation of proxies for an
estimated fee of $ , plus reasonable out-of-pocket expenses.
If the merger agreement is terminated, Plum Creek will share equally with
Georgia-Pacific the expense of printing this joint proxy statement/prospectus
and the materials used in this solicitation of proxies.
THE MATTERS TO BE CONSIDERED AT THE PLUM CREEK SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO PLUM CREEK STOCKHOLDERS. PLUM CREEK'S BOARD OF DIRECTORS URGES ALL
PLUM CREEK STOCKHOLDERS TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED
IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE OR CALL THE TOLL-FREE
TELEPHONE NUMBER OR USE THE INTERNET AS DESCRIBED IN THE INSTRUCTIONS PROVIDED
ON THE PROXY CARD.
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SPECIAL MEETING OF HOLDERS OF TIMBER COMPANY COMMON STOCK
DATE, TIME AND PLACE OF THE SPECIAL MEETING
Georgia-Pacific is sending this joint proxy statement/prospectus to holders
of Timber Company common stock as part of the solicitation of proxies by
Georgia-Pacific's board of directors for use at the special meeting of holders
of Timber Company common stock to be held on , at a.m., local
time, at .
PURPOSES OF THE SPECIAL MEETING; THE MERGERS
At the special meeting, holders of Timber Company common stock will consider
and vote upon a proposal to approve the merger agreement.
Georgia-Pacific knows of no other matter to be brought before the special
meeting of the holders of Timber Company common stock. If any other business
should properly come before the special meeting, the persons named in the proxy
card will vote in their discretion on such matter.
RECORD DATE AND QUORUM
Georgia-Pacific's board of directors has fixed the close of business on
as the record date for the special meeting of holders of Timber Company
common stock. Only holders of Timber Company common stock on the record date
will be entitled to vote at the special meeting and any adjournments or
postponements thereof. As of the record date, shares of Timber
Company common stock were outstanding and entitled to vote. The presence, in
person or by proxy, of a majority of the outstanding shares of Timber Company
common stock is necessary to constitute a quorum at the special meeting of the
holders of Timber Company common stock. Abstentions and broker non-votes will be
included in the determination of shares present at the special meeting for
purposes of determining whether a quorum is present. A broker non-vote occurs on
an item when a broker is not permitted to vote on that item without instruction
from the beneficial owner of the shares and no instruction is given.
REQUIRED VOTES
It is a condition of the merger agreement that a majority of the outstanding
shares of Timber Company common stock approve the merger agreement.
Georgia-Pacific does not intend to waive this condition.
As of the close of business on the record date, Georgia-Pacific's directors,
executive officers and their affiliates beneficially owned and were entitled to
vote approximately shares of Timber Company common stock, which represented
approximately % of the shares of Timber Company common stock outstanding on
that date. Georgia-Pacific's directors and officers holding an aggregate of
approximately % of the shares of Timber Company common stock outstanding as of
the record date have indicated that they intend to vote their shares FOR the
approval of the merger agreement.
Abstentions and broker non-votes will have the effect of a vote against the
adoption of the merger agreement.
PROXIES; VOTING AND REVOCATION
Holders of Timber Company common stock may grant a proxy by any of the
following three methods:
- BY MAIL. Complete, sign and return the proxy card in the enclosed
envelope.
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- BY TELEPHONE. Call the toll-free number listed on the proxy card and
follow the instructions provided on the proxy card.
- BY THE INTERNET. Go to the website listed on the proxy card and follow the
instructions provided on the proxy card.
Each share of Timber Company common stock is entitled to one vote with
respect to the proposals presented at the special meeting of holders of Timber
Company common stock.
All properly executed proxies delivered and not properly revoked will be
voted at the special meeting of holders of Timber Company common stock as
specified in such proxies. If holders of Timber Company common stock do not
specify a choice, their proxies will be voted FOR the approval of the merger
agreement.
Holders of Timber Company common stock may revoke their proxies by filing an
instrument of revocation with the secretary of Georgia-Pacific, c/o
Georgia-Pacific Corporation, 133 Peachtree Street, N.E., Atlanta, Georgia 30303
prior to the special meeting of the holders of Timber Company common stock.
Holders of Timber Company common stock may also revoke their proxies by
submitting a duly executed proxy bearing a later date, including a proxy given
by telephone or Internet, prior to the special meeting of the holders of Timber
Company common stock or by voting in person at the special meeting.
ADJOURNMENTS
Adjournments of the special meeting of the holders of Timber Company common
stock may be made for the purpose of, among other things, soliciting additional
proxies. Any adjournment may be made at any time by holders representing a
majority of the votes present in person or by proxy at the special meeting of
the holders of Timber Company common stock, whether or not a quorum exists,
without further notice other than by an announcement made at the meeting.
Proxies to be voted against a specific proposal may not be used to vote for an
adjournment of the special meeting for the purpose of soliciting additional
votes in favor of that proposal.
SOLICITATION OF PROXIES
If the mergers are completed, Plum Creek will pay all of the expense of
printing and mailing this joint proxy statement/prospectus and the materials
used in this solicitation of proxies. In addition to solicitation by mail, the
directors, officers and employees of Georgia-Pacific may also solicit proxies
from holders of Timber Company common stock by telephone, facsimile or in
person. Georgia-Pacific will also make arrangements with brokerage houses and
other custodians, nominees and fiduciaries to send the proxy materials to
beneficial owners of Timber Company common stock. Upon request, Plum Creek will
reimburse these brokerage houses and custodians for their reasonable expenses in
forwarding these proxy materials. will assist Georgia-Pacific in the
solicitation of proxies for an estimated fee of $ , plus reasonable
out-of-pocket expenses.
If the merger agreement is terminated, Georgia-Pacific will share equally
with Plum Creek the expense of printing this joint proxy statement/prospectus
and the materials used in this solicitation of proxies.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING OF HOLDERS OF TIMBER
COMPANY COMMON STOCK ARE OF GREAT IMPORTANCE TO HOLDERS OF TIMBER COMPANY COMMON
STOCK. GEORGIA-PACIFIC'S BOARD OF DIRECTORS URGES ALL HOLDERS OF TIMBER COMPANY
COMMON STOCK TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS
JOINT PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE OR CALL THE TOLL-FREE
TELEPHONE NUMBER OR USE THE INTERNET AS DESCRIBED IN THE INSTRUCTIONS PROVIDED
ON THE PROXY CARD.
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THE MERGERS
BACKGROUND OF THE MERGERS
Plum Creek's board of directors and management regularly consider a variety
of strategic options and transactions. In recent years, Plum Creek's management
has evaluated various alternatives for expanding and diversifying Plum Creek's
timberlands, including the acquisition of timberlands. Plum Creek's management
has analyzed opportunities for consolidation in the business of owning and
managing timberlands, and has discussed such matters with its board of
directors, its financial advisors and other owners or managers of timberlands.
Plum Creek's conversion from a master limited partnership into a publicly traded
REIT on July 1, 1999, was undertaken, in part, to enhance Plum Creek's ability
to compete for strategic acquisition opportunities.
Similarly, Georgia-Pacific's board of directors and Georgia-Pacific's
management have from time to time considered various strategic transactions with
various parties, including Plum Creek, as part of Georgia-Pacific's long-term
strategy to strengthen Georgia-Pacific's portfolio of businesses by divesting or
exiting non-strategic businesses, acquiring businesses which are high
value-added and that position Georgia-Pacific closer to its customers, and
continuing to build and strengthen its tissue business. Additionally,
Georgia-Pacific has analyzed opportunities to expand and diversify The Timber
Company's timberlands and enhance the value of its timber business.
In spring 1999, Plum Creek's management reviewed the advisability and
possibility of acquiring The Timber Company. It was the consensus of Plum
Creek's management that acquiring The Timber Company was consistent with Plum
Creek's strategy of expanding and diversifying its holdings of timberlands.
Accordingly, in June 1999, Rick R. Holley, President and Chief Executive Officer
of Plum Creek, telephoned Alston D. Correll, Chairman, President and Chief
Executive Officer of Georgia-Pacific, to schedule a meeting to discuss exploring
strategic alternatives involving Plum Creek and The Timber Company. On July 8,
1999, Mr. Holley met with Mr. Correll and raised the possibility of a business
combination transaction between Plum Creek and The Timber Company. Mr. Holley
and Mr. Correll also discussed the potential business benefits and possible
structure of a business combination transaction.
During the week of July 12, 1999, Mr. Correll telephoned Mr. Holley and
suggested that a subsequent meeting between the two of them be scheduled for
August 2, 1999 to discuss a possible business combination transaction in more
detail.
On July 29, 1999, Goldman Sachs made a presentation to members of Plum Creek
management concerning The Timber Company and various aspects of a possible
business combination transaction with The Timber Company.
On August 2, 1999, Messrs. Holley and Correll met in Vancouver, British
Columbia where they began discussing, among other things, the value of a
proposed business combination, a possible structure for such combination, the
possibility of long term fiber supply agreements, corporate governance and other
issues related to a possible combination of Plum Creek and The Timber Company.
Following this meeting, Mr. Correll telephoned Mr. Holley to further discuss
the proposed business combination. During this telephone call they agreed that
representatives of both companies should begin to consider and analyze the
various issues related to combining the two companies to determine the
advisability and feasibility of either party pursuing the transaction. No
further meetings were scheduled to discuss the proposed business combination
transaction.
Between September 1999 and November 1999, Plum Creek's management and
Goldman Sachs had internal discussions about various aspects of a possible
business combination between Plum Creek and The Timber Company. On September 1,
1999, Georgia-Pacific formally engaged Morgan Stanley to assist in its
evaluation of a potential transaction with Plum Creek. Also during this time,
tax counsel
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and representatives of both companies held a series of discussions in which they
discussed and analyzed possible transaction structures for combining the two
companies in a tax-efficient manner.
On November 11, 1999, Messrs. Holley and Correll had an unscheduled meeting
at an industry convention and had discussions concerning the proposed business
combination transaction. Following this meeting, Mr. Correll telephoned
Mr. Holley and informed him that Georgia-Pacific had decided not to continue to
pursue the proposed business combination transaction between Plum Creek and The
Timber Company.
On December 1, 1999, Mr. Holley wrote a letter to Mr. Correll noting that a
business combination involving Plum Creek and The Timber Company would benefit
the shareholders of both companies. The benefits listed included the realization
of operational and managerial synergies and the holders of Timber Company common
stock potentially realizing greater market liquidity. Additionally, Mr. Holley
discussed the possibility of (1) providing for Georgia-Pacific representation on
Plum Creek's board of directors and (2) addressing Georgia-Pacific's concerns
regarding its fiber supply by having the parties enter into a mutually
acceptable long-term fiber supply agreement.
In response to Mr. Holley's letter, Mr. Correll telephoned Mr. Holley to
express an interest in resuming discussions regarding the proposed business
combination transaction between Plum Creek and The Timber Company.
After discussing matters with other officers of Georgia-Pacific, Mr. Correll
decided that it would be appropriate to meet with members of the Georgia-Pacific
board of directors to discuss the possibility of a business combination with
Plum Creek in greater detail. As a result, between January 10 and January 20,
2000, Mr. Correll and Mr. Danny W. Huff, Executive Vice President and Chief
Financial Officer of Georgia-Pacific, held meetings with each member of
Georgia-Pacific's board of directors to, among other things, provide a general
overview of REITs and a specific description of Plum Creek, outline relevant
considerations in a possible business combination between Plum Creek and The
Timber Company, and address concerns about Georgia-Pacific's ability to maintain
a sufficient fiber supply for its manufacturing operations. Following these
individual briefings, at a meeting held on January 21, 2000, Georgia-Pacific's
board of directors decided that Georgia-Pacific should pursue further
conversations with Plum Creek.
On February 7, 2000, the parties entered into a reciprocal confidentiality
agreement and thereafter exchanged confidential information regarding the
businesses and operations of Plum Creek and The Timber Company.
On February 18, 2000, March 14, 2000 and March 17, 2000, the parties and
their financial advisors discussed the terms of the proposed business
combination transaction, including a possible exchange ratio, the structure of
the proposed business combination, the incurrence by Plum Creek of indebtedness
attributed by Georgia-Pacific to The Timber Company and other issues related to
the combination of Plum Creek and The Timber Company.
Following the meetings in February and March, Georgia-Pacific's senior
management determined that the exchange ratio offered by Plum Creek was
inadequate. Accordingly, on May 2, 2000, Georgia-Pacific's board of directors
recommended that Georgia-Pacific not pursue further discussions with Plum Creek
unless they raised their exchange ratio.
On May 26, 2000, Mr. Holley telephoned Mr. Correll and proposed a higher
exchange ratio and on June 5, 2000, Plum Creek informed Georgia-Pacific that it
was willing to increase its proposed exchange ratio and began detailed due
diligence on The Timber Company on or about June 15, 2000. On or about June 26,
2000, Plum Creek delivered to Georgia-Pacific its proposed terms for the merger
of The Timber Company into Plum Creek. The proposed terms provided, among other
things, that Plum Creek would (1) exchange 1.37 shares of Plum Creek common
stock for each Unit received in connection with the redemption of each
outstanding share of Timber Company common stock and (2) incur up to $1 billion
of debt to replace indebtedness attributed by Georgia-Pacific to The Timber
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Company. It was understood between the parties that the proposed terms were
subject to further negotiations.
At a meeting of Georgia-Pacific's governance committee held on June 26,
2000, Mr. Correll reviewed previous discussions with the board of directors and
the governance committee regarding a possible transaction between Plum Creek and
The Timber Company, and informed the governance committee that Georgia-Pacific
and Plum Creek had resumed discussions regarding a proposed transaction
involving The Timber Company. Mr. Correll noted that Plum Creek was offering an
exchange ratio of 1.37 shares of Plum Creek common stock for each share of
Timber Company common stock. Mr. Correll then described the structure of the
proposed transaction. Georgia-Pacific's governance committee was formed in 1997
in connection with the issuance of the "letter stock" to address, among other
things, any potential conflict of interests between the holders of Timber
Company common stock and the holders of Georgia-Pacific
Corporation-Georgia-Pacific Group common stock, which we will refer to as
"Georgia-Pacific Group common stock." The governance committee is comprised
solely of independent directors.
At a meeting held on June 29, 2000, Mr. Correll briefed Georgia-Pacific's
governance committee on the status of negotiations with Plum Creek and the
various issues yet to be agreed upon. The committee then received a presentation
from Morgan Stanley regarding its analysis of various aspects of the proposed
transaction. In addition, Georgia-Pacific's outside legal advisors reviewed the
proposed legal terms and conditions of the transaction that would be included in
the merger agreement and the legal duties and responsibilities of
Georgia-Pacific's board of directors in connection with the proposed
transaction.
At a meeting held on June 29, 2000, Georgia-Pacific's board of directors
ratified the actions taken by the governance committee with respect to the
proposed transaction and delegated its authority to, and otherwise authorized,
the Georgia-Pacific governance committee to consider and determine whether the
redemption of Timber Company common stock and the mergers are advisable and fair
to, and in the best interests of, Georgia-Pacific and its shareholders, taken as
a whole. Georgia-Pacific's board of directors further authorized the governance
committee to take any and all actions necessary and advisable in the discretion
of such committee to make such determination.
From the end of June 2000 and continuing through mid July 2000, Plum Creek,
Georgia-Pacific, including several key employees of Georgia-Pacific who were
responsible for the operations of The Timber Company, and their respective
legal, financial and accounting advisors finalized their respective due
diligence review of Plum Creek and The Timber Company.
On July 5, 2000, Skadden, Arps, Slate, Meagher & Flom, LLP, special counsel
to Plum Creek, delivered to Georgia-Pacific and its advisors a draft merger
agreement.
On July 10, 2000, Plum Creek's board of directors held a special meeting to
review and consider the proposed terms of the merger agreement, including the
proposed exchange ratio. Mr. Holley gave an overview of The Timber Company and
the objectives and strategic benefits of the proposed business combination
transaction. At the same board meeting, William R. Brown, Executive Vice
President and Chief Financial Officer of Plum Creek, gave a financial overview
of both Plum Creek and The Timber Company. Goldman Sachs made a presentation to
the board of directors and discussed its view and analysis of The Timber Company
and various aspects of the proposed business combination transaction. Skadden
Arps reviewed the proposed legal terms and conditions of the draft merger
agreement and the legal duties and responsibilities of Plum Creek's board of
directors in connection with the proposed business combination transaction.
From July 12 through July 16, 2000, representatives of Plum Creek and
Georgia-Pacific met in Chicago, Illinois to negotiate the terms of the draft
merger agreement and related documents. From July 17 through July 18, 2000,
representatives of Plum Creek and Georgia-Pacific negotiated the terms of the
draft merger agreement and related documents by telephone.
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Georgia-Pacific stated that as a condition to Georgia-Pacific entering into
the merger agreement, Georgia-Pacific would insist that PC Advisory Partners I,
L.P. and PC Intermediate Holdings, L.P., the holders of all of the outstanding
shares of Plum Creek special voting common stock, enter into a voting agreement
and consent pursuant to which such holders would have to agree to, among other
things:
- vote to approve the merger agreement and the transactions contemplated by
the merger agreement;
- convert all of their shares of Plum Creek special voting common stock into
shares of Plum Creek common stock; and
- permanently and irrevocably waive any and all rights to designate more
than three nominees to Plum Creek's board of directors.
Extensive negotiations took place from about July 10 to July 18, 2000 between
representatives of PC Advisory Partners I, PC Intermediate Holdings, Plum Creek
and Georgia-Pacific. On July 18, 2000, PC Advisory Partners I and PC
Intermediate Holdings agreed to enter into a voting agreement and consent. See
"Ancillary Arrangements--Voting Agreement and Consent" beginning on page 75.
At a meeting held on July 17, 2000, the Georgia-Pacific governance committee
determined, after presentations from, and discussions with, both senior
management of Georgia-Pacific and Georgia-Pacific's outside financial and legal
advisors, that the redemption of all of the outstanding shares of Timber Company
common stock, the mergers, the terms of the merger agreement and the terms of
the separation agreement were fair to and in the best interests of
Georgia-Pacific and its shareholders, taken as a whole. The governance committee
recommended that Georgia-Pacific's board of directors approve the redemption of
all of the outstanding shares of Timber Company common stock and the mergers and
take such steps as it deemed necessary or advisable to consummate the proposed
transaction, including the mergers and the redemption of all of the outstanding
shares of Timber Company common stock, and the transactions contemplated
thereby, subject in each case to obtaining a favorable private letter ruling
from the Internal Revenue Service. The governance committee further recommended
to Georgia-Pacific's board of directors that the merger agreement be submitted
to the holders of Timber Company common stock for their approval and adoption.
On July 17, 2000, Plum Creek's board of directors met informally with Plum
Creek's management and legal and financial advisors. Plum Creek's board of
directors received a report of the negotiations that had taken place with
Georgia-Pacific during the previous week and the changes to the proposed terms
of the merger agreement that resulted from those negotiations.
On July 18, 2000, Plum Creek's board of directors held a regular meeting at
which its legal advisors reviewed the principal terms of the proposed merger
agreement. At this meeting, Goldman Sachs presented its financial analysis of
the proposed business combination transaction. Goldman Sachs also delivered its
oral opinion, subsequently confirmed in writing, that, based upon and subject to
the various considerations set forth in its written opinion, as of July 18,
2000, the date of the merger agreement, the exchange ratio was fair from a
financial point of view to Plum Creek. Plum Creek's management once again
reviewed the objectives and strategic benefits of the proposed mergers.
After discussion, Plum Creek's board of directors, among other things,
unanimously:
- determined that the merger agreement and the transactions contemplated by
the merger agreement are advisable and in the best interests of Plum Creek
and its stockholders;
- approved the mergers and the other transactions contemplated by the merger
agreement;
- accepted, approved, authorized and adopted the form, terms and provisions
of the merger agreement and the various agreements contemplated by the
merger agreement;
- recommended that the Plum Creek stockholders vote to approve the merger
agreement and the transactions contemplated by the merger agreement; and
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- approved the amendment to Plum Creek's certificate of incorporation to
eliminate the requirement of a classified board of directors and
recommended that the Plum Creek stockholders vote to approve this
amendment.
At a meeting of Georgia-Pacific's board of directors held on July 18, 2000:
- the governance committee reviewed and recommended the transaction to the
board of directors;
- Morgan Stanley presented a summary of the analyses performed by Morgan
Stanley in connection with rendering its fairness opinion to
Georgia-Pacific's board of directors;
- outside legal advisors described the board's obligations under Georgia law
to Georgia-Pacific and its shareholders and reviewed the key terms of the
merger agreement; and
- Mr. Correll described certain material aspects of the transaction.
Following such presentations, Georgia-Pacific's board of directors, among
other things, unanimously:
- concluded that the redemption of the outstanding shares of Timber Company
common stock, the mergers, the merger agreement and the separation
agreement were advisable and fair to, and in the best interest of,
Georgia-Pacific and its shareholders, taken as a whole;
- approved, ratified and adopted the redemption of the outstanding shares of
Timber Company common stock, the mergers and the consummation of the
transactions contemplated by the merger agreement, the separation
agreement and the various agreements contemplated thereby, subject in each
case to obtaining a favorable private letter ruling from the Internal
Revenue Service;
- approved the form, terms and provisions of the merger agreement and the
separation agreement and the consummation of the transactions contemplated
thereby;
- determined in good faith, pursuant to Georgia-Pacific's articles of
incorporation, that the redemption of the outstanding shares of Timber
Company common stock constitutes a redemption of Timber Company common
stock within the meaning of Georgia-Pacific's articles of incorporation;
- directed the officers of Georgia-Pacific to submit the merger agreement to
the holders of Timber Company common stock for their approval;
- recommended that the holders of Timber Company common stock vote to
approve the merger agreement; and
- resolved that Georgia-Pacific, as the sole stockholder of each of the
Subsidiaries, would approve the merger agreement, subject to obtaining a
favorable private letter ruling from the Internal Revenue Service.
On July 18, 2000, following the approval of the boards of directors of Plum
Creek and Georgia-Pacific, the parties executed the merger agreement. The
parties issued a joint press release announcing the execution of the merger
agreement shortly after the close of trading on July 18, 2000.
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RECOMMENDATION OF PLUM CREEK'S BOARD OF DIRECTORS; PLUM CREEK'S REASONS FOR THE
MERGERS
Plum Creek's board of directors has unanimously determined that the mergers
are in the best interests of Plum Creek and its stockholders and has approved
the merger agreement and the transactions contemplated by the merger agreement.
Plum Creek's board of directors unanimously recommends that Plum Creek
stockholders vote FOR the merger agreement and the transactions contemplated by
the merger agreement.
In evaluating the merger agreement and the transactions contemplated by the
merger agreement, the board of directors considered all relevant factors and
information, including the following:
- the fact that the mergers will create the second largest private
timberland owner based on holdings in the United States with:
- over 7.9 million acres of commercial timberland;
- ownership of timberlands in 19 states with a strong presence in the
southern United States; and
- a team of proven senior management with a record of enhancing
stockholder value while maintaining an industry leading commitment to
environmental stewardship;
- the enhancement of the strategic and market position of Plum Creek after
acquiring The Timber Company, which might not have been achievable by Plum
Creek alone;
- the fact that the mergers will expand Plum Creek's customer base and
create new revenue sources given the complementary nature of the
businesses of Plum Creek and The Timber Company;
- the opportunities for cost reductions by integrating the two companies'
operations and by eliminating redundant overhead costs and duplicate
sales, marketing and administrative functions;
- the presentation concerning financial aspects of the proposed mergers made
to Plum Creek's board of directors by Goldman Sachs and the oral opinion,
later confirmed in writing, delivered by Goldman Sachs to Plum Creek's
board that, based upon and subject to the various considerations set forth
in the written opinion of Goldman Sachs, as of the date of the opinion,
the exchange ratio pursuant to the merger agreement was fair from a
financial point of view to Plum Creek (see "--Opinion of Financial Advisor
to Plum Creek");
- the due diligence review conducted with respect to The Timber Company's
business, operations, and competitive position;
- the presentations by, and discussions with, senior management of Plum
Creek and its in-house and outside legal advisors regarding the terms of
the merger agreement, including the closing conditions, Plum Creek's
ability under certain conditions to consider unsolicited alternative
business combination proposals, and Plum Creek and Georgia-Pacific's
ability to terminate the merger agreement under certain conditions;
- the expectation that the mergers would be accretive to Plum Creek's cash
flow and earnings;
- the fact that as of July 14, 2000 the value of Plum Creek common stock to
be issued in the mergers represented a 61% premium to Timber Company
common stock's per share closing price as of July 14, 2000, a 46% premium
to the six month average trading price of Timber Company common stock; and
a 49% premium to the one-year and 58% premium to the two-year average
trading price of Timber Company common stock;
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- the fact that the value of the Plum Creek shares to be received by the
holders of Timber Company common stock may increase or decrease as a
result of fluctuations in the price of Plum Creek shares and that any such
increase or decrease in value will not be limited by any "collar"
arrangement;
- the fact that the former holders of Timber Company common stock will hold
approximately 61% of the outstanding shares of Plum Creek common stock
after the completion of the mergers;
- the expected composition of Plum Creek's management after the mergers,
which will consist of substantially all of the current Plum Creek officers
and several key employees of Georgia-Pacific who were responsible for the
operations of the timber business;
- the composition of the board of directors after the mergers, which will
consist of eight current Plum Creek directors and up to three individuals
designated by Georgia-Pacific who are reasonably acceptable to Plum Creek;
- the ability of Plum Creek to operate the business of The Timber Company on
a more tax-efficient basis than Georgia-Pacific;
- the fact that the mergers will be qualified as reorganizations under the
Internal Revenue Code in which the holders of Timber Company common stock
will generally not recognize any gain or loss;
- the exchange ratio in relation to the historical and market trading prices
for Plum Creek common stock and Timber Company common stock;
- information concerning the businesses, assets, liabilities, results of
operations, financial conditions and competitive positions and prospects
of Plum Creek and of The Timber Company, in each case, before and after
the mergers;
- the current and prospective environment in which Plum Creek operates;
- the fact that the benefits of Plum Creek's and The Timber Company's
long-term prospects will be shared by all Plum Creek stockholders,
including existing holders of Timber Company common stock;
- the probability that harvesting timber from The Timber Company's
timberlands would not be subject to tax on built-in-gains following
completion of the mergers. See "The Mergers--Certain Tax Consequences of
the Mergers" beginning on page 53;
- the fact that Plum Creek will enter into a ten-year timber supply contract
with Georgia-Pacific, with an automatic extension for an additional ten
years, unless either party delivers a timely termination notice, on terms
substantially similar to the terms of the ten-year supply contract
currently in place between Georgia-Pacific and The Timber Company, which
would provide Georgia-Pacific with continued access to The Timber
Company's fiber in key fiber basins at negotiated market prices, and also
provide Plum Creek with a steady long-term customer;
- the parties' representations, warranties, covenants and agreements in the
merger agreement, including the circumstances under which a termination
fee would be paid and the amount of the fee;
- the ability of Plum Creek's board of directors to enter into discussions
with another party in response to an unsolicited offer if Plum Creek's
board of directors determines in good faith that entering into these
discussions is necessary for it to comply with its fiduciary duties to its
stockholders;
- the regulatory approvals required to complete the mergers and the
prospects for receiving those approvals;
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- the willingness of PC Advisory Partners I, L.P. and PC Intermediate
Holdings, L.P., who together are the largest holders of Plum Creek common
stock and the holders of all of the outstanding shares of Plum Creek
special voting common stock, to agree, subject to specified conditions, to
vote in favor of the merger agreement and the transactions contemplated by
the merger agreement and to convert all of their shares of Plum Creek
special voting common stock into Plum Creek common stock immediately prior
to the completion of the mergers; and
- the fact that the approval of the merger agreement and the transactions
contemplated by the merger agreement requires the affirmative vote of a
majority of the outstanding shares of Plum Creek common stock and special
voting common stock, voting together as a class, and a majority of the
outstanding shares of special voting stock, voting separately as a class.
- the incurrence by Plum Creek of approximately $1 billion of debt,
exclusive of the value of a $350 million note receivable, which is
expected to be monetized prior to consummation of the mergers, to
extinguish debt attributed to The Timber Company;
- the charges to be incurred in connection with the mergers, including costs
of integrating the businesses and transaction expenses arising from the
mergers;
- the potential adverse effects on Plum Creek's business, operations and
financial condition if the mergers are not completed following public
announcement of the merger agreement;
- the fact that the Plum Creek stockholders will not be entitled to
appraisal or dissenters' rights under Delaware law in connection with the
merger agreement and the transactions contemplated by the merger
agreement;
- the risks that the integration of The Timber Company's operations and
employees might not occur in a timely and efficient manner;
- the fact that an agreement will be entered into between Georgia-Pacific
and Plum Creek at the time of the mergers which will limit Plum Creek's
Southern manufacturing operations from competing with Georgia-Pacific's
operations in key fiber basins;
- the fact that for 24 months following the completion of the mergers,
Georgia-Pacific could incur substantial tax liability, which would give
rise to an indemnity obligation on the part of Plum Creek pursuant to the
terms of the tax matters agreement, if Plum Creek issues shares of common
stock in such an amount that the former holders of Timber Company common
stock would no longer own a majority of the outstanding shares of Plum
Creek common stock;
- the possibility of a delayed closing due to the need for a private letter
ruling from the Internal Revenue Service to the effect that the redemption
of Timber Company common stock, followed by the mergers, will be tax free
to Georgia-Pacific and the holders of Timber Company common stock and the
possibility of not being able to obtain such private letter ruling from
the Internal Revenue Service;
- the possibility that Plum Creek may have to make a special distribution in
2001 to its stockholders over and above the normal dividend as a result of
earnings and profits attributable to The Timber Company;
- the risk that, despite its best efforts, Plum Creek may not retain key
management personnel of Georgia-Pacific that operate the business of The
Timber Company after the completion of the mergers;
- the risk that the potential benefits sought in the mergers might not be
fully realized; and
- the risk that potential growth strategies might not be fully achieved.
33
<PAGE>
The Plum Creek board of directors believed that the risks of the transaction
were outweighed by the potential benefits of the mergers.
This discussion is not intended to be exhaustive, but Plum Creek believes
that this discussion includes all significant factors considered by Plum Creek's
board of directors. In light of the number and variety of information and
factors considered, Plum Creek's board of directors did not find it practicable
to, and did not, assign any specific or relative weights to the factors listed
above.
RECOMMENDATION OF GEORGIA-PACIFIC'S BOARD OF DIRECTORS; GEORGIA-PACIFIC'S
REASONS FOR THE MERGERS
Georgia-Pacific's board of directors has unanimously determined that the
redemption of all of the outstanding shares of Timber Company common stock and
the mergers are advisable and fair to, and in the best interests of,
Georgia-Pacific and its shareholders, taken as a whole, and has approved the
redemption, the merger agreement and the transactions contemplated by the merger
agreement. Georgia-Pacific's board of directors unanimously recommends that the
holders of Timber Company common stock vote FOR the merger agreement.
In evaluating the merger agreement and the transactions contemplated by the
merger agreement, Georgia-Pacific's board of directors considered all relevant
factors and information, including the following:
- the judgment, advice and analyses of Georgia-Pacific's senior management,
including its favorable recommendation of the redemption of the shares of
Timber Company common stock and the mergers;
- the board of directors' knowledge and consideration of the businesses,
operations, financial conditions, results of operations, competitive
positions and prospects of The Timber Company and Georgia-Pacific's
manufacturing and distribution business, which we will refer to as the
"Georgia-Pacific Group," and the nature of the industries in which The
Timber Company and the Georgia-Pacific Group operate, both on an
historical and prospective basis, and the influence of current industry,
economic and market conditions;
- the fact that the mergers create the second largest United States private
timberland owner with:
- over 7.9 million acres of commercial timberland;
- ownership of timberlands in 19 states with a strong presence in the
southern United States; and
- a team of proven senior management with a record of enhancing
stockholder value while maintaining an industry leading commitment to
environmental stewardship;
- the due diligence review which had been conducted with respect to Plum
Creek's business, operations, and competitive position and the potential
operating efficiencies and synergies that are expected to result from the
mergers and would inure to the benefit of the former holders of Timber
Company common stock, who would become stockholders of Plum Creek by
reason of the mergers;
- Morgan Stanley's presentations, including Morgan Stanley's opinion that,
as of July 18, 2000, and based upon and subject to the various
considerations set forth in its opinion, (1) the redemption of the shares
of Timber Company common stock and the mergers are fair from a financial
point of view to Georgia-Pacific and (2) the exchange ratio is fair from a
financial point of view to the holders of Timber Company common stock (see
"--Opinion of Financial Advisor to Georgia-Pacific");
- the presentations by, and discussions with, senior management of
Georgia-Pacific and its in-house and outside legal advisors regarding the
merger agreement's and the separation
34
<PAGE>
agreement's terms, including the closing conditions, Georgia-Pacific's
ability under certain conditions to consider unsolicited alternative
business combination proposals, and Georgia-Pacific and Plum Creek's
ability to terminate the merger agreement under certain conditions;
- the expectation that the mergers would be accretive to Plum Creek's cash
flow and earnings;
- the board of directors' belief that The Timber Company's value was not
reflected in the market price of Timber Company common stock and that the
redemption and the mergers would create more value to the holders of
Timber Company common stock and provide them with an opportunity to hold
an investment in a larger enterprise than would an alternate transaction,
such as a spinoff of The Timber Company to the holders of Timber Company
common stock;
- the board of directors' conclusion that the mergers would provide holders
of Timber Company common stock the opportunity for continued equity
participation in a larger entity with potentially increased market
liquidity;
- the board of directors' belief that the complete separation of the
Georgia-Pacific Group and The Timber Company would allow management of
each of Georgia-Pacific and Plum Creek, following the mergers, to focus on
achieving their respective strategic objectives to an extent that may not
be achievable by Georgia-Pacific in the current "letter stock" structure;
- the exchange ratio in relation to the historical and market trading prices
for Timber Company common stock and Plum Creek common stock and The Timber
Company's relative contribution to the combined enterprise, including:
- that as of July 14, 2000 the value of Plum Creek common stock to be
issued in the mergers represented a 61% premium to Timber Company
common stock's per share closing price as of July 14, 2000, a 46%
premium to the six month average trading price of Timber Company common
stock; and a 49% premium to the one-year and 58% premium to the
two-year average trading price of Timber Company common stock;
- that the former holders of Timber Company common stock will own over
61% of the outstanding shares of common stock of Plum Creek after the
mergers; and
- the fact that Plum Creek's per share dividend as of July 18, 2000 was
228% of The Timber Company's per share dividend;
- the fact that the value of the Plum Creek shares to be received by the
holders of Timber Company common stock may increase or decrease as a
result of fluctuations in the price of Plum Creek shares and that any such
increase or decrease in value will not be limited by any "collar"
arrangement;
- the fact that a condition to the redemption of the shares of Timber
Company common stock and the mergers requires that the holders of Timber
Company common stock approve the transaction following receipt of the
Internal Revenue Service private letter ruling;
- the board of directors' belief, after review of the termination fee with
its advisors, that the amount of the termination fee would not
meaningfully impair the possibility of a competing transaction;
- the fact that Georgia-Pacific has the ability to terminate the merger
agreement without paying a termination fee if:
- there has been any event, occurrence or condition which would
reasonably be expected to have a material adverse effect on, among
other things, the business or operations of Plum Creek;
35
<PAGE>
- the requisite approval of the holders of Timber Company common stock is
not obtained at a time when there has not been a public announcement of
a proposal for an alternate transaction; or
- a favorable private letter ruling from the Internal Revenue Service is
not obtained.
- the willingness of PC Advisory Partners I, L.P. and PC Intermediate
Holdings, L.P., who together are the largest holders of Plum Creek common
stock and the holders of all of the outstanding shares of Plum Creek
special voting common stock, to agree, subject to specified conditions, to
vote in favor of the merger agreement and the transactions contemplated by
the merger agreement and to convert all of their shares of Plum Creek
special voting common stock into Plum Creek common stock immediately prior
to the completion of the mergers;
- the fact that the mergers will be accomplished on a tax-free basis to
holders of Timber Company common stock and to Georgia-Pacific for U.S.
Federal income tax purposes;
- the ability of Plum Creek to operate the business of The Timber Company on
a more tax-efficient basis than Georgia-Pacific;
- the impact of the mergers on employees, including provisions of the merger
agreement intended to protect employee benefits and to encourage the
retention of officers and employees;
- the fact that the benefits of The Timber Company's long-term prospects
will be shared by all Plum Creek stockholders, including the existing
holders of Timber Company common stock, rather than solely by the existing
holders of Timber Company common stock;
- the interests of some of Georgia-Pacific's directors and management in the
mergers as described in "Interests of Directors and Officers in the
Mergers" on page 55;
- the possibility of a delayed closing due to the need for a private letter
ruling from the Internal Revenue Service to the effect that the redemption
of Timber Company common stock will be tax free to Georgia-Pacific and the
holders of Timber Company common stock;
- the possibility of not being able to obtain such private letter ruling
from the Internal Revenue Service; and
- the fact that fewer assets will be available to satisfy Georgia-Pacific's
remaining, but reduced, debt obligations.
In addition to the factors above, certain of which relate to the impact of
the transaction on both The Timber Company and the Georgia-Pacific Group, and
their respective shareholders, Georgia-Pacific's board of directors considered
various factors relating to the impact of the mergers solely on the
Georgia-Pacific Group and the holders of Georgia-Pacific Group common stock,
including the following material factors:
- the reduction of approximately $1.0 billion of Georgia-Pacific debt
attributed to The Timber Company;
- that the investment grade debt rating of the Georgia-Pacific Group is
expected to be preserved following the mergers;
- that the elimination of the "letter" stock structure as a result of the
mergers would simplify Georgia-Pacific's capital structure and would
provide Georgia-Pacific with greater flexibility to pursue acquisitions;
- that an agreement will be entered into between Georgia-Pacific and Plum
Creek at the time of the mergers which will limit Plum Creek's Southern
manufacturing operations from competing with Georgia-Pacific Group's
manufacturing operations in key fiber basins for up to ten years;
36
<PAGE>
- the board of directors' conclusion that the Georgia-Pacific Group has
adequate sources of timber and could procure timber efficiently on the
open market and, therefore, it was not necessary to own its timberlands in
order to efficiently and effectively operate Georgia-Pacific Group's
manufacturing operations and protect Georgia-Pacific Group's competitive
position;
- that at present the Georgia-Pacific Group purchases only about 19% of its
fiber needs from The Timber Company and only a few mills rely on The
Timber Company for 25% or more of their fiber needs and most of such mills
are covered by the ten-year timber supply contract referred to below;
- that Plum Creek will enter into a ten-year timber supply contract with
Georgia-Pacific, with an automatic extension for an additional ten years,
unless either party delivers a timely termination notice, on terms
substantially similar to the terms of the ten-year supply contract
currently in place between Georgia-Pacific and The Timber Company to
ensure continued access to The Timber Company's fiber in key fiber basins
at market prices;
- the belief that the mergers will reinforce Georgia-Pacific's reputation
among investors as a shareholder value driven company;
- that the transaction will allow existing management to focus on its
manufacturing operations and the new strategic direction announced in
connection with the contemplated transaction involving Georgia-Pacific and
Fort James Corporation, which we will refer to as the "Fort James
transaction";
- the belief that the mergers were consistent with Georgia-Pacific's effort
to reduce its exposure to commodity-based businesses;
- that for a period of 24 months following the closing of the mergers, a
change of control of Georgia-Pacific or the issuance by Georgia-Pacific of
shares in such an amount that Georgia-Pacific's shareholders on the date
of the closing of the mergers would no longer own a majority of the
outstanding shares of Georgia-Pacific capital stock at the time of either
such event could, in each case, result in a substantial tax liability to
Georgia-Pacific; and
- the elimination of any potential board of directors conflict of interest
that may arise in a letter stock structure.
This discussion is not intended to be exhaustive, but Georgia-Pacific
believes that this discussion includes all material factors considered by
Georgia-Pacific's board of directors. In light of the number and variety of
information and factors Georgia-Pacific's board of directors considered, the
board of directors did not find it practicable to, and did not, assign any
specific or relative weights to the factors listed above.
37
<PAGE>
OPINION OF FINANCIAL ADVISOR TO PLUM CREEK
On July 18, 2000, Goldman, Sachs & Co. delivered its oral opinion to Plum
Creek's board of directors that, as of that date, based upon and subject to the
various considerations set forth in the opinion, the exchange ratio pursuant to
the merger agreement was fair from a financial point of view to Plum Creek.
Goldman Sachs subsequently confirmed its oral opinion by delivery of its written
opinion, dated July 18, 2000.
THE FULL TEXT OF THE FAIRNESS OPINION OF GOLDMAN SACHS, DATED JULY 18, 2000,
WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED,
AND LIMITATIONS ON THE REVIEW UNDERTAKEN, BY GOLDMAN SACHS IN CONNECTION WITH
ITS OPINION, IS ATTACHED AS ANNEX B AND IS INCORPORATED BY REFERENCE INTO THIS
JOINT PROXY STATEMENT/PROSPECTUS. PLUM CREEK STOCKHOLDERS ARE URGED TO, AND
SHOULD, READ THE OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- drafts of the merger agreement;
- drafts of the separation agreement;
- the annual report to stockholders and annual report on Form 10-K of Plum
Creek for the year ended December 31, 1999;
- annual reports to unitholders and annual reports on Form 10-K of Plum
Creek Timber Company, L.P., a predecessor of Plum Creek, for each of the
four years ended December 31, 1998;
- the registration statement on Form S-4 of Plum Creek, dated January 28,
1999;
- the separate annual reports to the holders of Timber Company common stock
and the holders of Georgia-Pacific Group common stock for each of the
three years ended December 31, 1999;
- annual reports to shareholders of Georgia-Pacific for each of the two
years ended December 31, 1996;
- annual reports on Form 10-K of Georgia-Pacific for each of the five years
ended December 31, 1999;
- interim reports to holders of shares or units and quarterly reports on
Form 10-Q of Plum Creek, Plum Creek Timber Company, L.P. and
Georgia-Pacific;
- other communications from Plum Creek, Plum Creek Timber Company L.P. and
Georgia-Pacific to the holders of their respective shares or units;
- internal financial analyses and forecasts for The Timber Company prepared
by its management;
- internal financial analyses and forecasts for Plum Creek prepared by its
management;
- financial analyses and forecasts for The Timber Company prepared by Plum
Creek's management; and
- cost savings and operating synergies projected by the managements of Plum
Creek and The Timber Company to result from the mergers.
In addition, Goldman Sachs:
- held discussions with members of the senior management of Plum Creek,
Georgia-Pacific and The Timber Company regarding their assessment of the
strategic rationale for, and the potential benefits of, the mergers and
the past and current business operations, financial condition and future
prospects of Plum Creek and The Timber Company;
38
<PAGE>
- reviewed the reported price and trading activity for Plum Creek common
stock and Timber Company common stock;
- compared financial and stock market information for Plum Creek and The
Timber Company with similar information for other selected companies the
securities of which are publicly traded;
- reviewed the financial terms of selected recent business combinations in
the timber industry specifically and in other industries generally; and
- performed other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed the
accuracy and completeness of this information for purposes of rendering its
opinion. In that regard, Goldman Sachs assumed, with the consent of Plum Creek's
board of directors, that:
- the financial analyses and forecasts for Plum Creek and The Timber Company
prepared by Plum Creek's management and the cost savings and operating
synergies projected by the managements of Plum Creek and The Timber
Company to result from the mergers were reasonably prepared on a basis
reflecting the best available estimates and judgments of Plum Creek's
management;
- the projected cost savings and operating synergies will be realized in the
amounts and time periods contemplated;
- no gain will be recognized for Federal income tax purposes by the
Subsidiaries or Plum Creek as a result of the separation of the assets and
liabilities of The Timber Company into the Subsidiaries and the redemption
of all of the outstanding shares of Timber Company common stock; and
- the separation of the assets and liabilities of The Timber Company into
the Subsidiaries and the redemption of all of the outstanding shares of
Timber Company common stock and the mergers will be completed in
accordance with the terms, without the waiver of any material conditions,
of the merger agreement and the separation agreement as in effect on
July 18, 2000.
In addition, with the consent of Plum Creek's board of directors, Goldman
Sachs relied upon the advice Plum Creek has received from its legal counsel,
accountants and tax advisors as to all legal, accounting and tax matters
relating to the transactions contemplated by the merger agreement and the
separation agreement, including that:
- the mergers will be treated for Federal income tax purposes as a
reorganization within the meaning of section 368(a) of Internal Revenue
Code, and Georgia-Pacific and the Subsidiaries will each be party to that
reorganization;
- after the mergers are completed, Plum Creek will continue to qualify and
be treated as a REIT for Federal income tax purposes; and
- principles similar to section 1374 of the Internal Revenue Code will not
apply to the cutting of timber transferred by the Subsidiaries to Plum
Creek as a result of the mergers during the ten years after the mergers
are completed.
Goldman Sachs has not made an independent evaluation or appraisal, and has
not been furnished with any evaluation or appraisal, of the assets and
liabilities of Plum Creek or any of its subsidiaries or The Timber Company.
Goldman Sachs' advisory services and its opinion were provided for the
information and assistance of Plum Creek's board of directors in connection with
its consideration of the mergers. Goldman Sachs' opinion does not constitute a
recommendation as to how any Plum Creek stockholder should vote with respect to
the mergers.
39
<PAGE>
The following is a summary of the material financial analyses presented to
Plum Creek's board of directors by Goldman Sachs on July 18, 2000. It does not
purport to be a complete description of the analyses performed by Goldman Sachs.
The order of the analyses described, and the results of those analyses, do not
represent the relative importance or weight given to those analyses by Goldman
Sachs.
THE FOLLOWING SUMMARY INCLUDES INFORMATION PRESENTED IN TABULAR FORMAT. YOU
SHOULD READ THESE TABLES TOGETHER WITH THE TEXT OF EACH SUMMARY.
(1) SELECTED COMPANIES ANALYSIS. Goldman Sachs reviewed and compared
selected financial information, ratios and public market multiples for Plum
Creek to corresponding financial information, ratios and public market multiples
for The Timber Company and the following master limited partnerships and
corporations:
<TABLE>
<CAPTION>
MASTER LIMITED PARTNERSHIPS CORPORATIONS
--------------------------- ------------
<S> <C>
Crown Pacific Partners, L.P. Deltic Timber Corporation
U.S. Timberlands Company, L.P. TimberWest Forest Corporation
</TABLE>
Goldman Sachs selected these companies because they are publicly traded
timber companies with operations that, for purposes of analysis, may be
considered similar to the operations of Plum Creek and The Timber Company.
The ratios and multiples reviewed and compared by Goldman Sachs were
calculated for Plum Creek, The Timber Company and each of the other selected
companies based on projections derived by Goldman Sachs from median estimates of
earnings per share, or EPS, of the Institutional Brokers Estimate Service, or
IBES, and estimates for other operating results prepared by research analysts at
various "Wall Street" investment banks. These projections are referred to in the
tables below as "analyst projections." With respect to Plum Creek and The Timber
Company, Goldman Sachs also separately calculated these ratios using Plum
Creek's internal stand-alone projections for Plum Creek and stand-alone
projections for The Timber Company provided by Plum Creek management. These
projections were prepared by Plum Creek management assuming: (1) nominal pricing
for delivered sawlogs will remain flat, and nominal pricing for delivered
pulpwood will increase at 2% annually, through 2003 and (2) nominal pricing for
both delivered sawlog and pulpwood will increase by 5% in 2004 and 2.6% annually
thereafter. These assumptions are referred to as the "cyclical timber pricing
assumptions." All projections for The Timber Company utilized in this analysis
include taxes. All other data used by Goldman Sachs in connection with these
analyses were derived from the most recently available public information.
Goldman Sachs' analyses of Plum Creek, The Timber Company and the other
selected companies compared the following with respect to each company:
- the closing share price on July 17, 2000, the day prior to the
announcement of the mergers, as a percentage of the 52-week high share
price;
- annual dividend yield, based on the most recently reported dividend;
- IBES' estimated 5-year compounded annual growth rate of EPS;
- estimated total return, calculated by adding the annual dividend yield and
IBES' estimated 5-year compound annual growth rate of EPS;
- equity market capitalization as a multiple of estimated 2000 and 2001
funds from operations, or FFO, which is calculated by adding estimated
depreciation, depletion and amortization for each of these years to
estimated net income;
40
<PAGE>
- enterprise value as a multiple of:
- estimated 2000 and 2001 earnings before interest, taxes, depreciation,
depletion and amortization, or EBITDDA, which is calculated by adding
estimated interest, taxes, depreciation, depletion and amortization for
each of these years to estimated net income; and
- estimated tax-effected EBITDDA for 2000 and 2001, which is calculated
by reducing EBITDDA for each of these years by any taxes that would be
required to be paid.
Goldman Sachs calculated the equity market capitalization of Plum Creek, The
Timber Company and the other selected companies by multiplying each company's
closing share price on July 17, 2000 by the number of that company's outstanding
shares and adding to this result the economic value of that company's
outstanding options, which is determined by multiplying the number of
outstanding options by the difference between the July 17, 2000 closing share
price and the weighted average exercise price of those options. Goldman Sachs
calculated each company's enterprise value by adding its equity capitalization
and net debt, which is defined as debt less cash amounts and, for the purposes
of The Timber Company, less $350 million, the estimated fair value, as disclosed
in The Timber Company's most recent audited and unaudited balance sheets, of the
installment notes received by The Timber Company in connection with its
December 1999 California timberland sale.
The results of these analyses are summarized in the following charts.
<TABLE>
<CAPTION>
JULY 17, 2000
CLOSING SHARE
PRICE AS A %
OF 52-WEEK DIVIDEND 5-YEAR EPS TOTAL
SELECTED COMPANIES HIGH YIELD GROWTH RATE RETURN
------------------ ------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Plum Creek.......................... 85.9% 8.3% 7.0% 15.3%
The Timber Company.................. 89.8% 4.1% 8.5% 12.6%
Master Limited Partnerships:
Crown Pacific Partners, L.P....... 86.2% 10.7% 6.0% 16.7%
U.S. Timberlands Company, L.P..... 69.4% 18.3% 4.0% 22.3%
Corporations:
Deltic Timber Corporation......... 78.8% 1.2% 9.0% 10.2%
TimberWest Forest Corporation..... 89.2% 10.1% N/A N/A
All Selected Companies (excluding
Plum Creek and Plum Creek
management projections for The
Timber Company):
Mean.............................. 82.7% 8.9% 6.9% 15.5%
Median............................ 86.2% 10.1% 7.3% 14.7%
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
TAX-EFFECTED
FFO EBITDDA EBITDDA
MULTIPLES MULTIPLES MULTIPLES
SELECTED COMPANIES: 2000 2001 2000 2001 2000 2001
------------------- --------- -------- --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Plum Creek:
Analyst projections....................... 12.0x 11.5x 11.7x 11.5x 11.7x 11.5x
Management projections.................... 11.6x 13.1x 11.8x 12.5x 11.8x 12.5x
The Timber Company:
Analyst projections..................... 9.3x 8.4x 7.1x 6.7x 10.0x 9.3x
Plum Creek Management projections....... 10.5x 10.4x 7.7x 7.6x 10.4x 10.8x
Master Limited Partnerships:
Crown Pacific Partners, L.P............. 6.5x N/A 8.7x 8.6x 8.7x 8.6x
U.S. Timberlands Company, L.P........... N/A N/A 7.1x N/A N/A N/A
Corporations:
Deltic Timber Corporation............... 13.4x 11.0x 9.8x 8.5x 12.1x N/A
TimberWest Forest Corporation........... 7.6x 7.1x 8.7x 7.5x N/A N/A
All Selected Companies (excluding Plum
Creek and Plum Creek management
projections for The Timber Company):
Mean.................................... 9.2x 8.8x 8.3x 7.8x 10.2x 8.9x
Median.................................. 8.5x 8.4x 8.7x 8.0x 10.0x 8.9x
</TABLE>
(2) SELECTED TRANSACTION ANALYSIS. Goldman Sachs analyzed information
relating to 37 selected transactions involving sales of timberland in the
southern, western, northeastern and midwestern regions of the United States and,
in one case, Canada. All of these transactions were completed after 1996, except
for one transaction completed in 1996 and two that were pending. Goldman Sachs
obtained the information regarding these transactions from the INTERNATIONAL
WOOD FIBER REPORT, a timber industry publication, publicly available reports of
the parties to these transactions and Goldman Sachs' research estimates. Based
on the total consideration paid in the selected transactions, Goldman Sachs
calculated the following ranges and average implied prices per acre of
timberland in each of the following U.S. regions:
<TABLE>
<CAPTION>
REGION RANGE OF PRICE PER ACRE AVERAGE PRICE PER ACRE
------ ----------------------- ----------------------
<S> <C> <C>
Southern.............................. $393 - $2,898 $1,174
Western............................... $802 - $2,444 $1,761
Northeastern (including Canada)....... $105 - $1,143 $ 297
Midwestern............................ $ 391 - $462 $ 427
</TABLE>
Based on each region's average price per acre and the number of acres of
timberland owned by The Timber Company in each region, Goldman Sachs calculated
an implied average value per acre of timberland for The Timber Company of
$1,123.
(3) ANALYSIS OF TRANSACTION PRICE. Goldman Sachs determined that, based on
the exchange ratio of 1.37 shares of Plum Creek common stock for each Unit and
the closing price per share of Plum Creek common stock of $27.38 on July 17,
2000, the implied price per share of Timber Company common stock was $37.50.
This price represents a premium of 54.7% over the $24.25 closing price per share
of Timber Company common stock on July 17, 2000.
42
<PAGE>
In addition, Goldman Sachs calculated the following based on share, option
and acreage information provided by The Timber Company management:
- the implied diluted equity value of The Timber Company, as calculated by
multiplying the number of outstanding shares of Timber Company common
stock by the $37.50 implied price per share and adding to this result the
economic value of the outstanding options to purchase shares of Timber
Company common stock which is based on the $37.50 implied price;
- the implied levered value, or enterprise value, of The Timber Company, as
calculated by adding The Timber Company's implied diluted equity value and
expected net debt immediately prior to completion of the merger--for this
purpose, net debt is defined as debt less cash amounts and less
$350 million, the disclosed estimated fair value of The Timber Company's
installment notes described above; and
- the implied price per acre of The Timber Company's timberland, as
calculated by dividing the implied enterprise value by the number of
current acres of The Timber Company's timberland.
The results of these calculations are as follows:
<TABLE>
<CAPTION>
THE TIMBER COMPANY VALUE/PRICE
------------------ ----------------
<S> <C>
Implied diluted equity value................................ $3,068.4 million
Implied enterprise value.................................... $3,718.4 million
Price per acre of timberland................................ $787.80
</TABLE>
Using (1) Plum Creek management's stand-alone projections for The Timber
Company reflecting cyclical timber nominal pricing assumptions and (2) Plum
Creek management's stand-alone projections for The Timber Company, which assume
nominal pricing for delivered sawlog and pulpwood timber will increase 2.6%
annually on a steady basis, reflecting normalized nominal pricing assumptions
(referred to in the table below as the "Projections Reflecting Normalized Timber
Pricing"), Goldman Sachs calculated the ratios for The Timber Company set forth
below. The projections for The Timber Company used in this analysis did not
reflect any potential cost savings or operating synergies that may be realized
following the mergers but did assume The Timber Company would be operated as a
REIT.
<TABLE>
<CAPTION>
PROJECTIONS REFLECTING
PROJECTIONS REFLECTING NORMALIZED
CYCLICAL TIMBER PRICING TIMBER PRICING
------------------------------ ------------------------------
THE TIMBER COMPANY RATIOS 2000 2001 2002 2000 2001 2002
------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Enterprise value to EBITDDA........................ 10.8x 11.0x 11.0x 10.5x 10.3x 9.9x
Enterprise value to tax-effected EBITDDA(a)........ 11.4x 11.6x 11.5x 11.1x 10.9x 10.4x
Equity value to FFO................................ 11.8x 11.5x 11.4x 11.4x 10.6x 10.1x
</TABLE>
------------------------
(a) Represents EBITDDA for The Timber Company reduced by taxes on higher and
better use land sales.
(4) DISCOUNTED CASH FLOW ANALYSIS.
Goldman Sachs performed a discounted cash flow analysis to determine the
theoretical equity value per share of The Timber Company as of the end of 2000
utilizing (1) Plum Creek management's stand-alone projections for 2001-2013 for
The Timber Company reflecting cyclical timber pricing assumptions and (2) Plum
Creek management's stand alone projections for 2001-2013 for The Timber Company,
which assume nominal pricing for sawlog and pulpwood timber will increase 2.6%
annually on a steady basis, reflecting normalized pricing assumptions (referred
to in the chart below as the
43
<PAGE>
"Projections Reflecting Normalized Timber Pricing"). The projections assumed
that The Timber Company would be operated as a REIT. Using the projections
reflecting each pricing scenario, Goldman Sachs performed the following
discounted cash flow analyses: (A) including $15 million of potential annual
cost savings and operating synergies that may be realized following the mergers
and (B) excluding potential cost savings and operating synergies that may be
realized following the mergers.
In performing its analyses, Goldman Sachs applied discount rates from 8.0%
to 12.0% and assumed terminal growth rates after the year 2013 of 2.5% to 4.5%.
Based on the projected cash flows and application of these discount rates and
terminal growth rates to those projections, Goldman Sachs derived theoretical
equity values per share for The Timber Company within the following ranges:
<TABLE>
<CAPTION>
INCLUDING
$15 MILLION OF
POTENTIAL ANNUAL EXCLUDING POTENTIAL
SYNERGIES SYNERGIES
---------------- -------------------
<S> <C> <C>
Projections Reflecting Cyclical Timber
Pricing................................... $30.48 - $82.61 $28.91 - $79.28
Projections Reflecting Normalized Timber
Pricing................................... $35.56 - $95.10 $34.00 - $91.77
</TABLE>
(5) STOCK PRICE/DIVIDEND HISTORY ANALYSIS. Based on the trading history of
the shares of Plum Creek common stock and Timber Company common stock and the
dividends historically paid with respect to those shares, Goldman Sachs
calculated and compared the total return that would have been realized by a Plum
Creek stockholder or a holder of Timber Company common stock over selected
periods ending July 17, 2000. Goldman Sachs calculated the total return over
each selected period based on the appreciation in the price of shares of Plum
Creek common stock and Timber Company common stock, as applicable, and assuming
that all dividends paid with respect to those shares during the selected period
were reinvested in those shares.
The results of this analysis are summarized below:
<TABLE>
<CAPTION>
PERIOD ENDED JULY 17, 2000 PLUM CREEK TOTAL RETURN THE TIMBER COMPANY TOTAL RETURN
-------------------------- ----------------------- -------------------------------
<S> <C> <C>
Three months................ 19.1 % 5.1 %
Six months.................. 22.3 % 4.7 %
One year.................... (2.8)% 0.0 %
From December 12, 1997
(beginning of public
trading of the shares of
Timber Company common
stock).................... 10.9 % (4.5)%
</TABLE>
(6) EXCHANGE RATIO ANALYSIS. Goldman Sachs calculated the ratio of the
share price of Timber Company common stock to the share price of Plum Creek
common stock during the period from December 12, 1997, the day the shares of
Timber Company common stock began to trade publicly, to July 17, 2000, the day
prior to the announcement of the merger agreement, and during the one year
period ended July 17, 2000. The average of these ratios over those periods are
shown below:
<TABLE>
<CAPTION>
PERIOD AVERAGE RATIO
------ -------------
<S> <C>
December 12, 1997 to July 17, 2000.......................... 0.84
One year ended July 17, 2000................................ 0.92
</TABLE>
(7) PRO FORMA MERGER ANALYSIS. Goldman Sachs prepared pro forma analyses
of the financial impact of the transaction based on (a) Plum Creek management's
internal stand-alone projections for Plum Creek, and its stand-alone projections
for The Timber Company, each reflecting cyclical timber
44
<PAGE>
pricing assumptions, (b) Plum Creek management's internal stand-alone
projections for Plum Creek and its stand-alone projections for The Timber
Company, each prepared assuming nominal pricing for sawlog and pulpwood timber
will increase 2.6% annually on a steady basis, reflecting normalized pricing
assumptions, and (c) projections for Plum Creek and The Timber Company derived
by Goldman Sachs from IBES median EPS estimates and estimates for other
operating results prepared by research analysts of various "Wall Street"
investment banks. These projections assumed that The Timber Company would be
operated as a REIT. In connection with its pro forma analyses, Goldman Sachs
assumed that (1) the accumulated earnings and profits of The Timber Company
would be eliminated through the payment of current dividends, (2) total
transaction fees will be $60 million and will be financed through the incurrence
of debt, and (3) the interest rate on both The Timber Company debt Plum Creek
will assume as part of the transaction and the debt incurred to finance the
transaction fees will be 8.25%.
Goldman Sachs compared, on a per share basis, the estimated 2001 and 2002
FFO and funds available for distribution, or FAD, for Plum Creek on a
stand-alone basis to estimated 2001 and 2002 FFO and FAD for Plum Creek on a pro
forma basis. Goldman Sachs made these comparisons utilizing each of the sets of
projections described above both (1) assuming $15 million of potential annual
cost savings and operating synergies and (2) excluding potential cost savings
and operating synergies that may be realized following the mergers. However, no
comparison was made using IBES based projections for 2002 as data were not
available. The results of these comparisons are summarized in the chart below:
<TABLE>
<CAPTION>
RANGES OF ESTIMATED
RANGES OF ESTIMATED FFO FFO ACCRETION
ACCRETION EXCLUDING INCLUDING $15 MILLION OF
POTENTIAL SYNERGIES POTENTIAL SYNERGIES
----------------------- ------------------------
<S> <C> <C>
2001................................ 4.6% - 10.7% 8.1% - 14.1%
2002................................ 4.6% - 6.9% 7.9% - 10.8%
</TABLE>
<TABLE>
<CAPTION>
RANGES OF ESTIMATED
RANGES OF ESTIMATED FAD FAD ACCRETION
ACCRETION EXCLUDING INCLUDING $15 MILLION OF
POTENTIAL SYNERGIES POTENTIAL SYNERGIES
----------------------- ------------------------
<S> <C> <C>
2001................................ 7.2% - 12.2% 11.5% - 16.4%
2002................................ 6.1% - 9.3% 10.0% - 14.0%
</TABLE>
(8) SUMMARY CONTRIBUTION ANALYSIS. Goldman Sachs analyzed the percentage
contribution of Plum Creek and The Timber Company to Plum Creek, as the
surviving corporation after the completion of the mergers, based on actual 1999
operating results and projected operating results for 2000 - 2002 derived from
the projections described above under "Pro Forma Merger Analysis," excluding the
IBES based projections for 2002 for which data were not available), and other
financial information. The actual 1999 operating results were adjusted to
reflect results that may have been realized assuming The Timber Company had been
operated as a REIT in 1999 and the projected operating results assumed The
Timber Company would be operated as a REIT. For purposes of these analyses, The
Timber Company's contributions to the levered market capitalization and equity
market capitalization of the combined company were calculated based on the
aggregate market value as of July 17, 2000 of the shares of Plum Creek common
stock that the holders of Units will receive in the
45
<PAGE>
mergers. Potential cost savings and operating synergies were excluded for
purposes of these analyses. The results of these analyses are summarized in the
chart below.
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
------------- ------------------
<S> <C> <C>
Levered market capitalization.............. 40.5% 59.5%
Equity market capitalization............... 38.2% 61.8%
Range of 1999 (actual) and 2000-2002
(estimated) EBITDDA...................... 36.2% - 39.1% 60.9% - 63.8%
Range of 1999 (actual) and 2000-2002
(estimated) FFO and FAD.................. 33.8% - 38.7% 61.3% - 66.2%
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying the opinion of Goldman Sachs. In arriving at its opinion, Goldman
Sachs considered the results of all these analyses and did not attribute any
particular weight to any factor or analysis considered by it; rather, Goldman
Sachs made its determination as to fairness on the basis of its experience and
professional judgment after considering the results of all such analyses. No
company or transaction used in the above analyses as a comparison is directly
comparable to Plum Creek or The Timber Company or the contemplated mergers.
Goldman Sachs prepared these analyses solely for purposes of providing an
opinion to the board of directors as to the fairness of the exchange ratio to
Plum Creek from a financial point of view, and they do not purport to be
appraisals, nor do they necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts of future results
are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by these analyses. As
described above, the opinion of Goldman Sachs to Plum Creek's board of directors
was one of many factors taken into consideration by Plum Creek's board in making
its determination to approve the merger agreement.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Plum Creek having provided investment banking services to Plum
Creek and its predecessor, Plum Creek Timber Company, L.P., from time to time,
including having acted as a co-managing underwriter of a public offering of
5,000,000 shares of Plum Creek common stock in October 1999, in which an
additional 750,000 shares of Plum Creek common stock were issued pursuant to the
exercise of an over-allotment option, and having acted as Plum Creek's financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the merger agreement. Goldman Sachs has also acted as
financial advisor to SPO Partners & Co., an affiliate of Plum Creek, in
connection with the conversion in July 1999 of Plum Creek Timber Company, L.P.
from a master limited partnership by way of a merger into an indirect subsidiary
of Plum Creek. In addition, Goldman Sachs has provided investment banking
services to Georgia-Pacific from time to time, including having acted as a
co-managing underwriter of Georgia-Pacific's offering of 15,000,000 7.50%
Premium Equity Participating Units in June 1999, and may provide certain
investment banking services to Georgia-Pacific in the future. Goldman Sachs
provides a full range of financial advisory and securities services and, in the
course of its normal trading activities, may from time to time effect
transactions and hold positions in securities, including derivative securities,
of Plum Creek, The Timber Company and the Georgia-Pacific Group for its own
account and for the accounts of customers.
46
<PAGE>
Pursuant to a letter agreement dated August 26, 1999 between Plum Creek and
Goldman Sachs, Plum Creek engaged Goldman Sachs to act as its exclusive
financial advisor in connection with the possible acquisition of, or merger or
combination with an entity holding, all or a portion of the stock or assets
allocated to The Timber Company. Pursuant to the terms of this letter, Plum
Creek has agreed to pay Goldman Sachs a fee of $1,000,000 in connection with the
execution of the merger agreement.
In addition, Plum Creek has agreed that, upon receipt of the Internal
Revenue Service ruling with respect to the redemption of all of the outstanding
shares of Timber Company common stock as contemplated by the merger agreement,
it will pay Goldman Sachs a fee of $3,000,000. Plum Creek has also agreed that,
upon consummation of the mergers, it will pay Goldman Sachs a fee of $15,000,000
less any fees previously paid. In the event any termination fee is paid to Plum
Creek (1) upon the termination of the merger agreement or (2) if the mergers are
not consummated, Plum Creek has agreed to pay to Goldman Sachs a fee equal to
25% of the termination fee received by Plum Creek, not to exceed $15,000,000
less any fees previously paid.
In addition, Plum Creek has agreed to reimburse Goldman Sachs periodically,
upon request, and upon consummation of the mergers or upon termination of
Goldman Sachs' services pursuant to the letter agreement, for its reasonable
out-of-pocket expenses, including the fees and disbursements of Goldman Sachs'
attorneys, plus any sales, use or similar taxes (including additions to such
taxes, if any) arising in connection with any matter referred to in the letter.
Plum Creek has also agreed to indemnify Goldman Sachs and certain related
persons against certain liabilities in connection with its engagement, including
liabilities under the federal securities laws.
OPINION OF FINANCIAL ADVISOR TO GEORGIA-PACIFIC
Under an engagement letter dated September 1, 1999, Georgia-Pacific formally
retained Morgan Stanley to act as its financial advisor in connection with the
potential combination of The Timber Company and Plum Creek. At the meeting of
the Georgia-Pacific board of directors on July 18, 2000, Morgan Stanley rendered
its oral opinion, and subsequently confirmed in writing, that as of July 18,
2000, based upon and subject to the various considerations set forth in the
opinion, (1) the redemption of all of the outstanding shares of Timber Company
common stock and the mergers pursuant to the merger agreement were fair from a
financial point of view to Georgia-Pacific; and (2) the exchange ratio pursuant
to the merger agreement was fair from a financial point of view to holders of
Timber Company common stock.
The full text of the written opinion of Morgan Stanley dated July 18, 2000
is attached as Annex C to this joint proxy statement/prospectus. The opinion
sets forth, among other things, the assumptions made, procedures followed,
matters considered and limitations on the scope of the review undertaken by
Morgan Stanley in rendering its opinion. Morgan Stanley's opinion is directed to
the Georgia-Pacific board of directors and addresses only (1) the fairness of
the redemption of all of the outstanding shares of Timber Company common stock
and the mergers pursuant to the merger agreement from a financial point of view
to Georgia-Pacific; and (2) the fairness of the exchange ratio pursuant to the
merger agreement from a financial point of view to holders of Timber Company
common stock as of the date of the opinion. Morgan Stanley's opinion does not
address any other aspect of the redemption of all of the outstanding shares of
Timber Company common stock or the mergers and does not constitute a
recommendation to any holder of Timber Company common stock as to how to vote at
the special meeting of the holders of Timber Company common stock. The summary
of the opinion of Morgan Stanley set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of its opinion. The holders of Timber Company common stock are urged to, and
should, read the opinion in its entirety.
47
<PAGE>
In rendering its opinion, Morgan Stanley, among other things:
- reviewed certain publicly available financial statements and other
information of Georgia-Pacific, The Timber Company and Plum Creek;
- reviewed certain internal financial statements and other financial and
operating data concerning The Timber Company and Plum Creek prepared by
the managements of The Timber Company and Plum Creek, respectively;
- reviewed certain financial projections prepared by the management of The
Timber Company;
- reviewed and discussed with The Timber Company and Plum Creek information
relating to certain strategic, financial and operational benefits
anticipated from the redemption of all of the outstanding shares of Timber
Company common stock and the mergers, prepared by management of The Timber
Company;
- participated in discussions of past and current operations and the
financial condition and the prospects of The Timber Company with senior
executives of The Timber Company;
- discussed with senior executives of Georgia-Pacific the impact of the
redemption of all of the outstanding shares of Timber Company common stock
and the mergers on Georgia-Pacific;
- reviewed with the management of The Timber Company certain financial
projections and other operating data prepared by Plum Creek's management;
- participated in discussions of past and current operations and the
financial condition and the prospects of Plum Creek with senior executives
of Plum Creek;
- reviewed the pro forma impact of the mergers on Plum Creek's funds from
operations per share;
- reviewed the reported prices and trading activity for Timber Company
common stock and Plum Creek common stock;
- compared the financial performance of Plum Creek and The Timber Company
and the prices and trading activity of Plum Creek common stock and Timber
Company common stock with that of certain other comparable publicly-traded
companies and their securities;
- participated in discussions and negotiations among representatives of The
Timber Company, Georgia-Pacific and Plum Creek and their respective
financial and legal advisors;
- reviewed drafts of each of the merger agreement, the noncompete agreement,
the voting agreement and consent, the tax matters agreement, the timber
supply agreements and other related documents; and
- considered such other factors and performed such other analyses as it
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 certain strategic, financial and operational benefits anticipated
from the redemption of all of the outstanding shares of Timber Company common
stock and the mergers, Morgan Stanley assumed that they were reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
future financial performance of The Timber Company and Plum Creek. Morgan
Stanley also relied upon Georgia-Pacific management's assessment of
conversations between Georgia-Pacific management and selected credit rating
agencies with respect to the effect of the redemption of all of the outstanding
shares of Timber Company common stock and the mergers. In addition, Morgan
Stanley assumed that the mergers and the redemption of all of the outstanding
shares of Timber Company common stock will be consummated in accordance with the
terms set forth in the merger agreement including, among other things, that
Georgia-Pacific will receive
48
<PAGE>
a private letter ruling from the Internal Revenue Service concluding that the
redemption of all of the outstanding shares of Timber Company common stock will
be governed by sections 355(a) and (c) and, if applicable, section 361(c) of the
Internal Revenue Code and that the mergers shall not alter such conclusion and
that the mergers will be treated as a tax-free reorganization pursuant to the
Internal Revenue Code. Morgan Stanley assumed that in connection with the
receipt of all the necessary regulatory approvals for the proposed redemption of
all of the outstanding shares of Timber Company common stock and mergers,
including the private letter ruling referred to above, no restrictions will be
imposed that would have a material adverse effect on the contemplated benefits
expected to be derived in the proposed redemption of all of the outstanding
shares of Timber Company common stock and mergers. Morgan Stanley did not make
any independent valuation or appraisal of the assets or liabilities of The
Timber Company, nor was Morgan Stanley furnished with any such appraisals. In
rendering its opinion, Morgan Stanley was aware of the Fort James transaction
and did not consider the effect of the Fort James transaction on Georgia-Pacific
or The Timber Company or on the redemption of all of the outstanding shares of
Timber Company common stock or the mergers and Morgan Stanley does not express
any opinion as to the fairness of the Fort James transaction to Georgia-Pacific
or to the holders of Timber Company common stock. The opinion of Morgan Stanley
is necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to it as of July 18, 2000.
The following is a summary of the material financial analyses performed by
Morgan Stanley in connection with its opinion dated July 18, 2000. Certain of
these summaries of financial analyses include information presented in tabular
format. In order 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 EXCHANGE RATIO ANALYSIS
Morgan Stanley reviewed the ratios of the closing prices of Timber Company
common stock divided by the corresponding closing prices of Plum Creek common
stock over various periods ending July 14, 2000. These ratios are referred to as
period average exchange ratios. Morgan Stanley compared the exchange ratio set
forth in the merger agreement of 1.37x to these selected period average exchange
ratios. Morgan Stanley then calculated The Timber Company's pro forma ownership
represented by these period average exchange ratios. Morgan Stanley compared the
pro forma ownership of 62.1% represented by the 1.37x exchange ratio set forth
in the merger agreement to the pro forma ownership represented by the period
average exchange ratios. The results of this analysis are set forth below:
<TABLE>
<CAPTION>
PERIOD AVERAGE
EXCHANGE IMPLIED TIMBER COMPANY
PERIOD ENDING JULY 14, 2000 RATIO OWNERSHIP
--------------------------- -------------- ----------------------
<S> <C> <C>
July 14, 2000............................. 0.850x 50.4%
Prior 6 Months............................ 0.939 55.6
Prior 12 Months........................... 0.920 55.1
Prior 24 Months........................... 0.869 51.9
</TABLE>
RELATIVE CONTRIBUTION ANALYSIS
Morgan Stanley compared the relative contribution with respect to several
financial measures of each of The Timber Company and Plum Creek to the resultant
combined company, assuming completion of the mergers. Morgan Stanley then
compared these statistics to the pro forma ownership of the common stock of Plum
Creek after the completion of the mergers, by the holders of Timber Company
common stock, implied by the exchange ratio of 1.37. The analysis is based on
historical
49
<PAGE>
financial results, adjusted for assets sold, using public information, and 2000
and 2001 estimates based on publicly available securities research estimates.
Morgan Stanley's contribution analysis assumed no synergies. The results in
terms of net income, funds from operations (defined as net income plus
depreciation, depletion and amortization), EBITDA and exchange ratio are set
forth below:
<TABLE>
<CAPTION>
% CONTRIBUTION
-------------------------------
THE TIMBER COMPANY PLUM CREEK
------------------ ----------
<S> <C> <C>
NET INCOME
FY1999A...................................... 63.4% 36.6%
FY2000E...................................... 64.4 35.6
FY2001E...................................... 64.1 35.9
FUNDS FROM OPERATIONS
FY1999A...................................... 57.2 42.8
FY2000E...................................... 54.7 45.3
FY2001E...................................... 54.9 45.1
EBITDA
FY1999A...................................... 60.1 39.9
FY2000E...................................... 59.5 40.5
CURRENT EXCHANGE RATIO: 0.850
(as of 7/14/2000)............................ 50.4% 49.6%
</TABLE>
COMPARATIVE STOCK PRICE PERFORMANCE
Morgan Stanley reviewed the stock price performance of Timber Company common
stock and Plum Creek common stock and compared this performance with that of the
S&P 400 Index as well as Crown Pacific Partners common stock which is a publicly
traded timber company that shares some business attributes with The Timber
Company and Plum Creek. Morgan Stanley observed that since the initial
distribution of Timber Company common stock on December 17, 1997 to July 14,
2000, the closing market prices for each specified company or group appreciated
as set forth below:
<TABLE>
<CAPTION>
% OF TOTAL APPRECIATION
-----------------------
<S> <C>
Timber Company common stock.............................. (3.5%)
Plum Creek common stock.................................. (8.7)
Crown Pacific Partners................................... (9.4)
S&P 400.................................................. 66.1
</TABLE>
No company or index used in the comparative stock price performance analysis
is truly comparable to The Timber Company or Plum Creek.
HISTORIC PUBLIC MARKET TRADING VALUE
Morgan Stanley reviewed the closing prices of Timber Company common stock
and Plum Creek common stock from July 14, 1998 to July 14, 2000. Morgan Stanley
observed that the closing prices of
50
<PAGE>
Timber Company common stock and Plum Creek common stock on July 14, 2000, were
$24.06 and $28.31 respectively. Morgan Stanley also observed the following:
<TABLE>
<CAPTION>
TIMBER COMPANY PLUM CREEK
------------------------------ ------------------------------
AVERAGE LOW HIGH AVERAGE LOW HIGH
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Last 1 Month.................... 22.98 21.63 24.19 27.34 26.00 29.50
Last 3 Months................... 23.50 21.63 24.94 25.92 23.50 29.50
Last 6 Months................... 23.08 20.75 25.63 24.68 22.06 29.50
Last 12 Months.................. 23.76 20.75 27.00 25.94 22.06 31.88
Last 24 Months.................. 23.13 17.50 27.00 26.76 22.06 32.13
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS
Morgan Stanley performed a discounted cash flow analysis of The Timber
Company. A discounted cash flow analysis involves an analysis of the present
value of projected cash flows and a terminal value using discount rates and
perpetual growth rates. For purposes of this analysis, Morgan Stanley did not
take into account any potential merger-related cost savings. Morgan Stanley
analyzed The Timber Company's business based on The Timber Company management
estimates by utilizing a midpoint discount rate of 9.25% and perpetual growth
rates ranging from 2.5% to 3.5%. This analysis yielded a range of per share
values for Timber Company common stock of approximately $29.25 to $32.25. Morgan
Stanley compared this value range to the implied transaction value per share of
$38.78 to the holders of Timber Company common stock based on the exchange ratio
set forth in the merger agreement and Plum Creek common stock share price as of
July 14, 2000.
Morgan Stanley also performed a discounted cash flow analysis of Plum
Creek's business. For purposes of this analysis, Morgan Stanley did not take
into account any potential merger-related cost savings. Morgan Stanley analyzed
Plum Creek's business based on Plum Creek management estimates by utilizing a
midpoint discount rate of 9.5% and perpetual growth rates ranging from 2.5% to
3.5%. This analysis yielded a range of per share values for Plum Creek common
stock of approximately $30.00 to $32.75. Morgan Stanley also performed a
sensitivity case to Plum Creek's discounted cash flow analysis prepared in
conjunction with The Timber Company management. The sensitivity analysis yielded
a range of per share values for Plum Creek common stock of approximately $26.50
to $28.75. Morgan Stanley compared this value range to Plum Creek common stock
share price of $28.31 as of July 14, 2000.
DISCOUNTED ANALYSTS PRICE TARGETS
Morgan Stanley analyzed the research analyst price targets of Timber Company
common stock and Plum Creek common stock. Twelve month price targets were
discounted to July 14, 2000 using a cost of equity of 11.3% for The Timber
Company. This analysis yielded a range of discounted analyst price targets for
Timber Company common stock of approximately $26.06 to $29.65. Morgan Stanley
compared this value range to the implied transaction value per share of $38.78
to the holders of Timber Company common stock based on the exchange ratio set
forth in the merger agreement and Plum Creek common stock share price as of
July 14, 2000. Twelve month price targets were discounted to July 14, 2000 using
a cost of equity of 10.3% for Plum Creek. This analysis yielded a range of
discounted analyst price targets for Plum Creek common stock of approximately
$27.20 to $29.00.
PRO FORMA ANALYSIS
Morgan Stanley analyzed the pro forma impact of the mergers on funds from
operations (defined as net income plus depreciation, depletion and amortization)
per share for Plum Creek for fiscal years
51
<PAGE>
2001 and 2002. The pro forma results were calculated based on publicly available
estimates from securities research analysts for Plum Creek and The Timber
Company. Morgan Stanley noted that the mergers would be accretive to Plum
Creek's funds from operations per share in fiscal 2001 and 2002.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, Morgan Stanley
believes that the summary provided and the analyses described above must be
considered as a whole and that selecting any portion of Morgan Stanley's
analyses, without considering all its analyses, would create an incomplete view
of the process underlying Morgan Stanley's analyses and opinion. In addition,
Morgan Stanley may have deemed various assumptions more or less probable than
other assumptions, so that the range of valuations resulting from any particular
analysis described should not be taken to be Morgan Stanley's view of the actual
value of The Timber Company or Plum Creek.
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 The Timber Company or
Plum Creek. 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 such estimates. The
analyses performed were prepared solely as part of Morgan Stanley's analysis of
the fairness of (1) the redemption of all of the outstanding shares of Timber
Company common stock and the mergers pursuant to the merger agreement from a
financial point of view to Georgia-Pacific; and (2) the exchange ratio pursuant
to the merger agreement from a financial point of view to holders of Timber
Company common stock and were conducted in connection with the delivery of the
Morgan Stanley opinion to the Georgia-Pacific board of directors. The analyses
do not purport to be appraisals or to reflect the prices at which Timber Company
common stock or Plum Creek common stock might actually be traded. The exchange
ratio pursuant to the merger agreement and other terms of the merger agreement
were determined through arm's length negotiations between Georgia-Pacific and
Plum Creek and were approved by the Georgia-Pacific board of directors. In
addition, as described above, Morgan Stanley's opinion and presentation to the
Georgia-Pacific board of directors was one of many factors taken into
consideration by the Georgia-Pacific board of directors in making its decision
to approve the mergers. Consequently, the Morgan Stanley analyses as described
above should not be viewed as determinative of the opinion of the
Georgia-Pacific board of directors with respect to the value of Plum Creek or
The Timber Company or of whether the Georgia-Pacific board of directors would
have been willing to agree to a different consideration.
The Georgia-Pacific 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 biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the past, Morgan Stanley and
its affiliates have provided financial advisory and financing services for
Georgia-Pacific and Plum Creek and have received customary fees for the
rendering of these services. In the ordinary course of business, Morgan Stanley
may from time to time trade in the securities or indebtedness of
Georgia-Pacific, The Timber Company or Plum Creek for its own account, the
accounts of investment funds and other clients under the management of Morgan
Stanley or the accounts of its customers and accordingly, Morgan Stanley or its
affiliates may at any time hold long or short positions in these securities or
indebtedness.
Pursuant to an engagement letter dated September 1, 1999, Morgan Stanley
agreed to provide financial advisory services and a financial fairness opinion
in connection with the mergers. Pursuant to
52
<PAGE>
the engagement letter, Georgia-Pacific agreed to pay Morgan Stanley a fee of
$3,000,000 in connection with the execution of the merger agreement. In
addition, Georgia-Pacific has agreed to pay Morgan Stanley a fee upon
consummation of the mergers, which fee will be based upon the aggregate value of
the consideration in connection with the mergers, less any fees previously paid.
Georgia-Pacific has also agreed to reimburse Morgan Stanley for its
out-of-pocket expenses incurred in performing its services. In addition,
Georgia-Pacific has 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 certain liabilities
and expenses, including certain liabilities under the Federal securities laws,
related to or arising out of Morgan Stanley's engagement and any related
transactions.
CERTAIN TAX CONSEQUENCES OF THE MERGERS
The following is a summary of certain material Federal income tax
consequences to the holders of Timber Company common stock resulting from the
mergers and the related redemption of Timber Company common stock in exchange
for the Units. This summary is based upon the provisions of the Internal Revenue
Code of 1986, as amended, applicable Treasury Regulations thereunder, judicial
decisions and current administrative rulings, as of the date hereof, all of
which are subject to change, possibly on a retroactive basis. This summary
assumes that holders of Timber Company common stock hold their shares as a
capital asset (generally, property held for investment) and will hold Plum Creek
common stock received pursuant to the mergers as a capital asset. This summary
does not discuss all aspects of Federal income taxation which may be important
to particular holders of Timber Company common stock in light of their
individual investment circumstances, including certain types of holders subject
to special tax rules (E.G., financial institutions, broker-dealers, insurance
companies, partnerships, tax-exempt organizations, and foreign taxpayers), or to
holders who acquired their shares of Timber Company common stock through the
exercise of options or otherwise as compensation. In addition, this summary does
not address state, local or foreign tax consequences. Holders of Timber Company
common stock are urged to consult their tax advisors regarding the specific
Federal, state, local and foreign income and other tax consequences of the
redemption of Timber Company common stock and the mergers.
THE REDEMPTION
Georgia-Pacific and Plum Creek have requested a private letter ruling from
the Internal Revenue Service to the effect that the redemption of Timber Company
common stock for the Units will be treated as tax-free exchanges under
section 355 of the Internal Revenue Code to Georgia-Pacific and the holders of
Timber Company common stock. This private letter ruling would provide that:
- no gain or loss will be recognized by Georgia-Pacific as a result of the
redemption;
- no gain or loss will be recognized by, and no amount will be included in
the income of, the holders of Timber Company common stock upon receipt of
common stock of each Subsidiary, represented by Units, in exchange for
Timber Company common stock pursuant to the redemption of all of the
outstanding shares of Timber Company common stock;
- the basis of the shares of common stock of each Subsidiary received by
each holder of Timber Company common stock pursuant to the redemption will
equal the basis of Timber Company common stock exchanged for such shares;
and
- the holding period of the shares of common stock of each Subsidiary
received by each holder of Timber Company common stock pursuant to the
redemption will include the holding period of Timber Company common stock
surrendered for such shares.
Plum Creek and Georgia-Pacific have also requested rulings from the Internal
Revenue Service that (1) the mergers will not prevent the redemption of all of
the outstanding shares of Timber
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Company common stock from qualifying as tax-free, and (2) the redemption will
not prevent the mergers from qualifying as reorganizations under
section 368(a)(1)(A) of the Internal Revenue Code if the mergers otherwise so
qualify.
The private letter ruling, while generally binding on the Internal Revenue
Service, will be based on certain factual representations and assumptions
described therein and set forth in the ruling request, including the
representation that Timber Company common stock is the stock of Georgia-Pacific.
If any such assumptions or representations were incorrect or untrue in any
material respect, the private letter ruling may be invalidated. Neither
Georgia-Pacific nor Plum Creek is aware of any facts or circumstances that would
cause any such representations or assumptions to be incorrect or untrue in any
material respect. Nevertheless, if Georgia-Pacific consummates the redemption of
all of the outstanding shares of Timber Company common stock and the redemption
is held to be taxable, both Georgia-Pacific and the holders of Timber Company
common stock probably would incur material tax liabilities.
Current Treasury regulations require each holder of Timber Company common
stock who receives Units pursuant to the redemption of all of the outstanding
shares of Timber Company common stock to attach to his or her Federal income tax
return for the year in which the redemption occurs a detailed statement setting
forth such data as may be appropriate in order to show the applicability of
section 355 of the Internal Revenue Code to the redemption. Georgia-Pacific will
provide the appropriate information to each holder of Timber Company common
stock receiving Units in the redemption.
THE MERGERS
It is a condition to the obligation of Plum Creek to consummate the mergers
that Plum Creek receive an opinion from its special counsel, Skadden, Arps,
Slate, Meagher & Flom LLP, and it is a condition to the obligation of
Georgia-Pacific to consummate the mergers that Georgia-Pacific receive an
opinion from its special counsel, McDermott, Will & Emery, in both cases
substantially to the effect that (1) the mergers will be treated as
reorganizations within the meaning of section 368(a) of the Internal Revenue
Code and (2) Plum Creek and the Subsidiaries will each be a party to a
reorganization.
The issuance of such opinions is conditioned, among other things, on the
receipt by Skadden, Arps, Slate, Meagher & Flom LLP and McDermott, Will & Emery
of representation letters, which will be reconfirmed prior to the closing of the
mergers, from each of Plum Creek and Georgia-Pacific, in each case, in form and
substance reasonably satisfactory to Skadden, Arps, Slate, Meagher & Flom LLP
and McDermott, Will & Emery. An opinion of counsel is not binding on the
Internal Revenue Service or the courts, and no assurance can be given that the
Internal Revenue Service will not challenge the tax treatment of the mergers.
Other than as described above under "--The Redemption," no ruling has been or
will be sought from the Internal Revenue Service with regard to any of the tax
consequences of the mergers.
The following discussion assumes that the mergers will be consummated as
described in the merger agreement and this joint proxy statement/prospectus and
that the mergers will be treated as reorganizations within the meaning of
section 368(a) of the Internal Revenue Code.
EXCHANGE OF UNITS FOR PLUM CREEK COMMON STOCK. A holder of Timber Company
common stock will receive Units in connection with the redemption of Timber
Company common stock. The Units will be represented by certificates formerly
representing shares of Timber Company common stock and will be exchanged in the
mergers for Plum Creek common stock. Such holder will not recognize gain or loss
in connection with such exchange, except to the extent of cash, if any, received
instead of fractional shares of Plum Creek common stock. See "--Cash in Lieu of
Fractional Shares" below. The aggregate tax basis of Plum Creek common stock
received by such holder will be equal to the aggregate tax basis
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of the common stock of each of the Subsidiaries underlying the Units exchanged
in the mergers (excluding any portion of the holder's basis allocated to
fractional shares), and the holding period of Plum Creek common stock received
will include the holding period of the common stock of each of the Subsidiaries
underlying the Units and, in turn, Timber Company common stock exchanged
therefor. See "--The Redemption" for a description of a stockholder's tax basis
and holding period in the common stock of each of the Subsidiaries underlying
the Units received in exchange for its Timber Company common stock.
CASH IN LIEU OF FRACTIONAL SHARES. A stockholder who receives cash in lieu
of fractional shares of Plum Creek common stock will be treated as having
received such fractional shares pursuant to the mergers and then as having
exchanged such fractional shares for cash in a redemption by Plum Creek. The
amount of any gain or loss will be equal to the difference between the ratable
portion of the tax basis of the common stock of each of the Subsidiaries
underlying the Units exchanged in the mergers that is allocated to such
fractional shares and the cash received in lieu thereof. Any such gain or loss
will constitute long-term capital gain or loss if Timber Company common stock
exchanged for the Units pursuant to the redemption of Timber Company common
stock has been held by the holder for more than one year at the time of the
completion of the mergers.
TREATMENT OF SUBSIDIARIES AND PLUM CREEK. No gain or loss will be
recognized by any Subsidiary or Plum Creek as a result of the mergers.
ACCOUNTING TREATMENT
The mergers will be accounted for under the purchase method of accounting
and the Subsidiaries will be considered the acquiring parties for accounting
purposes.
DIVIDEND POLICY
The merger agreement permits Plum Creek and Georgia-Pacific to pay, prior to
completing the mergers, regular quarterly cash dividends to Plum Creek
stockholders and holders of Timber Company common stock, respectively. Plum
Creek and Georgia-Pacific have agreed in the merger agreement to coordinate the
declaration of dividends and the related record dates and payment dates so that
the holders of Timber Company common stock do not receive two dividends, or fail
to receive one dividend, for any single calendar quarter. Following the
completion of the mergers, Plum Creek expects to continue to pay dividends on
Plum Creek's common stock. However, the payment of dividends following the
completion of the mergers will be at the discretion of Plum Creek's board of
directors and will be determined after consideration of various factors,
including the earnings and financial condition of Plum Creek and the need to
satisfy certain annual minimum distribution requirements in order to maintain
its REIT status.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGERS
GENERAL
Members of the respective boards of directors and managements of Plum Creek
and Georgia-Pacific may be deemed to have interests in the mergers that are
different from or in addition to your interests as a stockholder.
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ACCELERATED VESTING OF OPTIONS
Prior to the completion of the mergers, each outstanding employee stock
option to purchase a share of Timber Company common stock will be converted into
an option to purchase one Unit for each share of Timber Company common stock
subject to such option. Options to purchase Units will be evidenced by the
option award agreements issued for shares of Timber Company common stock. Upon
completion of the mergers, each outstanding option to purchase Units will be
converted into an option to purchase a number of shares of Plum Creek common
stock equal to the number of Units subject to the option multiplied by 1.37, the
exchange ratio. The exercise price of such an option will be determined by
dividing the Unit exercise price by the exchange ratio. Additionally, all
unvested outstanding employee stock options to purchase Plum Creek common stock,
including the options held by the executive officers and directors of
Georgia-Pacific, will automatically accelerate and vest as a result of the
mergers. The following table discloses for each Georgia-Pacific executive
officer and employee director the number of options with respect to shares of
Timber Company common stock that will be subject to accelerated vesting upon the
mergers and the total number of options with respect to shares of Timber Company
common stock held by these officers and directors:
<TABLE>
<CAPTION>
NON-VESTED TOTAL NUMBER OF
NAME AND TITLE OPTIONS OPTIONS
-------------- ---------- ---------------
<S> <C> <C>
Alston D. Correll ......................................... 302,000 805,800
Chairman, Chief Executive Officer,
President and Director
Lee M. Thomas ............................................. 0 56,900
Executive Vice President--Packaged Products
Donald L. Glass ........................................... 309,200 494,400
Executive Vice President--Timber and
Chief Executive Officer--The Timber Company
Danny W. Huff ............................................. 47,300 79,000
Executive Vice President--Finance and
Chief Financial Officer
James F. Kelley ........................................... 52,450 123,900
Executive Vice President and General Counsel
Clint M. Kennedy* ......................................... 0 51,900
Executive Vice President--Pulp and Paper
Stephen E. Macadam ........................................ 0 0
Executive Vice President--Containerboard and Packaging/
Purchasing
Ronald L. Paul ............................................ 0 0
Executive Vice President--Distribution and
Wood Products
John F. Rasor ............................................. 0 38,600
Executive Vice President--Wood Procurement,
Gypsum and Industrial Wood Products
Patricia A. Barnard ....................................... 17,000 21,000
Senior Vice President--Human Resources
James E. Bostic, Jr. ...................................... 0 48,300
Senior Vice President--Environmental,
Government Affairs and Communications
James E. Terrell .......................................... 24,300 57,100
Vice President and Controller
</TABLE>
--------------------------
* Mr. Kennedy passed away on October 10, 2000.
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As of October 5, 2000, non-employee directors held 34,914 shares of Timber
Company restricted stock, all of which will be subject to accelerated vesting
upon the completion of the mergers.
In respect of options to purchase Georgia-Pacific common stock held by those
Georgia-Pacific employees who will become Plum Creek employees as a result of
the mergers, Georgia-Pacific has agreed to extend the period during which such
options may be exercised after the termination of the option holder's employment
with Georgia-Pacific. Ordinarily, former Georgia-Pacific employees have 90 days
to exercise vested Georgia-Pacific options after a termination of employment (or
60 months following retirement). However, Georgia-Pacific will extend this
period of post-termination exercisability to include any period of employment by
the option holder with Plum Creek. Of all the executive officers of
Georgia-Pacific, it is expected that only Mr. Glass will become an employee of
Plum Creek as a result of the mergers. Mr. Glass holds 494,400 options to
purchase Timber Company common stock, 309,200 of which are presently unvested.
CHANGE OF CONTROL AGREEMENT
Georgia-Pacific has entered into a change of control agreement with Donald
L. Glass. On July 18, 2000, Georgia-Pacific amended the agreement to provide
that the completion of the mergers will constitute a change of control under the
agreement and Plum Creek has agreed to assume the agreement as amended. The
agreement provides that if Mr. Glass is either terminated by Georgia-Pacific or,
after the mergers, Plum Creek other than for cause (as defined in the change of
control agreement) or disability (as defined in the change of control agreement)
or Mr. Glass terminates employment for good reason (as defined in the change of
control agreement) prior to the earlier to occur of (1) the third anniversary of
the effective date of the mergers and (2) Mr. Glass' 65th birthday, then
Mr. Glass shall receive a lump-sum cash amount equal to the lesser of (1) three
years and (2) the number of years (including fractions) from the date of
termination until Mr. Glass' 65th birthday times the sum of (a) Mr. Glass' base
salary plus (b) Mr. Glass' Annual Incentive (as defined in the change of control
agreement). In addition, Mr. Glass shall receive:
- a lump sum payment equal to Mr. Glass' pro rata Annual Incentive for the
year of termination;
- three years age and service credit under the Officer's Retirement
Agreement (as described below);
- continued participation in welfare and insurance benefits for three years
(or, if sooner, until Mr. Glass' 65th birthday);
- outplacement services, not to exceed $25,000;
- all awards granted under the Georgia-Pacific stock-based compensation
plans shall become exercisable or payable in accordance with the terms of
the plans; and
- a lump sum payment equal to the contributions Georgia-Pacific would have
made for the benefit of Mr. Glass to Georgia-Pacific's retirement plans
assuming Mr. Glass' has remained employed for an additional three years
(or, if sooner, until Mr. Glass' 65th birthday).
In the event the payments to Mr. Glass under the change of control agreement or
otherwise are subject to the 20% parachute payment excise tax under
section 4999 of the Internal Revenue Code and the payments exceed 110% of the
amount that could be paid to Mr. Glass without the imposition of the excise tax,
Georgia-Pacific or, after the mergers, Plum Creek will reimburse Mr. Glass in an
amount sufficient to enable Mr. Glass to retain his benefits as if the excise
tax had not applied.
OFFICER RETIREMENT AGREEMENT
Georgia-Pacific has entered into a retirement agreement with Mr. Glass. Upon
the consummation of the mergers, Plum Creek will assume the agreement and will
recognize service with Georgia-Pacific
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for all purposes under the agreement. The agreement provides that upon Normal
Retirement (as defined in the retirement agreement), Mr. Glass will be entitled
to a monthly benefit equal to 50% of Mr. Glass' average monthly cash salary
(including base salary and annual incentive bonuses) less any amounts payable
under the retirement compensation plans maintained by Georgia-Pacific.
Mr. Glass is also entitled to a reduced benefit under the agreement upon an
Early Retirement (as defined in the retirement agreement), a termination
following one year of service due to death or disability or a termination
following three years of service for any other reason. The agreement further
provides that Georgia-Pacific may forfeit all benefits to Mr. Glass if he
(1) competes with Georgia-Pacific during the three year period following his
termination of employment, (2) discloses trade secrets or confidential
information or (3) solicits employees or customers of Georgia-Pacific during the
two year period following his termination of employment. However, the right to
forfeit the benefits under the agreement will expire upon the occurrence of a
Change in Control (as defined in the Georgia-Pacific Corporation/Timber Group
1997 Long-Term Incentive Plan or any successor plan).
BOARD OF DIRECTORS OF PLUM CREEK
Under the merger agreement, Plum Creek has agreed that, upon completion of
the mergers, up to three individuals designated by Georgia-Pacific prior to the
mergers who are reasonably acceptable to Plum Creek will be added to Plum
Creek's board of directors.
VOTING AGREEMENT AND CONSENT
In connection with the execution of the merger agreement, Plum Creek,
Georgia-Pacific, PC Advisory Partners I, L.P. and PC Intermediate Holdings, L.P.
entered into a voting agreement and consent dated as of July 18, 2000. Pursuant
to the voting agreement and consent, PC Advisory Partners I and PC Intermediate
Holdings, which are affiliates of John H. Scully, William J. Patterson and
William E. Oberndorf, members of Plum Creek's board of directors, and which own
all of the outstanding shares of Plum Creek special voting common stock and
approximately 24% of the outstanding shares of Plum Creek common stock, agreed,
subject to specified exceptions, to (1) vote for the approval of the merger
agreement and the transactions contemplated by the merger agreement and for the
proposal to amend Plum Creek's certificate of incorporation to eliminate the
classified board of directors and (2) convert their shares of Plum Creek special
voting common stock into Plum Creek common stock immediately prior to the
mergers. Further, pursuant to the voting agreement and consent, Messrs. Scully,
Patterson and Oberndorf waived their right to designate more than three nominees
to Plum Creek's board of directors, effective immediately prior to the
completion of the mergers. See "Ancillary Arrangements--Voting Agreement and
Consent."
HUMAN RESOURCES AGREEMENT
Plum Creek, Georgia-Pacific and each of the Subsidiaries entered into a
human resources agreement dated as of July 18, 2000. This agreement deals with
the matters involved in the termination of the employment of the Subsidiary
employees and the commencement of the employment of the Subsidiary employees
with Plum Creek. See "Ancillary Arrangements--Human Resources Agreement."
NONCOMPETE AGREEMENT
Plum Creek and Georgia-Pacific will enter into a noncompete agreement at or
prior to the completion of the mergers which will limit Plum Creek's Southern
manufacturing operations from competing with Georgia-Pacific Group's operations
in key fiber basins. See "Ancillary Arrangements--Noncompete Agreement."
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TIMBER SUPPLY AGREEMENTS
Prior to or at the completion of the mergers, Georgia-Pacific and certain
subsidiaries of Plum Creek will enter into a ten-year supply agreement with an
automatic ten-year renewal provision on substantially similar terms, unless
either party delivers a timely termination notice. This ten-year supply
agreement will provide Georgia-Pacific with continued access to fiber in The
Timber Company's key fiber basins at negotiated market prices. See "Ancillary
Arrangements--Timber Supply Agreements."
REGULATORY APPROVALS
HART-SCOTT-RODINO ACT FILINGS
Under the Hart-Scott-Rodino Act and its accompanying rules, the mergers may
not be completed until information and materials required under the
Hart-Scott-Rodino Act are furnished to the Antitrust Division of the Department
of Justice and the Federal Trade Commission and specified waiting periods expire
or are terminated.
On , we each filed a notification and report form required under
the Hart-Scott-Rodino Act with the Antitrust Division of the Department of
Justice and the Federal Trade Commission, which commenced a 30-day waiting
period. The waiting period expired on . Although the waiting period
has expired, the Antitrust Division of the Department of Justice, the Federal
Trade Commission or any state could take action under the antitrust laws with
respect to the mergers at any time before or after the completion of the
mergers, including seeking to enjoin completion of the mergers, to rescind the
mergers, or to require us to divest particular assets. Private parties also may
seek to take legal action under the antitrust laws under certain circumstances.
NO APPRAISAL RIGHTS
Under Delaware law, Plum Creek stockholders will not have appraisal or
dissenters' rights in connection with the mergers if the merger agreement and
the transactions contemplated by the merger agreement are approved.
Under Georgia law, Georgia-Pacific shareholders will not have appraisal or
dissenters' rights in connection with the mergers if the merger agreement and
the transactions contemplated by the merger agreement are approved.
STOCK EXCHANGE LISTING
The Plum Creek common stock to be issued to holders of Units in the mergers
will be listed on the New York Stock Exchange and the Pacific Exchange, subject
to official notice of issuance.
FEDERAL SECURITIES LAWS CONSEQUENCES
All shares of Plum Creek common stock received by the holders of the Units
in the mergers will be freely transferable under the Federal securities laws,
except that shares of Plum Creek common stock received by persons who are deemed
to be "affiliates" of Georgia-Pacific or any of the Subsidiaries under the
Securities Act of 1933, as amended, prior to the completion of the mergers may
be resold by them only in transactions permitted by Rule 145 under the
Securities Act or as otherwise permitted under the Securities Act. Persons who
may be deemed affiliates of Georgia-Pacific generally include individuals or
entities that control, are controlled by, or are under common control with,
Georgia-Pacific.
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THE REDEMPTION
Pursuant to the separation agreement, prior to the redemption of all of the
outstanding shares of Timber Company common stock, the Subsidiaries will own all
of the assets and liabilities attributed by Georgia-Pacific to The Timber
Company. After the conditions of the merger agreement described below under "The
Merger Agreement--Conditions to the Notice of Redemption and Mergers" have been
satisfied or waived, Georgia-Pacific will send a notice of redemption to the
holders of Timber Company common stock. On the last fiscal day of the month on
the thirtieth trading day after the date that the notice of redemption is sent
to the holders of Timber Company common stock, Georgia-Pacific will redeem all
of the outstanding shares of Timber Company common stock in exchange for all of
the outstanding shares of each of the Subsidiaries by issuing one Unit, which
will represent one outstanding share of common stock of each of the
Subsidiaries, for each outstanding share of Timber Company common stock. The
Units shall be evidenced by the certificates formerly representing shares of
Timber Company common stock and the shares of common stock of each Subsidiary
shall not be separately transferrable.
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement. A copy of the merger agreement is attached as Annex A to this joint
proxy statement/prospectus and is incorporated in this joint proxy
statement/prospectus by reference. WE URGE YOU TO READ THE MERGER AGREEMENT
CAREFULLY AND IN ITS ENTIRETY.
TERMS OF THE MERGERS
GENERAL
On the first business day following the redemption of all of the outstanding
shares of Timber Company common stock, the Subsidiaries will each merge with and
into Plum Creek. Plum Creek will be the surviving corporation in the mergers.
Unless we agree otherwise, the closing of the mergers will occur on the day on
which the conditions set forth in the merger agreement are satisfied or waived;
PROVIDED, HOWEVER, that the closing shall not occur prior to January 1, 2001.
Georgia-Pacific will, after the notice of redemption date and prior to the
closing of the mergers, conduct the business of The Timber Company only in the
ordinary course of business consistent with past practice and Plum Creek will
have the right to approve any transaction which requires an expenditure or
commitment in excess of $1.0 million by The Timber Company during this period.
CONVERSION OF SECURITIES
Upon completion of the mergers, each Unit, which consists of the shares of
common stock of each Subsidiary represented thereby, will be converted into the
right to receive 1.37 shares of Plum Creek common stock; PROVIDED, HOWEVER, that
each Unit owned by Georgia-Pacific, Plum Creek or any of their respective
subsidiaries (other than, in each case, Units held in trust accounts, managed
accounts, custodial accounts and the like that are beneficially owned by third
parties) prior to completion of the mergers will be cancelled and will not be
converted into Plum Creek common stock and no exchange will be made with respect
to such Units. Following the completion of the mergers, all Units will no longer
be outstanding and will automatically be cancelled.
FRACTIONAL SHARES
Plum Creek will not issue any fractional shares of its common stock in the
mergers. Instead, the exchange agent will pay each of those holders of Units
otherwise entitled to a fractional share of Plum Creek common stock, an amount
in cash, without interest or other payment, determined by multiplying (1) the
average of the per share closing sale price of Plum Creek common stock on the
New York
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Stock Exchange on each of the twenty trading days ending on the third trading
day immediately before the completion of the mergers by (2) the fractional share
interest to which the holder of Units would otherwise be entitled.
STOCK OPTIONS
Prior to the completion of the mergers, each outstanding employee stock
option to purchase one share of Timber Company common stock will be converted
into an option to purchase one Unit for each share of Timber Company common
stock subject to such option. Options to purchase Units will be evidenced by the
option award agreements used for shares of Timber Company common stock. Upon
completion of the mergers, each option to purchase a Unit will be converted into
an option to purchase a number of shares of Plum Creek common stock equal to the
product of (1) the number of Units subject to the original option and (2) 1.37,
rounded to the nearest whole share, if necessary. The exercise price for each of
these options will also be adjusted and will be equal to the quotient of
(1) the exercise price of the option to purchase a Unit divided by (2) 1.37,
rounded to the nearest whole cent. All options to purchase Units will be
accelerated and will become vested and exercisable as of the date the mergers
are completed.
In respect of options to purchase Georgia-Pacific common stock held by those
Georgia-Pacific employees who will become Plum Creek employees as a result of
the mergers, Georgia-Pacific has agreed to extend the period during which such
options may be exercised after the termination of the option holder's employment
with Georgia-Pacific to include any period of employment by the option holder
with Plum Creek. Ordinarily, former Georgia-Pacific employees have 90 days to
exercise vested Georgia-Pacific options after a termination of employment or
60 months for employees who retire.
CERTIFICATE OF INCORPORATION OF PLUM CREEK
Pursuant to the merger agreement, Plum Creek's certificate of incorporation
will be amended to eliminate the Plum Creek special voting common stock.
BOARD OF DIRECTORS OF PLUM CREEK
Under the merger agreement, Plum Creek has agreed that, upon completion of
the mergers, up to three individuals designated by Georgia-Pacific prior to the
mergers who are reasonably acceptable to Plum Creek will be added to Plum
Creek's board of directors.
EXCHANGE OF NEW STOCK CERTIFICATES
EXCHANGE AGENT
Once we complete the mergers, the exchange agent will mail to each holder of
record of Timber Company common stock a letter of transmittal and instructions
for use in surrendering the Units, which will be represented by certificates
formerly representing shares of Timber Company common stock, in exchange for
certificates representing shares of Plum Creek common stock into which the Units
have been converted. Upon surrender of the certificate formerly representing
Timber Company common stock to the exchange agent, each holder of such
certificate will be entitled to receive, in addition to the dividends and
distributions described below, a certificate representing Plum Creek common
stock and cash instead of any fractional share of Plum Creek common stock.
DIVIDENDS AND DISTRIBUTIONS
No dividends or other distributions declared, made or paid after the mergers
with respect to Plum Creek common stock with a record date on or after the date
we complete the mergers will be paid to
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the holders of the Units until the holder surrenders the certificates formerly
representing Timber Company common stock.
Following surrender to the exchange agent of any certificate formerly
representing Timber Company common stock, each holder of Units will be paid,
without interest:
- any dividends or other distributions made with respect to Plum Creek
common stock with a record date on or after the mergers and a payment date
before surrender; and
- at the appropriate payment date, any dividends or other distributions made
with respect to Plum Creek common stock with a record date after the
mergers, but prior to surrender, and a payment date after surrender of any
certificate.
TRANSFERS
Upon completion of the mergers, the transfer books of Georgia-Pacific solely
with respect to the shares of Timber Company common stock evidencing the Units
will be closed, and there will be no further registration of transfers of such
shares.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains, subject to exceptions and qualifications,
representations and warranties of Georgia-Pacific relating to, among other
things:
- the organization and qualification of Georgia-Pacific and the
Subsidiaries;
- the authority of Georgia-Pacific and the Subsidiaries relative to the
merger agreement and the separation agreement and the transactions
contemplated thereby;
- the capitalization of Georgia-Pacific and the Subsidiaries;
- the receipt of consents and approvals required for the mergers;
- its filings with the Securities and Exchange Commission and its financial
statements;
- no undisclosed liabilities with respect to The Timber Company;
- the accuracy of information supplied by it in connection with this joint
proxy statement/ prospectus;
- the absence of certain events with respect to The Timber Company;
- the absence of litigation with respect to The Timber Company;
- its real property with respect to The Timber Company;
- its compliance with laws with respect to The Timber Company;
- the receipt of all necessary permits and authorizations;
- its employee benefit plans with respect to The Timber Company;
- its employee relations and compliance with employment related laws, in
each case, with respect to The Timber Company;
- taxes;
- its intellectual property with respect to The Timber Company;
- environmental matters with respect to The Timber Company;
- state anti-takeover statutes;
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- the votes necessary to approve the mergers and the absence of appraisal
rights;
- the opinion of Morgan Stanley with respect to the fairness of the
redemption of the shares of Timber Company common stock and the mergers to
Georgia-Pacific from a financial point of view and the fairness of the
exchange ratio to the holders of Timber Company common stock from a
financial point of view;
- its rights agreement;
- its insurance with respect to The Timber Company;
- the absence of transactions with affiliates with respect to The Timber
Company;
- the identification of material contracts and absence of defaults
thereunder with respect to The Timber Company;
- the ownership and assumption of the assets and liabilities of The Timber
Company by the Subsidiaries collectively;
- its allocation policies;
- the accuracy of the representations and warranties provided by
Georgia-Pacific in the merger agreement and the other information provided
pursuant to the merger agreement;
- brokers;
- its solvency; and
- the Fort Bragg timberlands installment note.
The merger agreement also contains, subject to exceptions and
qualifications, representations and warranties made by Plum Creek as to, among
other things:
- the organization and qualification of Plum Creek and its subsidiaries;
- its authority relative to the merger agreement and the transactions
contemplated thereby;
- the capitalization of Plum Creek and its subsidiaries;
- the receipt of consents and approvals required for the mergers;
- its filings with the Securities and Exchange Commission and its financial
statements;
- no undisclosed liabilities;
- the accuracy of information supplied by it in connection with this joint
proxy statement/ prospectus;
- the absence of certain events;
- the absence of litigation;
- the votes necessary to approve the mergers;
- its real property;
- its compliance with laws;
- the receipt of all necessary permits and authorizations;
- the identification of material contracts and absence of defaults
thereunder;
- environmental matters;
- taxes;
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- tax comfort with respect to the cutting of timber transferred by the
Subsidiaries not being subject to section 1374 of the Internal Revenue
Code;
- the absence of transactions with affiliates;
- its insurance;
- its employee relations and compliance with employment related laws;
- its employee benefit plans; and
- brokers.
COVENANTS
CONDUCT OF GEORGIA-PACIFIC PENDING THE MERGERS
Georgia-Pacific has agreed that, subject to exceptions, between the date of
the merger agreement and the completion of the mergers, it will use commercially
reasonable efforts to, among other things:
- conduct the operations of The Timber Company in all material respects in
the ordinary course and consistent with past practice, preserve intact The
Timber Company business organization, keep available the services of The
Timber Company officers and employees and maintain satisfactory
relationships with persons having significant business relationships with
The Timber Company; and
- cause the transactions contemplated by the merger agreement to qualify as
a series of substantially tax-free transactions and neither
Georgia-Pacific nor any of its subsidiaries or affiliates will take any
actions that could prevent such transactions from qualifying as
substantially tax free transactions.
Additionally, neither Georgia-Pacific nor the Subsidiaries will issue equity
interests if it would cause the transactions contemplated by the merger
agreement to fail to qualify as a series of substantially tax-free transactions.
Georgia-Pacific has agreed that, subject to exceptions, until completion of
the mergers, Georgia-Pacific will use the cash generated from the operations,
financing transactions, asset dispositions or investments of The Timber Company
solely to:
- pay expenses allocated to The Timber Company;
- reserve for taxes allocated only to The Timber Company;
- make permitted expenditures under the merger agreement; and
- reduce indebtedness attributed to The Timber Company.
Further, unless Plum Creek consents in writing, Georgia-Pacific will not:
- amend its organizational documents;
- issue any shares of Timber Company common stock or securities convertible
into Timber Company common stock except for the issuance of Timber Company
common stock or Units upon the exercise of stock options or the issuance
of Timber Company common stock under any stock purchase plan;
- except for activities in the ordinary course of business and not in excess
of $5 million individually, sell, lease, license, encumber or dispose of
any properties or assets on behalf of The Timber Company;
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- (1) pay any dividends or make any distributions on Timber Company common
stock other than its $.25 per share quarterly dividend, (2) reclassify,
combine split or subdivide Timber Company common stock in any way,
(3) redeem or acquire any shares of Timber Company common stock or
(4) enter into any agreement with respect to the voting of Timber Company
common stock;
- acquire any material interest in any entity or material assets for The
Timber Company, except for acquisitions of timberlands satisfying
specified conditions or other than in the ordinary course of business
consistent with past practice and not in excess of $10.0 million
individually;
- incur any indebtedness for borrowed money or issue any debt securities or
assume or become responsible for the obligations of any person for
borrowed money, except (1) borrowings incurred in the ordinary course of
business or in connection with transactions otherwise permitted by the
merger agreement, (2) borrowings incurred to refinance any existing
indebtedness, (3) borrowings under existing credit facilities or (4) as
contemplated by the transfer of all of The Timber Company assets and
liabilities to the Subsidiaries pursuant to the separation agreement;
- enter into or amend any contract or arrangement that, if fully performed,
would be an impermissible (1) acquisition or (2) incurrence of
indebtedness by The Timber Company pursuant to the terms of the merger
agreement;
- acquire any interest in timberlands, except for acquisitions of such
assets at or below fair market value and so long as the intended tax
consequences of the mergers are not adversely affected;
- take any action with respect to accounting policies of The Timber Company,
other than as required by law or by generally accepted accounting
principles;
- except to the extent required under existing plans, agreements or by law
or as contemplated by the merger agreement or any agreement contemplated
thereby, (1) increase the compensation payable to any director, agent,
consultant or employee of The Timber Company, (2) make any loans from the
assets of The Timber Company to any director, agent, consultant or
employee or affiliate of Georgia-Pacific or (3) adopt or materially amend
any new or existing employee benefit plan relating to employees of The
Timber Company;
- amend, modify or terminate any ancillary agreements executed in connection
with the mergers;
- enter into any monetization transaction with respect to the installment
note received in connection with the sale of the Fort Bragg timberlands;
or
- take any action intended or reasonably expected to result in (1) any of
Georgia-Pacific's representations set forth in the merger agreement being
or becoming untrue in any material respect prior to the notice of
redemption, (2) any of the conditions set forth in the merger agreement
not being satisfied or (3) a violation of any provision of the merger
agreement.
CONDUCT OF PLUM CREEK PENDING THE MERGERS
Plum Creek has agreed that, subject to exceptions, between the date of the
merger agreement and the completion of the mergers, it will use commercially
reasonable efforts to:
- conduct its operations in all material respects in the ordinary course and
consistent with past practice, preserve intact its business organization,
keep available the services of its officers and employees and maintain
satisfactory relationships with persons having significant business
relationships with Plum Creek;
- cause the transactions contemplated by the merger agreement to qualify as
a series of substantially tax-free transactions and neither Plum Creek nor
any of its subsidiaries or affiliates will take any actions that could
prevent such transactions from qualifying as substantially tax free
transactions; and
- maintain its status as a REIT.
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Additionally, neither Plum Creek nor any of its subsidiaries will issue
equity interests if it would cause the transactions contemplated by the merger
agreement to fail to qualify as a series of substantially tax-free transactions.
Plum Creek agreed that, subject to exceptions, until the completion of the
mergers, Plum Creek will use the cash generated from its operations, financing
transactions, asset dispositions or investments solely to:
- pay expenses;
- make permitted expenditures under the merger agreement; and
- retire or refinance its debt.
Further, unless Georgia-Pacific consents in writing, Plum Creek will not:
- except as contemplated by the merger agreement, amend its organizational
documents;
- except for activities in the ordinary course of business and not in excess
of $5 million individually, sell, lease, license, encumber or dispose of
any properties or assets;
- (1) pay any dividends or make any distributions on Plum Creek common stock
other than its $.57 per share quarterly dividend, (2) reclassify, combine,
split or subdivide its capital stock in any way, (3) redeem or acquire any
shares of its common stock, or (4) enter into any agreement with respect
to the voting of its capital stock;
- acquire any material interest in any entity or material assets, except for
acquisitions of timberlands or mills satisfying specified conditions or
other than in the ordinary course of business consistent with past
practice and not in excess of $10 million individually;
- incur any indebtedness for borrowed money or issue any debt securities or
assume or become responsible for the obligations of any person for
borrowed money, except (1) borrowings incurred in the ordinary course of
business or in connection with transactions otherwise permitted by the
merger agreement, (2) borrowings incurred to refinance any existing
indebtedness or (3) borrowings incurred under existing credit facilities;
- enter into or amend any contract or arrangement that, if fully performed,
would be an impermissible (1) acquisition or (2) incurrence of
indebtedness by Plum Creek pursuant to the terms of the merger agreement;
- acquire any interest in timberlands or mills, except for acquisitions of
such assets at or below fair market value and so long as the intended tax
consequences of the transactions contemplated by the merger agreement are
not adversely affected;
- take any action with respect to its accounting policies, other than as
required by law or by generally accepted accounting principles;
- amend, modify or terminate any ancillary agreements executed in connection
with the mergers; or
- take any action intended or reasonably expected to result in (1) any of
Plum Creek's representations set forth in the merger agreement being or
becoming untrue in any material respect prior to the completion of the
mergers, (2) any of the conditions set forth in the merger agreement not
being satisfied or (3) a violation of any provision of the merger
agreement.
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CONDUCT OF BUSINESS OF GEORGIA-PACIFIC BETWEEN THE NOTICE OF REDEMPTION DATE
AND THE COMPLETION OF THE MERGERS
Georgia-Pacific has agreed that, between the date of the notice of the
redemption of Timber Company common stock and the completion of the mergers, it
will:
- conduct the operations of The Timber Company only in the ordinary course
of business consistent with past practice and will not (1) enter into,
modify or terminate any contract in excess of $1,000,000 without Plum
Creek's prior written consent or (2) take any of the following actions:
- amend its certificate of incorporation or bylaws;
- issue, pledge or transfer any shares of Timber Company common stock or
securities convertible into Timber Company common stock;
- pay any dividend or make any distributions on Timber Company common
stock other than its $.25 per share quarterly dividend;
- reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any Timber Company common stock; or
- change the accounting policies of The Timber Company, other than in the
ordinary course of business or as required by generally accepted
accounting principles; and
- obtain Plum Creek's prior written consent before entering into any
transaction involving the expenditure of, or commitment to expend,
$1,000,000 or more, whether or not in the ordinary course of business.
ALLOCATION POLICY
Georgia-Pacific will not, without the prior written consent of Plum Creek:
- change its allocation policies with respect to the allocation of the
expenses, assets and liabilities of Georgia-Pacific attributed to The
Timber Company;
- change its year 2000 capital expenditure budget for The Timber Company; or
- with respect to items that are not subject to any objective allocation
practice, increase the percentage of total expenses allocable to The
Timber Company for its 2001 budget from the 2000 budget.
NO SOLICITATION
GEORGIA-PACIFIC. Georgia-Pacific has agreed that it will not, directly or
indirectly, solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, or provide any non-public information to any other
person relating to any transaction involving:
- the sale of any assets of The Timber Company, other than in the ordinary
course of business;
- the sale of any of the capital stock of The Timber Company; or
- any merger, consolidation, business combination or similar transaction
involving The Timber Company.
This does not prohibit:
- Georgia-Pacific from furnishing information to, and engaging in
discussions or negotiations with any person that makes an unsolicited,
written proposal, a "Georgia-Pacific Bona Fide Proposal," to acquire
Georgia-Pacific, The Timber Company or any of Georgia-Pacific's
subsidiaries which
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Georgia-Pacific's board of directors determines in good faith is
reasonably capable of being completed; or
- Georgia-Pacific's board of directors from failing to make or withdrawing
or modifying its recommendation to approve the mergers in response to a
Georgia-Pacific Bona Fide Proposal;
provided, however, in each case referred to above, Georgia-Pacific's board of
directors concludes in good faith, following consultation with its outside
counsel, that its action is necessary for Georgia-Pacific's board of directors
to comply with its fiduciary duties to its shareholders. If the board of
directors receives such a proposal, Georgia-Pacific must promptly inform Plum
Creek in writing of the terms of the proposal and the identity of the person
making it.
PLUM CREEK. Plum Creek has agreed that it will not, directly or indirectly,
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, or provide any non-public information to any other person
relating to any transaction involving:
- the sale of any of the assets of Plum Creek, other than in the ordinary
course of business;
- the sale of any of the capital stock of Plum Creek; or
- any merger, consolidation, business combination or similar transaction.
This does not prohibit:
- Plum Creek from furnishing information to, and engaging in discussions or
negotiations with any person that makes an unsolicited, written proposal,
a "Plum Creek Bona Fide Proposal" to acquire Plum Creek or any of Plum
Creek's subsidiaries which Plum Creek's board of directors determines is
reasonably capable of being completed; or
- Plum Creek's board of directors from failing to make or withdrawing or
modifying its recommendation to approve the mergers in response to a Plum
Creek Bona Fide Proposal;
provided, however, in each case referred to above, Plum Creek's board of
directors concludes in good faith, following consultation with its outside
counsel, that its action is necessary for Plum Creek's board of directors to
comply with its fiduciary duties to its stockholders. If Plum Creek's board of
directors receives such a proposal, Plum Creek must promptly inform
Georgia-Pacific in writing of the terms of the proposal and the identity of the
person making it.
CONDITIONS TO THE NOTICE OF REDEMPTION AND MERGERS
JOINT CONDITIONS TO EFFECT THE NOTICE OF REDEMPTION AND THE MERGERS--TO BE
SATISFIED OR WAIVED ON OR PRIOR TO THE NOTICE OF REDEMPTION DATE
The obligations of Georgia-Pacific and Plum Creek to effect the notice of
redemption and the mergers are subject to the satisfaction or waiver of the
following conditions on or prior to the notice of redemption date:
- the receipt of a private letter ruling from the Internal Revenue Service
reasonably satisfactory to both Georgia-Pacific and Plum Creek concluding
that the redemption of Timber Company common stock will be governed by
sections 355(a) and (c) and, if applicable, section 361(c) of the Internal
Revenue Code and that the mergers shall not alter such conclusion;
- the required approval of:
- the holders of Plum Creek common stock and the holders of Plum Creek
special voting common stock, voting together as a single class;
- the Plum Creek special voting common stock voting separately; and
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- the holders of Timber Company common stock;
- no governmental authority has enacted any rule which prevents or prohibits
completion of the mergers or the transactions contemplated by the merger
agreement;
- the Plum Creek common stock to be issued in the mergers has been
authorized for listing on the New York Stock Exchange and the Pacific
Exchange;
- the registration statement on Form S-4, of which this joint proxy
statement/prospectus is a part, continues to be effective under the
Securities Act;
- the expiration of the waiting period under the Hart-Scott-Rodino Act;
- neither of us shall be advised by our respective counsel that, as of the
notice of redemption date, there exists (1) a regulation, revenue ruling
or notice of the Internal Revenue Service or any other published
pronouncement, including in proposed form, (2) the enactment or proposal
of any legislation or (3) the likelihood of any of the foregoing that in
any such case creates a substantial risk that principles that are similar
to section 1374 of the Internal Revenue Code would apply to the cutting of
timber transferred by the Subsidiaries to Plum Creek pursuant to the
mergers during the ten year period following the completion of the
mergers; and
- Southeastern Asset Management has provided assurances with respect to its
intent concerning the shares of Timber Company common stock that it owns
prior to the redemption and the shares of Plum Creek common stock that it
will own as a result of the mergers such that any future transactions
involving such stock will not cause section 355(e) of the Internal Revenue
Code to apply to the transactions contemplated by the merger agreement.
PLUM CREEK'S CONDITIONS TO EFFECT THE NOTICE OF REDEMPTION AND THE
MERGERS--TO BE SATISFIED OR WAIVED ON OR PRIOR TO THE NOTICE OF REDEMPTION
DATE
Plum Creek's obligation to effect the notice of redemption and the mergers
also depends on the satisfaction or waiver of each of the following conditions
on or prior to the notice of redemption date:
- each of Georgia-Pacific's representations and warranties are true and
correct in all material respects when made and as of the notice of
redemption date;
- Georgia-Pacific has performed or complied in all material respects with
all obligations to be performed by it under the merger agreement at or
prior to the notice of redemption date;
- Georgia-Pacific has delivered to Plum Creek an officer's certificate
certifying as of the notice of redemption date that each of
Georgia-Pacific's representations and warranties is true and that
Georgia-Pacific has complied with its obligations under the merger
agreement;
- Plum Creek has received the favorable opinions of Georgia-Pacific's
outside counsel, King & Spalding, and Georgia-Pacific's general counsel,
each dated the notice of redemption date;
- Plum Creek has received the opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, outside counsel to Plum Creek, dated as of the notice of
redemption date, to the effect that the mergers will be treated as
reorganizations within the meaning of section 368(a) of the Internal
Revenue Code and that Plum Creek and the Subsidiaries will each be a party
to a reorganization and, after the mergers, Plum Creek will continue to
qualify as a REIT for U.S. Federal income tax purposes;
- the earnings and profits of the Subsidiaries immediately following the
separation of The Timber Company assets and liabilities to the
Subsidiaries does not exceed an agreed upon amount;
- Georgia-Pacific has executed and delivered to Plum Creek the ancillary
agreements contemplated by the merger agreement; and
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- from the date of the merger agreement there has not been any event which
would reasonably be expected to have a material adverse effect on The
Timber Company.
GEORGIA-PACIFIC'S CONDITIONS TO EFFECT THE NOTICE OF REDEMPTION AND THE
MERGERS--TO BE SATISFIED OR WAIVED ON OR PRIOR TO THE NOTICE OF REDEMPTION
DATE
Georgia-Pacific's obligations to effect the notice of redemption and the
mergers also depends on the satisfaction or waiver of each of the following
conditions on or prior to the notice of redemption date:
- each of Plum Creek's representations and warranties are true and correct
in all material respects when made and as of the notice of redemption
date;
- Plum Creek has performed or complied in all material respects with all
obligations to be performed by it under the merger agreement at or prior
to the notice of redemption date;
- Plum Creek has delivered to Georgia-Pacific an officer's certificate
certifying as of the notice of redemption date that each of Plum Creek's
representations and warranties are true and that Plum Creek has complied
with its obligations under the merger agreement;
- Georgia-Pacific has received the favorable opinions of Plum Creek's
outside counsel, Skadden, Arps, Slate, Meagher & Flom LLP and the general
counsel of Plum Creek, each dated the notice of redemption date;
- Georgia-Pacific has received the opinion of McDermott, Will & Emery,
special counsel to Georgia-Pacific, dated the notice of redemption date,
to the effect that the mergers will be treated as reorganizations within
the meaning of section 368(a) of the Internal Revenue Code and that Plum
Creek and the Subsidiaries will each be a party to a reorganization;
- Plum Creek has executed and delivered to Georgia-Pacific the ancillary
agreements contemplated by the merger agreement;
- from the date of the merger agreement there has not been any event which
would reasonably be expected to have a material adverse effect on Plum
Creek; and
- Plum Creek has received an opinion from Skadden, Arps, Slate, Meagher &
Flom LLP that, after the mergers, Plum Creek will continue to qualify as a
REIT for U.S. Federal income tax purposes.
PLUM CREEK'S CONDITIONS TO EFFECT THE MERGERS--TO BE SATISFIED OR WAIVED ON
OR PRIOR TO THE COMPLETION OF THE MERGERS
Plum Creek's obligation to effect the mergers also depends on the
satisfaction or waiver of each of the following conditions:
- the Subsidiaries will own all of the assets and have assumed all of the
liabilities of The Timber Company and all of the outstanding shares of
Timber Company common stock will have been redeemed in exchange for Units;
- Georgia-Pacific has complied in all material respects with all agreements
and covenants required by the merger agreement to be performed or complied
with by it after the notice of redemption date and on or prior to the
completion of the mergers;
- Georgia-Pacific has delivered to Plum Creek an officer's certificate
certifying that as of the time of the mergers, Georgia-Pacific has
complied with all of the conditions set forth in the preceding two
bullets;
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- no governmental authority has enacted any rule which prevents or prohibits
completion of the mergers or the transactions contemplated by the merger
agreement;
- Southeastern Asset Management has confirmed the assurances it made on or
prior to the notice of redemption date with respect to its intent
concerning the shares of Timber Company common stock that it owns prior to
the redemption and the shares of Plum Creek common stock that it will own
as a result of the mergers such that any future transactions involving
such stock will not cause section 355(e) of the Internal Revenue Code to
apply to the transactions contemplated by the merger agreement;
- the rights granted pursuant to the Georgia-Pacific rights agreement with
respect to Timber Company common stock have been terminated or redeemed;
and
- Georgia-Pacific has not (1) amended its organizational documents,
(2) issued any shares of Timber Company common stock or securities
convertible into Timber Company common stock or options, warrants or other
rights to acquire any shares of Timber Company common stock or any equity
interests of The Timber Company, except the issuance of Timber Company
common stock or Units upon the exercise of Georgia-Pacific options or the
issuance of Timber Company common stock under any stock purchase plan,
(3) paid any dividends or made any distributions with respect to Timber
Company common stock other than its $.25 quarterly dividend,
(4) reclassified, combined, split, subdivided, redeemed or acquired any
Timber Company common stock or (5) changed its accounting policies with
respect to The Timber Company other than in the ordinary course of
business or except as required by changes in generally accepted accounting
principles.
GEORGIA-PACIFIC'S CONDITIONS TO EFFECT THE MERGERS--TO BE SATISFIED OR
WAIVED ON OR PRIOR TO THE COMPLETION OF THE MERGERS
The obligations of each of Georgia-Pacific and the Subsidiaries to effect
the mergers also depends on the satisfaction or waiver of each of the following
conditions:
- Plum Creek has complied in all material respects with all agreements and
covenants required by the merger agreement to be performed or complied
with by it after the notice of redemption date and on or prior to the
completion of the mergers;
- Plum Creek has delivered to Georgia-Pacific an officer's certificate
certifying that as of the time of the mergers it has complied with all
agreements and covenants required by the merger agreement after the notice
of redemption date and on or prior to the completion of the mergers;
- no governmental authority has enacted any rule which prevents or prohibits
the completion of the mergers or the transactions contemplated by the
merger agreement; and
- Southeastern Asset Management has confirmed the assurances it made on or
prior to the notice of redemption date with respect to its intent
concerning the shares of Timber Company common stock that it owns prior to
the redemption and the shares of Plum Creek common stock that it will own
as a result of the mergers such that any future transactions involving
such stock will not cause section 355(e) of the Internal Revenue Code to
apply to the transactions contemplated by the merger agreement.
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TERMINATION
RIGHT TO TERMINATE
Except as otherwise described below, the merger agreement may be terminated,
at any time before we complete the mergers and before or after any stockholder
approval, in any of the following ways:
- by our mutual written consent;
- on or prior to the notice of redemption date, by Plum Creek based on
(1) a material breach of any representation, warranty, covenant or
agreement on the part of Georgia-Pacific, (2) the inability to obtain the
private letter ruling from the Internal Revenue Service or (3) the
occurrence of an event which would reasonably be expected to have a
material adverse effect on The Timber Company;
- on or prior to the notice of redemption date, by Georgia-Pacific, based on
(1) a material breach of any representation, warranty, covenant or
agreement on the part of Plum Creek, (2) the inability to obtain the
private letter ruling from the Internal Revenue Service or (3) the
occurrence of an event which would reasonably be expected to have a
material adverse effect on Plum Creek;
- by either one of us, if a final nonappealable decree or injunction
prevents the completion of the mergers;
- by either one of us, if the mergers are not completed before July 18, 2001
through no fault of the party wishing to terminate the merger agreement,
provided that either Plum Creek or Georgia-Pacific may extend the merger
agreement three months if we have not received the private letter ruling
from the Internal Revenue Service and provided further that
Georgia-Pacific may extend the merger agreement three months if Plum Creek
has received advice from its counsel that the likelihood of the
(1) issuance of a regulation, revenue ruling or notice of the Internal
Revenue Service or any other published pronouncement, including in
proposed form, or (2) enactment or proposal of legislation creates a
substantial risk that principles similar to those of section 1374 of the
Internal Revenue Code would apply to the cutting of timber transferred by
the Subsidiaries to Plum Creek pursuant to the mergers during the ten year
period following the completion of the mergers and at the end of such
three months Georgia-Pacific may extend the merger agreement an additional
three months if either Plum Creek or Georgia-Pacific is advised by its
respective counsel that this tax condition continues to exist;
- by either one of us, if the merger agreement is not approved by the:
- holders of Timber Company common stock;
- holders of Plum Creek common stock and the holders of Plum Creek
special voting common stock, voting together as a single class; and
- holders of Plum Creek special voting common stock voting separately;
- on or prior to the notice of redemption date, by Plum Creek, if
Georgia-Pacific's board of directors has not recommended or has modified
its recommendation of the mergers, the merger agreement or the
transactions contemplated by the merger agreement in a manner adverse to
Plum Creek, provided that Plum Creek notifies Georgia-Pacific of this
termination within thirty days of its receipt of written notice from
Georgia-Pacific that its board of directors has failed to recommend or so
modified its recommendation;
- on or prior to the notice of redemption date, by Georgia-Pacific, if Plum
Creek's board of directors has not recommended or has modified its
recommendation of the mergers, the merger agreement or the transactions
contemplated by the merger agreement in a manner adverse to
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Georgia-Pacific, provided that Georgia-Pacific notifies Plum Creek of this
termination within thirty days of its receipt of written notice from Plum
Creek that its board of directors has failed to recommend or so modified
its recommendation;
- by Georgia-Pacific, if Georgia-Pacific's board of directors has determined
in good faith that approving and entering into an agreement in connection
with a Georgia-Pacific Bona Fide Proposal to acquire any interest in The
Timber Company would result in a transaction more favorable to its
shareholders from a financial point of view than the mergers, provided
that:
- Georgia-Pacific has complied with the no solicitation provisions of the
merger agreement;
- Georgia-Pacific pays to Plum Creek a termination fee in the amount of
$100 million; and
- Georgia-Pacific provides Plum Creek at least three business days
advance notice of such termination;
- by Plum Creek, if Plum Creek's board of directors has determined in good
faith that approving and entering into an agreement in connection with a
Plum Creek Bona Fide Proposal to acquire any interest in Plum Creek would
result in a transaction more favorable to its stockholders from a
financial point of view than the mergers, provided that:
- Plum Creek has complied with the no solicitation provisions of the
merger agreement;
- Plum Creek pays to Georgia-Pacific a termination fee in the amount of
$100 million; and
- Plum Creek provides Georgia-Pacific at least three business days
advance notice of such termination;
- by Georgia-Pacific, if:
- Georgia-Pacific's board of directors is unable to obtain an opinion,
dated as of the notice of redemption date and the date of the
redemption, of a nationally recognized investment banking or appraisal
firm in form and substance reasonably satisfactory to Georgia-Pacific's
board of directors to the effect that, after transferring all of the
assets and liabilities of The Timber Company to the Subsidiaries and
redeeming all of the outstanding shares of Timber Company common stock,
Georgia-Pacific will be able to pay its debts as they come due in the
usual course of business and its total assets will exceed the sum of
its total liabilities; and
- Georgia-Pacific pays to Plum Creek a termination fee in the amount of
$100 million.
TERMINATION FEES PAYABLE BY PLUM CREEK IN OTHER CIRCUMSTANCES
Plum Creek shall also be obligated to pay to Georgia-Pacific a termination
fee in the amount of $100 million if:
- Georgia-Pacific terminates the merger agreement based upon the board of
directors of Plum Creek not recommending or modifying its recommendation
of the mergers, the merger agreement and the transactions contemplated by
the merger agreement in a manner adverse to Georgia-Pacific; or
- either Plum Creek or Georgia-Pacific terminates the merger agreement based
upon Plum Creek having failed to receive the requisite approval from the
Plum Creek stockholders, and (1) Georgia-Pacific is not in material breach
of the merger agreement, (2) prior to the Plum Creek stockholder meeting
to approve the merger agreement and the transactions contemplated by the
merger agreement, a bona fide proposal has been publicly announced and
(3) within nine months of such termination, Plum Creek enters into any
agreement with respect to a bona fide proposal.
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TERMINATION FEES PAYABLE BY GEORGIA-PACIFIC IN OTHER CIRCUMSTANCES
Georgia-Pacific shall also be obligated to pay to Plum Creek a termination
fee in the amount of $100 million if:
- Plum Creek terminates the merger agreement based upon the board of
directors of Georgia-Pacific not recommending or modifying its
recommendation of the mergers, the merger agreement and the transactions
contemplated by the merger agreement in a manner adverse to Plum Creek; or
- either Plum Creek or Georgia-Pacific terminates the merger agreement based
upon Georgia-Pacific having failed to receive the requisite approval from
the holders of Timber Company common stock and (1) Plum Creek is not in
material breach of the merger agreement, (2) prior to the meeting of the
holders of Timber Company common stock to approve the merger agreement, a
bona fide proposal has been publicly announced and (3) within nine months
of such termination, Georgia-Pacific enters into any agreement with
respect to a bona fide proposal.
EXPENSES
In the event of termination of the merger agreement in accordance with its
terms, all costs and expenses incurred in connection with the merger agreement
and the transactions contemplated by the merger agreement shall be paid by the
party incurring such costs and expenses, provided that all printing expenses,
Securities and Exchange Commission filing fees and Hart-Scott-Rodino Act filing
fees shall be divided equally between Plum Creek and Georgia-Pacific.
If the mergers are consummated, Plum Creek shall pay:
- its own costs and expenses;
- all filing fees;
- printing costs; and
- all of the costs and expenses incurred by Georgia-Pacific in connection
with the mergers except for:
- 25% of the legal fees and expenses incurred by Georgia-Pacific in
connection with the separation of the assets and liabilities of
Georgia-Pacific attributed to The Timber Company to the Subsidiaries
and the redemption of Timber Company common stock; and
- the expenses associated with Georgia-Pacific obtaining comfort that the
transactions contemplated by the merger agreement will not cause
Georgia-Pacific to be unable to pay its debts or cause the total assets
of Georgia-Pacific to become less than the sum of its total
liabilities.
74
<PAGE>
ANCILLARY ARRANGEMENTS
SEPARATION AGREEMENT
In connection with the execution of the merger agreement, Georgia-Pacific,
the Subsidiaries and several other wholly owned subsidiaries of Georgia-Pacific
which hold the assets and liabilities attributed to The Timber Company entered
into a separation agreement dated as of July 18, 2000. The separation agreement
is intended to result in all of the assets and liabilities attributed to The
Timber Company being held by the Subsidiaries at the time of the redemption of
all of the outstanding shares of Timber Company common stock.
The separation agreement provides for, among other things, transfers of
assets, assumptions of liabilities and cross-indemnities designed to allocate,
generally, financial responsibility for the liabilities attributed to The Timber
Company to the Subsidiaries and for the liabilities attributed to the Georgia-
Pacific group to Georgia-Pacific and its other subsidiaries.
The Subsidiaries have agreed to pay certain intercompany indebtedness
payable to Georgia-Pacific at the time of the redemption that represents the
portion of Georgia-Pacific's outstanding indebtedness that is attributable to
The Timber Company. As of , 2001, the amount of such indebtedness was
approximately $ million.
The separation agreement also contains various agreements between
Georgia-Pacific and the Subsidiaries that will take effect subsequent to the
redemption date, including agreements relating to providing corporate records
and access to information, retention of records, cooperation with respect to
government reports and filings and confidentiality.
VOTING AGREEMENT AND CONSENT
In connection with the execution of the merger agreement, Plum Creek,
Georgia-Pacific, PC Advisory Partners I, L.P. and PC Intermediate Holdings, L.P.
have entered into a voting agreement and consent dated as of July 18, 2000.
Pursuant to the voting agreement and consent, PC Advisory Partners I and PC
Intermediate Holdings, which are affiliates of John H. Scully, William J.
Patterson and William E. Oberndorf, members of Plum Creek's board of directors,
and which own all of the outstanding shares of Plum Creek special voting common
stock and approximately 24% of the outstanding shares of Plum Creek common
stock, have agreed, subject to specified exceptions, to vote:
- to approve the merger agreement and the transactions contemplated by the
merger agreement, including, the amendment to Plum Creek's certificate of
incorporation as contemplated by the merger agreement;
- against any proposal or offer to acquire all or a substantial part of the
business or properties of Plum Creek or capital stock of Plum Creek or any
proposal or offer that, if consummated, would cause the transactions
contemplated by the merger agreement to fail to qualify as a series of
tax-free transactions, unless they shall have received the prior written
consent of Plum Creek and Georgia-Pacific; and
- to approve any proposed amendment to Plum Creek's certificate of
incorporation to eliminate its classified board of directors.
Additionally, PC Advisory Partners I and PC Intermediate Holdings agreed in
the voting agreement and consent to:
- convert each share of Plum Creek special voting common stock held by PC
Advisory Partners I and PC Intermediate Holdings into one share of Plum
Creek common stock immediately prior to the mergers;
- permanently and irrevocably waive, simultaneously with the completion of
the mergers, any and all rights to designate more than three nominees to
the board of directors of Plum Creek; and
- acknowledge that the waiver of rights referred to in the immediately above
clause will permanently and irrevocably extinguish any rights of PC
Advisory Partners I and PC
75
<PAGE>
Intermediate Holdings to designate a majority of the board of directors of
Plum Creek (unless three directors would constitute a majority of the
board of directors of Plum Creek).
Accordingly, pursuant to the voting agreement and consent, Messrs. Scully,
Patterson and Oberndorf have waived their right to designate more than three
nominees to Plum Creek's board of directors, effective upon the completion of
the mergers. A copy of the voting agreement and consent is attached as Annex D
to this joint proxy statement/prospectus and is incorporated in this joint proxy
statement/ prospectus by reference.
HUMAN RESOURCES AGREEMENT
In connection with the merger agreement, Plum Creek, Georgia-Pacific and
each of the Subsidiaries entered into a human resources agreement dated as of
July 18, 2000. Plum Creek has agreed to provide the employees who were formerly
salaried and nonunion employees of a Subsidiary immediately prior to the mergers
and who after completion of the mergers are Plum Creek employees:
- base compensation not less than the base compensation provided to these
employees immediately prior to the mergers; and
- employee benefits and other terms and conditions of employment no less
favorable than those provided to similarly situated Plum Creek employees.
Plum Creek has also agreed to provide the employees who were formerly
unionized employees of a Subsidiary immediately prior to the mergers and who
after completion of the mergers are Plum Creek employees, wages, employee
benefits and other terms and conditions of employment substantially equivalent
to the benefits provided to them under their respective collective bargaining
agreements.
Georgia-Pacific will amend its retirement plans and the 401(k) plans to
provide that each participant who becomes a Plum Creek employee shall fully vest
in their accrued benefits and account balances under the plans. In addition,
upon completion of the mergers, these employees will be immediately eligible to
participate in similar plans of Plum Creek and will receive credit for service
with Georgia-Pacific under the plans for certain purposes.
NONCOMPETE AGREEMENT
In connection with the merger agreement, Plum Creek and Georgia-Pacific have
agreed to enter into a noncompete agreement pursuant to which Plum Creek agrees
that for a period of ten years neither it, its subsidiaries nor any entity that
owns in excess of 50% of the outstanding common equity of Plum Creek would,
directly or indirectly, engage in, or have any equity or profit interest in any
corporation or other entity that engages in any activity associated with the
manufacture of softwood lumber, softwood plywood, softwood veneer or other
similar products utilizing softwood timber within a one hundred mile radius of
Georgia-Pacific's existing softwood lumber or plywood manufacturing operations
located in Arkansas, Georgia and Oregon, without the prior consent of
Georgia-Pacific. However, the noncompete agreement does not prohibit Plum Creek
from:
- purchasing or selling logs and stumpage;
- operating its softwood lumber operations in its existing facilities;
- acquiring timberland and associated facilities or corporations or
entities, in each case, engaged in the manufacture of softwood lumber,
softwood plywood, softwood veneer or other similar products utilizing
softwood timber so long as less than 20% of the assets acquired is
associated with the manufacture of these products;
- selling timberlands or any of its softwood lumber manufacturing
facilities;
- expanding its softwood lumber manufacturing facilities as long as it does
not exceed 20% of its current capacity;
- managing its timberlands;
76
<PAGE>
- in-woods chipping
- manufacturing and merchandising its logs; or
- acquiring or holding a passive investment of five percent or less in any
publicly traded equity securities.
TAX MATTERS AGREEMENT
In connection with the closing of the mergers, Plum Creek, Georgia-Pacific
and each of the Subsidiaries will enter into a tax matters agreement. The tax
matters agreement will define Plum Creek's and Georgia-Pacific's rights and
obligations with respect to Federal, state and other taxes and refunds relating
to The Timber Company's operations for tax years (or portions thereof) ending
prior to the mergers. The tax matters agreement will also specify the parties'
respective obligations in connection with any audit or investigation concerning
any Federal, state or other taxes or in the event that the redemption of all of
the outstanding shares of Timber Company common stock is subsequently determined
not to qualify as a tax-free transaction for U.S. Federal income tax purposes.
Under the tax matters agreement, in general, Georgia-Pacific will prepare and
file all tax returns and pay all taxes for Georgia-Pacific and its subsidiaries,
including The Timber Company, with respect to periods (or portions thereof)
ending on or before the completion of the mergers, and Plum Creek will reimburse
Georgia-Pacific for The Timber Company's allocable share of the tax liability
with respect to such periods. In general, The Timber Company's allocable share
of the tax liability for such periods will be computed in a manner consistent
with past practice as if The Timber Company were a separate stand-alone
corporation for Federal income tax purposes. In addition, Plum Creek is
generally required to indemnify Georgia-Pacific for taxes that arise if the
redemption of all of the outstanding shares of Timber Company common stock is
determined to be subject to tax, unless such taxes are attributable to the
actions of Georgia-Pacific, in which case Georgia-Pacific will be responsible
for such taxes. For example, even if the redemption of all of the outstanding
shares of Timber Company common stock otherwise qualifies for tax-free treatment
under section 355 of the Internal Revenue Code, the redemption may be
disqualified as tax-free to Georgia-Pacific under section 355(e) of the Internal
Revenue Code if 50% or more of the stock of Georgia-Pacific or Plum Creek is
acquired as part of a plan or series of related transactions that include the
redemption. Pursuant to the tax matters agreement, if the Plum Creek common
stock issued to the former holders of Timber Company common stock in the mergers
constitutes less than 50% of the outstanding shares of Plum Creek common stock
as a result of issuances (or possibly large block purchases) of Plum Creek
common stock after the mergers, Plum Creek would be liable for any taxes imposed
on Georgia-Pacific as a result of the application of section 355(e) of the
Internal Revenue Code.
TIMBER SUPPLY AGREEMENTS
Georgia-Pacific and The Timber Company have negotiated a new timber supply
agreement which will be effective for 10 years following the completion of the
mergers and subject to an automatic ten year renewal period, unless either party
delivers a timely termination notice. This agreement covers four key southern
timber basins: Southeast Arkansas, Mississippi, Florida, and Southeast Georgia.
Under the agreement, The Timber Company must offer to Georgia-Pacific specified
percentages of its annual harvest, subject to absolute minimum and maximum
limitations in each basin. Georgia-Pacific can elect between 36%-51% of The
Timber Company's annual harvest each year in Mississippi, Florida and Southeast
Georgia, and between 52%-65% in Southeast Arkansas. The total annual volume will
range from a minimum of 3.3 million tons to a maximum of 4.2 million tons. The
prices for such timber will be negotiated at arms length between The Timber
Company and Georgia-Pacific every six months, and will be set by third party
arbitration if the parties cannot agree.
The Timber Company has also entered into a ten year supply contract to
deliver 50 million board feet annually of Douglas-fir and Western Hemlock
sawtimber to Georgia-Pacific's sawmills at Coos Bay and Philomath, Oregon as
well as 68 thousand green tons of pulpwood to the Georgia-Pacific Toledo
77
<PAGE>
pulpmill and Coos Bay sawmill. Prices will be based on prevailing market prices
with recourse to arbitration if the parties do not agree that the pricing
formula reflects market prices.
The timber supply agreement and the supply contract will be replaced with
new agreements on substantially the same terms and entered into with certain
subsidiaries of Plum Creek if the mergers are completed.
TRANSITION SERVICES AGREEMENT
In connection with the merger agreement, Plum Creek and Georgia-Pacific will
enter into a transition services agreement at or prior to the completion of the
mergers, which sets forth the obligations of Georgia-Pacific to provide Plum
Creek with specified transition services and support, including, computer
support and related services, state and local tax compliance services, and such
other services requested by Plum Creek that Georgia-Pacific can reasonably
provide to assist in the transition. The transition services agreement shall
remain in effect for a period of up to ( ) months after the completion of
the mergers. In consideration for such transition services, Plum Creek will pay
to Georgia-Pacific a fee based on Georgia-Pacific's actual costs of providing
such services plus 5% of such costs.
CONTRIBUTION
Following the completion of the mergers, Plum Creek will contribute the
assets and liabilities of the Subsidiaries to Plum Creek Timberlands, L.P, its
operating partnership.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The Plum Creek common stock trades on both the New York Stock Exchange and
the Pacific Exchange under the symbol "PCL." Timber Company common stock is
listed on the New York Stock Exchange under the symbol "TGP."
The table below shows, for the calendar quarters indicated, the reported
high and low sale prices of Plum Creek common stock and Timber Company common
stock, in each case, as reported on the New York Stock Exchange based on
published financial sources, and the dividends declared on the stock.
<TABLE>
<CAPTION>
PLUM CREEK COMMON STOCK
---------------------------------------------------
CASH
DIVIDENDS
HIGH LOW DECLARED
--------------- --------------- ---------------
<S> <C> <C> <C>
CALENDAR 1998
First Quarter........................ $ 34.88 $ 30.00 $ 0.57
Second Quarter....................... 34.25 28.19 0.57
Third Quarter........................ 31.00 24.50 0.57
Fourth Quarter....................... 28.75 25.00 0.57
CALENDAR 1999
First Quarter........................ $ 29.44 $ 25.50 $ 0.57
Second Quarter....................... 32.13 $ 25.75 0.57
Third Quarter........................ 31.88 26.13 0.57
Fourth Quarter....................... 29.50 23.81 0.57
CALENDAR 2000
First Quarter........................ $ 25.75 $ 21.50 $ 0.57
Second Quarter....................... 29.81 23.13 0.57
Third Quarter........................ 28.94 21.88 0.57
Fourth Quarter.......................
<CAPTION>
TIMBER COMPANY COMMON STOCK
---------------------------------------------------
CASH
DIVIDENDS
HIGH LOW DECLARED
--------------- --------------- ---------------
<S> <C> <C> <C>
CALENDAR 1998
First Quarter........................ $ 27.25 $ 21.25 $ 0.25
Second Quarter....................... 27.00 19.69 0.25
Third Quarter........................ 23.19 18.00 0.25
Fourth Quarter....................... 24.56 17.38 0.25
CALENDAR 1999
First Quarter........................ $ 24.06 $ 19.88 $ 0.25
Second Quarter....................... 27.13 22.00 0.25
Third Quarter........................ 27.19 22.00 0.25
Fourth Quarter....................... 25.81 22.38 0.25
CALENDAR 2000
First Quarter........................ $ 25.63 $ 20.75 $ 0.25
Second Quarter....................... 25.75 21.63 0.25
Third Quarter........................ 32.00 21.56 0.25
Fourth Quarter.......................
</TABLE>
78
<PAGE>
Additionally, set forth below are the closing sale prices of Plum Creek
common stock and Timber Company common stock on July 18, 2000, the last trading
day before the public announcement of the signing of the merger agreement, and
on , the latest practicable date prior to the printing of this joint
proxy statement/prospectus. Also listed below for the above dates are the
implied equivalent per share value for shares of Timber Company common stock,
which is the Plum Creek common stock price multiplied by the exchange ratio of
1.37.
<TABLE>
<CAPTION>
TIMBER
PLUM COMPANY
TIMBER COMPANY CREEK SHARE
SHARE PRICE SHARE PRICE EQUIVALENT VALUE
---------------- ---------------- ----------------
<S> <C> <C> <C>
July 18, 2000....................................... $ 24.75 $ 27.19 $ 37.25
............................ $ $ $
</TABLE>
We urge you to obtain current market quotations for Timber Company common
stock and Plum Creek common stock prior to making any decision with respect to
the mergers.
PLUM CREEK TIMBER COMPANY, INC.
UNAUDITED COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited combined pro forma condensed financial statements
reflect the proposed merger of The Timber Company with and into Plum Creek. The
unaudited combined pro forma condensed balance sheet assumes the merger occurred
on June 30, 2000. The unaudited combined pro forma condensed statements of
income assume the merger occurred on January 1, 1999.
Plum Creek converted from a master limited partnership to a corporation on
July 1, 1999 and has elected to be treated for Federal income tax purposes as a
REIT. Therefore, the unaudited combined pro forma condensed income statement for
the year ended December 31, 1999 has been prepared on the basis of Plum Creek
converting to a REIT as of January 1, 1999.
The mergers will be accounted for as a purchase business combination in
accordance with APB Opinion No. 16, "Business Combinations." Plum Creek will be
the surviving entity and will issue approximately 109 million shares, or 61% of
the outstanding shares immediately after the mergers, to the holders of Timber
Company common stock. As a result, the mergers will be accounted for as a
reverse acquisition with The Timber Company treated as the acquiring company for
financial reporting purposes.
In connection with the mergers, Plum Creek will conform its accounting
policies to those of the acquiring company--The Timber Company. However, upon
consummation of the mergers, The Timber Company expects to change its accounting
for certain reforestation costs to the method used by Plum Creek, which is
considered preferable for the merged companies. The unaudited pro forma
condensed consolidated financial statements have been prepared on that basis.
The cumulative effect for the above accounting policy change has not been
reflected in the unaudited pro forma condensed consolidated financial statements
because The Timber Company does not have the information available to compute
the cumulative effect of the change in accounting for reforestation costs net of
depletion over the prior harvest cycle of approximately 30 years.
In connection with the mergers, Plum Creek will succeed to the portion of
Georgia-Pacific's earnings and profits that are allocated to The Timber Company.
In accordance with section 857 of the Internal Revenue Code, earnings and
profits inherited in connection with a merger by a REIT must be distributed as a
dividend (which are subject to tax as ordinary income) by the close of the
taxable year. It is estimated that the amount of earnings and profits that Plum
Creek will succeed to in connection with the mergers could be as high as
$200 million, or $1.12 per pro forma share.
REITs are generally required each year to distribute 95% of their taxable
income, other than long-term capital gains. With respect to long-term capital
gains, REITs may elect to retain and pay tax
79
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
UNAUDITED COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
on such income. The effect of such an election is that stockholders must include
in their taxable income their proportionate share of the undistributed long-term
capital gains but would also receive a tax credit for their proportional share
of taxes paid by the REIT. Substantially all of Plum Creek's taxable income
qualifies as long-term capital gains.
Historically, Plum Creek's distributions to stockholders as a REIT have been
characterized partially as long-term capital gain dividends and partially as a
return of capital. Other than as set forth below, it is anticipated that 100% of
Plum Creek's distributions in the year the mergers will be consummated will be
characterized as a long-term capital gain dividend and no portion will represent
a return of capital. In addition to these distributions, a one-time special
dividend may be required in the year the mergers are consummated to distribute
the earnings and profits inherited as a result of the mergers. As an
alternative, Plum Creek may reduce or eliminate the requirement to make a
special dividend by electing to treat a portion of its taxable income as
retained capital gains as described above. The extent to which a one-time
special dividend is required to be made in the year the mergers are consummated
is affected by several factors, all of which are not known at this time,
including the following:
a. the extent of earnings and profits inherited in connection with the
mergers,
b. the taxable income in the year the mergers are consummated, including
the taxable income from the date of the mergers associated with the
assets and liabilities of The Timber Company,
c. the date the mergers are consummated, and
d. the extent to which Plum Creek elects to have long-term capital gains
treated as retained capital gains.
The unaudited combined pro forma condensed financial statements are not
necessarily indicative of the operating results or financial position that would
have been achieved had the mergers occurred on the indicated dates, and should
not be construed as representative of future operating results or financial
position.
The unaudited combined pro forma condensed financial statements and the
accompanying notes should be read in conjunction with the historical financial
statements and related notes of The Timber Company and Plum Creek.
80
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
UNAUDITED COMBINED PRO FORMA CONDENSED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------- PLUM CREEK
THE TIMBER PLUM CREEK COMBINED
COMPANY PLUM CREEK MERGER REIT PRO FORMA
HISTORICAL(A) HISTORICAL(B) TRANSACTION CONVERSION(L) (SURVIVING ENTITY)
---------------- ------------- ----------- ------------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $ 522,000 $ 460,620 $ 63,985 (e) $(251,667)(m) $ 794,938
Costs and Expenses:
Cost of Goods Sold.............. 111,000 285,822 23,716 (f) (219,439)(m) 247,069
(18,015)(g)
63,985 (e)
Selling, General and
Administrative................ 43,000 28,374 (13,755)(m) 57,619
------------ ----------- -------- --------- ------------
Total Costs and Expenses...... 154,000 314,196 69,686 (233,194) 304,688
Operating Income.................. 368,000 146,424 (5,701) (18,473) 490,250
Interest Expense.................. (69,000) (63,456) (2,129)(h) 9,827 (n) (121,344)
3,414 (i)
Gain on Disposition of Assets..... 355,000 3,697 358,697
Reorganization Costs.............. (5,053) 5,053 (o)
Other Income--Net................. 1,193 1,193
------------ ----------- -------- --------- ------------
Income before Income Taxes and
Equity in Earnings (Loss) of
Unconsolidated Subsidiaries and
Preferred Stock Dividends....... 654,000 82,805 (4,416) (3,593) 728,796
(Provision) Benefit for Income
Taxes........................... (256,000) 13,105 87,227 (j) (13,105)(p) (168,773)
Equity in Earnings (Loss) of
Unconsolidated Subsidiaries and
Preferred Stock Dividends....... 17,522 (12,107)(k) 5,196 (q) 10,611
------------ ----------- -------- --------- ------------
Income from Continuing Operations $ 398,000 $ 113,432 $ 70,704 $ (11,502) $ 570,634
============ =========== ======== ========= ============
Income from Continuing Operations
per Share--Basic................ $ 1.72 (d)
=============
Income from Continuing Operations
Pro Forma per Share--Basic...... $ 3.65 $ 3.20
============ ============
Income from Continuing Operations
per Share--Diluted.............. $ 1.72 (d)
=============
Income from Continuing Operations
Pro Forma per Share--Diluted.... $ 3.63 $ 3.19
============ ============
Pro Forma Shares
Outstanding--Basic.............. 109,078,690 (c) 178,285,265 (r)
Pro Forma Shares Outstanding--
Diluted......................... 109,685,446 (c) 178,835,785 (r)
Weighted average number of Shares
outstanding
Basic and Diluted................. 55,819,390
</TABLE>
See accompanying Notes to Unaudited Combined Pro Forma Condensed Financial
Statements
81
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
UNAUDITED COMBINED PRO FORMA CONDENSED
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PLUM CREEK
THE TIMBER COMBINED
COMPANY PLUM CREEK PRO FORMA PRO FORMA
HISTORICAL(A) HISTORICAL(B) ADJUSTMENTS (SURVIVING ENTITY)
---------------- ------------- ----------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues......................................... $ 205,000 $ 112,100 $27,414 (e) $ 344,514
Costs and Expenses:
Cost of Goods Sold............................. 41,000 32,958 11,594 (f) 106,620
(6,346)(g)
27,414 (e)
Selling, General and Administrative............ 20,000 6,850 26,850
------------ ----------- ------- ------------
Total Costs and Expenses..................... 61,000 39,808 32,662 133,470
Operating Income................................. 144,000 72,292 (5,248) 211,044
Interest Expense................................. (21,000) (23,698) (1,402)(h) (44,393)
1,707 (i)
Gain on Disposition of Assets.................... 49,910 49,910
Other Income--Net................................ 3,165 3,165
------------ ----------- ------- ------------
Income before Income Taxes and Equity in Earnings
(Loss) of Unconsolidated Subsidiaries and
Preferred Stock Dividends...................... 123,000 101,669 (4,943) 219,726
(Provision) Benefit for Income Taxes............. (48,000) 44,822 (j) (3,178)
Equity in Earnings (Loss) of Affiliates and
Preferred Stock Dividends...................... (87) (3,755)(k) (3,842)
------------ ----------- ------- ------------
Net Income....................................... $ 75,000 $ 101,582 $36,124 $ 212,706
============ =========== ======= ============
Earnings per Share--Basic........................ $ 1.47
=============
Earnings per Share Pro Forma--Basic.............. $ 0.69 $ 1.19
============ ============
Earnings per Share--Diluted...................... $ 1.47
=============
Earnings per Share Pro Forma--Diluted............ $ 0.69 $ 1.19
============ ============
Pro Forma Shares Outstanding--Basic.............. 109,078,690 (c) 178,285,265 (r)
Pro Forma Shares Outstanding--Diluted............ 109,486,231 (c) 178,585,108 (r)
Weighted average number of Shares outstanding
Basic.......................................... 69,199,000
Diluted........................................ 69,208,000
</TABLE>
See accompanying Notes to Unaudited Combined Pro Forma Condensed Financial
Statements
82
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
UNAUDITED COMBINED PRO FORMA CONDENSED
BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
PLUM CREEK
THE TIMBER COMBINED
COMPANY PLUM CREEK PRO FORMA PRO FORMA
HISTORICAL(A) HISTORICAL(B) ADJUSTMENTS (SURVIVING ENTITY)
---------------- ------------- ----------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents...................... $ 126,178 $ 126,178
Other Current Assets........................... $ 9,000 19,008 28,008
---------- ---------- ---------- ----------
9,000 145,186 154,186
Timber and Timberlands--Net...................... 1,166,000 986,699 $1,158,895 (s) 3,311,594
Property, Plant and Equipment--Net............... 18,000 1,138 19,138
Investment in Unconsolidated Subsidiaries........ 84,740 138,777 (s) 223,517
Other Assets..................................... 353,000 4,548 357,548
---------- ---------- ---------- ----------
Total Assets................................. $1,546,000 $1,222,311 $1,297,672 $4,065,983
========== ========== ========== ==========
LIABILITIES
Current Liabilities.............................. $ 44,000 $ 38,330 $ 82,330
Long-Term Debt, including Line of Credit......... 1,027,000 628,031 $ 36,699 (t) 1,678,428
(13,302)(s)
Deferred Taxes................................... 381,000 (243,653)(u) 137,347
Payable to Georgia-Pacific....................... 75,075 (u) 75,075
Other Liabilities................................ 9,000 724 9,724
---------- ---------- ---------- ----------
Total Liabilities............................ 1,461,000 667,085 (145,181) 1,982,904
---------- ---------- ---------- ----------
Commitments and Contingencies
CAPITAL
Common Stock..................................... 692 (692)(v) 1,783
1,783 (w)
Other Stockholders' Equity....................... 554,534 (554,534)(v) 2,081,296
1,846,950 (v)
83,217 (w)
168,578 (x)
(17,449)(y)
Parent's Equity (Difference of Assets over
Liabilities)................................... 85,000 (85,000)(w)
---------- ---------- ---------- ----------
Total Liabilities and Stockholders' Equity... $1,546,000 $1,222,311 $1,297,672 $4,065,983
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Combined Pro Forma Condensed Financial
Statements
83
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(a) See Notes to Combined Financial Statements for basis of presentation of The
Timber Company Historical Financial Statements.
(b) See Notes to Consolidated/Combined Financial Statements for basis of
presentation of the Plum Creek Historical Financial Statements.
(c) Pro Forma Shares Outstanding--Basic for The Timber Company assumes that for
purposes of accounting, the assets and liabilities of The Timber Company
have been transferred to the Subsidiaries followed by a distribution of
79,619,482 Units (whereby a Unit represents one share of common stock of
each of the Subsidiaries) in exchange for the redemption of all the
outstanding shares of Timber Company common stock. Furthermore, it is
assumed that after the redemption but prior to the mergers, holders of the
Units will receive 1.37 shares of Plum Creek shares for each Unit, which
will be accounted for as a 1.37 to 1 stock split.
Pro Forma Shares Outstanding--Diluted, using the treasury stock method, for
The Timber Company includes the dilutive impact of 7,503,833 outstanding
options (after adjusting for the 1.37 to 1 stock split) at exercise prices
ranging from $15.29 to $18.34 (after adjusting for the 1.37 to 1 stock
split).
(d) Income from Continuing Operations per share is computed by dividing Income
from Continuing Operations less income allocated to the former general
partner of Plum Creek Timber Company, LP prior to the July 1, 1999
conversion to a REIT by the weighted average number of shares outstanding.
The former general partner was allocated approximately $17.2 million for the
six months ended June 30, 1999.
(e) To conform the presentation of The Timber Company's revenues from higher and
better use land sales for consistency with Plum Creek's presentation.
(f) Reflects higher depletion expense and cost of goods sold for land sales in
connection with the step-up in basis of Plum Creek's assets and liabilities
related to the purchase price allocation.
(g) Reflects the change in accounting policy as of January 1, 1999 for The
Timber Company with respect to certain reforestation costs. The Timber
Company currently capitalizes site preparation and planting costs but
generally expenses all silviculture costs (primarily fertilization and
herbicide application) after a timber stand has been established. In
connection with the mergers, The Timber Company expects to change its
accounting for capitalized reforestation costs to the method used by Plum
Creek. Therefore, the pro forma income statements have been prepared as if
The Timber Company adopted Plum Creek's capitalization method as of
January 1, 1999. The adjustment for the year ended December 31, 1999
reflects the capitalization of $18.0 million of reforestation costs that
were previously expensed by The Timber Company. The adjustment for the six
months ended June 30, 2000 reflects the capitalization of $6.5 million of
reforestation costs that were previously expensed by The Timber Company less
higher depletion of $0.2 million as a result of the additional reforestation
costs capitalized in 1999.
(h) Reflects additional interest expense associated with increased borrowings of
approximately $36.7 million under Plum Creek's line of credit for merger
related costs. The Timber Company estimates that it will incur merger
related costs of approximately $19.2 million and Plum Creek estimates it
will incur costs of approximately $17.5 million. Merger related costs
include estimated allowances for legal, investment advisory, tax and
financial advisory, solicitation, printing, filing fees, and other costs.
84
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
The Timber Company's estimated merger costs have been included in the
purchase price. Plum Creek's estimated costs have not been expensed in the
combined pro forma statements of income due to their nonrecurring nature,
but instead have been charged directly to Other Stockholders' Equity.
At June 30, 2000, The Timber Company had approximately $1.027 billion of
Georgia-Pacific's allocated long-term debt. The average interest rate on the
allocated debt was 7.1% for the year ended December 31, 1999 and was 7.2%
for the six months ended June 30, 2000. In connection with the mergers, the
allocated debt will be required to be replaced with outside third party
debt. It is not currently known to what extent the debt will be refinanced
with fixed-rate and variable-rate debt or at what interest rates the debt
will be refinanced. Accordingly, for every 0.125% increase in the interest
rate, net income for the year will decrease by approximately $1.3 million.
(i) Reflects the decrease in interest expense associated with amortizing a
premium over the life of Plum Creek's debt. In connection with the assumed
January 1, 1999 purchase price allocation, a premium of $33.7 million was
recorded to adjust Plum Creek's long-term debt to its fair value.
(j) Reflects the reduction in The Timber Company's corporate income tax expense
as a result of the mergers of the Subsidiaries into Plum Creek, a REIT. A
REIT is generally not subject to corporate-level income tax if it satisfies
certain requirements. However, Plum Creek (the surviving entity), will
generally be subject to the corporate-level income tax ("built-in gains
tax") to the extent it disposes of certain property of The Timber Company
that it acquired in the mergers during the ten-year period following the
mergers. The built-in gains tax only applies to gains from such asset sales
to the extent the fair value of the property exceeds its tax basis at the
date of the mergers. The built-in gains tax does not apply to income
generated from the harvesting and sale of trees. For the year ended
December 31, 1999, The Timber Company had approximately $435 million of
timberland sales that would have remained subject to the built-in gains tax
and approximately $8 million of timberland sales for the six months ended
June 30, 2000. The pro forma income tax provision was calculated using a
combined Federal and state statutory tax rate of 39%.
Furthermore, in accordance with the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," a one-time benefit of
approximately $169 million will be recorded at the consummation date as a
result of the Subsidiaries being merged into a REIT. The benefit of
approximately $169 million represents the elimination of a deferred tax
liability associated with temporary differences primarily related to
timberlands that are not expected to be disposed of in a transaction subject
to built-in gains tax during the ten-year period following the mergers. This
tax benefit has not been included in the combined pro forma statements of
income due to its nonrecurring nature, and as a result, has been credited
directly to Other Stockholders' Equity.
(k) Reflects lower equity in earnings from unconsolidated subsidiaries as a
result of the purchase price allocation. In connection with Plum Creek's
conversion to a REIT, substantially all assets and associated liabilities
related to manufacturing operations and harvesting activities and some
higher and better use lands were transferred to several unconsolidated
corporate subsidiaries. In connection with the purchase price allocation,
the assets and liabilities of the unconsolidated subsidiaries will be
stepped-up to their fair value. The lower equity in earnings for the year
ended December 31, 1999 is primarily due to higher depreciation expense of
$10.7 million and higher basis associated with land sales of $5.0 million,
offset in part by lower interest expense of
85
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
$3.3 million and lower income taxes of $4.9 million. The lower equity in
earnings for the six months ended June 30, 2000 is primarily due to higher
depreciation expense of $5.3 million and higher basis associated with land
sales of $0.8 million, offset in part by lower interest expense of
$1.7 million and lower income taxes of $1.8 million.
Summarized below are the unaudited pro forma results of operations for the
unconsolidated subsidiaries for the year ended December 31, 1999 and the six
months ended June 30, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 JUNE 30, 2000
----------------- ----------------
<S> <C> <C>
Revenues................................. $737,684 $333,772
Gross Profit............................. 47,263 15,550
Interest Expense......................... 16,109 7,684
Income Tax Expense (Benefit)............. 2,513 (4,802)
Net Income (Loss)........................ 10,726 (4,329)
</TABLE>
Summarized unaudited pro forma financial position data for the
unconsolidated subsidiaries as of June 30, 2000 are as follows:
<TABLE>
<S> <C> <C>
Current Assets........................... $104,048
Noncurrent Assets........................ 379,832
Current Liabilities...................... 76,068
Noncurrent Liabilities................... 177,622
</TABLE>
In accordance with APB No. 18, "The Equity Method of Accounting for
Investments in Common Stock," the revenues and associated expenses of Plum
Creek related to the sale of timber to the unconsolidated subsidiaries is
deferred until the logs or finished goods are sold outside the group of
unconsolidated subsidiaries. Therefore, all sales by Plum Creek to the
unconsolidated subsidiaries will also be included in the revenue of the
unconsolidated subsidiaries in the period in which the timber (in the form
of either whole logs, lumber, plywood or other wood products) is sold
outside the unconsolidated subsidiaries. Sales and investments between the
unconsolidated subsidiaries are eliminated in preparing the summarized
combined financial information of the unconsolidated subsidiaries. Revenues
reported by Plum Creek that were also included in the revenues of the
unconsolidated subsidiaries amounted to $187.8 million for the year ended
December 31, 1999 and $89.8 million for the six months ended June 30, 2000.
(l) Reflects the pro forma adjustments required to conform Plum Creek's
historical financial reporting for the six months ended June 30, 1999 with
its historical financial reporting for the six months ended December 31,
1999 as a result of its July 1, 1999 conversion to a REIT. Prior to July 1,
1999, Plum Creek was organized as a master limited partnership. As a result
of the conversion to a REIT on that date, substantially all of the assets
and related liabilities of the manufacturing operations, harvesting
activities and some higher and better use lands were transferred to
unconsolidated corporate subsidiaries.
(m) Reflects the reduction of revenues and expenses associated with the
manufacturing operations and costs of harvesting timber. These activities
are conducted by the unconsolidated subsidiaries and
86
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
are reported as Equity in Earnings (Loss) of Unconsolidated Subsidiaries and
Preferred Stock Dividends.
(n) Reflects the reduction in interest expense as a result of the transfer of
approximately $170.1 million of indebtedness to the unconsolidated
subsidiaries in connection with the conversion to a REIT. This reduction is
almost entirely offset by lower equity in earnings from the unconsolidated
subsidiaries as a result of their assumption of the $170.1 million of
indebtedness.
(o) Reflects the elimination of costs associated with Plum Creek's conversion to
a REIT that were expensed in the historical Plum Creek financial statements.
These costs are not reflected in the combined pro forma income statement
because they represent nonrecurring expenditures.
(p) Reflects the elimination of a one-time tax benefit due to its nonrecurring
nature and the reclassification of income tax expense to equity in earnings
from the unconsolidated subsidiaries. In accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," a
one-time benefit of approximately $14.0 million was recorded at the time of
the conversion by Plum Creek to a REIT. The benefit related to the net
temporary differences associated with the assets and liabilities transferred
to the unconsolidated subsidiaries. This deferred tax benefit is being
eliminated from the combined pro forma statement of income due to its
nonrecurring nature. Prior to the conversion to a REIT, a taxable subsidiary
of the master limited partnership recorded a tax provision of approximately
$1.0 million. This tax is reclassified to the Equity in Earnings of
Unconsolidated Subsidiaries and Preferred Stock Dividends.
(q) Reflects Plum Creek's approximately 99% share of the equity income from the
unconsolidated subsidiaries for the six months ended June 30, 1999. The
equity income reflects the income related to the assets and liabilities that
were transferred to the unconsolidated subsidiaries in connection with the
conversion to a REIT. (See footnote (k) for a summary of the unaudited pro
forma income of the unconsolidated subsidiaries for the year ended
December 31, 1999.)
(r) Pro Forma Shares Outstanding--Basic reflects for accounting purposes, the
assumed 109,078,690 shares that will be issued to the holders of Timber
Company common stock in exchange for the redemption by Georgia-Pacific of
Timber Company common stock after the 1.37 to 1 stock split plus the
69,206,575 shares that were issued to the stockholders of Plum Creek in
connection with the mergers.
Pro Forma Shares Outstanding--Diluted reflects the dilutive impact of
7,503,833 outstanding options of The Timber Company (after adjusting for the
1.37 to 1 stock split) at exercise prices ranging from $15.29 to $18.34
(after adjusting for the 1.37 to 1 stock split).
(s) Reflects the increase (decrease) in Plum Creek's assets and liabilities to
their fair value in connection with the merger of each of the Subsidiaries
with Plum Creek. The mergers are being accounted for as a purchase of Plum
Creek's assets and liabilities by The Timber Company. The approximate
purchase price of $1.87 billion is based on The Timber Company acquiring all
of Plum Creek's 69,206,575 outstanding shares and 332,450 outstanding
options at the approximate fair value of Plum Creek's stock as of the
July 18, 2000 announcement date plus approximately $19.2 million of merger
related costs.
87
<PAGE>
PLUM CREEK TIMBER COMPANY, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
The approximate purchase price of $1.87 billion has been allocated among the
assets and liabilities of Plum Creek based on their approximate fair value
as follows:
<TABLE>
<CAPTION>
<S> <C>
Assets acquired:
Cash and Cash Equivalents................................. $ 126,178
Other Current Assets...................................... 19,008
Timber and Timberlands.................................... 2,145,594
Property, Plant and Equipment............................. 1,138
Investment in Unconsolidated Subsidiaries and Preferred
Stock................................................... 223,517
Other Assets.............................................. 4,548
----------
Total Assets............................................ $2,519,983
Liabilities assumed:
Current Liabilities....................................... $ 38,330
Long-Term Debt............................................ 614,729
Other Liabilities......................................... 724
----------
Total Liabilities....................................... $ 653,783
</TABLE>
The above allocation is based on preliminary estimates made by Plum Creek's
management of the fair value of assets acquired and liabilities assumed,
which are subject to refinement as appraisals are completed and additional
information becomes available.
The fair value of the Investment in Unconsolidated Subsidiaries and
Preferred Stock is based on the underlying fair value of the assets and
liabilities held by the unconsolidated subsidiaries. The purchase price
adjustment related to the Investment in Unconsolidated Subsidiaries and
Preferred Stock has been pushed down to the underlying assets and
liabilities. The basis step-up allocated to the timber and timberlands will
result in higher depletion over the growth cycle of the particular stands or
higher basis in connection with land sales. The basis step-up allocated to
the Investment in Unconsolidated Subsidiaries and Preferred Stock was
primarily pushed-down to the manufacturing assets of the unconsolidated
subsidiaries which are generally depreciated over ten years. The basis
adjustment allocated to the long-term debt represents a discount based on
interest rates at June 30, 2000 and will be amortized over the remaining
life of the debt.
(t) Reflects the anticipated additional amount borrowed under Plum Creek's line
of credit for the payment of merger related expenditures.
(u) Represents the reduction of deferred taxes as a result of each of the
Subsidiaries merging into an entity that has elected to be subject to tax as
a REIT under section 856 of the Internal Revenue Code. As a REIT, Plum Creek
is generally not subject to corporate-level income tax. However, to the
extent certain of The Timber Company assets are disposed of in a taxable
transaction during the ten-year period following the mergers, Plum Creek
will be subject to the corporate-level income tax. Additionally, gains on
installment sales consummated prior to the end of the ten-year period
(including installment sales by The Timber Company prior to the mergers)
will continue to be subject to the corporate level income tax beyond the ten
years. The corporate-level tax only applies to gains from such asset sales
to the extent the fair value of the property exceeds its tax basis at the
date of the mergers.
88
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
</TABLE>
It is estimated that a deferred tax liability of approximately $211 million
will be owed in the future as a result of asset sales during the ten-year
period and collections on notes related to prior and future installment
sales. Approximately $75 million of the $211 million deferred tax liability
is being reclassified to a payable to Georgia-Pacific because the related
installment notes will not be transferred in connection with the mergers.
However, in accordance with the tax sharing agreement between Plum Creek and
Georgia-Pacific, Plum Creek will be liable for the related deferred taxes on
the installment notes retained by Georgia-Pacific.
(v) Reflects the elimination of Plum Creek's historical equity and the issuance
of 69,206,575 shares, at an average price of approximately $26.69 per share,
to the stockholders of Plum Creek in connection with the mergers.
(w) For accounting purposes, represents the recapitalization of The Timber
Company to reflect the issuance of 79,619,482 shares to the holders of
Timber Company common stock in exchange for the redemption of Timber Company
common stock, the 1.37 to 1 stock split immediately prior to the mergers and
the 69,206,575 shares issued in connection with the purchase of Plum Creek.
The par value for the 178,285,265 shares being issued in connection with the
recapitalization and merger is $0.01 per share, or approximately
$1.8 million.
(x) Reflects the expected one-time tax benefit that will be recognized by The
Timber Company upon the consummation of the mergers. The expected benefit is
credited directly to Other Stockholders' Equity due to the nonrecurring
nature of this adjustment. (See footnote (j))
(y) Reflects the direct charge to Other Stockholders' Equity for estimated
non-recurring merger related costs that are expected to be incurred by Plum
Creek. Plum Creek will expense these costs in its financial statements as
incurred.
89
<PAGE>
THE TIMBER COMPANY
SELECTED FINANCIAL DATA
For purposes of the mergers, Georgia-Pacific has prepared separate financial
statements that are different from the financial statements previously prepared
for The Timber Company. The financial statements prepared for the mergers
reflect the operations of The Timber Company as if it were a stand-alone entity
(the "Carve-out Financial Statements"). In the Carve-out Financial Statements,
The Timber Company recognizes revenues and earnings from timber deed sales to
Georgia-Pacific Group at the time of the timber deed agreement (which is the
applicable accounting policy for timber deeds sold to third parties) verses when
the timber is cut (which is the applicable accounting policy for timber deed
sold to related parties). In addition, because The Timber Company does not have
shares outstanding for purposes of preparing the Carve-out Financial Statements,
no dividend payments, option exercises or share repurchases are reflected in
such statements. The Carve-out Financial Statements disclose only the
commitments and contingencies and debt information directly related to The
Timber Company as a stand-alone entity. The Carve-out Financial Statements
reflect pro forma earnings per share that gives effect to the recapitalization
that will be done for accounting purposes in connection with the mergers. The
Carve-out Financial Statements are included herein and begin on page F-2.
The Timber Company is providing the following information to aid you in your
analysis of the financial aspects of the mergers. The Timber Company derived the
information for each of the years in the period ending January 1, 2000 from, and
should be read in conjunction with, its audited financial statements for these
fiscal years contained elsewhere in this joint proxy statement/prospectus. The
Timber Company derived the financial information for the six months ended
July 1, 2000, and as of July 1, 2000, from its unaudited financial statements
that include, in the opinion of management, all normal and recurring adjustments
that management considers necessary for a fair statement of results. The
operating results for the six months ended July 1, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 30,
2000. This information is only a summary and you should read it in conjunction
with The Timber Company's historical audited financial statements and related
notes contained on pages F-1 through F-31 of this joint proxy
statement/prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------
JANUARY 1, DECEMBER 31,
---------- -----------------------------------------
2000 1998 1997 1996 1995
---------- -------- -------- -------- --------
(DOLLAR AMOUNTS, EXCEPT PER SHARE,
AND SHARES ARE IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operations
Net sales........................... $ 522 $ 541 $ 551 $ 547 $ 493
Income before extraordinary item.... 398 182 215 127 97
Extraordinary item, net of taxes.... -- (2) -- -- --
----- ----- ----- ----- -----
Net income.......................... 398 180 215 127 97
Other statistical data
Basic pro forma earnings per share:
Income before extraordinary item.... $3.65
Extraordinary item, net of taxes.... --
-----
Net income.......................... $3.65
-----
Diluted pro forma earnings per
share:
Income before extraordinary item.... $3.63
Extraordinary item, net of taxes.... --
-----
Net income.......................... $3.63
-----
Basic pro forma shares
outstanding....................... 109.1
Diluted pro forma shares
outstanding....................... 109.7
Earnings to fixed charges........... 10.2 5.2 5.2 3.0 2.4
Cash flow to interest............... 3.3 3.8 3.5 2.6 2.2
Effective income tax rate........... 39.1% 39.1% 39.1% 38.9% 39.4%
</TABLE>
90
<PAGE>
EARNINGS TO FIXED CHARGES
Income before income taxes and extraordinary items plus total interest cost
(interest expense plus capitalized interest) and one-third of rent expense,
divided by total interest cost plus one-third of rent expense.
CASH FLOW TO INTEREST
Cash provided by operations plus interest expense divided by total interest
cost (interest expense plus capitalized interest).
EFFECTIVE INCOME TAX RATE
Provision for income taxes divided by income before income taxes and
extraordinary items.
THE TIMBER COMPANY
SELECTED FINANCIAL DATA--FINANCIAL POSITION, END OF YEAR
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------
JANUARY 1, DECEMBER 31,
---------- -----------------------------------------
2000 1998 1997 1996 1995
---------- -------- -------- -------- --------
(DOLLAR AMOUNTS ARE IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Financial position, end of year
Total assets...................... $1,521 $1,173 $1,171 $1,326 $1,348
Debt.............................. 970 983 971 1,316 1,365
Parent's equity (deficit)......... 127 (81) (49) (172) (207)
------ ------ ------ ------ ------
Other statistical data
Total debt to capital, book
basis........................... 65.5% 85.2% 83.4% 99.6% 100.0%+
</TABLE>
TOTAL DEBT TO CAPITAL, BOOK BASIS
Debt divided by the sum of total debt, deferred income taxes, net, other
long-term liabilities and parent's equity as of the end of the year.
91
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE TIMBER COMPANY
GENERAL
On December 16, 1997, shareholders of Georgia-Pacific approved the creation
of two classes of common stock intended to reflect separately the performance of
Georgia-Pacific's manufacturing and timber businesses (the "Letter Stock
Recapitalization"). Georgia-Pacific's articles of incorporation were amended and
restated to, among other things, (i) create a new class of stock designated as
Georgia-Pacific Corporation--Timber Group common stock, $0.80 par value per
share, and (ii) authorize the distribution of one share of Timber Company common
stock for each outstanding share of Georgia-Pacific. Timber Company common stock
tracks the performance of a wholly-owned division of Georgia-Pacific that is
engaged primarily in the growing and selling of timber on the approximately
4.7 million acres of timberlands that Georgia-Pacific owns or leases. Also in
connection with the Letter Stock Recapitalization, Georgia-Pacific formed
Georgia-Pacific Group, a wholly-owned division that manufactures and distributes
building products and pulp and paper products.
Since December 16, 1997, Georgia-Pacific has reported the results of The
Timber Company in separate financial statements that tracks the financial
performance of The Timber Company (the "Letter Stock Financial Statements").
Because these Letter Stock Financial Statements are consolidated with and into
the financial statements of Georgia-Pacific, they are not prepared as if The
Timber Company were a stand-alone entity. In the Letter Stock Financial
Statements, The Timber Company recognizes revenues and earnings from timber deed
sales to Georgia-Pacific Group as the timber is cut by the Georgia-Pacific
Group. The Letter Stock Financial Statements also disclose, among other things,
information regarding commitments and contingencies, equity transactions and
debt related to Georgia-Pacific. In addition, the Letter Stock Financial
Statements reflect dividend payments, option exercises, share repurchases and
earnings per share related to Timber Company common stock.
For purposes of this merger transaction, Georgia-Pacific has prepared
separate financial statements, different from the Letter Stock Financial
Statements, which reflect the operations of The Timber Company as if it were a
stand-alone entity (the "Carve-out Financial Statements"). In the Carve-out
Financial Statements, The Timber Company recognizes revenues and earnings from
timber deed sales to Georgia-Pacific Group at the time the timber deed agreement
(the applicable accounting policy for timber deeds sold to third parties). In
addition, because The Timber Company does not have shares outstanding for
purposes of preparing the Carve-out Financial Statements, no dividend payments,
option exercises or share repurchases are reflected in such statements. The
Carve-out Financial Statements disclose only the commitments and contingencies
and debt information directly related to The Timber Company as a stand-alone
entity. The Carve-out Financial Statements reflect pro forma earnings per share
that gives effect to the recapitalization that will be done for accounting
purposes in connection with the mergers. The Carve-out Financial Statements are
included herein and begin on page F-2.
Historically, The Timber Company grew, harvested and sold timber,
substantially all of which was sold to manufacturing facilities that now
constitute the Georgia-Pacific Group. Currently, The Timber Company and the
Georgia-Pacific Group operate under a policy governing sales of timber through
the year 2000, which is more fully described in Note 10 of the Notes to Combined
Financial Statements. In 2000, the Georgia-Pacific Group is expected to purchase
approximately 60% of The Timber Company's harvest volumes. This will allow The
Timber Company to continue to provide a comparable amount of timber available
for sale on the open market as in 1999.
The Timber Company's harvest volumes in 1999 were comparable to 1998. As a
result of the land sales in the Northeast, hardwood pulpwood harvest volumes
were slightly lower in 1999. Total harvest volumes for 2000 are expected to be
between 12 million and 13 million tons. The decrease is a result of strategic
timberland sales in 1999 and regular harvest planning for 2000. Sawtimber demand
is expected
92
<PAGE>
to remain strong in the South and West. In addition, pulpwood demand is expected
to improve as the demand for pulp and paper products increases.
MERGERS
On July 18, 2000, Georgia-Pacific signed a definitive agreement to combine
The Timber Company with Plum Creek. In connection with the mergers, The Timber
Company expects to transfer the assets and liabilities of The Timber Company to
the Subsidiaries. Georgia-Pacific will redeem all of the outstanding shares of
Timber Company common stock. In connection with the redemption, each outstanding
share of Timber Company common stock will be exchanged for one Unit. In
connection with the mergers, holders of the Units will receive 1.37 shares of
Plum Creek common stock for each Unit. This transaction, which includes the
incurrence by Plum Creek of approximately $1.0 billion of debt to extinguish the
debt attributed to The Timber Company by Georgia-Pacific, is valued at
approximately $4 billion. Plum Creek will assume a ten-year timber supply
agreement between Georgia-Pacific Group and The Timber Company. The mergers are
subject to, among other things, approval by the Plum Creek stockholders and the
holders of Timber Company common stock, receipt of a ruling from the Internal
Revenue Service that the redemption of all of the outstanding shares of Timber
Company common stock is tax-free to Georgia-Pacific and to the holders of Timber
Company common stock and receipt by Georgia-Pacific and Plum Creek of opinions
of their respective counsel that the mergers will be treated as tax-free
reorganizations under the Internal Revenue Code. The mergers are also subject to
receipt of applicable governmental approvals and the satisfaction of customary
closing conditions. The mergers are expected to be completed by the end of the
first quarter of 2001.
YEAR-TO-DATE SECOND QUARTER 2000 COMPARED WITH YEAR-TO-DATE SECOND QUARTER 1999
The Timber Company reported net sales of approximately $205 million and net
income of $75 million, or $0.69 diluted pro forma earnings per share, for the
six-month period ended July 1, 2000 compared to net sales of $273 million and
net income of $143 million for the six-months ended July 3, 1999. The 1999
results included a one-time, after-tax gain of $50 million from the sale of
company timberlands in Maine and New Brunswick.
Timber sales decreased $62 million year-to-date, from $263 million as of
July 3, 1999 to $201 million as of July 1, 2000, primarily as a result of lower
harvest volumes resulting from a smaller land base following the 1999 sale of
more than one million acres of timberlands in California, Maine, and New
Brunswick, and unseasonably dry weather in the southern United States which
resulted in lower weighted average selling prices. The Timber Company expects
log sales volumes to increase and pricing to remain stable during the second
half of 2000.
General and administrative expense remained unchanged at $20 million for
both the first half of 2000 and 1999.
Earnings before interest and taxes decreased $127 million to $144 million in
the first six months of 2000 compared to $271 million in the same period of
1999. Excluding the pre-tax gain on the sale of timberlands in Maine and New
Brunswick of $84 million in the second quarter of 1999, earnings before interest
and taxes decreased $43 million primarily as a result of lower total harvest
volumes resulting from a smaller land base following the 1999 timberland sales
and lower weighted average selling prices.
Net interest expense decreased $14 million to $21 million for the first six
months of 2000 compared to $35 million for the first half of 1999 due primarily
to interest income on the $351 million note receivable related to the
December 1999 California timberland sale.
For a discussion of commitments and contingencies refer to Note 6 of the
Notes to Combined Financial Statements.
93
<PAGE>
1999 COMPARED WITH 1998
The Timber Company reported net sales of $522 million and net income of $398
million, or $3.63 diluted pro forma earnings per share, after giving effect to
the recapitalization in connection with the mergers (see Note 1 of the Notes to
Combined Financial Statements) in 1999, compared with net sales of $541 million
and net income of $180 million in 1998. The 1999 results included a $355 million
pretax gain ($215 million after taxes, or $1.97 pro forma earnings per share)
from the sale of 1,024,000 acres of timberlands located in California, Maine and
New Brunswick, Canada. The 1998 results included a $24 million pretax gain ($14
million after taxes) from the sale of certain timberlands in West Virginia and
an extraordinary, after-tax loss of $2 million for the early retirement of debt.
Timber sales decreased $24 million to $497 million in 1999 compared to $521
million in 1998, primarily as a result of a 27% decline in pulpwood selling
prices. Timber sales to unrelated parties grew 66% over 1998 as The Timber
Company increased its total sales revenue to third parties from 20% in 1998 to
33% in 1999.
Southern softwood sawtimber prices decreased 11% from record levels in 1998
due in part to the dry ground conditions in the South. This decline in price was
offset by a 11% increase in harvest volumes due in part to strong demand in the
building products business. However, Western sawtimber volumes decreased 16%
compared to 1998 due in part to weather conditions which restricted harvesting
in the Northwest during the first nine months of 1999. Softwood pulpwood prices
were down 20% compared to 1998 due to a combination of dry weather and pulp mill
curtailments and/or shutdowns in the first half of 1999. Hardwood pulpwood
prices also continued to drop, as anticipated. Hardwood sawtimber harvest
volumes increased 18% over 1998, while pricing remained flat. Western sawtimber
prices increased 19% year over year, primarily due to recovering Western
markets. Also contributing was the increased demand in the building products
business that was experienced during 1999. Prices for most products are
anticipated to hold at or near current levels in 2000.
Excluding the pretax gain on the sale of timberlands in California, Maine
and New Brunswick of $355 million in 1999, and the pretax gain on the sale of
certain timberlands in West Virginia of $24 million in 1998, earnings before
interest and taxes increased $22 million to $368 million in 1999 compared with
$346 million in 1998. The 6% increase resulted primarily from a $34 million
increase in gains on miscellaneous land sales as compared to 1998, offset by
lower pulpwood selling prices. Overall, 4% higher total harvest volumes
partially offset the year over year 8% decline in average sales price. Cost of
sales, excluding depreciation and cost of timber harvested and gains on asset
sales, decreased by $10 million to $121 million in 1999, compared to $131
million in 1998. Much of the decline in cost of sales was attributable to lower
silvicultural expenses and lower cut and haul expenses.
General and administrative expense was $43 million in 1999 compared with $36
million in 1998. The increase is due to higher incentive compensation accruals,
higher legal fees and $2 million of one-time, nonrecurring charges in the third
quarter of 1999, primarily related to charitable contributions. General and
administrative expense is expected to decline in 2000 by approximately 10%,
consistent with the reduced size of The Timber Company's timberland holdings.
Interest expense decreased by $2 million to $69 million in 1999 compared to
$71 million in 1998 due primarily to a decrease in the weighted average interest
rate.
1998 COMPARED WITH 1997
The Timber Company reported net sales of $541 million and net income of $180
million in 1998, compared with net sales of $551 million and net income of $215
million in 1997. The 1998 results included a $24 million pretax gain ($14
million after taxes) from the sale of certain West Virginia timberlands and an
extraordinary, after-tax loss of $2 million, for the early retirement of debt.
The 1997 results included a $114 million pretax gain ($71 million after taxes)
from the sale of 127,000 acres
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<PAGE>
of timberlands located near Martell, California. There were no sales from the
Martell timberlands in 1997, and the operating profits from those timberlands
were not significant for any of the years presented on the financial statements.
Timber sales decreased $4 million to $521 million in 1998 compared to $525
million in 1997. This decline was due in large part to the fact that 1.4 million
fewer tons (9%) were harvested in 1998 compared to 1997. This overall decline in
volume was offset somewhat by an increase in Southern sawtimber prices of 13%.
After reaching record levels in the first half of 1998 due to extremely wet
weather, prices for Southern sawtimber were closer to 1997 prices by year-end
1998. Southern sawtimber harvest levels were 3% lower in 1998 as compared with
1997. Softwood pulpwood harvest volumes declined 15% in 1998 in part due to a
different harvest plan for softwood pulpwood in 1998 versus 1997 and in part due
to downtime taken by pulp and paper mills. While causing a decline in total
sales revenue, this also resulted in a higher-margin product mix for 1998.
Softwood pulpwood prices remained unchanged in 1998 compared to 1997. Western
softwood sawtimber prices decreased 9% compared to 1997 due to weak demand
associated with the Asian economic problems. Hardwood sawtimber prices decreased
in large part due to the mix of hardwood sawtimber harvested (i.e., a higher
proportion of less-expensive, lower-grade sawtimber being harvested).
Sales from real estate development activities decreased $5 million to $3
million in 1998, compared to $8 million in 1997, due to the sale of the real
estate development properties located in South Carolina and Florida in the first
quarter of 1998. The Timber Company is no longer engaged in real estate
development activities.
Excluding the pretax gain on the sale of certain timberlands in West
Virginia of $24 million in 1998, and the pretax gain on the sale of timberlands
near Martell, California, of $114 million in 1997, earnings before interest and
taxes increased $23 million to $346 million in 1998, compared with $323 million
in 1997. This increase was the result of a higher-margin product mix coupled
with efforts to reduce costs by optimizing productivity and operating with a
workforce focused on cost control. Cost of sales, excluding depreciation and
cost of timber harvested and gains on asset sales, decreased by $21 million to
$131 million in 1998, compared to $152 million in 1997. Much of the decline in
cost of sales was attributable to lower silvicultural expenses and lower cut and
haul expenses.
General and administrative expense was $36 million in 1998, compared with
$43 million in 1997. Excluding a one-time charge of $3 million related to
information systems write-offs in 1997, general and administrative expense
decreased $4 million as a result of the implementation of strategies that focus
continually on controlling costs.
Interest expense declined 15% to $71 million in 1998, compared with $84
million in 1997. The primary reason for this decline was a lower level of debt,
which resulted from applying the $270 million proceeds from the sale of the
timberlands near Martell, California. Also contributing to the decline were
lower average interest rates.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. The Timber Company generated cash from operations of
$98 million during the six-months ended July 1, 2000 compared with $82 million
for the same period a year ago. The increase in cash generated from operations
was due principally to the transfer to Georgia-Pacific of an $18 million tax
escrow account related to the 1999 sale of the New Brunswick timberlands.
The Timber Company generated cash from operations of $159 million during
1999. The Timber Company's cash provided by operations in 1998 was $201 million.
The decrease is due in part to the cash received from the sale of a timber deed
sold to the Georgia-Pacific Group in the second quarter of 1998 for
approximately $23 million and to taxes paid of approximately $14 million on the
gain from the 1999 sale of timberlands in New Brunswick, Canada.
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<PAGE>
INVESTING ACTIVITIES. Expenditures during the first half of 2000 were
$38 million, including $23 million related to silvicultural investments.
Expenditures for the same period in 1999 totaled $26 million, with $22 million
related to silvicultural investments.
Proceeds from the sales of miscellaneous timberlands were $6 million during
the first six months of 2000. During the first six months of 1999, proceeds from
sales of assets were $95 million. In addition to miscellaneous land sales,
during the second quarter of 1999, The Timber Company sold approximately 390,000
acres of timberlands in the Canadian province of New Brunswick and approximately
440,000 acres of timberlands in Maine for approximately $92 million.
Expenditures in 1999 were $80 million, which included $42 million for
silvicultural investments, $36 million for timberland purchases and $2 million
for equipment purchases. Expenditures in 1998 totaled $65 million. Expenditures
for both 1999 and 1998 excluded tax-free exchange transactions. The Timber
Company expects to invest approximately $50 million in 2000, without considering
the cost of any acquisitions, primarily for silvicultural investments.
Excluding tax-free exchange transactions, The Timber Company received $124
million in proceeds from the sale of assets in 1999, including $92 million from
the sale of approximately 390,000 acres of timberlands in New Brunswick, Canada,
and approximately 440,000 acres of timberlands in Maine.
In December 1999, The Timber Company sold approximately 194,000 acres of its
redwood and Douglas fir timberlands in Northern California for a purchase price
of approximately $397 million. In conjunction with the sale, Georgia-Pacific
received notes from the purchaser for the purchase price. These notes are fully
secured by a standby letter of credit with an unaffiliated third-party financial
institution. Georgia-Pacific expects to monetize these notes through the
issuance of notes payable in the first half of 2000. The Timber Company expects
to use the proceeds of the monetization of the notes to reduce debt. The
estimated annual operating profits and capital expenditures for 1999 related to
these timberlands were $30 million and $1 million, respectively.
The Timber Company expects to continue to optimize its timber portfolio in
2000, selling selected properties that are nonstrategic or have a greater value
as conservation, commercial or recreational sites. There are currently more than
100,000 acres of scattered parcels that have been identified for such sales.
Excluding tax-free exchange transactions, The Timber Company received $64
million in proceeds from the sale of assets in 1998, principally real estate
development properties located in South Carolina and Florida and certain
timberlands in West Virginia.
The Timber Company expects to buy and sell timberlands as part of a
continuing effort to improve its competitive position. Proceeds from sales of
timberlands will be used by it either to fund the purchase of other timberlands
that, due to location or species mix, are most desirable or to reduce debt or
return cash to Georgia-Pacific. The cost of timberland purchases or the proceeds
from timberland sales could be material to the results of operations and
financial condition reported for The Timber Company in a particular of year.
FINANCING ACTIVITIES. Georgia-Pacific's total debt increased by
$94 million to $7.12 billion at July 1, 2000 from $7.02 billion at January 1,
2000. At July 1, 2000 and January 1, 2000, $1,027 million and $970 million,
respectively, of such debt was allocated to The Timber Company.
At January 1, 2000 and December 31, 1998, $970 million and $983 million,
respectively, of Georgia-Pacific's total debt was allocated to The Timber
Company. The debt of The Timber Company bears interest at a rate equal to the
weighted average interest rate of Georgia-Pacific's total debt, calculated on a
quarterly basis. At January 1, 2000, the weighted average interest rate on
Georgia-Pacific's total debt, excluding senior deferrable notes, was 7.2%
including outstanding interest rate exchange agreements. The Timber Company's
debt increases or decreases by the amount of any cash provided by or used for
its operating activities, investing activities, and other nondebt-related
financing
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<PAGE>
activities. See Note 1 of the Notes to Combined Financial Statements for further
discussion of financial activities.
In conjunction with the sale of 440,000 acres of The Timber Company's Maine
timberlands in June 1999, Georgia-Pacific received notes from the purchaser in
the amount of $51 million. In November 1999, Georgia-Pacific monetized these
notes through the issuance of notes payable in a private placement. These
proceeds were used to reduce The Timber Company's debt. Georgia-Pacific will use
proceeds from the notes receivable to fund payments required for the notes
payable.
In conjunction with the sale of 194,000 acres of The Timber Company's
California timberlands in December 1999, The Timber Company received notes from
the purchaser with an estimated fair value of $350 million. Georgia-Pacific
plans to monetize these notes through the issuance of notes payable in the
fourth quarter of 2000. The Timber Company expects to use proceeds from the
monetization of the notes to reduce its debt. Georgia-Pacific will use proceeds
from the notes receivable to fund payments required for the notes payable.
During 1999 and 1998, The Timber Company returned cash to Georgia-Pacific of
$190 million and $212 million, respectively.
In 2000, The Timber Company expects its cash flow from operations, together
with proceeds from any sales of assets and available financing sources, to be
sufficient to fund planned capital investments, and make scheduled debt
repayments.
OTHER. The Timber Company employs approximately 400 people of which there
are not a significant number of union employees.
In July 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 137, providing for a one year delay of the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities"("SFAS No. 133").
SFAS No. 133 establishes accounting and reporting standards for derivative
instrument and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet and measure
those instruments at fair value. The Timber Company will be required to adopt
SFAS No. 133 in 2001. In June 2000, the FASB issued SFAS No. 138 that amends the
accounting and reporting of derivatives under SFAS No. 133 to exclude, among
other things, contracts for normal purchases and normal sales. Georgia-Pacific's
management is evaluating the effect of this statement on The Timber Company. The
impact of adjustments to fair value is not expected to be material to The Timber
Company's combined financial position because The Timber Company does not
utilize derivatives.
The Timber Company has resolved the effects of the Year 2000 problem on its
key information systems. The Year 2000 problem, which is common to most
businesses, concerns the inability of such systems to properly recognize and
process dates and date-sensitive information on and beyond January 1, 2000. The
Timber Company developed a Year 2000 plan, under which all of its key
information systems were tested and noncompliant software or technology was
modified or replaced. The work needed to resolve the Year 2000 problem with
regard to its operations was performed as part of normal systems maintenance and
replacement practices. The Timber Company did not accelerate its internal
maintenance schedule or incur any incremental cost for such work. The Timber
Company did not incur any significant cost or problems in its key information
systems related to Year 2000. The Timber Company will continue to monitor the
effect of Year 2000 on its systems during the first few months of 2000.
For a discussion of commitments and contingencies, see Note 9 of the Notes
to Combined Financial Statements.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION ACT OF 1995. The statements under "Management's
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Discussion and Analysis" and other statements contained herein that are not
historical facts, including statements regarding pricing trends and expected
harvest rotations, are forward-looking statements (as such term is defined under
the Private Securities Litigation Reform Act of 1995) based on current
expectations. The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions. In addition to the risks, uncertainties and
assumptions discussed elsewhere herein, factors that could cause or contribute
to actual results differing materially from such forward-looking statements
include the following: the effect on The Timber Company of governmental,
legislative and environmental restrictions; catastrophic losses from fires,
floods, windstorms earthquakes, volcanic eruptions, insect infestations or
diseases; material variations in regional market demand for timber products;
fluctuations in interest rates; and other risks, uncertainties and assumptions
discussed in Georgia-Pacific's filings with the Securities and Exchange
Commission, including Georgia-Pacific's Form 10-K dated January 1, 2000 and
Georgia-Pacific's Form 8-K dated October 17, 1996.
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<PAGE>
BUSINESS OF PLUM CREEK
GENERAL
Plum Creek is in the business of acquiring, managing and operating
timberland properties for the primary purpose of planting, growing, harvesting
and selling merchantable timber and wood fiber. Plum Creek is the fourth largest
owner and operator of private timberlands in the United States with a forest
resource base of approximately 3.2 million acres. Plum Creek's diverse timber
holdings are located in four distinct regions and are strategically situated
near end-markets for its products. As of December 31, 1999, Plum Creek's timber
portfolio contained approximately 33.0 million cunits, as summarized below. A
cunit is a standard unit of measurement of volume equal to one hundred cubic
feet of timber.
<TABLE>
<CAPTION>
ACRES CUNITS
REGION (STATES) (OWNED) (IN MILLIONS) PRIMARY SPECIES
--------------- --------- ------------- --------------------
<S> <C> <C> <C>
Cascade Region .................................. 285,000 4.4 Douglas-fir
(Washington) Hemlock
Rocky Mountain Region ........................... 1,488,000 10.6 Douglas-fir
(Montana) Larch
(Idaho) Pine
Northeast Region ................................ 912,000 13.5 Spruce
(Maine) Firs
Birch
Maple
Southern Region ................................. 523,000 4.5 Southern Yellow Pine
(Louisiana)
(Arkansas)
</TABLE>
Plum Creek's timberlands are well diversified, not only by geography and
species mix but also by age class distribution. Growth rates vary depending on
species, location, age and forestry practices. Plum Creek manages its
timberlands in four business segments: the Northeast resources segment,
consisting of timberlands in central Maine; the Cascade resources segment,
consisting of timberlands in western Washington; the Rockies resources segment,
consisting of timberlands in western Montana and northern Idaho; and the
Southern resources segment, consisting of timberlands in Louisiana and Arkansas.
RESOURCE MANAGEMENT
Plum Creek seeks to enhance the value of its timberland holdings by actively
managing them in an economically prudent and environmentally responsible manner.
One way through which Plum Creek enhances the value of its forest resources is
by improving the productivity of its forests through modern technology. Plum
Creek's implementation of advanced and beneficial silviculture methods has
increased growth rates of its timber and shortened harvest cycles. Plum Creek
also focuses on controlling harvesting costs and sorting and merchandising logs
to capture the highest value from each log.
Plum Creek also carefully considers its forest management activities on
properties with potentially higher and better uses than long-term timber
production. Higher and better use properties are properties that are typically
located near recreational areas or expanding population centers and that may be
better suited for conservation, residential or recreational purposes. To date,
Plum Creek has transferred approximately 21,500 acres of these properties to a
wholly owned subsidiary and expects them to be sold or exchanged within the next
five years.
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Plum Creek's policy is to ensure that every acre of timberland harvested is
promptly reforested. Company managers and foresters spend substantial time
throughout the year planning and implementing the reforestation effort. The
process begins well in advance of final harvest with Plum Creek's foresters
working closely with Plum Creek's nursery and seed orchard personnel to
determine how best to plant, grow and develop the next generation of timber.
Each year, Plum Creek plants nearly 20 million seedlings as part of its
reforestation efforts.
ENVIRONMENTAL STEWARDSHIP
Plum Creek is dedicated to environmental forestry practices and subscribes
to the principles and objectives of the American Forest and Paper Association's
Sustainable Forestry Initiative(SM) which sets forth a comprehensive nationwide
approach to responsible forest stewardship. These principles are designed to
ensure that forest management is integrated with the conservation of soil, air
and water resources, wildlife and fish habitat and aesthetics. A 1999
independent audit of Plum Creek's forest practices in all of its operating
regions conducted by PricewaterhouseCoopers LLP concluded that Plum Creek is in
compliance with the objectives of the Sustainable Forestry Initiative(SM). Plum
Creek also works closely with Federal, state and local governmental authorities
in establishing and implementing habitat conservation plans for various species
of wildlife. Habitat conservation agreements providing protected habitat for
numerous species currently cover over approximately 232,000 acres of Plum
Creek's timberland. Plum Creek is currently developing two additional habitat
conservation plans--one for native fish species such as bull trout, steelhead
and salmon, covering approximately 1.6 million acres in Montana, Idaho and
Washington, and another for red-cockaded woodpeckers, covering approximately
260,000 acres in Arkansas and Louisiana.
MANUFACTURING
Plum Creek's manufacturing operations are conducted through its
unconsolidated subsidiaries and include six lumber mills, two plywood plants,
one medium density fiberboard facility, and two lumber remanufacturing
facilities. These facilities, strategically located near Plum Creek's
timberlands in Montana, Idaho, Louisiana and Arkansas (which supply the
facilities with the majority of their raw material), convert logs to lumber,
plywood and other wood products, and convert sawdust and shavings to medium
density fiberboard. These facilities accounted for 68% of Plum Creek's 1999
combined segment revenue of $758.9 million.
Plum Creek employs modern technology in its manufacturing facilities in
order to achieve high efficiencies, maximize the utilization of its timber
resources and maintain the high quality standards that have been the basis of
its penetration of value-added markets. Since the beginning of 1995 through
June 30, 2000, Plum Creek has invested approximately $125 million in capital
improvements to improve the efficiency and expand the capacity of its conversion
facilities.
Plum Creek's lumber products manufactured in the northwest United States are
targeted to domestic lumber retailers, such as retail home centers, for use in
repair and remodeling projects. Lumber products manufactured in the southern
United States are targeted to the home construction, industrial and export
markets. Value-added products and services such as consumer appearance boards,
pull-to-length boards, premium furring strips, premium studs and pattern boards
targeted to specialty markets have made the company less dependent on the more
volatile home construction market. Plum Creek produces high-grade plywood that
it primarily sells into specialized industrial markets including recreational
boat, recreational vehicle, and fiberglass-reinforced panels. Its plywood
products are generally of higher quality than commodity construction grade
products and command higher prices in these specialty markets. Plum Creek also
supplies high-quality medium density fiberboard markets in North America and the
Pacific Rim. Medium density fiberboard products are primarily sold to
distributors and door, molding, fixture and furniture manufacturers.
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<PAGE>
GROWTH STRATEGY
Plum Creek's disciplined growth strategy has allowed it to expand and
diversify its timber holdings, as well as increase its cash flow. Over the last
decade, Plum Creek has increased its timber holdings from approximately
1.4 million acres to approximately 3.2 million acres at the end of 1999. For the
same period, Plum Creek's inventory of standing timber increased from
approximately 19.4 million cunits to approximately 33.0 million cunits. In
addition, Plum Creek's EBITDA, defined as operating income before depreciation,
depletion and amortization, grew from $97 million in 1990 to approximately
$251 million in 1999, inclusive of EBITDA from Plum Creek's unconsolidated
subsidiaries. EBITDA does not take into account capital expenditures, does not
represent cash provided by operating activities in accordance with generally
accepted accounting principles and does not indicate the cash available to fund
cash needs, including distributions to stockholders.
POLICIES OF PLUM CREEK
Plum Creek does not have a policy with respect to the issuance of
securities, the borrowing of money, the making of loans to other persons, the
underwriting of securities or the repurchasing of its securities. Plum Creek's
policy is to operate in a manner that will permit it to qualify as a REIT for
Federal income tax purposes. Other than the REIT qualification rules discussed
elsewhere in this joint proxy statement/prospectus, there are no additional
limitations on the percentage of assets Plum Creek may invest in any one
property or security. The extent to which Plum Creek engages in any activity
will be determined in light of then-existing conditions. Plum Creek's board of
directors may institute or revise any of Plum Creek's policies at their
discretion without a vote of Plum Creek stockholders.
BUSINESS OF THE TIMBER COMPANY
The Timber Company is engaged in the business of growing, acquiring,
managing, and operating timberland properties for the primary purpose of
planting, growing, harvesting, and selling merchantable timber and wood fiber.
The Timber Company is one of the largest timberland owners in the United States,
owning or controlling approximately 4.7 million acres. These timberlands are
located in three regions: 3.9 million acres of primarily pine forests in the
South; 286,000 acres of primarily Douglas-fir forests in Oregon; and 503,000
acres of mixed hardwood forests in the Appalachian and north central regions of
the United States. These timberlands are within economic reach of over 1,000
customers. Principal products include softwood sawtimber, softwood pulpwood,
hardwood sawtimber and hardwood pulpwood.
The Timber Company's policy is to ensure that every acre of timberlands is
promptly reforested. The Timber Company's managers and foresters spend
substantial time throughout the year planning and implementing the reforestation
effort. The process begins well in advance of final harvest with The Timber
Company's foresters working closely with The Timber Company's nursery and seed
orchard personnel to determine how best to plant, grow and develop the next
generation of timber.
The Timber Company also operates six world-class nurseries, and plants more
than 125 million conifer seedlings each year. It does not own or operate logging
equipment or converting facilities. Logging operations are performed by
independent contractors working for purchasers of the standing timber or, in
certain circumstances, for The Timber Company. The Timber Company also engages
in certain businesses related to the ownership and management of its timberlands
including, but not limited to, the management of hunting leases and mineral
rights.
The Timber Company has developed a program to refine and improve the
quality, value and productivity of timberlands by selling or exchanging small
parcels of land that are either marginally productive or more valuable for uses
other than long-term timber production. The Timber Company redeploys a majority
of the proceeds from these tactical land sales to acquire more productive
timberlands.
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The Timber Company attempts to maximize shareholder value through the
implementation of strategies that constantly focus on merchandising timber for
maximum return, maximizing timberland productivity, controlling costs, enhancing
the quality of its timberlands portfolio and ensuring environmentally
sustainable operations.
DIRECTORS DESIGNATED BY GEORGIA-PACIFIC TO BE ADDED
TO PLUM CREEK'S BOARD OF DIRECTORS
Under the merger agreement, the following individuals designated by
Georgia-Pacific and reasonably acceptable to Plum Creek will be added to Plum
Creek's board of directors at the closing of the mergers:
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<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF
PLUM CREEK COMMON STOCK AND TIMBER COMPANY COMMON STOCK
This section of the joint proxy statement/prospectus describes material
differences between the current rights of the holders of Timber Company common
stock and rights those shareholders will have as Plum Creek stockholders
following the mergers. The following discussion is intended only to highlight
material differences between the rights of corporate shareholders under Delaware
law and Georgia law generally and specifically with respect to Plum Creek
stockholders and the holders of Timber Company common stock pursuant to the
respective charters and bylaws of Plum Creek and Georgia-Pacific. The discussion
does not constitute a complete comparison of the differences between the rights
of such holders or the provisions of the Delaware General Corporation Law, the
Georgia Business Corporation Code, Georgia-Pacific's articles of incorporation,
Georgia-Pacific's bylaws, Plum Creek's certificate of incorporation and Plum
Creek's bylaws. The holders of Timber Company common stock are referred to the
Georgia Business Corporation Code, Georgia-Pacific's articles of incorporation,
Georgia-Pacific's bylaws and the Delaware General Corporation Law, Plum Creek's
certificate of incorporation and Plum Creek's bylaws for detailed information
regarding such differences.
The rights of the holders of Timber Company common stock are governed by
Georgia law, Georgia-Pacific's articles of incorporation and Georgia-Pacific's
bylaws. Upon completion of the mergers, the rights of the holders of Timber
Company common stock who become Plum Creek stockholders as a result of the
mergers will be governed by Delaware law, and by Plum Creek's certificate of
incorporation and Plum Creek's bylaws, each as amended as contemplated by the
merger agreement.
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
Description of
common stock....... Plum Creek is authorized to issue On December 16, 1997, shareholders
300,000,000 shares of common stock, of Georgia-Pacific approved the
par value $.01 per share. Following creation of two classes of common
the mergers, only one class of stock, Georgia- Pacific Group common
common stock will be issued and stock and Timber Company common
outstanding. Holders of Plum Creek stock, which was intended to reflect
common stock are entitled to one separately the performance of
vote per share. Georgia-Pacific's two operating
groups, Georgia-Pacific Group and
The Timber Company. Georgia-Pacific
is authorized to issue 400,000,000
shares of Georgia-Pacific Group
common stock, par value $.80 per
share, and 250,000,000 shares of
Timber Company common stock, par
value $.80 per share.
On each matter to be voted on by the
holders of Georgia-Pacific Group
common stock and Timber Company
common stock voting together as a
single voting group, each share of
Georgia-Pacific Group common stock
is entitled to one vote and each
share of Timber Company common stock
is entitled to a variable vote equal
to the
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
ratio of the time-weighted average
market value of one share of Timber
Company common stock to the time-
weighted average market value of one
share of Georgia-Pacific Group
common stock calculated over the
twenty-trading day period ending
ten-trading days prior to the record
date for each respective meeting of
shareholders, and may have more
than, less than, or exactly one vote
per share. Because each share of
Timber Company common stock has a
variable number of votes, the
relative voting power per share of
Timber Company common stock and
Georgia-Pacific Group common stock
fluctuates. As of the date of this
joint proxy statement/ prospectus,
each share of Timber Company common
stock is entitled to of a
vote.
Georgia-Pacific's articles of
incorporation provide that holders
of all classes of Georgia-Pacific
common stock and any series of
Georgia-Pacific junior preferred
stock outstanding at the time of a
vote and entitled to vote together
with the holders of Georgia-Pacific
common stock will vote together as a
single class on all matters as to
which holders of Georgia-Pacific
common stock are generally entitled
to vote other than a matter with
respect to which Georgia-Pacific
common stock or either
Georgia-Pacific Group common stock
or Timber Company common stock or
any series of Georgia-Pacific junior
preferred stock would be entitled to
vote as a separate voting group.
Georgia-Pacific's board of directors
is authorized and empowered to fix
and determine whether or not shares
of Georgia-Pacific preferred stock
have voting rights and the extent of
any such voting rights.
Under the Georgia Business
Corporation Code, holders of
Georgia-Pacific group common stock
and Timber Company common stock vote
together as a single voting group,
except as to
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
certain amendments to
Georgia-Pacific's articles of
incorporation affecting, among other
things, the designations, rights,
preferences or limitations of either
class of Georgia-Pacific common
stock or in connection with mergers
and statutory share exchanges
involving such amendments, in which
case a separate vote by the holders
of the particular class affected is
also required.
Description of
preferred stock.... Plum Creek is authorized to issue Georgia-Pacific's articles of
75,000,000 shares of preferred incorporation authorize the board of
stock, par value $.01 per share. directors to issue 10,000,000 shares
Plum Creek's certificate of of preferred stock, no par value,
incorporation authorizes the board and 25,000,000 shares of junior
of directors to issue shares of preferred stock, no par value.
preferred stock in one or more Subject to Georgia law and
series, establish the number of Georgia-Pacific's articles of
shares to be included in each such incorporation, Georgia-Pacific's
series and fix the designations, articles of incorporation authorize
powers, including voting powers, the board of directors to issue
preferences and rights of the shares shares of preferred stock in one or
of each such series and the more series, establish the number of
qualifications, limitations and shares to be included in each such
restrictions thereof. Currently, no series and fix the designations,
shares of Plum Creek preferred stock powers, including voting powers,
are outstanding. preferences and rights of the shares
of each such series and the
qualifications, limitations and
restrictions thereof. Currently, no
shares of Georgia-Pacific preferred
stock are outstanding.
The Georgia-Pacific junior preferred
stock has three series. The holders
of each unit, or one one-hundredth
(1/100) of a share, of Series A
Junior Preferred Stock and Series B
Junior Preferred Stock are entitled
to one vote on all matters submitted
to a vote of the Georgia-Pacific
shareholders. The holders of each
unit, or one one-hundredth (1/100)
of a share, of Series C Junior
Preferred Stock are entitled to the
number of votes per share which the
holders of Timber Company common
stock then have with respect to
matters submitted to a vote of the
shareholders of Georgia-Pacific. The
holders of each series of
Georgia-Pacific junior preferred
stock and the holders of
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PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
Timber Company common stock and
Georgia-Pacific Group common stock
vote together as one voting group on
all matters submitted to a vote of
shareholders of Georgia-Pacific.
However, if at any time, dividends
on any series of Georgia-Pacific
junior preferred stock are in
arrears in an amount equal to six
quarterly dividends thereon, then
during such period from the
occurrence of such event until such
time as all accrued and unpaid
dividends for all previous quarterly
dividend periods and for the current
quarterly dividend period on any
series of Georgia-Pacific junior
preferred stock then outstanding
have been declared and paid or set
apart for payment, the holders of
each of the three series of
Georgia-Pacific junior preferred
stock outstanding at the time of
such default, shall have the right
to elect two directors of
Georgia-Pacific. Currently, no
shares of Georgia-Pacific Series A
Junior Preferred Stock are
authorized, 5,000,000 shares of
Georgia-Pacific Series B Junior
Preferred Stock are authorized and
5,000,000 shares of Georgia-Pacific
Series C Junior Preferred Stock are
authorized.
Risk inherent in
letter stock
structure.......... Plum Creek does not have a tracking Holders of Timber Company common
stock structure. stock are subject to all the risks
of an investment in Georgia-Pacific
as a whole. Financial effects
arising from the Georgia-Pacific
Group that affect Georgia-Pacific's
consolidated results of operations
could, if significant, affect the
results of operations or financial
condition of The Timber Company. In
addition, holders of Timber Company
common stock do not have shareholder
approval rights associated with
traditional common stock. There is
no board of directors that owes
separate fiduciary duties to the
holders of Timber Company common
stock and holders of Timber Company
common stock may
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<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
not have any remedies if any action
by directors or officers of
Georgia-Pacific has an adverse
effect on Timber Company common
stock.
Ownership
restrictions
mandated by REIT
structure.......... As a REIT, Plum Creek's capital Georgia-Pacific is not a REIT.
stock must be held by at least 100
persons and no more than 50% of the
value of such stock may be owned,
directly or indirectly, by five or
fewer individuals, which includes
certain entities such as private
foundations, at all times during any
taxable year. Plum Creek's
certificate of incorporation
provides for certain restrictions
regarding the transfer and ownership
of its capital stock for purposes of
aiding the company in meeting the
REIT stock ownership requirements.
In general, these provisions render
ineffective any purported transfers
of stock that would cause Plum Creek
to fail to qualify as a REIT. See
"Description of Capital
Stock--Restrictions on Ownership and
Transfer of Shares."
Special meeting of
shareholders....... Under Delaware law, a special Under Georgia law, a special meeting
meeting of stockholders may be of shareholders may be called by the
called by the board of directors or board of directors or any other
any other person authorized to do so person authorized to do so in the
in the certificate of incorporation articles of incorporation or the
or the bylaws. Plum Creek's bylaws bylaws. In addition, Georgia law
authorize the Chairman of the Board, provides that a special meeting of
the President, any Vice President, shareholders may also be called by
the Secretary or any Assistant the holders of at least 25% of all
Secretary to call a special meeting votes entitled to be cast on any
of stockholders upon the written issue proposed to be considered at a
request of the board of directors, a special meeting or such greater or
committee of the board of directors lesser percentages as the articles
or stockholders owning a majority of of incorporation or the bylaws
the issued and outstanding capital provide. Georgia-Pacific's bylaws
stock of Plum Creek entitled to vote allow the Chairman of the Board, any
on the issue proposed to be Vice Chairman, the President, the
considered at the special meeting. Chief Executive Officer or
Georgia-Pacific's board of directors
to call special meetings of
shareholders, and provide that a
special meeting of shareholders
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PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
shall be called, among other
circumstances, upon written request
of the holders of not less than 75%
of the voting power of the
outstanding capital stock of
Georgia-Pacific entitled to be vote
on any issue proposed to be
considered at the special meeting.
Action by written
consent in lieu of
a shareholders'
meeting............ Unless prohibited by the terms of a Georgia law permits shareholders to
corporation's certificate of act without a meeting only by
incorporation, Delaware law provides unanimous written consent of the
that stockholders may take action by shareholders entitled to vote on the
written consent in lieu of voting at action, unless otherwise provided by
a stockholders' meeting. Plum the articles of incorporation.
Creek's certificate of incorporation Georgia-Pacific's articles of
expressly eliminates the ability of incorporation do not provide for
stockholders to act by written shareholders action by less than
consent. unanimous written consent.
Advance notice
provisions for
board nomination at
annual meetings.... Plum Creek's bylaws require that Georgia-Pacific's bylaws require
nominations of persons for election that nominations of persons for
to the board of directors must be election to the board of directors
made by the board of directors or by must be made by the affirmative vote
any stockholder of record entitled of a majority of the entire board of
to vote generally in the election of directors or by any shareholder of
directors who gives proper notice. record entitled to vote generally in
If made by a stockholder, such the election of directors who gives
stockholder must provide advance proper notice. If made by a
written notice to Plum Creek not shareholder, such shareholder must
less than 60 days nor more than 90 provide advance written notice to
days prior to the anniversary date Georgia-Pacific not less than 60
of the immediately preceding annual days nor more than 75 days prior to
meeting of stockholders; provided, the date of the meeting, provided
however, that in the event that the that if less than 70 days' notice or
annual meeting is called for a date prior public disclosure of the date
that is not within 30 days before or of the scheduled meeting is given or
after such anniversary date, notice made to shareholders, notice by the
by the stockholder must be received shareholder must be received not
not later than the close of business later than the close of business on
on the 10th day following the the 10th day following the earlier
earlier of the day on which such of the day on which the notice of
notice of the date of the annual the meeting is mailed or public
meeting was mailed or such public disclosure of the date of such
disclosure of the date of the annual meeting is made.
meeting was made; PROVIDED
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PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
FURTHER that in the case of a
special meeting of stockholders
called for the purpose of electing
directors, notice by the stockholder
must be received not later than the
close of business on the 10th day
following the earlier of the day on
which the notice of the meeting is
mailed.
Number of
directors.......... Plum Creek's bylaws provide that the Georgia-Pacific's bylaws provide
board of directors shall consist of that the number of the board of
not less than three nor more than directors shall be 12, but the
fifteen members, the exact number of number may be increased or decreased
which shall be fixed by the board of either by the board of directors or
directors. Upon completion of the by the affirmative vote of at least
mergers, the size of Plum Creek's 75% of the voting power of the
board of directors will be eleven outstanding capital stock of
members. Georgia- Pacific entitled to vote
generally in the election of
directors, voting as a separate
voting group. Presently,
Georgia-Pacific's board of directors
consists of 12 members.
Classified board of
directors.......... As permitted by Delaware law, Plum Georgia law provides that a
Creek's board of directors is corporation's board of directors may
divided into three classes, as be divided into various classes with
nearly equal in size as possible, staggered terms of office. Georgia-
with one class of three members Pacific's board of directors is
being elected annually. Plum Creek divided into three classes, as
directors are elected to a term of nearly equal in size as possible,
three years. with one class being elected
Classification of directors makes it annually. Georgia-Pacific directors
more difficult for stockholders to are elected to a term of three
change the composition of the board years.
of directors. If the Plum Creek Classification of directors makes it
stockholders approve the amendment more difficult for shareholders to
to Plum Creek's certificate of change the composition of the board
incorporation, Plum Creek will of directors.
eliminate its staggered board and
each elected director will serve for
a term of one year.
Election of
directors.......... The Delaware General Corporation Law Under the Georgia Business
provides that directors, unless Corporation Code, directors are
their terms are staggered, will be elected at each annual shareholders
elected at each annual stockholders meeting unless their terms are
meeting. The certificate of staggered pursuant to the
incorporation may authorize the corporation's articles of
election of certain directors by one incorporation or a bylaw adopted by
or more classes or series of shares. the shareholders. The articles of
The certificate of incorporation may authorize the
election
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109
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<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
incorporation or the bylaws also may of certain directors by one or more
allow the stockholders or the board classes or series of shares. The
of directors to fix or change the articles of incorporation or the
number of directors, but a bylaws also may allow the
corporation must have at least one shareholders or the board of
director. Since Plum Creek has a directors to fix or change the
classified board of directors, at number of directors. Since
least two annual meetings of Georgia-Pacific has a classified
stockholders will generally be board of directors, at least two
required to change a majority of the annual meetings of shareholders will
board of directors. If Plum Creek generally be required to change a
was confronted by a stockholder majority of the board of directors.
attempting to force a proxy contest, If Georgia-Pacific was confronted by
a tender or exchange offer or other a holder attempting to force a proxy
extraordinary corporate transaction, contest, a tender or exchange offer
the extended time period required to or other extraordinary corporate
replace a majority of the board of transaction, the extended time
directors would allow the board period required to replace a
sufficient time to review the majority of the board of directors
proposal, provide the board with an is designed to allow the board
opportunity to review available sufficient time to review the
alternatives to the proposal and act proposal, provide the board with an
in what it believes to be the best opportunity to review available
interests of stockholders. These alternatives to the proposal and act
factors may have the effect of in what it believes to be the best
deterring such proposals or make interests of shareholders. These
them less likely to succeed. factors may have the effect of
If the Plum Creek stockholders deterring such proposals or making
approve the amendment to Plum them less likely to succeed.
Creek's certificate of incorporation Under Georgia law, shareholders do
to eliminate the classified board of not have cumulative voting rights
directors, each elected director for the election of directors unless
will serve for a term of one year. the articles of incorporation so
Under Delaware law, stockholders do provide. Georgia- Pacific's articles
not have cumulative voting rights of incorporation do not provide for
for the election of directors unless cumulative voting rights.
the certificate of incorporation so
provides. Plum Creek's certificate
of incorporation does not provide
for cumulative voting rights.
John H. Scully, William J. Patterson
and William E. Oberndorf,
collectively referred to herein as
the "Principals," currently are
entitled to designate nominees
constituting a majority of Plum
Creek's board of directors, for so
long as the Principals beneficially
own at least five million shares of
Plum Creek common stock or Plum
Creek special voting common stock in
the aggregate at the time such slate
of board nominees is
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110
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PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
determined. Additionally, for so
long as the Principals beneficially
own less than five million shares
but at least three million shares of
Plum Creek common stock or Plum
Creek special voting common stock in
the aggregate at the time the slate
of board nominees is determined, the
Principals are entitled to designate
two nominees to the board. Pursuant
to the voting agreement, the
Principals have waived the right to
designate more than three nominees
to Plum Creek's board of directors
conditioned upon completion of the
mergers. This waiver will have the
effect of permanently and
irrevocably extinguishing any rights
of the Principals to designate a
majority of the board of directors
of Plum Creek, unless three
directors would constitute a
majority of the board of directors.
Removal of
directors.......... The Delaware General Corporation Law Georgia law provides that classified
provides that classified directors directors of a corporation may be
of a corporation may only be removed removed only for cause by a majority
for cause by the holders of a of the votes entitled to be cast on
majority of the shares entitled to their election, unless the articles
vote at an election of directors, of incorporation or a bylaw adopted
unless the certificate of by the shareholders provides
incorporation otherwise provides. otherwise. However, if a director is
Plum Creek's certificate of elected by a particular voting group
incorporation provides that any of shareholders, that director may
director, including persons elected only be removed by the requisite
by directors to fill vacancies on vote of that voting group.
the board of directors, may be Georgia-Pacific's bylaws provide
removed from office only (a) with that any director or the entire
cause and (b) by the affirmative Georgia-Pacific board of directors
vote of the holders of at least may be removed, with or without
two-thirds of the total voting power cause, by the affirmative vote of
of the shares of capital stock of the holders of 75% of the voting
Plum Creek then entitled to vote at power of the outstanding capital
a meeting of the stockholders called stock of Georgia-Pacific entitled to
for that purpose. vote generally on the election of
directors, voting as a separate
voting group.
Board of director
vacancies.......... Under Delaware law, unless the The Georgia Business Corporation
certificate of incorporation or Code provides that vacancies on the
bylaws provide otherwise, the board board of directors may be filled by
of directors may fill any vacancy on the shareholders or directors,
the board, unless the
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111
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<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
including newly created articles of incorporation or a bylaw
directorships resulting from an approved by the shareholders
increase in the number of directors. provides otherwise.
Plum Creek's certificate of Georgia-Pacific's bylaws provide
incorporation provide that vacancies that a vacancy may be filled by the
on the board of directors may only affirmative vote of a majority of
be filled by the vote of a majority the remaining directors, even if
of directors then in office, though less than a quorum, or by a sole
less than a quorum, or by a sole remaining director, or if the
remaining director, and the vacancy is not filled or no director
directors so chosen shall hold remains, by the holders of the
office until the end of the term to shares of capital stock who are
which they are appointed and until entitled to vote for the director
their successors are duly elected with respect to which the vacancy is
and qualified, or until their being filled. If a vacancy occurs
earlier death, resignation or with respect to a director elected
removal. by a particular class or series of
shares voting as a separate voting
group, the vacancy may be filled by
the remaining director or directors
elected by that class or series, or,
if the vacancy is not filled by such
remaining director or directors or
no such director remains, by the
holders of that class or series of
shares.
A director elected to fill a vacancy
is elected for the unexpired term of
his predecessor in office. Any
directorship to be filled by reason
of an increase in the number of
directors may be filled by the board
of directors, but only for a term of
office continuing until the next
election of directors by the
shareholders and the election and
qualification of his successor.
Indemnification.... Plum Creek's bylaws provide, and The Georgia Business Corporation
Delaware law permits, that a Code permits a corporation to
corporation may indemnify any person indemnify an individual for any
who was or is a party or is liability and reasonable expense
threatened to be made a party to any that may be incurred in connection
type of proceeding, other than an with or resulting from any
action by or in the right of the threatened, pending or completed
corporation, because he or she is or civil, criminal, administrative or
was an officer, director, employee investigative action, suit or
or agent of the corporation, or is proceeding (whether brought by or in
or was serving at the request of the the right of the corporation or
corporation as a director, officer, otherwise), in which he or she may
employee or agent of another become involved because he or she is
corporation or entity, against or was a director, officer, employee
expenses, including attorney's fees, or agent of the corporation;
judgments, fines and amounts paid in provided, that
settlement actually and reasonably - such individual acted in a manner
incurred in connection with such he
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PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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proceeding: or she believed in good faith to
- if he or she acted in good faith be in or not opposed to the best
and in a manner he or she reasonably interests of the corporation; and
believed to be in or not opposed - in the case of a criminal
to the best interests of the proceeding, he or she had no
corporation; and reasonable cause to believe that
- in the case of a criminal his or her conduct was unlawful.
proceeding, he or she had no Georgia law requires, to the extent
reasonable cause to believe that that an officer, director, employee
his or her conduct was unlawful. or agent has been successful, on the
Plum Creek's bylaws provide, and the merits or otherwise, in the defense
Delaware General Corporation Law of any proceeding to which he or she
permits, that a corporation may was a party, the corporation to
indemnify any person who was or is a indemnify the officer, director,
party or is threatened to be made a employee or agent against reasonable
party to any threatened, pending or expenses incurred by him or her in
completed action or suit brought by connection therewith.
or in the right of the corporation Georgia-Pacific's bylaws provide,
because he or she is or was an and the Georgia Business Corporation
officer, director, employee or agent Code permits, that upon receipt of a
of the corporation, or is or was claim for indemnification by an
serving at the request of the officer or director of
corporation as a director, officer, Georgia-Pacific for which mandatory
employee or agent of another indemnification is not applicable,
corporation or other entity, against the corporation must make a
expenses, including attorney's fees, determination that indemnification
actually and reasonably incurred in is permissible under the
connection with the defense or circumstances. The determination
settlement of such action or suit if shall be made:
he or she acted in good faith and in - by a majority vote of a quorum
a manner he or she reasonably consisting of directors not at
believed to be in or not opposed to that time parties to the suit;
the best interests of the - if such quorum is not obtainable
corporation, except that there may or, even if obtainable, if a quorum
be no such indemnification if the of disinterested directors so
person is found liable to the directs, by duly selected special
corporation unless, in such a case, legal counsel; or
the court determines the person is - if such determination has not been
entitled thereto. A corporation must made within 90 days after the
indemnify a present or former claim is asserted, and if
officer or director against expenses requested by the claimant, by vote
actually and reasonably incurred by of a majority of the shares
him or her who successfully defends entitled to vote thereon.
himself or herself in a proceeding Upon receipt of a claim for
to which he or she was a party indemnification made by a person who
because he or she is or was an is not a director or officer of the
officer or director of the corporation, Georgia-Pacific's Chief
corporation. Executive Officer and general
Plum Creek's bylaws provide, and the counsel shall determine whether
Delaware General Corporation Law indemnification is permissible under
permits, that prior to indemnifying the circumstances.
an
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<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
individual, a determination must be Additionally, Georgia-Pacific's
made that such person has met the bylaws provide, and the Georgia
applicable standard of conduct. Such Business Corporation Code permits,
determination shall be made, with that no indemnification shall be
respect to a person who is a made with regard to any claim, issue
director or officer at the time of or matter as to which a director,
such determination, by officer, employee or agent shall
- a majority vote of the directors have been adjudged liable to
who are not parties to such action, Georgia-Pacific unless and only to
suit or proceeding, even though the extent that the court in which
less than a quorum; such action or suit was brought
- by a committee of such directors shall determine that despite the
designated by majority vote of adjudication of liability but in
such directors, even though less view of all the circumstances of the
than a quorum; case, such director, officer,
- independent legal counsel in a employee or agent is fairly and
written opinion if there are no such reasonably entitled to indemnity for
directors, or if such directors so such expenses as the court shall
direct; or deem proper. Georgia law also states
- by the stockholders. that a corporation may not indemnify
Plum Creek's bylaws provide, and the a director adjudged liable:
Delaware General Corporation Law - for any appropriation, in
permits, that a corporation may violation of his or her duties, of
advance expenses, including any business opportunity of the
attorney's fees, to any director or corporation;
officer as long as any director or - for acts or omissions which
officer receiving an advance involve intentional misconduct or a
undertakes to repay the amounts knowing violation of law;
advanced if it is ultimately - for unlawful distributions; or
determined that such director or - for any transaction from which he
officer is not entitled to be or she received an improper personal
indemnified. benefit.
Georgia law permits a corporation to
advance expenses to directors and
officers as long as the director,
officer, employee or agent receiving
an advance (i) furnishes the
corporation a written affirmation of
his good faith belief that he has
met the applicable standards of
conduct and (ii) undertakes to repay
the amounts advanced if it is
ultimately determined that such
director or officer was not entitled
to be indemnified.
Limitations on
liability of
directors.......... In accordance with Delaware law, Georgia-Pacific's articles of
Plum Creek's certificate of incorporation eliminate a director's
incorporation eliminates personal personal liability for monetary
liability of a director of Plum damages to Georgia-Pacific or any of
Creek or its stockholders for its
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<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
monetary damages for breach of shareholders for any action taken,
fiduciary duty as a director, other or failure to take any action, as a
than with respect to: director, except that such liability
- breaches of the director's duty of is not eliminated for:
loyalty to the corporation or its - any appropriation, in violation of
stockholders; such director's duties, of any
- acts or omissions not in good business opportunity of
faith involving intentional Georgia-Pacific;
misconduct or knowing violations - acts or omission which involve
of law; intentional misconduct or a
- the payment of unlawful dividends knowing violation of law;
or unlawful stock repurchases or - unlawful distributions; or
redemptions; or - any transaction from which the
- any transaction in which the director received an improper
director received an improper personal benefit.
personal benefit. Georgia-Pacific's articles of
Plum Creek's certificate of incorporation provide that if at any
incorporation provides that if the time Georgia law is amended to
Delaware General Corporation Law is further eliminate or limit the
amended to further eliminate or liability of a director, then the
limit the liability of a director, liability of each director of
then the liability of each director Georgia-Pacific shall be limited to
of Plum Creek shall be eliminated or the fullest extent permitted
limited to the fullest extent thereby.
permitted thereby.
Rights on
disposition of
assets of a
group.............. Plum Creek stockholders are not If Georgia-Pacific disposes of all
entitled to special rights or substantially all of the
associated with the disposition of properties and assets of The Timber
assets of a group because Plum Company (e.g. 80% or more of the
Creek's certificate of incorporation then fair value), other than in
does not authorize a letter stock. specified related business
transactions, Georgia-Pacific must
either:
- distribute to the holders of
Timber Company common stock an
amount in cash and/or securities
or other property equal to the
fair value of the net proceeds of
such disposition, either by
special dividend or by redemption
of all or part of the outstanding
shares of Timber Company common
stock; or
- convert each share of Timber
Company common stock into a number
of shares of Georgia-Pacific Group
common stock equal to 110% of the
ratio of the average market
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<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
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<S> <C> <C>
value of one share of Timber
Company common stock to the
average market value of one share
of Georgia-Pacific Group common
stock, calculated over the 10
trading day period beginning on
the 16th trading day after
consummation of the disposition
transaction.
Georgia-Pacific may, at any time
prior to the first anniversary of a
dividend on, or partial redemption
of, shares of Timber Company common
stock following a disposition of all
or substantially all of the
properties and assets of The Timber
Company, convert each remaining
outstanding share of Timber Company
common stock into a number of shares
of Georgia-Pacific Group common
stock equal to 110% of the ratio of
the time-weighted average market
value of one share of Timber Company
common stock to the time-weighted
average market value of one share of
Georgia-Pacific group common stock,
calculated over the 20 trading day
period ending five trading days
prior to the date of the notice of
such conversion.
The proceeds from any disposition of
properties and assets that do not
comprise all or substantially all of
the properties and assets of The
Timber Company will be assets of The
Timber Company and will be used for
its benefit, subject to
Georgia-Pacific's management and
allocation policies.
Business
combination
restrictions....... Delaware's business combination Under Georgia law, corporations may
statute prevents an "interested adopt a provision requiring that
stockholder," defined generally as a certain business combinations be
person beneficially owning 15% or approved by a special vote of the
more of a corporation's outstanding board of directors and/or the
voting stock, with the exception of shareholders unless certain criteria
any person who owned and has set forth in Georgia's fair price
continued to own shares in excess of statute are met. Georgia's fair
the 15% limitation since price statute prohibits certain
December 23, 1987, from engaging in business combinations between a
a "business combination" with a Georgia corporation and an
Delaware interested
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<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
corporation for three years shareholder (as defined below),
following the date such person unless certain requirements are met.
became an interested stockholder. Generally, for purposes of this
The term "business combination" statute, "business combinations" are
includes mergers or consolidations defined to include mergers, sales of
with an interested stockholder and 10% or more of the corporation's
certain other transactions with an assets out of the ordinary course of
interested stockholder, including, business, liquidations and certain
without limitation: issuances of securities involving
- any merger or consolidation of the the corporation and any interested
corporation with (a) the shareholder.
interested stockholder or To satisfy Georgia's fair price
(b) with any other entity if the statute, a business combination with
merger is caused by such an interested shareholder must meet
interested stockholder and results one of three criteria:
in the inapplicability of - the transaction must be approved
Delaware's business combination unanimously by the "continuing
statute; directors"--directors who served
- any sale, lease, exchange, as directors immediately prior to
mortgage, pledge, transfer or other the date the interested
disposition - except shareholder first became an
proportionately as a stockholder interested shareholder and who are
of such corporation - to or with not affiliates or associates of
the interested stockholder of the interested shareholder or his
assets of the corporation having affiliates, provided that the
an aggregate market value equal to continuing directors constitute at
10% or more of either the least three members of the board
aggregate market value of all of directors at the time of such
assets of the corporation approval;
determined on a consolidated basis - the transaction must be
or the aggregate market value of recommended by at least two-thirds
all the outstanding stock of the of the continuing directors and
corporation; approved by a majority of the
- any transaction which results in votes entitled to be cast by
the issuance or transfer by the holders of voting shares,
corporation or by certain excluding shares beneficially
subsidiaries thereof of any stock owned by the interested
of the corporation or such shareholder who is, or whose
subsidiary to the interested affiliate is, a party to the
stockholder, except pursuant to business combination; or
certain transfers in a conversion - the terms of the transaction must
or exchange or a pro rata meet statutory fair pricing
distribution to all stockholders criteria and certain other tests
of the corporation or certain intended to assure that all
other transactions, none of which shareholders receive a fair price
increases the interested and equivalent consideration for
stockholder's proportionate their shares regardless of when
ownership of any class or series they sell to the acquiring party.
of the corporation's stock or of The Georgia fair price statute is
the voting stock of the designed to inhibit unfriendly
corporation; acquisitions that do not satisfy the
- any transaction involving the specified fair price requirements.
corporation or certain
subsidiaries thereof which has the
effect, directly
</TABLE>
117
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
or indirectly, of increasing the The Georgia Business Corporation
proportionate share of the stock Code authorizes Georgia corporations
of any class or series, or to adopt a provision which requires
securities convertible into stock that business combinations with
of the corporation or any interested shareholders occurring
subsidiary which is owned by the within five years of the date a
interested stockholder, except as person first becomes an interested
a result of immaterial changes due shareholder be approved by a
to fractional share adjustments or super-majority vote of the
as a result of any purchase or shareholders. For purposes of this
redemption of any shares of stock statute, "business combinations" are
not caused directly or indirectly defined to include mergers, sales of
by the interested stockholder; or 10% or more of the corporation's net
- any receipt by the interested assets, and certain issuances of
stockholder of the benefit, securities, all involving the
directly or indirectly, except corporation and any interested
proportionately as a stockholder shareholder.
of such corporation, of any loans, With limited exceptions, the Georgia
advances, guarantees, pledges, or business combination statute
other financial benefits provided requires approval of a subject
by or through the corporation or transaction in one of three ways:
certain subsidiaries. - prior to such person becoming an
The three-year moratorium may be interested shareholder, the
avoided if: corporation's board of directors
- before such person became an must have approved the business
interested stockholder, the board combination or the transaction
of directors of the corporation which resulted in the shareholder
approved either the business becoming an interested
combination or the transaction in shareholder;
which the interested stockholder - the interested shareholder must
became an interested stockholder; acquire at least 90% of the
- upon consummation of the outstanding voting stock of the
transaction which resulted in the corporation (other than shares
stockholder becoming an interested owned by officers, directors and
stockholder, the interested their affiliates and associates)
stockholder owned at least 85% of in the same transaction in which
the voting stock of the such person becomes an interested
corporation outstanding at the shareholder; or
time the transaction commenced, - subsequent to becoming an
excluding shares held by directors interested shareholder, such person
who are also officers of the acquires additional shares
corporation and by employee stock resulting in ownership of at least
plans that do not provide employee 90% of the outstanding shares,
participants with the right to other than shares owned by
determine confidentially whether officers, directors and their
shares held subject to the plan affiliates and associates, and
will be tendered in a tender or obtains the approval of the
exchange offer; or business combination by the
- on or following the date on which holders of a majority of the
shares entitled to vote thereon,
exclusive of the shares held
beneficially by the interested
shareholder and its affiliates and
</TABLE>
118
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
such person became an interested shares owned by officers,
stockholder, the business directors and their affiliates and
combination is approved by the associates.
board of directors of the For purposes of both the fair price
corporation and authorized at an statute and the business combination
annual or special meeting of statute, an "interested shareholder"
stockholders, not by written is defined as a person or entity
consent, by the affirmative vote that is the beneficial owner of 10%
of the stockholders of at least or more of the voting power of the
66 2/3% of the outstanding voting corporation's voting stock, or a
stock of the corporation not owned person or entity that is an
by the interested stockholder. affiliate of the corporation and, at
any time within the two-year period
immediately prior to the date in
question, was the beneficial owner
of 10% or more of the voting power
of the corporation's voting stock.
Georgia-Pacific has elected to be
subject to both the fair price
statute and the business combination
statute.
Vote on
extraordinary
corporate
transactions....... Delaware law provides that, unless a Under Georgia law, a sale or other
corporation's certificate of disposition of all or substantially
incorporation requires a greater all of the corporation's assets, a
vote of the stockholders or the merger of the corporation with and
Delaware business combination into another corporation, a share
statute discussed above applies then exchange involving one or more
(a) a sale, lease or exchange of all classes or series of the
or substantially all of the corporation's shares or a
corporation's assets, (b) a merger dissolution of the corporation must
or consolidation of the corporation be approved by the board of
with another corporation or (c) a directors (except in certain limited
dissolution of the corporation, circumstances) plus, with certain
requires the affirmative vote of the exceptions, the affirmative vote of
board of directors, except in the holders of a majority of all
certain limited circumstances, plus, shares of stock entitled to vote
with certain exceptions, the thereon.
affirmative vote of a majority of
the outstanding stock entitled to
vote thereon.
Liquidation........ In the event of any dissolution, In the event of a liquidation,
liquidation or winding up of the dissolution or winding up of
affairs of Plum Creek, whether Georgia-Pacific, whether voluntary
voluntary or involuntary, after or involuntary, after payment or
payment in full of the amounts provision for payment of the debts
required to be paid to the holders and other liabilities of Georgia-
of Plum Creek preferred stock, the Pacific and full preferential
remaining assets and funds of Plum amounts, including any accumulated
Creek shall be distributed pro rata and unpaid distributions, to which
to the holders of Plum Creek common holders of any outstanding shares of
Georgia-Pacific
</TABLE>
119
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
stock based on the aggregate number preferred stock or junior preferred
of shares of Plum Creek common stock stock are entitled, regardless of
outstanding. the group to which such shares of
Georgia-Pacific preferred stock or
junior preferred stock were
attributed, the holders of Georgia-
Pacific Group common stock and
Timber Company common stock will be
entitled to receive the net assets,
if any, of Georgia-Pacific for
distribution to holders of
Georgia-Pacific common stock on a
per share basis in proportion to a
fixed number of units per share of
each class, referred to herein as
"Liquidation Units." Holders of
Timber Company common stock are
entitled to a portion of the assets
remaining for distribution to
holders of Georgia-Pacific common
stock on a per share basis in
proportion to the Liquidation Units
per share of Timber Company common
stock. Georgia-Pacific's articles of
incorporation provide that each
share of Georgia-Pacific Group
common stock initially has one
Liquidation Unit and each share of
Timber Company common stock
initially has the number of
Liquidation Units equal to the ratio
to the time-weighted average market
value of one share of Timber Company
common stock to the time-weighted
average market value of one share of
Georgia-Pacific Group common stock
calculated over the 20-trading day
period ending on the 40th trading
day immediately succeeding the date
of the effectiveness of
Georgia-Pacific's articles of
incorporation. The number of
Liquidation Units to which Timber
Company common stock is entitled is
subject to adjustment if shares of
either class are subdivided,
combined or distributed as a
dividend. The number of Liquidation
Units to which each share of Timber
Company common stock is entitled
will not change without the approval
of the holders of Timber Company
common stock and the holders of the
Georgia-Pacific Group common stock.
</TABLE>
120
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
Conversion at
Option of
Company............ Plum Creek common stock is not Georgia-Pacific may, at any time,
subject to conversion. convert each share of Timber Company
common stock into a number of shares
of Georgia-Pacific Group common
stock equal to 115% of the ratio of
the time-weighted average market
value of one share of Timber Company
common stock to the time-weighted
average market value of one share of
Georgia-Pacific group common stock,
calculated over the 20-day trading
period ending five trading days
prior to the date of notice of such
conversion.
Redemption in
Exchange for Stock
of a Subsidiary.... Plum Creek common stock does not Georgia-Pacific may redeem Timber
contain a redemption feature. Company common stock in exchange for
shares of the common stock of one or
more wholly owned subsidiaries of
Georgia-Pacific that hold all of the
assets and liabilities of The Timber
Company.
Par value,
dividends and
repurchases of
shares............. The concepts of par value, capital Georgia law dispenses with the
and surplus are retained under concept of par value of shares for
Delaware law. Delaware law permits a most purposes as well as statutory
corporation to declare and pay definitions of capital, surplus and
dividends out of surplus or, if the like. Under Georgia law, a
there is no surplus, out of the net corporation may make distributions
profits for the fiscal year in which to its shareholders subject to any
the dividend is declared and/or for restrictions imposed in the
the preceding fiscal year as long as corporation's articles of
the amount of capital of the incorporation, except that no
corporation following the distribution may be made if as a
declaration and payment of the result the corporation would not be
dividend is not less than the able to pay its debts as they become
aggregate amount of the capital due in the usual course of business
represented by the issued and or its total assets would be less
outstanding stock of all classes than the sum of its total
having a preference upon the liabilities plus the amount that
distribution of assets. would be needed, if the corporation
Under the Delaware General were to be dissolved at the time of
Corporation Law, a corporation may the distribution, to satisfy the
purchase or, if so provided in the preferential rights upon dissolution
corporation's certificate of of shareholders whose preferential
incorporation, rights are superior to those
receiving the distribution.
</TABLE>
121
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
redeem shares of any class of its Under the Georgia Business
capital stock, but subject generally Corporation Code, a corporation may
to there being no impairment of acquire its own shares of capital
capital of the corporation and stock and shares so acquired will
provided that immediately following constitute authorized but unissued
any such redemption, the corporation shares, unless the articles of
generally must have outstanding incorporation provide that such
shares of one or more classes or shares become treasury shares or
series of capital stock which have prohibit the reissuance of
full voting rights. reacquired shares. If such
reissuance is prohibited, the number
of authorized shares will be reduced
by the number of shares reacquired.
Dividends on Timber Company common
stock are paid at the discretion of
Georgia-Pacific's board of directors
based primarily upon the financial
condition, results of operations and
business requirements of The Timber
Company and Georgia-Pacific as a
whole. Dividends are payable out of
the lesser of (1) the assets of
Georgia-Pacific legally available
for the payment of dividends and
(2) The Timber Company Available
Dividend Amount. Georgia-Pacific's
board of directors, subject to the
limitation set forth above, may, in
its sole discretion, declare and pay
dividends exclusively on Timber
Company common stock, exclusively on
the Georgia-Pacific Group common
stock or any combination thereof, in
equal or unequal amounts,
notwithstanding the amount of
dividends previously declared on
either class, the respective voting
or liquidation rights of either
class or any other factor. The
"Timber Company Available Dividend
Amount" on any date, shall mean any
amount in excess of the minimum
amount necessary for The Timber
Company to be able to pay its debts
as they become due in the ordinary
course of business.
Dissenters' or
appraisal rights... The Delaware General Corporation Law Georgia law provides that
provides stockholders of a Delaware shareholders who comply with certain
corporation appraisal rights in procedural requirements of the
connection with mergers and Georgia Business Corporation Code
are entitled to dissent
</TABLE>
122
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
consolidations generally, provided from and obtain payment of the fair
the stockholder complies with value of their shares in the event
certain procedural requirements of of mergers, share exchanges, sales
the Delaware General Corporation or exchanges of all or substantially
Law. However, this right to demand all of the corporation's assets,
appraisal does not apply to amendments to the articles of
stockholders if (a) they are incorporation that materially and
stockholders of the surviving adversely affects certain rights in
corporation and a vote of the respect of a dissenter's shares and
stockholders of such corporation is certain other actions taken pursuant
not necessary to authorize the to a shareholder vote to the extent
merger or consolidation or (b) the provided for under the Georgia
shares held by the stockholders are Business Corporation Code, the
of a class or series listed on a articles of incorporation, bylaws or
national securities exchange, a resolution of the board of
designated as a national market directors. However, unless the
system security on an interdealer corporation's articles of
quotation system by the National incorporation provide otherwise,
Association of Securities Dealers or appraisal rights are not available:
are held of record by more than - to holders of shares of any class
2,000 stockholders, in each case on of shares not entitled to vote on
the record date set to determine the the transaction;
stockholders entitled to vote on the - in a sale of all or substantially
merger or consolidation. all of the property of the
Notwithstanding the above, appraisal corporation pursuant to court
rights are available for the shares order;
of any class or series of stock of a - in a sale of all or substantially
Delaware corporation if the holders all of the corporation's assets for
thereof are required by the terms of cash, where all or substantially
an agreement of merger or all of the net proceeds of such
consolidation to accept for their sale will be distributed to the
stock anything except: shareholders within one year; or
- shares of stock of the corporation - to holders of shares which at the
surviving or resulting from the record date were either listed on
merger or consolidation; a national securities exchange or
- shares of stock of any other held of record by more than 2,000
corporation which at the effective shareholders, unless: (1) in the
date of the merger or case of a plan of merger or share
consolidation will be listed on a exchange, the holders of shares of
national securities exchange, the class or series are required
designated as a national market under the plan of merger or share
system security on an interdealer exchange to accept for their
quotation system by the National shares anything except shares of
Association of Securities Dealers the surviving corporation or a
or held of record by more than publicly held corporation which at
2,000 stockholders; the effective date of the merger
- cash in lieu of fractional shares or share exchange are either
of the corporations described in listed on a national securities
either of the above; or exchange or held of record by more
- any combination of the shares of than 2,000 shareholders, except
stock and cash in lieu of fractional for scrip or cash payments in lieu
shares described in any of the of fractional shares;
three above.
</TABLE>
123
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
A Delaware corporation may provide or (2) the articles of
in its certificate of incorporation incorporation or a resolution of
that appraisal rights shall be the board of directors approving
available for the shares of any the transaction provides
class or series of its stock as the otherwise.
result of an amendment to its Appraisal rights under Georgia law
certificate of incorporation, any differ from appraisal rights under
merger or consolidation to which the Delaware law in that, under Georgia
corporation is a party, or the sale law, shareholders have appraisal
of all or substantially all of the rights for more types of
assets of the corporation. transactions than under Delaware
law, and unlike the appraisal rights
provisions under Delaware law, under
Georgia law the board of directors
may voluntarily extend appraisal
rights to shareholders. In addition,
Georgia law provides that, if a
shareholder is entitled to exercise
appraisal rights, those rights
constitute the shareholder's
exclusive remedy in the absence of
fraud or failure to comply with
certain procedural requirements.
Amendments to
charter............ Under Delaware law, unless a greater Georgia law provides that certain
vote is required by the certificate relatively technical amendments to a
of incorporation, an amendment to corporation's articles of
the certificate of incorporation incorporation may be adopted by the
generally may be approved by a directors without shareholder
majority of the outstanding shares action. Generally, the Georgia
entitled to vote upon the proposed Business Corporation Code requires a
amendment following the adoption of majority vote of the outstanding
a resolution by the board of shares of each voting group entitled
directors supporting the to vote to amend the articles of
advisability of such amendment. Plum incorporation, unless the Georgia
Creek's certificate of incorporation Business Corporation Code, the
provides that the amendment or articles of incorporation, or a
repeal of, or adoption of provisions bylaw adopted by the shareholders
inconsistent with, certain articles requires a greater number of
of Plum Creek's certificate of affirmative votes. Georgia-
incorporation shall require the Pacific's articles of incorporation
approval of at least two-thirds of provide that Article IV of
the total voting power of the shares Georgia-Pacific's articles of
of capital stock entitled to vote incorporation regarding the
thereon, voting as a single class. Georgia-Pacific junior preferred
stock may not be amended, modified
or repealed by the shareholders, nor
shall any amendment to
Georgia-Pacific's articles of
incorporation which is inconsistent
with Article IV be adopted by the
shareholders of Georgia-Pacific,
except pursuant to the vote of at
least 75% of the voting power of the
</TABLE>
124
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
outstanding capital stock entitled
to vote generally in the election of
directors, voting as a class.
Amendments to
bylaws............. Under Delaware law, the power to Under Georgia law, shareholder
amend the bylaws of a corporation is action is generally not necessary to
vested in the stockholders, but a amend the bylaws, unless the
corporation in its certificate of articles of incorporation provide
incorporation may also confer such otherwise or the shareholders in
power upon the board of directors. amending or repealing a particular
Under Plum Creek's certificate of bylaw provide expressly that the
incorporation, the board of board of directors may not amend or
directors is expressly authorized to repeal that bylaw. The shareholders
make, amend or repeal Plum Creek's do, however, have the right to
bylaws without any action on the amend, repeal or adopt bylaws,
part of the stockholders, solely by except for bylaws that restrict the
the affirmative vote of at least power of the board to manage the
two-thirds of the directors then in business.
office. In addition, Plum Creek's Under Georgia-Pacific's bylaws, the
bylaws may be amended or repealed by board of directors has the power to
the stockholders by the affirmative alter, amend or repeal the bylaws or
vote of the holders of shares adopt new bylaws, but any bylaws
representing at least two-thirds of adopted by the board of directors
the combined voting power of the may be altered, amended or repealed,
outstanding shares of capital stock and new bylaws adopted, by the
of Plum Creek entitled to vote. shareholders. However,
Georgia-Pacific's articles of
incorporation provide that,
notwithstanding any provision of
Georgia-Pacific's bylaws, the
following provisions of
Georgia-Pacific's bylaws may not be
amended, modified or repealed by the
shareholders, nor may any provision
of Georgia-Pacific's bylaws
inconsistent with such provisions be
adopted by the shareholders, except
pursuant to the affirmative vote of
at least 75% of the voting power of
the outstanding capital stock
entitled to vote generally in the
election of directors, voting as a
class:
- the shareholder special meeting
section;
- the number of directors section;
- the nomination for election of
directors section;
- the board of directors special
meeting section; or
</TABLE>
125
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
- the board of directors quorum and
manner of acting section.
Shareholder rights
agreement.......... Plum Creek does not have a Georgia-Pacific's board of directors
shareholder rights agreement in has adopted a Restated Rights
effect. However, see discussion Agreement between Georgia-Pacific
above regarding ownership and First Chicago Trust Company of
restrictions mandated by the REIT New York, as rights agent. Pursuant
structure. to the terms of the rights
agreement, Georgia-Pacific issued
one right with respect to each share
of Timber Company common stock,
referred to herein as a "Timber
Right," which entitles the holder
thereof to purchase shares of
Georgia-Pacific Series C Junior
Preferred Stock under the conditions
specified in the rights agreement.
The Timber Rights are exercisable
upon the earlier of:
- the tenth day after a public
announcement that a person or
group of affiliated or associated
persons has acquired, obtained the
right to acquire, or otherwise
obtained beneficial ownership of
15% or more of the total voting
rights of the then outstanding
shares of Georgia-Pacific common
stock; and
- the tenth business day following
the commencement of a tender or
exchange offer by a person or
group that, if consummated, would
result in such person or group
acquiring, obtaining the rights to
acquire or otherwise beneficially
owning 15% or more of the total
voting rights of the then
outstanding shares of Georgia-
Pacific common stock.
Each Timber Right entitles the
registered holder thereof to
purchase one one-hundredth (1/100th)
of a share of Georgia-Pacific
Series C Junior Preferred Stock,
referred to herein as a "Series C
Unit," at a purchase price of
$100.00, subject to adjustment,
referred
</TABLE>
126
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
to herein as the "Series C Unit
Purchase Price."
Under certain circumstances
involving an acquiring person or
upon the occurrence of certain
events while there is an acquiring
person as set forth in the rights
agreement, the Timber Rights will
"flip-in," and proper provision will
be made so that each holder of a
Timber Right, other than Timber
Rights which are, or under certain
circumstances specified in the
rights agreement were, beneficially
owned by an acquiring person, which
will thereafter be void, will
thereafter be entitled to purchase,
at the Series C Unit Purchase Price,
a number of Series C Units with a
market value equal to twice the
Series C Unit Purchase Price.
In the event, following the stock
acquisition date:
- Georgia-Pacific is acquired in a
merger or other business
combination transaction and
Georgia-Pacific is not the
surviving corporation;
- any person consolidates or merges
with Georgia-Pacific and all or
part of Georgia-Pacific's common
stock is converted or exchanged
for securities, cash or property
of any other person; or
- 50% or more of Georgia-Pacific's
assets or earning power is sold or
transferred;
the Timber Rights will "flip-over,"
and each Timber Right will entitle
its holder to purchase, for the
Series C Unit Purchase Price, a
number of shares of common stock of
the surviving entity in any such
merger, consolidation or other
business combination or the
purchaser in any such sale or
transfer with a market value equal
to twice the Series C Unit Purchase
Price.
The rights agreement permits a
majority
</TABLE>
127
<PAGE>
<TABLE>
<CAPTION>
PLUM CREEK THE TIMBER COMPANY
(DELAWARE) (GEORGIA)
---------- ---------
<S> <C> <C>
of independent directors to
terminate the Timber Rights without
any payment to any holder thereof.
The rights agreement could, under
certain circumstances, discourage
third parties from seeking to
acquire a significant portion of the
outstanding securities of
Georgia-Pacific; engaging in any
transaction which might result in a
change of control of
Georgia-Pacific; or acquiring,
holding, voting or disposing of any
securities of Georgia-Pacific.
Georgia-Pacific has amended the
rights agreement to provide that
(1) neither Plum Creek nor any of
its affiliates or associates will be
deemed an "Acquiring Person" as
defined in the rights agreement and
(2) the Subsidiaries will not have
to establish a stockholder rights
plan upon redemption of Timber
Company common stock.
</TABLE>
128
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of the current terms of the capital stock of Plum
Creek and the terms of the capital stock of Plum Creek to be in effect after the
completion of the mergers is not meant to be complete and is qualified by
reference to the certificate of incorporation and bylaws of Plum Creek. Copies
of Plum Creek's certificate of incorporation and bylaws are incorporated by
reference. To obtain copies of these documents see, "Where You Can Find More
Information" on page 147.
AUTHORIZED CAPITAL STOCK--PRIOR TO COMPLETION OF THE MERGERS
Plum Creek has authorized 525,634,567 shares of capital stock, consisting
of:
- 300,000,000 shares of common stock, par value $.01 per share;
- 634,566 shares of special voting common stock, par value $.01 per share;
- 150,000,001 shares of excess stock, par value $.01 per share; and
- 75,000,000 shares of preferred stock, par value $.01 per share.
AUTHORIZED CAPITAL STOCK--FOLLOWING COMPLETION OF THE MERGERS
CONVERSION AND ELIMINATION OF PLUM CREEK SPECIAL VOTING COMMON STOCK
The voting agreement and consent provides that immediately prior to the
completion of the mergers, all of the outstanding shares of Plum Creek special
voting common stock will be converted into shares of Plum Creek common stock
pursuant to Plum Creek's certificate of incorporation. As a result, the number
of outstanding shares of Plum Creek common stock will be increased by 634,566
shares. Pursuant to the merger agreement, Plum Creek's certificate of
incorporation will be amended to eliminate the special voting common stock and,
accordingly, Plum Creek's board of directors will no longer have the right to
authorize the issuance of any shares of Plum Creek special voting common stock.
See "Ancillary Arrangements--Voting Agreement and Consent" beginning on page 74.
PLUM CREEK STOCK OUTSTANDING
The outstanding shares of Plum Creek common stock are, and the shares of
Plum Creek common stock to be issued pursuant to the merger agreement will be,
duly authorized, validly issued, fully paid and nonassessable.
VOTING RIGHTS
Each holder of Plum Creek common stock is entitled to one vote for each
share of Plum Creek common stock held of record on the applicable record date on
all matters submitted to a vote of stockholders.
DIVIDEND RIGHTS; RIGHTS UPON LIQUIDATION
The holders of Plum Creek common stock are entitled to receive, from funds
legally available for the payment thereof, dividends when and as declared by
resolution of Plum Creek's board of directors, subject to any preferential
dividend rights granted to the holders of any outstanding Plum Creek preferred
stock. In the event of liquidation, each share of Plum Creek common stock is
entitled to share pro rata in any distribution of Plum Creek's assets after
payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Plum Creek preferred stock.
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PREEMPTIVE RIGHTS
Holders of Plum Creek common stock have no preemptive rights to purchase,
subscribe for or otherwise acquire any unissued or treasury shares or other
securities.
PREFERRED STOCK
Plum Creek's board of directors has the authority to determine and alter the
rights, preferences, privileges and restrictions granted to or imposed on any
unissued series of Plum Creek's preferred stock and to fix the number of shares,
distribution rights, conversion or exchange rights, voting rights, redemption
rights, liquidation preferences, and sinking funds of any series of Plum Creek
preferred stock. The authorized shares of Plum Creek preferred stock will be
available for issuance without further action by Plum Creek's stockholders,
unless stockholder action is required by applicable law or by the rules of a
stock exchange on which any series of Plum Creek's stock may be listed. As of
, no shares of preferred stock are outstanding and Plum Creek has no
current plans to issue any preferred stock.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF SHARES
In order for Plum Creek to qualify as a REIT under the Internal Revenue
Code, among other things, not more than 50% in value of its outstanding capital
stock may be owned, directly or indirectly, by five or fewer individuals, as
defined by the Internal Revenue Code. Also, shares of Plum Creek capital stock
must be beneficially owned by 100 or more persons during the last 335 days of a
taxable year of 12 months, other than the first year or during a proportionate
part of a shorter year taxable year.
To protect Plum Creek from losing its status as a REIT, its certificate of
incorporation, subject to some exceptions, provides that no person, other than
the individuals designated in its certificate of incorporation and their
affiliates, may beneficially own more than the Ownership Limit of Plum Creek's
shares of capital stock. "Ownership Limit" means the provisions in Plum Creek's
certificate of incorporation which prohibit ownership either directly or under
the applicable attribution rules of the Internal Revenue Code of more than 5% of
the lesser of the total number of shares of common stock outstanding or the
value of the outstanding shares of common stock by any stockholder other than by
some designated persons agreed to by Plum Creek. These ownership restrictions,
however, allow the individuals designated in its certificate of incorporation
and some of their affiliates to beneficially own up to 27% of Plum Creek capital
stock, which percentage will be permanently reduced in accordance with any
reduction in their proportional beneficial ownership from sales of shares of
Plum Creek capital stock by these individuals and their affiliates or new
issuances of capital stock by Plum Creek, and which percentage will be increased
to adjust for repurchases of capital stock by Plum Creek.
Any transfer of shares of Plum Creek capital stock is null and void, and the
intended transferee will acquire no rights to the shares of capital stock, if
the transfer would do any of the following:
- cause any person to beneficially own shares of Plum Creek capital stock in
excess of the Ownership Limit not otherwise permitted as provided above;
- result in the shares of Plum Creek capital stock being owned by fewer than
100 persons within the meaning of section 856(a)(5) of the Internal
Revenue Code;
- result in Plum Creek being "closely held" within the meaning of
section 856(h) of the Internal Revenue Code;
- result in Plum Creek failing to qualify as a "domestically controlled
REIT" within the meaning of section 897(h)(4)(B) of the Internal Revenue
Code; or
- otherwise cause Plum Creek to fail to qualify as a REIT.
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The restriction on transferability and ownership described above which
prohibits any person from beneficially owning shares of Plum Creek capital stock
in excess of the Ownership Limit will not apply if Plum Creek's board of
directors, upon receipt of a ruling from the Internal Revenue Service or an
opinion of counsel or other evidence or undertakings acceptable to it, waives
the application of the Ownership Limit to a person subject to the limit,
provided that:
- Plum Creek's board of directors obtains representations and undertakings
as are reasonably necessary to ascertain that the acquiror's beneficial
ownership or constructive ownership of shares of capital stock will not at
that time or in the future result in any of the other situations described
above; and
- the acquiror agrees in writing that any violation or attempted violation
of any other limitations, restrictions and conditions that Plum Creek's
board of directors may impose at the time of waiver with respect to the
acquiror will result in the conversion of these shares in excess of the
original limit applicable to the acquiror into shares of excess stock.
If any purported transfer of Plum Creek capital stock or other event
resulting in an increase in any holder's percentage interest in Plum Creek
common stock would cause a purported transferee or holder to be in violation of
the Ownership Limit or would cause Plum Creek to be disqualified as a REIT, then
the purported transferee or holder will not acquire or will cease to own, as the
case may be, the number of shares in excess of the Ownership Limit or in excess
of the highest number of shares which would allow Plum Creek to remain qualified
as a REIT. The excess stock will be converted automatically into an equal number
of shares of stock and transferred automatically, by operation of law, to a
trust, the beneficiary of which will be a qualified charitable organization
selected by Plum Creek. Automatic transfer shall be deemed to be effective as of
the close of business on the trading day prior to the date of the violative
transfer or event. Upon the occurrence of a conversion of shares of capital
stock into an equal number of shares of excess stock, these shares of capital
stock shall be automatically retired and canceled, without any action required
by Plum Creek's board of directors, and shall thereupon be restored to the
status of authorized but unissued shares of the particular class or series of
capital stock from which this excess stock was converted and may be reissued by
Plum Creek as that particular class or series of capital stock.
As soon as practical after the transfer of shares of excess stock to the
trust, the trustee of the trust, who shall be designated by Plum Creek, will be
required to designate one or more persons who could own excess shares without
violating the Ownership Limit or causing Plum Creek to be disqualified as a REIT
and to sell excess shares to these permitted transferees. Upon the trustee's
designation and sale of the excess stock to the permitted transferee, shares of
excess stock will automatically convert into an equal number of shares of
capital stock of the same class and series from which the excess stock was
converted. Upon the occurrence of a conversion of shares of excess stock into an
equal number of shares of capital stock, shares of excess stock shall be
automatically retired and canceled, without any action by Plum Creek's board of
directors, and shall be restored to the status of authorized but unissued shares
of excess stock and may be reissued by Plum Creek as excess stock. However, if
the transfer of excess stock to a purported permitted transferee would or does
violate any of the transfer restrictions set forth above, this transfer shall be
void as to that number of shares of excess stock that cause the violation of
this restriction when shares are converted into shares of capital stock and the
purported permitted transferee shall be deemed to be a prohibited owner and
shall acquire no rights in these shares of excess stock or Plum Creek capital
stock. Shares of Plum Creek capital stock shall be automatically converted into
excess stock and transferred to the trust from which they were originally
transferred.
Any prohibited owner shall be entitled, following acquisition of the shares
of excess stock and the subsequent designation and sale of excess stock to a
permitted transferee, to receive from the trustee
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sales proceeds received by the trust for the excess shares. The proceeds of a
sale are calculated according to a formula in Plum Creek's certificate of
incorporation.
In addition, excess shares held in the trust shall be deemed to have been
offered for sale to Plum Creek, or its designee, at a price per share equal to
the lesser of the price per share in the transaction that created the excess
stock or market value. Plum Creek shall have the right to accept this offer for
a period of 90 days.
All certificates representing shares of common stock bear a legend referring
to the restrictions described above.
Plum Creek is required to keep records which disclose the actual ownership
of its outstanding shares of capital stock. Accordingly, in order to comply with
these record keeping requirements, any person who beneficially owns more than
30% of the outstanding shares of any class or series of Plum Creek capital
stock, or the lower percentages as are then required pursuant to regulations
under the Internal Revenue Code, is required to provide to Plum Creek, by
January 31st of each year, a written statement or affidavit stating the name and
address of the beneficial owner, the number of shares beneficially owned by the
beneficial owner and a description of how the shares are held. In addition, each
record and beneficial owner of Plum Creek capital stock shall, upon demand, be
required to disclose to Plum Creek in writing the information Plum Creek may
request in order to determine its status as a REIT and to ensure compliance with
the Ownership Limit. In addition, the individuals designated in Plum Creek's
certificate of incorporation and their affiliates shall promptly notify Plum
Creek upon any transfer of its capital stock.
The ownership limitations described above could have the effect of delaying,
deferring or preventing a change of control in which holders of common stock
might receive a premium for their shares over the then prevailing market price.
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
Under Delaware law, an acquirer of 15% or more of Plum Creek voting stock
must wait three years before engaging in a business combination with Plum Creek
unless one of the following exceptions is available:
- approval by Plum Creek's board of directors prior to the time the acquiror
became a 15% holder of Plum Creek voting stock;
- achieving an ownership level of at least 85% of Plum Creek voting stock in
the transaction in which the acquiror became a 15% holder of Plum Creek
voting stock; or
- approval of the business combination by Plum Creek's board of directors
and at least two-thirds of Plum Creek's disinterested holders of Plum
Creek voting stock.
Any of these provisions could delay, deter or prevent a tender offer or takeover
attempt with respect to Plum Creek.
TRANSFER AGENT AND REGISTRAR
EquiServe, L.P. acts as transfer agent and registrar for Plum Creek common
stock.
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FEDERAL INCOME TAXATION OF PLUM CREEK
AND ITS STOCKHOLDERS
The following is a summary of the Federal income tax considerations
anticipated to be material to prospective holders of Plum Creek common stock.
The discussion does not address the tax consequences that may be relevant to
individual stockholders in light of their particular circumstances or any
special treatment to which they may be subject under certain Federal income tax
laws, such as dealers in securities, traders in securities that elect to mark to
market, banks, insurance companies, tax-exempt organizations, except to the
extent discussed under the heading "--Taxation of Tax-Exempt U.S. Stockholders,"
or non-United States persons, except to the extent discussed under the heading
"--Taxation of Non-United States Stockholders." This summary does not address
any consequences arising under the laws of any state, local or foreign
jurisdiction.
The information in the discussion below is based on current provisions of
the Internal Revenue Code, existing, temporary and currently proposed Treasury
Regulations thereunder, the legislative history of the Internal Revenue Code,
existing administrative interpretations and practices of the Internal Revenue
Service, and judicial decisions, all of which are subject to change either
prospectively or retroactively. No assurance can be given that future
legislation, Treasury Regulations, administrative interpretations or judicial
decisions will not significantly change the current law or adversely affect
existing interpretations of current law.
Prospective holders of Plum Creek common stock are urged to consult their
tax advisors regarding the specific Federal, state, local and foreign income and
other tax consequences of the ownership and disposition of Plum Creek common
stock.
TAXATION OF PLUM CREEK AS A REIT
GENERAL.
Under Federal income tax law, if certain detailed conditions imposed by the
Internal Revenue Code and the related Treasury Regulations are satisfied, an
entity that invests principally in real estate and that would otherwise be
subject to tax as a corporation may elect to be treated as a REIT for Federal
income tax purposes. These conditions relate, in part, to the nature of the
entity's assets and income. Provided Plum Creek qualifies to be subject to tax
as a REIT, it will generally not be subject to Federal corporate income tax on
taxable income that it distributes currently to stockholders. This treatment
substantially eliminates "double taxation." Double taxation means taxation once
at the corporate level when income is earned and once again at the stockholder
level when such income is distributed.
Plum Creek has elected to be treated for tax purposes as a REIT commencing
with its taxable year ending on December 31, 1999. Plum Creek believes that it
was organized and has operated in such a manner as to qualify for taxation as a
REIT, and intends to continue to operate in such a manner. No assurance can be
given, however, that it was organized and has operated in such a manner as to
qualify as a REIT. Plum Creek has, however, as described more fully under
"Income Tests" below, received a private letter ruling from the Internal Revenue
Service substantially to the effect that its timberlands, including those
timberlands that are subject to timber cutting contracts, will be considered
qualifying real estate assets or interests in real property for purposes of the
REIT asset tests discussed below, and that the gains derived by Plum Creek from
timber cutting contracts will be from the sale of real property for purposes of
the REIT gross income tests. See "Risk Factors."
As a condition to the obligation of Plum Creek to consummate the mergers,
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Plum Creek, will
deliver an opinion to the effect that Plum Creek will continue to meet the
requirements for qualification and taxation as a REIT after the mergers. The
opinion will be based upon facts, representations and assumptions as of its
date, and
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Skadden, Arps, Slate, Meagher & Flom LLP will have no obligation to advise Plum
Creek or holders of Plum Creek common stock of any subsequent change in the
matters stated, represented or assumed or any subsequent change in applicable
law. Qualification and taxation as a REIT will depend upon Plum Creek's ability
to meet on an ongoing basis (through actual annual operating results, its asset
base, distribution levels and diversity of share ownership) the various
qualification tests imposed under the Internal Revenue Code discussed below, the
results of which will not be reviewed by Skadden, Arps, Slate, Meagher & Flom
LLP on a continuing basis. No assurance can be given that the actual results of
Plum Creek's operations for any particular taxable year will satisfy such
requirements, and an opinion of counsel is not binding upon the Internal Revenue
Service. Further, the anticipated income tax treatment described in this joint
proxy statement/prospectus may be changed, perhaps retroactively, by
legislative, administrative or judicial action at any time. See "--Failure to
Qualify as a REIT."
The sections of the Internal Revenue Code and the corresponding Treasury
Regulations relating to the taxation of REITs and their stockholders are highly
technical and complex. The following discussion sets forth the material aspects
of the rules that govern the Federal income tax treatment of a REIT and its
stockholders. This summary is based on current United States law, including the
applicable Internal Revenue Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all of
which are subject to change, which changes may apply retroactively.
Provided Plum Creek qualifies for taxation as a REIT, it will generally not
be subject to Federal corporate income taxes on that portion of its ordinary
income or capital gain that Plum Creek currently distributes to stockholders.
The REIT provisions of the Internal Revenue Code generally allow a REIT to
deduct dividends paid to its stockholders. This deduction for dividends
substantially eliminates the "double taxation" at the corporate and stockholder
levels that generally results from investment in a regular corporation. Plum
Creek will, however, be subject to Federal income tax under certain
circumstances, including the following:
- Plum Creek will be subject to tax at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital
gains. See, however, "Annual Distribution Requirements" with respect to
its ability to elect to treat as having been distributed to stockholders
certain of its capital gains upon which it has paid taxes, in which event
so much of the taxes as Plum Creek has paid with respect to such income
would be available as a credit or refund to stockholders;
- Plum Creek may be subject to the "alternative minimum tax" on certain of
its items of tax preference;
- If Plum Creek has (1) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in
the ordinary course of business or (2) other nonqualifying income from
foreclosure property, Plum Creek will be subject to tax at the highest
corporate rate on such income. In general, foreclosure property is
property acquired through foreclosure after a default on a loan secured by
the property or on a lease of the property;
- Plum Creek will be required to pay a 100% tax on any net income from
prohibited transactions. In general, prohibited transactions are sales or
other taxable dispositions of property, other than foreclosure property,
held for sale to customers in the ordinary course of business;
- If Plum Creek fails to satisfy the 75% gross income test or the 95% gross
income test as discussed below, but Plum Creek has maintained its
qualification as a REIT because certain other requirements have been met,
Plum Creek will be subject to a 100% tax on an amount equal to (1) the
gross income attributable to the greater of the amount by which Plum Creek
fails the 75% or 95% gross income test multiplied by (2) a fraction
intended to reflect its profitability;
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- Plum Creek will be required to pay a 4% excise tax on the amount by which
its annual distributions to stockholders are less than the sum of (1) 85%
of its ordinary income for the year, (2) 95% of its REIT capital gain net
income for the year, other than capital gain income Plum Creek elects to
retain and pay tax on and (3) any undistributed taxable income from prior
periods, other than capital gains from such years which Plum Creek elected
to retain and pay tax on;
- For tax years beginning after 2000, a 100% excise tax may be imposed on
some items of income and expense that are directly or constructively paid
between a REIT and a taxable REIT subsidiary if and to the extent that the
Internal Revenue Service successfully adjusts the reported amounts of
these items; and
- If Plum Creek acquires an asset from a corporation that was subject to tax
under subchapter C of the Internal Revenue Code in a transaction in which
the adjusted tax basis of the asset in the hands of Plum Creek is
determined by reference to the adjusted tax basis of the asset in the
hands of the transferor corporation, then under recently issued temporary
Treasury Regulations, the transferor corporation would generally be
required to recognize any built-in gain that would have been realized if
it had sold all of its assets at their respective fair market values and
immediately liquidated on the day before the date of the transfer. The
regulations provide, however, that in lieu of taxation of the transferor
corporation as described immediately above, Plum Creek may make an
irrevocable election to be subject to tax at the highest regular corporate
tax rate then applicable on the built-in gain recognized upon a subsequent
disposition of any such assets during the ten-year period following their
acquisition from the transferor corporation. Plum Creek intends to make
such an election with respect to the assets of the Subsidiaries that are
acquired pursuant to the mergers to avoid an immediate tax on the
Subsidiaries.
REQUIREMENTS FOR QUALIFICATION
Plum Creek has elected to be treated as a REIT beginning with its taxable
year ended December 31, 1999. In order to continue to qualify as a REIT, Plum
Creek must meet the requirements discussed below relating to its organization,
sources of income, nature of assets and distributions of income.
ORGANIZATIONAL REQUIREMENTS
Plum Creek's stock must be held by at least 100 persons and no more than 50%
of the value of its capital stock may be owned, directly or indirectly, by five
or fewer individuals (as specially defined for these purposes) at all times
during the last half of the taxable year. For these purposes, certain entities
such as private foundations are treated as an individual. Plum Creek must
satisfy these stock ownership requirements in its second taxable year and in
each subsequent taxable year. Plum Creek's certificate of incorporation provides
for certain restrictions regarding the transfer of its capital stock in order to
aid in meeting the stock ownership requirements, but these restrictions cannot
insure that Plum Creek will in all cases comply with these ownership
requirements.
To monitor its compliance with the stock ownership requirements, Plum Creek
is required to maintain records regarding the actual ownership of its stock. To
do so, Plum Creek must demand written statements each year from the record
holders of certain percentages of its stock in which the record holders are to
disclose the actual owners of the stock (I.E., the persons required to include
in gross income the REIT dividends). A list of those persons failing or refusing
to comply with this demand must be maintained as part of its records. A
stockholder who fails or refuses to comply with the demand must submit a
statement with its Federal income tax return disclosing the actual ownership of
the stock and certain other information.
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INCOME TESTS
In order to maintain qualification as a REIT, Plum Creek must annually
satisfy two gross income requirements. First, for each taxable year Plum Creek
must derive, directly or indirectly, at least 75% of its gross income (excluding
gross income from "prohibited transactions") from investments relating to real
property or mortgages on real property (including "rents from real property" and
"gain from the sale or other disposition of real property") other than property
held primarily for sale to customers in the ordinary course of business or from
certain types of temporary investments. Second, for each taxable year Plum Creek
must derive, directly or indirectly, at least 95% of its gross income (excluding
gross income from "prohibited transactions") from such real property
investments, dividends, interest and gain from the sale or disposition of stock
or securities (or from any combination of the foregoing).
In addition, if Plum Creek should realize any net income from the sale or
other disposition of property held primarily for sale to customers in the
ordinary course of business (including its share of any such gain realized by
any partnership in which Plum Creek is a partner) then such income would be
treated as income from a "prohibited transaction" and would not count towards
satisfying the 95% and 75% gross income tests. Such income would also be subject
to a 100% penalty tax. Under existing law, whether property is held primarily
for sale to customers in the ordinary course of a trade or business is a
question of fact that depends on all the facts and circumstances with respect to
the particular transaction.
Rents that Plum Creek receives will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. The only rental income Plum Creek has received in
the past and is anticipated to receive in the future is derived from certain
farmlands and grazing lands and from certain hunting leases. It is anticipated
that any income Plum Creek receives from such hunting leases and properties will
constitute "rents from real property" under the applicable rules. While it is
not expected that Plum Creek will receive a substantial amount of rental income,
Plum Creek will take steps to ensure that any such rental income will qualify as
"rents from real property" for purposes of the 75% and 95% gross income tests.
Plum Creek has received a private letter ruling from the Internal Revenue
Service substantially to the effect that its timberlands, including those
timberlands that are subject to timber cutting contracts, will be considered
qualifying real estate assets or interests in real property for purposes of the
REIT asset tests, and that the gains derived by Plum Creek from timber cutting
contracts will be from the sale of real property for purposes of the REIT gross
income tests. In reaching these conclusions, the Internal Revenue Service
expressly relied upon a representation from Plum Creek that its disposals of
timber pursuant to these timber cutting contracts will qualify as disposals of
timber under section 631(b) of the Internal Revenue Code. In connection with
this representation, Plum Creek has received an opinion of Skadden, Arps, Slate,
Meagher & Flom, LLP, substantially to the effect that its disposal of timber
pursuant to these timber cutting contracts will qualify for treatment under
section 631(b) of the Internal Revenue Code.
If Plum Creek fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, Plum Creek may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Internal
Revenue Code. These relief provisions will generally be available if:
- Plum Creek's failure to meet such tests was due to reasonable cause and
not due to willful neglect;
- Plum Creek attaches a schedule of the sources of its income to its Federal
income tax return; and
- any incorrect information on the schedule was not due to fraud with intent
to evade tax.
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It is not possible, however, to state whether in all circumstances Plum Creek
would be entitled to the benefit of these relief provisions. As discussed above
in "--General," even if these relief provisions apply, a tax would be imposed
with respect to the excess gross income.
The Treasury Regulations provide that if Plum Creek is a partner in a
partnership, it will be deemed to own its proportionate share of the assets of
the partnership, and it will be deemed to be entitled to its proportionate share
of the gross income of the partnership. In addition, the character of the assets
and gross income of the partnership generally retains the same character in its
hands for purposes of satisfying the gross income tests and the asset tests.
ASSET TESTS
At the close of each quarter of its taxable year, Plum Creek must satisfy
the following three tests relating to the nature of its assets:
- at least 75% of the value of its total assets must be represented by real
estate assets including (1) its allocable share of real estate assets held
by partnerships in which Plum Creek owns an interest and (2) stock or debt
instruments held for not more than one year purchased with the proceeds of
a stock offering or long-term (at least five years) debt offering, cash,
cash items and government securities;
- not more than 25% of its total assets may be represented by securities
other than those in the 75% asset class; and
- of the investments included in the 25% asset class, the value of any one
issuer's securities owned by Plum Creek may not exceed 5% of the value of
its total assets, and Plum Creek may not own more than 10% of any one
issuer's outstanding voting securities.
Recent legislation adds, effective in 2001, the requirement that Plum Creek can
generally not own more than 10% of the total value of the outstanding securities
of any one corporate issuer. The 5% and 10% asset limitations described above do
not apply to wholly owned qualified REIT subsidiary corporations, or, effective
in 2001, to electing taxable REIT subsidiary corporations. The value of stock
held by a REIT in taxable REIT subsidiary corporations may not, however, exceed,
in the aggregate, 20% of the value of a REIT's total assets. See "--Legislative
or Other Actions Affecting REITs."
As of the date of this joint proxy statement/prospectus, substantially more
than 75% of the fair market value of the assets indirectly owned by Plum Creek
through its operating partnership will consist of timberlands owned in fee, and
Plum Creek expects that, at all times after the mergers, substantially more than
75% of the assets owned by it directly and indirectly through the operating
partnership will consist of fee ownership of timberland. Accordingly, Plum Creek
believes that it will be able to meet the 75% test described above on a going
forward basis.
The operating partnership owns indirectly all of the nonvoting common stock
and preferred stock (representing approximately 99% of the outstanding equity)
and none of the voting stock (representing approximately 1% of the outstanding
equity) of its various unconsolidated subsidiaries which are engaged in the
business of purchasing and harvesting timber and manufacturing timber products.
These unconsolidated subsidiaries were formed, as part of the conversion of Plum
Creek from a partnership to a REIT, to own and operate businesses that Plum
Creek, as a REIT, would not be permitted to own and operate directly. Through
its ownership interest in the operating partnership, Plum Creek is considered to
own its pro rata share of the stock of such unconsolidated subsidiaries held by
the operating partnership. Neither Plum Creek nor the operating partnership will
own any outstanding voting securities of the unconsolidated subsidiaries. As of
January 1, 2001, Plum Creek intends to enter into transactions that will enable
such unconsolidated subsidiaries to become wholly owned, and it will make an
election to treat them as taxable REIT subsidiaries. See "Federal Income
Taxation of Plum Creek and its Stockholders--Legislative or Other Actions
Affecting REITs."
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Prior to the 2001 effective date of recently enacted legislation, the 5%
test described above must generally be met for any quarter in which Plum Creek
acquires securities of the issuer. Thus this requirement must be satisfied not
only on the date Plum Creek acquires securities of each of the unconsolidated
subsidiaries but also each time Plum Creek increase its ownership of securities
of any unconsolidated subsidiaries, including as a result of its interest in the
operating partnership, the exercise by the partners of their exchange rights or
otherwise. Although Plum Creek will take steps to ensure that it satisfy the 5%
value test for any quarter with respect to which testing will occur, there can
be no assurance that such steps will always be successful or will not require
Plum Creek to reduce its overall interest in one or more of the unconsolidated
subsidiaries. The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is based
on the assumption of continued compliance with these tests.
If Plum Creek fails to satisfy the asset tests at the end of a calendar
quarter, such a failure would not cause Plum Creek to lose its REIT status if
(1) Plum Creek satisfied all of the asset tests at the close of the preceding
calendar quarter and (2) the discrepancy between the value of its assets and the
asset requirements either did not exist immediately after the acquisition of any
particular asset or was not wholly or partly caused by such an acquisition
(I.E., the discrepancy arose from changes in the market values of its assets).
If the condition described in clause (2) of the preceding sentence were not
satisfied, Plum Creek could still avoid disqualification by eliminating any
discrepancy within 30 days after the close of the quarter in which it arose.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, Plum Creek is required to make distributions
(other than capital gain dividends) to its stockholders in an amount at least
equal to (1) the sum of (a) 95% of its "REIT taxable income" (computed without
regard to the dividends paid deduction and its net capital gain) and (b) 95% of
the net income (after tax), if any, from foreclosure property, minus (2) the sum
of certain items of noncash income. Recent legislation reduces the distribution
requirement from 95% to 90%, effective 2001. These distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before Plum Creek timely files its tax return for such year and if paid
on or before the first regular dividend payment date after such declaration. To
the extent that Plum Creek does not distribute (or Plum Creek is not treated as
having distributed) all of its capital gain or Plum Creek distributes (or Plum
Creek is treated as having distributed) at least 95% (or 90% after 2000), but
less than 100%, of its "REIT taxable income," as adjusted, Plum Creek will be
subject to tax on the undistributed income at regular corporate tax rates. If
Plum Creek should fail to distribute during each calendar year at least the sum
of (1) 85% of its REIT ordinary income for such year, (2) 95% of its REIT
capital gain income for such year (other than capital gain income which Plum
Creek elects to retain and pay tax on as provided for below) and (3) any
undistributed taxable income from prior periods (other than capital gains from
such years which Plum Creek elected to retain and pay tax on), Plum Creek would
be subject to a 4% excise tax on the excess of the required distribution over
the amounts actually distributed.
Plum Creek may elect to retain rather than distribute its net long-term
capital gains. The effect of this election is that:
- Plum Creek would be required to pay the tax on such gains at regular
corporate tax rates;
- its stockholders, although required to include their proportionate share
of the undistributed long-term capital gain in income, would receive a
credit or refund for their share of the tax paid by Plum Creek; and
- the basis of a stockholder's stock would be increased by the amount of the
undistributed long-term capital gains (minus the amount of the tax on
capital gains paid by Plum Creek which was included in income by the
stockholder).
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It is possible that Plum Creek, from time to time, may not have sufficient
cash or other liquid assets to meet the annual distribution requirements
described above due to timing or other differences between (1) the actual
receipt of income and actual payment of deductible expenses and (2) the
inclusion of such income and deduction of such expenses in arriving at its
taxable income. If Plum Creek encounters this situation, it may elect to retain
the capital gain and pay the tax on the gain. Nevertheless, in order to pay such
tax or otherwise meet the distribution requirements, Plum Creek may find it
necessary to arrange for short or possibly long-term borrowings, issue equity,
or sell assets.
Under certain circumstances, Plum Creek may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
its stockholders in a later year, which may be included in its deduction for
dividends paid for the earlier year. Thus, Plum Creek may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, Plum Creek will
be required to pay interest based upon the amount of any deduction taken for
deficiency dividends.
DISTRIBUTION OF ACQUIRED EARNINGS AND PROFITS
The Internal Revenue Code provides that when a REIT acquires a subchapter C
corporation (such as the Subsidiaries), the REIT may qualify as a REIT only if,
as of the close of the year of acquisition, the REIT has no "earnings and
profits" acquired from such acquired corporation. In the mergers, Plum Creek
will succeed to the earnings and profits of the Subsidiaries and, therefore,
Plum Creek will be required to distribute the earnings and profits of the
Subsidiaries effective on or before December 31, 2001. As a result of the
requirement to distribute such earnings and profits, as further described below,
the character of the portion of Plum Creek's distribution in the year the
mergers are completed that is attributable to the amount of such earnings and
profits that would otherwise be a return of capital or capital gain to
stockholders will be ordinary income.
Plum Creek has retained independent certified public accountants to review
the determination of the Subsidiaries' earnings and profits for purposes of this
requirement, and it will attempt to ensure that it has no earnings and profits
as of the end of the taxable year in which the mergers are consummated. Any
adjustments to the Subsidiaries' income for taxable years ending on or before
the closing of the mergers, including as a result of an examination of its
returns by the Internal Revenue Service, could affect the calculation of the
Subsidiaries' earnings and profits. Furthermore, the determination of earnings
and profits requires the resolution of certain technical tax issues with respect
to which there is no authority directly on point and, consequently, the proper
treatment of these issues for earnings and profits purposes is not free from
doubt.
There can be no assurance that the Internal Revenue Service will not examine
the tax returns of the Subsidiaries and propose adjustments to increase their
taxable income and therefore their earnings and profits. In this regard, the
Internal Revenue Service can consider all taxable years of the Subsidiaries as
open for review for purposes of determining the amount of such earnings and
profits. If Plum Creek fails to distribute an amount equal to the Subsidiaries'
earnings and profits effective on or before December 31, 2001, Plum Creek would
not qualify as a REIT. Recent legislation provides, however, that distributions
made after December 31, 2000 will be treated as first made from earnings and
profits which, but for such distributions, would result in a failure to meet the
requirements described above. Accordingly, based on the amounts anticipated to
be distributed to stockholders after completion of the mergers in 2001, Plum
Creek expects that, even if the earnings and profits of the Subsidiaries were
subsequently to be adjusted upward by the Internal Revenue Service, the amounts
distributed will exceed such earnings and profits and Plum Creek will not be
disqualified as a REIT. Nevertheless, such an adjustment may give rise to the
imposition of the 4% excise tax on the excess of income required to be
distributed and the amounts treated as distributed after application of the
earnings and profits rule. See "--Annual Distribution Requirements."
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Because of the nature of a substantial portion of its income as capital
gain, Plum Creek may not have to make actual additional cash distributions in
excess of its normal distribution in order to meet the distribution requirement
described above. Instead, Plum Creek may elect to retain its capital gains and
pay tax on such gains. See "--Annual Distribution Requirements." Such an
election would effectively change the portion of Plum Creek's distributions for
the applicable year that would otherwise be capital gain to ordinary income.
FAILURE TO QUALIFY AS A REIT
If Plum Creek fails to qualify for taxation as a REIT in any taxable year
and if the relief provisions do not apply, it will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to stockholders in any year in which Plum Creek
fails to qualify as a REIT will not be deductible by Plum Creek nor will they be
required to be made. As a result, cash available for distribution to
stockholders would be significantly reduced. In addition, if Plum Creek fails to
qualify as a REIT, all distributions to stockholders will be subject to tax as
ordinary income, to the extent of its current and accumulated earnings and
profits, and, subject to certain limitations of the Internal Revenue Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, Plum Creek will
also be disqualified from being eligible to be subject to tax as a REIT for the
four taxable years following the year during which such qualification was lost.
It is not possible to state whether in all circumstances Plum Creek would be
entitled to such statutory relief.
TAXATION OF TAXABLE U.S. HOLDERS
As used herein, the term "U.S. Holder" means a holder of Plum Creek common
stock who for United States Federal income tax purposes is
- an individual who is a citizen or resident of the United States;
- an entity which is a corporation or partnership for United States Federal
income tax purposes and which is created or organized in the United States
or under the laws of the United States or any political subdivision
thereof (although certain partnerships so created or organized may be
treated, under regulations not yet published, as not a United States
person);
- any estate whose income is includable in gross income for United States
Federal income tax purposes regardless of its source; or
- a "Domestic Trust." A Domestic Trust is generally any trust with respect
to which a court within the United States is able to exercise primary
supervision over the administration of such trust, and as to which one or
more United States fiduciaries have the authority to control all
substantial decisions of such trust.
DISTRIBUTIONS TO U.S. HOLDERS
Provided that Plum Creek qualifies as a REIT, distributions made to U.S.
Holders, other than tax-exempt entities, that are not designated as capital gain
dividends, will generally be subject to tax as ordinary income to the extent of
Plum Creek's current and accumulated earnings and profits as determined for
Federal income tax purposes. If the amounts distributed exceed a stockholder's
allocable share of Plum Creek's earnings and profits, the excess will be treated
as a return of capital to the extent of the stockholder's adjusted basis in its
shares, which will not be subject to tax, and thereafter as a gain from the sale
or exchange of a capital asset. At the present time, Plum Creek anticipates that
substantially all of the distributions made by it will constitute capital gain
dividends. Nevertheless, certain measures taken to satisfy the requirement to
distribute earnings and profits acquired in the mergers may result in
effectively changing the character of such distributions to
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ordinary income in the year the mergers are completed. See "--Taxation of Plum
Creek as a REIT--Distribution of Acquired Earnings and Profits."
Distributions made to U.S. Holders that Plum Creek properly designates as
capital gain dividends will be subject to tax as capital gains (to the extent
that they do not exceed Plum Creek's actual net capital gain for the taxable
year) without regard to the period for which a U.S. Holder has held its shares.
The maximum long-term Federal capital gains rate for individuals with respect to
capital gains dividends is 20%. If Plum Creek elects to retain capital gains
rather than distribute them, a U.S. Holder will be deemed to receive a capital
gain dividend equal to its share of such retained capital gains. In such a case,
a stockholder will receive a tax credit or refund for its share of the tax paid
by Plum Creek on such undistributed capital gains and the basis of the
stockholders' common stock would be increased by the amount of the undistributed
capital gains (minus the amount of the tax on capital gains paid by Plum Creek
deemed distributed to such stockholders).
Dividends declared by Plum Creek in October, November, or December of any
year and payable to a stockholder of record on a specified date in any such
month shall be treated as both paid by Plum Creek and received by the
stockholder on December 31 of such year, provided that Plum Creek actually pays
the dividend on or before January 31 of the following calendar year.
Stockholders may not include in their income tax returns any of Plum Creek's net
operating losses or capital losses. Plum Creek will notify each stockholder
after the close of its taxable year as to the portions of the distributions
attributable to that year which constitute ordinary income, capital gain or a
return of capital.
Plum Creek will be treated as having sufficient earnings and profits to
treat as a dividend any distribution that Plum Creek makes up to the amount
required to be distributed in order to avoid imposition of the 4% excise tax
discussed under "--Taxation of Plum Creek as a REIT--General" and "--Taxation of
Plum Creek as a REIT--Annual Distribution Requirements." As a result,
stockholders may be required to treat as taxable dividends certain distributions
that would otherwise result in tax free returns of capital. In addition, any
"deficiency dividend" will be treated as a "dividend" (an ordinary dividend or a
capital gain dividend, as the case may be), regardless of Plum Creek's earnings
and profits.
PASSIVE ACTIVITY LOSSES AND THE INVESTMENT INTEREST LIMITATION
Distributions made by Plum Creek and gain arising from the sale or exchange
by a U.S. Holder of Plum Creek common stock will not be treated as passive
activity income, and, as a result, U.S. Holders will generally not be able to
apply any "passive losses" against such income or gain. Dividends from Plum
Creek will generally be treated as investment income for purposes of the
investment interest limitation to the extent the dividends do not constitute a
capital gain dividend or a return of capital. Net capital gain from the sale or
other disposition of shares of common stock and capital gain dividends will
generally not be considered investment income for purposes of the investment
interest limitation.
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SALE OF PLUM CREEK COMMON STOCK
Upon any sale or other taxable disposition of shares of Plum Creek common
stock, a U.S. Holder will generally recognize gain or loss for Federal income
tax purposes in an amount equal to the difference between (1) the amount of cash
and the fair market value of any property received on such sale or other
disposition and (2) the holder's adjusted basis in such shares for tax purposes.
Such gain or loss will be capital gain or loss if the shares have been held by
the U.S. Holder as a capital asset and will be eligible for preferential capital
gains rates if such shares have been held for more than one year, as discussed
above under "Distributions to U.S. Holders." In general, any loss recognized by
a U.S. Holder upon the sale or other disposition of Plum Creek common stock that
has been held for six months or less (after applying certain holding period
rules) will be treated as a long-term capital loss to the extent of
distributions received by such U.S. Holder which were treated as long-term
capital gains.
TAXATION OF TAX-EXEMPT U.S. STOCKHOLDERS
Based upon a published ruling by the Internal Revenue Service, distributions
that Plum Creek makes to a stockholder that is a tax-exempt entity will not
constitute "unrelated business taxable income" ("UBTI"), provided that the
tax-exempt entity has not financed the acquisition of its shares with
"acquisition indebtedness" within the meaning of the Internal Revenue Code and
the shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity.
Notwithstanding the preceding paragraph, however, a portion of the dividends
Plum Creek distributes may be treated as UBTI to certain United States private
pension trusts if Plum Creek were treated as a "pension-held REIT." Plum Creek
is not currently nor does it anticipate that it will be a "pension-held REIT."
If Plum Creek were to become a pension-held REIT, these rules would generally
only apply to certain United States pension trusts that hold more than 10% of
its stock.
TAXATION OF NON-UNITED STATES STOCKHOLDERS
The rules governing United States Federal income taxation of the ownership
and disposition of Plum Creek common stock by persons that are, for purposes of
such taxation, nonresident alien individuals, foreign corporations, foreign
partnerships or foreign estates or trusts (collectively, "Non-U.S. Holders") are
complex, and no attempt is made herein to provide more than a brief summary of
such rules. Accordingly, the discussion does not address all aspects of United
States Federal income tax and does not address state, local or foreign tax
consequences that may be relevant to a Non-U.S. Holder in light of its
particular circumstances. In addition, this discussion is based on current law,
which is subject to change, and assumes that Plum Creek qualifies for taxation
as a REIT. Prospective Non-U.S. Holders should consult their tax advisors to
determine the impact of Federal, state, local and foreign tax laws with regard
to the ownership and disposition of Plum Creek common stock (including reporting
requirements) in light of their individual investment circumstances. As
discussed below, because of the nature of Plum Creek's income, investment in
Plum Creek common stock by Non-U.S. Holders may be less favorable than
investments in REITs whose principal activity is not timber-related.
DISTRIBUTIONS TO NON-U.S. HOLDERS
Under the Foreign Investors In Real Property Tax Act ("FIRPTA"),
distributions to a Non-U.S. Holder that are attributable to gain from sales or
exchanges by Plum Creek of United States real property interests will cause the
Non-U.S. Holder to be treated as recognizing such gain as income effectively
connected with a United States trade or business. Non-U.S. Holders would thus
generally be subject to tax at the same rates applicable to domestic
stockholders (subject to a special alternative minimum tax in the case of
nonresident alien individuals). Such gain may also be subject to a 30% branch
profits tax in the hands of a Non-U.S. Holder that is a corporation. Plum Creek
is generally required to withhold 35% of any such distribution. That amount is
creditable against the Non-U.S. Holder's United States Federal income tax
liability. It should be noted that the 35% withholding tax
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rate on capital gain dividends is higher than the maximum rate on long-term
capital gains of U.S. Holders that are individuals. It should also be emphasized
that the income Plum Creek receives under its timber cutting contracts will be
characterized for Federal income tax purposes as gain from the sale or other
disposition of real property. Accordingly, the portion of any distribution that
Plum Creek makes that is not a return of capital will be subject to such
treatment. Plum Creek currently expects that substantially all of its
distributions will be capital gain and accordingly will be subject to such
treatment. Plum Creek will withhold at a rate of 35% on the entire amount of any
distribution to Non-U.S. Holders.
The portion of dividends received by Non-U.S. Holders payable out of Plum
Creek's earnings and profits which are not attributable to capital gains if any,
and which are not effectively connected with a United States trade or business
of the Non-U.S. Holder will be subject to United States withholding tax at the
rate of 30% (unless reduced by treaty). In general, Non-U.S. Holders will not be
considered engaged in a United States trade or business solely as a result of
their ownership of Plum Creek common stock. In cases where the dividend income
from a Non-U.S. Holder's investment in Plum Creek common stock is (or is treated
as) effectively connected with the Non-U.S. Holder's conduct of a United States
trade or business, the Non-U.S. Holder will generally be subject to United
States Federal income tax at graduated rates, in the same manner as United
States stockholders are subject to tax with respect to such dividends (and may
also be subject to the 30% branch profits tax in the case of a Non-U.S. Holder
that is a foreign corporation).
Under recently finalized United States Treasury Regulations applicable to
dividends paid after December 31, 2000, to obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder will be required to either (1) provide an
Internal Revenue Service Form W-8BEN certifying such Non-U.S. Holder's
entitlement to benefits under a treaty together with, in certain circumstances,
additional information, or (2) satisfy certain other applicable treaty
certification requirements. The final Treasury Regulations also provide special
rules to determine whether, for purposes of determining the applicability of a
tax treaty and for purposes of the 30% withholding tax described above,
dividends paid to a Non-U.S. Holder that is an entity should be treated as paid
to the entity or to those persons or entities holding an interest in such
entity. Non-U.S. Holders who hold Plum Creek common stock through United States
pass-through entities should consult their tax advisors.
Distributions in excess of Plum Creek's current and accumulated earnings and
profits to Non-U.S. Holders will not be subject to tax to the extent that they
do not exceed the adjusted basis of the stockholder's common stock, but rather
will reduce the adjusted basis of such common stock. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Holder's shares of Plum
Creek common stock, they will give rise to gain from the sale or exchange of
such shares, the tax treatment of which is described below. Because at the time
of a distribution Plum Creek will generally not know whether such distribution
is in excess of earnings and profits, Plum Creek will withhold at a rate of 35%
on the entire amount of any distribution (or a lower applicable treaty rate).
Nevertheless, a Non-U.S. Holder may seek a refund of such amounts from the
Internal Revenue Service if it subsequently determines that such distribution
was, in fact, in excess of Plum Creek's current or accumulated earnings and
profits and the amount withheld exceeded the Non-U.S. Holder's United States
Federal income tax liability, if any, with respect to the distribution.
SALE OF PLUM CREEK COMMON STOCK
Gain recognized by a Non-U.S. Holder upon the sale or exchange of Plum Creek
common stock will generally not be subject to United States taxation unless such
shares constitute a "United States real property interest" within the meaning of
FIRPTA. Plum Creek common stock will not constitute a "United States real
property interest" so long as Plum Creek is a "domestically controlled REIT." A
"domestically controlled REIT" is a REIT in which, at all times during a
specified testing period, less than 50% in value of its stock is held directly
or indirectly by Non-U.S. Holders. Plum Creek believes that it is currently a
"domestically controlled REIT," because its stock is publicly traded; however,
no
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assurance can be given that Plum Creek will continue to be a "domestically
controlled REIT." If Plum Creek ceases to be a "domestically-controlled REIT,"
gain arising from the disposition of shares of Plum Creek common stock will not
be subject to tax, provided that such shares are publicly traded on an
established securities market (as determined under applicable Treasury
Regulations) and the stockholder holds 5% or less of the outstanding stock of
Plum Creek during the five-year period ending on the date of disposition.
Notwithstanding the foregoing, a Non-U.S. Holder will be subject to tax on
gain from the sale or exchange of common stock not otherwise subject to FIRPTA
if the Non-U.S. Holder is a nonresident alien individual who is present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States. In such case, the nonresident alien individual will be
subject to a 30% United States withholding tax on the amount of such
individual's gain.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Plum Creek must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, such stockholder, regardless of whether any tax was actually
withheld. That information may also be made available to the tax authorities of
the country in which a Non-U.S. Holder resides.
Backup withholding tax, which generally is imposed at the rate of 31% on
certain payments to persons that fail to furnish certain information under the
United States information reporting requirements, will generally not apply to
dividends, including any capital gain dividends, that Plum Creek pays on its
stock to a Non-U.S. Holder at an address outside the United States.
The payment of the proceeds from the disposition of Plum Creek common stock
to or through a United States office of a broker will be subject to information
reporting and backup withholding unless the owner, under penalties of perjury,
certifies, among other things, its status as a Non-U.S. Holder, or otherwise
establishes an exemption. The payment of the proceeds from the disposition of
Plum Creek common stock to or through a non-U.S. office of a non-U.S. broker
will generally not be subject to backup withholding and information reporting.
The backup withholding tax is not an additional tax and may be credited
against a Non-U.S. Holder's United States Federal income tax liability or
refunded to the extent excess amounts are withheld, provided that the required
information is supplied to the Internal Revenue Service.
The Internal Revenue Service has issued final Treasury Regulations regarding
the backup withholding and information rules discussed above, which are
generally effective for payments made after December 31, 2000. In general, those
final Treasury Regulations do not significantly alter the substantive
withholding and information reporting requirements, but unify current
certification procedures and forms and clarify reliance standards. Non-U.S.
Holders should consult their tax advisors regarding the application of the final
Treasury Regulations and their potential effect on the ownership of Plum Creek
common stock.
TAX ASPECTS OF PLUM CREEK'S OWNERSHIP OF INTERESTS IN THE OPERATING PARTNERSHIP
As of the date of this joint proxy statement/prospectus, substantially all
of Plum Creek's assets are held indirectly through its operating partnership. In
general, partnerships are "pass-through" entities that are not subject to
Federal income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership and are
potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel to Plum Creek, has delivered an opinion, substantially
to the effect that the operating partnership will not be classified as an
association subject to tax as a corporation, but will instead be classified as
either (1) a disregarded entity if Plum Creek owns 100% of its membership
interests directly or indirectly through one or more of its wholly owned
subsidiaries, or (2) a partnership if, in addition to Plum Creek at least one
other person that is
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unrelated to Plum Creek or that is not, directly or indirectly, a 100% owned
disregarded entity, owns an interest in the operating partnership. Accordingly,
Plum Creek will include in its income its proportionate share of the foregoing
items of the operating partnership for purposes of the various REIT income tests
and in the computation of its REIT taxable income. Moreover, for purposes of the
REIT asset tests, Plum Creek will include its proportionate share of assets held
through the operating partnership.
OTHER TAXES
Plum Creek, the operating partnership, any of its subsidiaries, or its
stockholders may be subject to foreign, state and local tax in various
countries, states and localities, including those countries, states and
localities in which they transact business, own property, or reside. The state,
local or foreign tax treatment of Plum Creek and its stockholders in those
jurisdictions may differ from the Federal income tax treatment described above.
Consequently, prospective holders of Plum Creek common stock should consult
their tax advisors regarding the effect of foreign, state and local tax laws
upon the ownership and disposition of Plum Creek common stock in light of their
individual investment circumstances.
LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
Congress recently enacted legislation, generally effective in 2001, that
will, among other things:
- allow Plum Creek to restructure its ownership of its unconsolidated
subsidiaries so that such subsidiaries will become wholly owned by Plum
Creek;
- add a requirement that a REIT cannot generally own securities having a
value of more than 10% of the total value of the outstanding securities of
any one corporate issuer (other than a qualified REIT subsidiary or an
electing taxable REIT subsidiary);
- limit the value of securities issued by one or more taxable REIT
subsidiaries that a REIT may own, directly or indirectly, to an amount
that does not exceed 20% of the value of the REIT's gross assets; and
- reduce from 95% to 90% the percentage of income that REITs are required to
distribute annually.
In February 2000, President Clinton released his proposed budget for fiscal
year 2001. Provisions contained in the proposal would, if enacted into law:
- generally extend the 4% excise tax on delayed distributions by REITs to
cases where the REIT timely distributes less than 98% of its ordinary
income or capital gain net income for a tax year during that year. As
discussed above, the excise tax does not apply under current law if the
REIT timely distributes at least 85% of its ordinary income and 95% of its
capital gain net income; see "--Taxation of Plum Creek as a REIT--General"
and "--Annual Distribution Requirements"; and
- provide an additional requirement that an entity will not qualify as a
REIT if one person, including an entity, directly or constructively owns
stock possessing 50% or more of the voting power or value of its stock.
The current 50% shareholder requirement, which is not affected by the
proposal, generally looks to direct and constructive ownership by five or
fewer persons who are individuals. See "--Taxation of Plum Creek as a
REIT--Organizational Requirements."
The rules dealing with Federal income taxation are constantly under review
by persons involved in the legislative process and by the Internal Revenue
Service and the Treasury Department. Changes to the Federal tax laws and
interpretations of Federal tax laws could adversely affect an investment in Plum
Creek.
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AMENDMENT TO PLUM CREEK'S CERTIFICATE OF INCORPORATION
TO ELIMINATE THE CLASSIFICATION OF THE
PLUM CREEK BOARD OF DIRECTORS
Article Fifth of Plum Creek's certificate of incorporation currently
provides for the division of the board of directors into three classes with each
serving staggered three year terms. The purpose of dividing the directors into
three classes was to promote continuity and stability in Plum Creek's management
and policies by making an attempted takeover of Plum Creek more difficult. A
classified board of directors extends the time required to make a change in
control of the board and tends to discourage any hostile takeover because it
takes at least two annual meetings to make a change in control of the board,
since only a minority of the directors are elected at each meeting.
Plum Creek's board of directors believes that the elimination of the
classified board will allow Plum Creek stockholders to express their views
annually regarding the entire board by electing all directors annually and also
help to ensure that each director will represent the interests of all
stockholders. Further, the elimination of the classified board of directors
promotes greater accountability on the part of all of the directors each year
and encourages directors to better serve stockholders while discouraging the
preservation of the status quo. The amendment is not being proposed in response
to any specific takeover effort of which the Plum Creek board of directors is
aware. If this proposal is approved, each elected Plum Creek director will serve
one year terms. The proposed amendment to the certificate of incorporation will
not affect the current term of any of the current members of Plum Creek's board
of directors.
Approval of this proposed amendment to Plum Creek's certificate of
incorporation requires the affirmative vote of 66 2/3% of the outstanding shares
of Plum Creek common stock and Plum Creek special voting common stock, voting
together as a single class.
The holders of all of the outstanding shares of Plum Creek special voting
common stock, who also own approximately 24% of the outstanding shares of Plum
Creek common stock and a total of 25% of the combined outstanding shares of Plum
Creek common stock and special voting common stock, have entered into a voting
agreement and consent, which provides, among other things, that each of them
will vote their shares of special voting common stock and common stock in favor
of the amendment to Plum Creek's certificate of incorporation to eliminate the
classified board of directors.
Plum Creek's board of directors recommends that the Plum Creek stockholders
vote for the proposed amendment to Plum Creek's certificate of incorporation to
end the classification of Plum Creek's board of directors even though approving
the amendment is not a condition to completing the mergers.
LEGAL MATTERS
The validity of the shares of Plum Creek common stock to be issued pursuant
to the terms of the merger agreement will be passed upon by Skadden, Arps,
Slate, Meagher & Flom, LLP. It is a condition to the completion of the mergers
that Plum Creek and Georgia-Pacific receive opinions from Skadden, Arps, Slate,
Meagher & Flom, LLP and McDermott, Will & Emery, respectively, with respect to
the tax treatment of the mergers. See "The Merger Agreement--Conditions to the
Notice of Redemption and Mergers" and "The Mergers--Certain Tax Consequences of
the Mergers."
EXPERTS
The consolidated/combined financial statements of Plum Creek incorporated in
this joint proxy statement/prospectus by reference to the Annual Report on
Form 10-K for Plum Creek for the year ended December 31, 1999 have been so
incorporated in reliance on the report of
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PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements and schedule of Georgia-Pacific
Corporation and the combined financial statements of The Timber Company included
in or incorporated by reference in this joint proxy statement/prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any Plum Creek stockholder who wishes to present a proposal at the Plum
Creek 2001 annual meeting of stockholders, and who wishes to have such proposal
included in Plum Creek's proxy statement for that meeting, must deliver a copy
of such proposal to Plum Creek Timber Company, Inc., 999 Third Avenue, Suite
2300, Seattle, Washington 98104, Attention: Secretary, on or before
November 24, 2000. If a Plum Creek stockholder intends to present a proposal at
the Plum Creek 2001 annual meeting of stockholders that is not included in Plum
Creek's proxy statement for that meeting, and the Plum Creek stockholder fails
to promptly notify Plum Creek of such proposal in writing prior to February 9,
2001, then the proxies appointed by Plum Creek's management would be allowed to
use their discretionary voting authority when the proposal is raised at the
annual meeting. Article II, Section 5 of Plum Creek's bylaws governs submission
of matters for presentation at Plum Creek stockholder meetings.
Due to the contemplated completion of the mergers, Georgia-Pacific does not
currently intend to hold a 2001 annual meeting for the holders of Timber Company
common stock. If that meeting is held, any proposals of the holders of Timber
Company common stock intended to be presented at this meeting must be received
by the secretary of Georgia-Pacific at its principal executive offices no later
than the close of business on November 30, 2000.
WHERE YOU CAN FIND MORE INFORMATION
We file reports (including annual reports which contain audited financial
statements), proxy statements and other information with the Securities and
Exchange Commission. You may read and copy these reports, proxy statements and
other information at the Securities and Exchange Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
1-800-SEC-0330 for further information on the public reference rooms. Our
Securities and Exchange Commission filings are also available to the public from
commercial document retrieval services and at the web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov."
Plum Creek has filed with the Securities and Exchange Commission a
registration statement on Form S-4. This joint proxy statement/prospectus is a
part of the registration statement and constitutes the prospectus of Plum Creek
for the Plum Creek common stock to be issued to the holders of Units in the
mergers. As allowed by the Securities and Exchange Commission rules, this joint
proxy statement/prospectus does not contain all of the information you can find
in the registration statement or the exhibits to the registration statement.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this joint proxy statement/prospectus. This means
that we can disclose important information to you by referring you to another
document filed separately with the Securities and Exchange Commission. These
documents contain important information about Plum Creek and The Timber Company
and their respective financial condition. The information incorporated by
reference is considered to be part of this joint proxy statement/prospectus.
Information that we file later with the Securities and Exchange
147
<PAGE>
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any filing we will make
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 following the date of this joint
proxy statement/prospectus and prior to the date of the Plum Creek special
meeting or the special meeting of the holders of Timber Company common stock:
<TABLE>
<CAPTION>
PLUM CREEK'S SEC FILINGS (FILE NO. 1-10239) PERIOD
------------------------------------------- --------------------------------------------------
<S> <C>
Annual Report on Form 10-K........................ Fiscal Year ended December 31, 1999
Quarterly Reports on Form 10-Q.................... Quarters ended March 31, 2000 and June 30, 2000
Current Reports on Form 8-K....................... Dated January 12, 2000 and July 20, 2000
Current Report on Form 8-K/A...................... Dated July 24, 2000
The description of Plum Creek common stock set
forth in the Registration Statement on
Form S-3/A...................................... Dated October 28, 1999
</TABLE>
<TABLE>
<CAPTION>
GEORGIA-PACIFIC'S SEC FILINGS (FILE NO. 1-3506) PERIOD
----------------------------------------------- --------------------------------------------------
<S> <C>
Annual Report on Form 10-K........................ Fiscal Year ended January 1, 2000
Quarterly Reports on Form 10-Q.................... Quarters ended April 1, 2000 and July 1, 2000
Current Reports on Form 8-K....................... Dated March 23, 2000, April 19, 2000, July 18,
2000 and July 20, 2000
</TABLE>
You can obtain any of the documents incorporated by reference in this joint
proxy statement/ prospectus through Plum Creek or Georgia-Pacific, as the case
may be, or from the SEC web site at "http://www.sec.gov." Documents incorporated
by reference are available from the appropriate company without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this joint proxy
statement/prospectus. You can obtain documents incorporated by reference in this
joint proxy statement/prospectus by requesting them in writing or by telephone
from the appropriate company at the following addresses:
Plum Creek Timber Company, Inc.
999 Third Avenue, Suite 2300
Seattle, Washington 98104
Attention: Director of Investor Relations
Telephone No.: 1-800-858-5347
Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Investor Relations
Telephone No.: (404) 652-5555
IN ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, YOU SHOULD MAKE YOUR
REQUEST BY .
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE MERGERS OR ABOUT US THAT DIFFERS FROM OR ADDS TO THE
INFORMATION IN THIS JOINT PROXY STATEMENT/ PROSPECTUS OR THE DOCUMENTS THAT WE
PUBLICLY FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, IF ANYONE
DOES GIVE YOU DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR
SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS
JOINT PROXY STATEMENT/PROSPECTUS OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON
TO WHOM IT IS UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY
THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS SPEAKS
ONLY AS OF ITS DATE UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER
DATE APPLIES.
148
<PAGE>
THE TIMBER COMPANY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Public Accountants.................. F-2
Combined Statements of Income for the years ended
January 1, 2000 and December 31, 1998 and 1997.......... F-3
Combined Statements of Cash Flows for the years ended
January 1, 2000 and December 31, 1998 and 1997.......... F-4
Combined Balance Sheets as of January 1, 2000 and
December 31, 1998....................................... F-5
Combined Statements of Parent's Equity (Deficit) for the
years ended January 1, 2000 and December 31, 1998 and
1997.................................................... F-6
Notes to Combined Financial Statements.................... F-7
Combined Statements of Income for the six months ended
July 1, 2000 (unaudited) and July 3, 1999 (unaudited)... F-26
Combined Statements of Cash Flows for the six months ended
July 1, 2000 (unaudited) and July 3, 1999 (unaudited)... F-27
Combined Balance Sheet as of July 1, 2000 (unaudited) and
January 1, 2000......................................... F-28
Notes to Combined Financial Statements as of July 1, 2000
(unaudited)............................................. F-29
</TABLE>
------------------------
On December 16, 1997, shareholders of Georgia-Pacific approved the creation
of two classes of common stock intended to reflect separately the performance of
Georgia-Pacific's manufacturing and timber businesses (the "Letter Stock
Recapitalization"). Georgia-Pacific's articles of incorporation were amended and
restated to, among other things, (i) create a new class of stock designated as
Georgia-Pacific Corporation--Timber Group common stock, $0.80 par value per
share, and (ii) authorize the distribution of one share of Timber Company common
stock for each outstanding share of Georgia-Pacific. Timber Company common stock
tracks the performance of a wholly owned division of Georgia-Pacific that is
engaged primarily in the growing and selling of timber on the approximately
4.7 million acres of timberlands that Georgia-Pacific owns or leases. Also in
connection with the Letter Stock Recapitalization, Georgia-Pacific formed
Georgia-Pacific Group, a wholly-owned division that manufactures and distributes
building products and pulp and paper products.
Since December 16, 1997, Georgia-Pacific has reported the results of The
Timber Company in separate financial statements that track the financial
performance of The Timber Company (the "Letter Stock Financial Statements").
Because these Letter Stock Financial Statements are consolidated with and into
the financial statements of Georgia-Pacific, they are not prepared as if The
Timber Company were a stand-alone entity. In the Letter Stock Financial
Statements, The Timber Company recognizes revenues and earnings from timber deed
sales to Georgia-Pacific Group as the timber is cut by the Georgia-Pacific
Group. The Letter Stock Financial Statements also disclose, among other things,
information regarding commitments and contingencies, equity transactions and
debt related to Georgia-Pacific. In addition, the Letter Stock Financial
Statements reflect dividend payments, option exercises, share repurchases and
earnings per share related to Timber Company common stock.
For purposes of this merger transaction, Georgia-Pacific has prepared
separate financial statements, different from the Letter Stock Financial
Statements, which reflect the operations of The Timber Company as if it were a
stand-alone entity (the "Carve-out Financial Statements"). In the Carve-out
Financial Statements, The Timber Company recognizes revenues and earnings from
timber deed sales to Georgia-Pacific Group at the time of the timber deed
agreement (the applicable accounting policy for timber deeds sold to third
parties). In addition, because The Timber Company does not have shares
outstanding for purposes of preparing the Carve-out Financial Statements, no
dividend payments, option exercises or share repurchases are reflected in such
statements. The Carve-out Financial Statements disclose only the commitments and
contingencies and debt information directly related to The Timber Company as a
stand-alone entity. The Carve-out Financial Statements reflect pro forma
earnings per share that gives effect to the recapitalization that will be done
for accounting purposes in connection with the mergers. The Carve-out Financial
Statements are included herein and begin on page F-2.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Timber Company:
We have audited the accompanying combined balance sheets of The Timber
Company (as described in Note 1) as of January 1, 2000 and December 31, 1998 and
the related combined statements of income, parent's equity (deficit), and cash
flows for each of the three years in the period ended January 1, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Timber Company
as of January 1, 2000 and December 31, 1998 and the results of their operations
and their cash flows for each of the three years in the period ended January 1,
2000 in conformity with accounting principles generally accepted in the United
States.
/s/ Arthur Andersen LLP
---------------------
Arthur Andersen LLP
Atlanta, Georgia
October 3, 2000
F-2
<PAGE>
THE TIMBER COMPANY
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
JANUARY 1, DECEMBER 31,
---------- -------------------
2000 1998 1997
---------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales
Timber--Georgia-Pacific Group............................. $ 323 $ 416 $ 425
Timber--unrelated parties
Delivered............................................... 43 53 87
Stumpage................................................ 131 52 13
Other..................................................... 25 20 26
------ ------ ------
Total net sales......................................... 522 541 551
------ ------ ------
Costs and expenses
Cost of sales, excluding depreciation and depletion shown
below................................................... 70 114 137
Depreciation and depletion................................ 41 45 48
General and administrative................................ 43 36 43
Interest.................................................. 69 71 84
Other income.............................................. (355) (24) (114)
------ ------ ------
Total costs and expenses................................ (132) 242 198
------ ------ ------
Income before income taxes and extraordinary item........... 654 299 353
Provision for income taxes.................................. 256 117 138
------ ------ ------
Income before extraordinary item............................ 398 182 215
Extraordinary item-loss from early retirement of debt, net
of taxes.................................................. -- (2) --
------ ------ ------
Net income.................................................. $ 398 $ 180 $ 215
====== ====== ======
Basic pro forma earnings per share:
Income before extraordinary item............................ $ 3.65
------
Extraordinary item, net of taxes............................ --
------
Net income.................................................. $ 3.65
======
Diluted pro forma earnings per share:
Income before extraordinary item............................ $ 3.63
------
Extraordinary item, net of taxes............................ --
------
Net income.................................................. $ 3.63
======
Basic pro forma shares outstanding.......................... 109.1
======
Diluted pro forma shares outstanding........................ 109.7
======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-3
<PAGE>
THE TIMBER COMPANY
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
JANUARY 1, DECEMBER 31,
---------- -------------------
2000 1998 1997
---------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income.................................................. $ 398 $ 180 $ 215
Adjustments to reconcile net income to cash provided by
operations:
Depreciation and depletion................................ 41 45 48
Other Income.............................................. (355) (24) (114)
Deferred income taxes..................................... 131 6 66
Gain on sales of assets, net.............................. (51) (17) (15)
Other..................................................... (5) 11 12
------ ------ ------
Cash provided by operations................................. 159 201 212
------ ------ ------
Cash flows from investing activities
Property, plant and equipment investments................... (2) (6) (2)
Timber and timberland investments........................... (78) (59) (44)
Proceeds from sales of assets............................... 124 64 271
------ ------ ------
Cash provided by (used for) investing activities............ 44 (1) 225
------ ------ ------
Cash flows from financing activities
Net cash returned to Georgia-Pacific Corporation............ (190) (212) (92)
Additions to (repayments of) debt........................... (13) 12 (345)
------ ------ ------
Cash used for financing activities.......................... (203) (200) (437)
------ ------ ------
Increase (decrease) in cash................................. -- -- --
Balance at beginning of year................................ -- -- --
------ ------ ------
Balance at end of year...................................... $ -- $ -- $ --
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-4
<PAGE>
THE TIMBER COMPANY
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
2000 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Assets
Timber and timberlands
Timberlands............................................. $ 318 $ 302
Fee timber.............................................. 523 580
Reforestation........................................... 259 227
Other................................................... 27 34
------ ------
Total timber and timberlands.......................... 1,127 1,143
------ ------
Property, plant and equipment
Land and improvements................................... 22 25
Buildings............................................... 5 5
Machinery and equipment................................. 36 36
------ ------
Property, plant and equipment, at cost.................. 63 66
Accumulated depreciation................................ (44) (42)
------ ------
Total property, plant and equipment, net.............. 19 24
Note receivable 350 --
Other assets.............................................. 25 6
------ ------
Total assets.............................................. $1,521 $1,173
Liabilities and parent's equity (deficit)
Debt...................................................... $ 970 $ 983
Other liabilities......................................... 47 25
Deferred income tax liabilities........................... 377 246
------ ------
Total liabilities......................................... 1,394 1,254
------ ------
Commitments and contingencies
Parent's equity (deficit)................................. 127 (81)
------ ------
Total liabilities and parent's equity (deficit)........... $1,521 $1,173
====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-5
<PAGE>
THE TIMBER COMPANY
COMBINED STATEMENTS OF PARENT'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
JANUARY 1, DECEMBER 31,
---------- -------------------
2000 1998 1997
---------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Parent's equity (deficit) balance, beginning of
year............................................... $(81) $(49) $(172)
Net income........................................... 398 180 215
Net cash returned to Georgia-Pacific Corporation..... (190) (212) (92)
---- ---- -----
Parent's equity (deficit) balance, end of year....... $127 $(81) $ (49)
==== ==== =====
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-6
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL. On December 16, 1997, shareholders of Georgia-Pacific Corporation
("Georgia-Pacific") approved the creation of two classes of common stock
intended to reflect separately the performance of Georgia-Pacific's
manufacturing ("Georgia Pacific Group") and timber businesses ("The Timber
Company") (the "Letter Stock Recapitalization"). Georgia-Pacific's Articles of
Incorporation were amended and restated to, among other things, (i) create a new
class of stock designated as Georgia-Pacific Corporation--Timber Group common
stock, $0.80 par value per share and (ii) authorize the distribution of one
share of The Timber Company stock for each outstanding share of Georgia Pacific.
The Timber Company represents the businesses whose results have been
separately tracked by Georgia-Pacific's Timber Company common stock and is
engaged primarily in the growing and selling of timber on the approximately 4.7
million acres of timberlands that Georgia-Pacific owns or leases. In 1999, these
timberlands supplied approximately 19% of the overall timber requirements of
Georgia-Pacific's manufacturing facilities.
BASIS OF PRESENTATION. The financial statements of The Timber Company have
been prepared on a basis that management believes to be reasonable and
appropriate and include (i) the historical balance sheets, results of operations
and cash flows for The Timber Company, with all significant intercompany
transactions and balances eliminated; and (ii) assets and liabilities of
Georgia-Pacific and related transactions identified with The Timber Company,
including allocated portions of Georgia-Pacific's debt and general and
administrative expenses.
The Timber Company's combined financial statements reflect the application
of the management and allocation policies adopted by the Board of Directors of
Georgia-Pacific to various corporate activities, as described below.
MERGERS. On July 18, 2000, Georgia-Pacific signed a definitive agreement to
combine The Timber Company with Plum Creek Timber Company, Inc. ("Plum Creek").
Prior to the mergers, Georgia-Pacific will have transferred the assets and
liabilities of The Timber Company to six wholly owned subsidiaries (the
"Subsidiaries"). Georgia-Pacific will redeem all of the outstanding shares of
Timber Company common stock. In connection with the redemption, each outstanding
share of Timber Company common stock will be exchanged for one unit (a "Unit"),
which will represent one outstanding share of common stock of each of the
Subsidiaries. Also in connection with the mergers, holders of the Units will
receive 1.37 shares of Plum Creek stock for each Unit. This transaction, which
includes the incurrence by Plum Creek of $1.0 billion of debt to extinguish the
debt attributed to The Timber Company by Georgia-Pacific, is valued at
approximately $4 billion. Plum Creek will assume a ten-year timber supply
agreement between Georgia-Pacific Group and The Timber Company. The mergers are
subject to approval by the stockholders of Plum Creek and the holders of Timber
Company common stock, and receipt of a ruling from the Internal Revenue Service
that the redemption of all of the outstanding shares of Timber Company common
stock is tax-free to Georgia-Pacific and to the holders of Timber Company common
stock and the receipt of opinions of counsel of Plum Creek and Georgia-Pacific,
respectively, that the mergers will be treated as tax-free reorganizations under
the Internal Revenue Code. The mergers are also subject to receipt of applicable
governmental approvals and the satisfaction of customary closing conditions. The
mergers are expected to be completed by the end of the first quarter of 2001.
FINANCIAL ACTIVITIES. At June 30, 1997, $1.0 billion of Georgia-Pacific's
total debt was allocated to The Timber Company for financial statement purposes.
Georgia-Pacific's debt was allocated to The
F-7
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Timber Company based upon a number of factors including expected future cash
flows, volatility of earnings, and the ability to pay debt service. In addition,
Georgia-Pacific considered certain measures of creditworthiness, such as
coverage ratios and various tests of liquidity, as a means of ensuring that each
group could continue to pay debt service during a business downcycle. The Timber
Company's debt increases or decreases by the amount of any net cash generated
by, or required to fund, its operating activities, investing activities, and
financing activities. Management believes that such allocation is equitable and
reasonable.
Interest is charged to The Timber Company in proportion to the respective
amount of its debt at a rate equal to the weighted average interest rate of
Georgia-Pacific's debt calculated on a quarterly basis. Georgia-Pacific's
management believes that this method of allocation of the cost of debt is
equitable and provides a reasonable estimate of the cost attributable to the
groups. Changes in the cost of Georgia-Pacific's debt are reflected in
adjustments to the weighted average interest cost of such debt.
ALLOCATION OF SHARED SERVICES. A portion of Georgia-Pacific's shared
general and administrative expenses (such as executive management, human
resources, legal, accounting and auditing, tax, treasury, strategic planning and
information systems support) has been allocated to The Timber Company based upon
identification of such services specifically used by The Timber Company. Where
determinations based on specific usage alone have been impracticable, other
methods and criteria were used that management believes are equitable and
provide a reasonable estimate of the cost attributable to The Timber Company.
These methods consisted of allocating costs based on (i) number of employees of
each group, (ii) percentage of office space and (iii) estimated percentage of
staff time utilized. The total of these allocations was $3 million, $4 million
and $7 million in 1999, 1998 and 1997, respectively. It is not practicable to
provide a detailed estimate of the expenses that would be recognized if The
Timber Company were a separate legal entity.
ALLOCATION OF EMPLOYEE BENEFITS. A portion of Georgia-Pacific's employee
benefit costs, including pension and postretirement health care and life
insurance benefits, has been allocated to The Timber Company. The Timber
Company's pension cost related to its participation in Georgia-Pacific's
noncontributory defined benefit pension plan, and other employee benefit costs
related to its participation in Georgia-Pacific's postretirement health care and
life insurance benefit plans, are actuarially determined based on the number of
its employees and an allocable share of the plan assets and are calculated in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 87,
"Employers' Accounting for Pensions," and SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," respectively.
Georgia-Pacific's management believes such method of allocation is equitable and
provides a reasonable estimate of the costs attributable to The Timber Company.
Since plan assets are not segregated into separate accounts or restricted to
providing benefits to employees of The Timber Company, assets of
Georgia-Pacific's employee benefit plans may be used to provide benefits to all
employees of Georgia-Pacific. Plan assets have been allocated to The Timber
Company based on the percentage of its projected benefit obligation to the
plans' total projected benefit obligations.
ALLOCATION OF FEDERAL AND STATE INCOME TAXES. The federal income taxes of
Georgia-Pacific and the subsidiaries that own assets allocated to The Timber
Company are determined on a consolidated basis.
F-8
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Consolidated federal income tax provisions and related tax payments or refunds
are allocated to The Timber Company based principally on the taxable income and
tax credits directly attributable to it. Such allocations reflect The Timber
Company's contribution (positive or negative) to Georgia-Pacific's consolidated
federal taxable income and the consolidated federal tax liability and tax credit
position. Tax benefits, if any, generated by The Timber Company that cannot be
used by The Timber Company, but can be used on a consolidated basis, are
credited to The Timber Company. Had The Timber Company filed separate tax
returns, the provision for income taxes and net income for The Timber Company
would not have significantly differed from the amounts reported on its
statements of income for the years ended January 1, 2000 and December 31, 1998
and 1997. However, the amounts of current and deferred taxes and taxes payable
or refundable allocated to The Timber Company on the historical financial
statements may differ from those that would have been allocated had The Timber
Company filed separate income tax returns.
Depending on the tax laws of the respective jurisdictions, state and local
income taxes are calculated on either a consolidated or combined basis or on a
separate corporation basis. State income tax provisions and related tax payments
or refunds determined on a consolidated or combined basis are allocated to The
Timber Company based on its contribution to such consolidated or combined state
taxable incomes. State and local income tax provisions and related tax payments
that are determined on a separate corporation basis are allocated to The Timber
Company in a manner designed to reflect the contributions of The Timber Company
to Georgia-Pacific's separate state or local taxable income.
REVENUE RECOGNITION. Timber sales are recognized when legal ownership or
the risk of loss passes to the purchaser and the quantity sold is determinable.
This occurs when a purchaser acquires stumpage or standing timber, or when a
purchaser receives logs on a delivered sale agreement. There are two types of
stumpage agreements. A timber deed agreement is one in which the purchaser takes
title to all timber on a tract of land. When title passes, revenue is recognized
for the full value of all timber on the tract. A cutting contract agreement is
one in which the purchaser acquires the right to harvest all stumpage on a tract
at an agreed-to price per unit for all products on the tract. The sale, and any
related advances, is recognized as the purchaser harvests the timber on the
tract. For delivered sales, the risk of loss passes when the timber is delivered
to the customer. Revenues are determined by multiplying actual harvest volumes
by contractually agreed-upon prices negotiated with the purchasers, including
the Georgia-Pacific Group, the manufacturing entity of Georgia-Pacific. Other
sales are recognized when earned.
PRO FORMA EARNINGS PER SHARE. In connection with the mergers,
Georgia-Pacific expects to transfer the assets and liabilities of The Timber
Company to the Subsidiaries. Georgia-Pacific will redeem all of the outstanding
shares of Timber Company common stock. In connection with the redemption, each
outstanding share of Timber Company common stock will be exchanged for one Unit.
Also in connection with the mergers, holders of the Units will receive 1.37
shares of Plum Creek stock for each Unit. The pro forma basic earnings per share
have been calculated after giving effect to the mergers. Furthermore, the
diluted pro forma earnings per share include the dilutive effect of 7,503,833
outstanding options (after adjusting for the mergers) using the treasury stock
method at exercise prices ranging from $15.29 to $18.34 (after adjusting for the
mergers). The actual shares issued in the mergers will depend on the number of
shares of Timber Company common stock outstanding on the date the mergers are
completed.
F-9
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TIMBER AND TIMBERLANDS. The Timber Company capitalizes timber and
timberland purchases and reforestation costs. The cost of timber harvested is
based on the volume of timber harvested, the capitalized cost and the total
timber volume estimated to be available over the growth cycle. Timber carrying
costs are expensed as incurred.
Gains or losses on sales of timberlands are reflected in "Cost of sales" on
the accompanying statements of income. During 1999, 1998 and 1997, The Timber
Company recognized net gains on sales of timberlands of $51 million,
$17 million and $15 million, respectively, that are reflected as a reduction of
"Cost of sales." Occasionally, The Timber Company sells entire basins or large
tracts of timberlands in non-strategic areas. Gains or losses from these major
divestitures, which are generally greater than $20 million for a single
transaction, are reflected as "Other income".
The Timber Company enters into tax-free exchange transactions to acquire and
sell assets, principally timberlands. During 1999, 1998 and 1997, The Timber
Company acquired assets totaling $34 million, $5 million and $7 million,
respectively, under tax-free exchange transactions. Also during 1999, 1998 and
1997, The Timber Company disposed of assets for consideration of $32 million,
zero and $10 million, respectively, under tax-free exchange transactions. These
transactions are treated as noncash exchanges for purposes of preparing the
accompanying statements of cash flows.
PROPERTY, PLANT AND EQUIPMENT. Forestry-related property, plant and
equipment are recorded at cost. Lease obligations for which The Timber Company
assumes or retains substantially all the property rights and risks of ownership
are capitalized. Replacements of major units of property are capitalized, and
the replaced properties are retired. Replacements of minor components of
property, and repair and maintenance costs, are charged to expense as incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Useful lives are 25 years for land
improvements, 20 to 45 years for buildings, and 3 to 20 years for machinery and
equipment. Upon retirement or disposition of assets, cost and accumulated
depreciation are removed from the related accounts and any gain or loss is
included in income.
INVESTMENT IN REAL ESTATE HELD FOR DEVELOPMENT AND SALE. The Timber Company
divested its real estate development properties located in South Carolina and
Florida in the first quarter of 1998. As a result, The Timber Company is no
longer engaged in real estate development activities. Real estate held for
development and sale was stated at the lower of cost or net realizable value,
and included direct costs of land and land development and indirect costs,
including amenities, less amounts charged to cost of sales. These costs were
allocated to individual lots or acreage sold based on relative sales value.
Direct costs were allocated on a specific neighborhood basis, while indirect
costs were allocated over the projects. The Timber Company recognized sales of
retail homesites developed when all conditions, as set forth in SFAS No. 66,
"Accounting for Sales of Real Estate," had occurred.
FINANCIAL INSTRUMENTS. The carrying amount of The Timber Company's Note
receivable and Debt approximates fair value.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements as well as reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from these estimates.
F-10
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING STANDARDS CHANGE. In July 1999, the FASB issued SFAS No. 137,
providing for a one-year delay of the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on its balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation. The
Timber Company will be required to adopt SFAS No. 133 in 2001. Georgia-Pacific's
management is evaluating the effect of this statement on the The Timber Company.
The impact of such adjustments to fair value is not expected to be material to
The Timber Company's financial position because The Timber Company does not
utilize derivatives.
CHANGE IN FISCAL YEAR. On or about April 22, 1999, The Timber Company
determined to change its fiscal year from December 31 to end on the Saturday
closest to December 31. Additionally, The Timber Company reports its quarterly
periods on a 13-week basis ending on a Saturday. The impact of one additional
day on the year ended January 1, 2000 was not material. There will be no
transition period on which to report.
RECLASSIFICATIONS. Certain 1998 and 1997 amounts have been reclassified to
conform with the 1999 presentation.
NOTE 2. FACTORS AFFECTING THE TIMBER COMPANY'S BUSINESS
FACTORS AFFECTING SUPPLY AND DEMAND. The results of operations of The
Timber Company are and will continue to be affected by cyclical supply and
demand factors related to the forest products industry. The supply of timber is
significantly affected by land use management policies of the U.S. government,
which in recent years have limited, and are likely to continue to limit, the
amount of timber offered for sale by certain U.S. government agencies. Such
government agencies historically have been major suppliers of timber to the U.S.
forest products industry, but timber sales by such government agencies currently
are at historically low levels. Any reversal of government land use management
policies that substantially increases sales of timber by U.S. government
agencies could significantly reduce prices for logs, lumber and other forest
products. The demand for logs and manufactured wood products also has been, and
in the future can be expected to be, subject to cyclical fluctuations. Such
demand is primarily affected by the level of housing starts, repair and
remodeling activity, industrial wood product use, competition from nonwood
products, and the demand for pulp and paper products. These factors are subject
to fluctuations due to changes in economic conditions, interest rates,
population growth, weather conditions, competitive pressures and other factors.
Any decrease in the level of industry demand for logs and wood products
generally can be expected to result in lower net sales, operating income and
cash flow of The Timber Company.
HARVESTING LIMITATIONS. Net sales, operating income and cash flow of The
Timber Company are dependent, to a significant extent, on the continued ability
of purchasers of standing timber and, to a lesser extent, of The Timber Company
to harvest timber at adequate levels. Weather conditions, timber growth cycles,
access limitations and regulatory requirements associated with the protection of
wildlife and water resources may restrict harvesting of The Timber Company's
timberlands. From time to time, proposals have been made in state legislatures
that would regulate the level of timber harvesting. Timber harvests also may be
affected by various natural factors, including damage by fire, insect
F-11
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. FACTORS AFFECTING THE TIMBER COMPANY'S BUSINESS (CONTINUED)
infestation, disease, prolonged drought, severe weather conditions and other
causes. The effects of such natural disasters may be particularly damaging to
young timber. Although damage from such natural causes usually is localized and
affects only a limited percentage of the timber, there can be no assurance that
any damage affecting The Timber Company's timberlands will in fact be so
limited. Consistent with industry practice, The Timber Company does not maintain
insurance coverage with respect to damage to its timberlands. Any of the above
factors that materially limits the ability of purchasers or The Timber Company
to harvest timber could have a significant adverse impact on the net sales,
operating income and cash flow of The Timber Company.
COMMITTED PRODUCT PURCHASES BY THE GEORGIA-PACIFIC GROUP; POSSIBLE INABILITY
TO DEVELOP NEW MARKETS. During 1999, The Timber Company derived approximately
62% of its net sales from sales of timber directly to the Georgia-Pacific Group.
For a description of the terms of sales of timber by The Timber Company to the
Georgia-Pacific Group, see Note 10 of the Notes to Combined Financial
Statements. While management of The Timber Company believes that there is
significant demand for The Timber Company's timber products from users other
than the Georgia-Pacific Group, no assurance can be given that such demand will
be equivalent to The Timber Company's planned annual harvests. Any excess supply
of timber that results from the inability of The Timber Company to sell its
products to users other than the Georgia-Pacific Group could result in lower
prices for The Timber Company's products, which could have a material adverse
effect on the net sales, operating income and cash flow of The Timber Company.
ENVIRONMENTAL REGULATION. The Timber Company is subject to extensive and
changing federal, state and local environmental laws and regulations, the
provisions and enforcement of which are expected to become more stringent in the
future. The Timber Company's operations generate air emissions, discharge
wastewater and stormwater, and generate and dispose of both hazardous and
nonhazardous wastes. The Timber Company is subject to regulation under the
Endangered Species Act (the "ESA"), the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, and the Federal Insecticide,
Fungicide and Rodenticide Act, as well as similar state laws and regulations.
Violations of various statutory and regulatory programs that apply to The Timber
Company's operations can result in civil penalties, remediation expenses,
natural resource damages, potential injunctions, cease and desist orders, and
criminal penalties. Some environmental statutes impose strict liability,
rendering a person liable for environmental damage without regard to negligence
or fault on the part of such person. There can be no assurance that such laws or
future legislation or administrative or judicial action with respect to
protection of the environment will not adversely affect The Timber Company.
The ESA and counterpart state legislation protect species threatened with
possible extinction. A number of species indigenous to The Timber Company's
timberlands have been and in the future may be protected under these laws,
including the northern spotted owl, marbled murrelet, gray wolf, grizzly bear,
bald eagle, red-cockaded woodpecker, coho salmon and various other species.
Protection of endangered and threatened species may include restrictions on
timber harvesting, road building and other silvicultural activities on private,
federal and state land containing the affected species.
The U.S. Environmental Protection Agency has proposed regulations under its
Total Maximum Daily Load ("TMDL") and National Pollutant Discharge Elimination
System ("NPDES") programs under the Clean Water Act that could redefine certain
silvicultural activities as point sources of
F-12
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. FACTORS AFFECTING THE TIMBER COMPANY'S BUSINESS (CONTINUED)
pollution. These proposals, if enacted as currently written, have the potential
to negatively impact forest management activities in certain areas.
POTENTIAL ACQUISITION RISKS. The Timber Company intends to pursue
acquisitions as part of its strategy in order to increase cash flow and returns
to its shareholders. There can be no guarantee, however, that The Timber Company
will be able to identify any timberlands for acquisition on terms that are
economically feasible. Additionally, any acquisition strategy involves numerous
risks, including difficulties inherent in the integration of systems, operations
and personnel, diversion of management attention away from other business
concerns and the need to potentially secure additional financing to consummate
such acquisitions.
NOTE 3. DIVESTITURES
During the second quarter of 1999, The Timber Company sold approximately
390,000 acres of timberlands in New Brunswick, Canada, and approximately 440,000
acres of timberlands in Maine for approximately $92 million and recognized a
pretax gain of $84 million ($50 million after taxes). The amount is reflected in
"Other income" on the accompanying statements of income. In conjunction with the
sale of its Maine timberlands, Georgia-Pacific received notes from the purchaser
in the amount of $51 million. In November 1999, Georgia-Pacific monetized these
notes through the issuance of notes payable in a private placement. The proceeds
of this transaction were credited to The Timber Company through a reduction of
its allocated debt.
In December 1999, The Timber Company sold approximately 194,000 acres of
redwood and Douglas fir timberlands in Northern California for a purchase price
of approximately $397 million and recognized a pretax gain of $271 million ($165
million after taxes). The amount is reflected in "Other income" on the
accompanying statements of income. In conjunction with the sale of its
California timberlands, The Timber Company received notes from the purchaser
with an estimated fair value of $350 million. These notes are fully secured by a
standby letter of credit with an unaffiliated third-party financial institution.
Georgia-Pacific plans to monetize these notes through the issuance of notes
payable in the first half of 2000. These notes are included in "Note receivable"
on the accompanying balance sheets at January 1, 2000.
In March 1998, The Timber Company sold its real estate development
properties located in South Carolina and Florida for $18 million in cash,
resulting in a pretax gain of approximately $1 million.
In December 1998, The Timber Company completed the sale of approximately
61,000 acres of timberlands located in West Virginia. This sale resulted in a
pretax gain of $24 million ($14 million after taxes). The amount is reflected in
"Other income" on the accompanying statements of income.
In March 1997, The Timber Company sold 127,000 acres of timberlands located
near Martell, California, for $270 million. In conjunction with the sale of its
Martell timberlands, Georgia-Pacific received notes from the purchaser in the
amount of $270 million related to the timberlands. In April 1997,
Georgia-Pacific monetized the notes through the issuance of notes payable in a
private placement. The proceeds of this transaction were credited to The Timber
Company through a reduction of its allocated debt. The Timber Company recognized
a pretax gain of $114 million on the sale of the timberlands ($71 million after
taxes), which is included in "Other income" on the accompanying statements of
income.
F-13
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INDEBTEDNESS
At June 30, 1997, $1.0 billion of Georgia-Pacific's total debt was allocated
to The Timber Company for financial statement purposes. Georgia-Pacific's debt
was allocated to The Timber Company based upon a number of factors including
expected future cash flows, volatility of earnings, and the ability to pay debt
service and dividends. In addition, Georgia-Pacific considered certain measures
of creditworthiness, such as coverage ratios and various tests of liquidity, as
a means of ensuring that each group could continue to pay debt service during a
business downcycle. Georgia-Pacific believes that such allocation is equitable
and reasonable.
At January 1, 2000 and December 31, 1998, $970 million and $983 million,
respectively, of Georgia-Pacific's debt was allocated to The Timber Company.
Georgia-Pacific has not allocated any debt securities or instruments to The
Timber Company. Interest is charged to The Timber Company in proportion to the
respective amount of its debt at a rate equal to the weighted average interest
rate of Georgia-Pacific's debt calculated on a quarterly basis and was 7.1%,
7.2% and 7.8% in 1999, 1998 and 1997, respectively.
During 1998, Georgia-Pacific recorded an after-tax loss of approximately
$14 million related to the early redemption of debentures. Of this extraordinary
loss, $2 million was allocated to The Timber Company.
Because The Timber Company's debt is an allocated amount, there is no
scheduled maturity. Georgia-Pacific does not expect repayment of The Timber
Company debt on a schedule substantially different from its own scheduled debt
maturity. The scheduled maturities of Georgia-Pacific's long-term debt for the
next five years are as follows: 1% in 2000, 0% in 2001, 8% in 2002, 7% in 2003
and 1% in 2004.
NOTE 5. INCOME TAXES
The provision for income taxes includes The Timber Company's allocated
portion of income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax bases of assets
and liabilities. The Timber Company's provision for income taxes consists of the
following:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
---------- -------------------
2000 1998 1997
---------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income taxes:
Current............................................ $105 $ 95 $ 61
Deferred........................................... 111 6 56
State income taxes:
Current............................................ 20 16 11
Deferred........................................... 20 -- 10
---- ---- ----
Provision for income taxes........................... $256 $117 $138
==== ==== ====
</TABLE>
F-14
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. INCOME TAXES (CONTINUED)
The federal statutory income tax rate was 35%. The Timber Company's
provision for income taxes is reconciled to the federal statutory rate as
follows:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
---------- -------------------
2000 1998 1997
---------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Provision for income taxes computed at the federal
statutory tax rate................................. $229 $105 $124
State income taxes, net of federal benefit........... 27 12 14
---- ---- ----
Provision for income taxes........................... $256 $117 $138
==== ==== ====
</TABLE>
The components of The Timber Company's net deferred income tax liabilities
are as follows:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
2000 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Deferred income tax assets:
Other accruals and reserves......................... $ 1 $ 1
----- -----
1 1
Valuation allowance................................... -- --
----- -----
1 1
----- -----
Deferred income tax liabilities:
Machinery and equipment............................. (5) (9)
Timber and timberlands.............................. (373) (238)
Other................................................. -- --
----- -----
(378) (247)
----- -----
Deferred income tax liabilities, net.................. $(377) $(246)
</TABLE>
NOTE 6. RETIREMENT PLANS
DEFINED BENEFIT PENSION PLANS. Most of The Timber Company's employees
participate in noncontributory defined benefit pension plans. These include
plans that are administered solely by Georgia-Pacific. Georgia-Pacific's funding
policy for solely administered plans is based on actuarial calculations and the
applicable requirements of federal law.
Benefits under the majority of plans for hourly employees are primarily
related to years of service. Georgia-Pacific has separate plans for salaried
employees and officers under which benefits are primarily related to
compensation and years of service. The officers' plan is not funded and is
nonqualified for federal income tax purposes.
Plan assets consist principally of common stocks, bonds, mortgage
securities, interests in limited partnerships, cash equivalents and real estate.
F-15
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. RETIREMENT PLANS (CONTINUED)
The following table sets forth the change in projected benefit obligation
and the change in plan assets for the solely administered plans allocated as
described in Note 1 of the Notes to Combined Financial Statements under
"Allocation of Employee Benefits":
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
2000 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year..... $ 16 $ 15
Service cost.......................................... 1 1
Interest cost......................................... 1 1
Actuarial gains (losses).............................. (1) --
Benefits paid......................................... (1) (1)
---- ----
Projected benefit obligation at end of year........... $ 16 $ 16
==== ====
Change in plan assets
Fair value of assets at beginning of year............. $ 21 $ 20
Actual return on plan assets.......................... 5 2
Employer contributions................................ -- --
Benefits paid......................................... (1) (1)
---- ----
Fair value of assets at end of year................... $ 25 $ 21
==== ====
</TABLE>
The funded status and the amounts recognized on the accompanying balance
sheets for the solely administered plans are set forth in the following table:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
2000 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Funded status......................................... $ 8 $ 6
Unrecognized actuarial gain........................... (8) (6)
Unrecognized prior service cost....................... -- --
Unrecognized net (asset) obligation................... -- --
---- ----
Net (accrued) prepaid benefit cost.................... $ -- $ --
==== ====
Amounts recognized on the balance sheets consist of:
Prepaid pension cost.................................. $ -- $ --
Accrued pension liability............................. -- --
---- ----
Net amount recognized................................. $ -- $ --
==== ====
</TABLE>
F-16
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. RETIREMENT PLANS (CONTINUED)
The Timber Company's share of the net periodic pension cost for solely
administered pension plans included the following:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
JANUARY 1, DECEMBER 31,
---------- -------------------
2000 1998 1997
---------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost of benefits earned...................... $ 1 $ 1 $ 1
Interest cost on projected benefit obligation........ 1 1 1
Expected return on plan assets....................... (2) (2) (2)
---- ---- ----
Net periodic pension cost............................ $ -- $ -- $ --
==== ==== ====
</TABLE>
The following assumptions were used:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
JANUARY 1, DECEMBER 31,
---------- -------------------
2000 1998 1997
---------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Discount rate used to determine the projected benefit
obligation......................................... 7.5% 6.5% 7.0%
Rate of increase in future compensation levels used
to determine the projected benefit obligation...... 5.7% 5.6% 5.5%
Expected long-term rate of return on plan assets used
to determine net periodic pension cost............. 9.5% 9.5% 9.5%
---- ---- ----
</TABLE>
DEFINED CONTRIBUTION PLANS. Georgia-Pacific sponsors several defined
contribution plans to provide eligible employees with additional income upon
retirement. Georgia-Pacific's contributions to the plans are based on employee
contributions and compensation. The allocated portion of Georgia-Pacific's
contributions related to The Timber Company totaled $1 million each in 1999,
1998 and 1997.
HEALTH CARE AND LIFE INSURANCE BENEFITS. Georgia-Pacific provides certain
health care and life insurance benefits to eligible retired employees. Salaried
participants generally become eligible for retiree health care benefits after
reaching age 55 with 10 years of service or after reaching age 65. Benefits,
eligibility and cost-sharing provisions for hourly employees vary by location
and/or bargaining unit. Generally, the medical plans pay a stated percentage of
most medical expenses, reduced for any deductible and payments made by
government programs and other group coverage. The plans are funded through a
trust established for the payment of active and retiree benefits.
Georgia-Pacific contributes to the trust in the amounts necessary to fund
current obligations of the plans.
In 1991, Georgia-Pacific began transferring its share of the cost of
post-age 65 health care benefits to future salaried retirees. It is currently
anticipated that Georgia-Pacific will continue to reduce the percentage of the
cost of post-age 65 benefits that it will pay on behalf of salaried employees
who retire in each of the years 1995 through 1999 and that Georgia-Pacific will
continue to share the pre-age 65 cost with future salaried retirees but will no
longer pay any of the post-age 65 cost for salaried employees who retire after
1999.
F-17
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. RETIREMENT PLANS (CONTINUED)
The following tables set forth the change in projected benefit obligation
and the amounts recognized on the accompanying balance sheets:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
2000 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year..... $ 1 $ 1
Actuarial gains (losses).............................. -- --
---- ----
Projected benefit obligation at end of year........... $ 1 $ 1
==== ====
</TABLE>
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
2000 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Funded status......................................... $ (1) $ (1)
Unrecognized actuarial (gain) losses.................. -- --
Unrecognized prior service cost....................... -- --
Unrecognized net (asset) obligation................... -- --
---- ----
Net accrued benefit cost.............................. $ (1) $ (1)
==== ====
Amounts recognized on the balance sheets consist of:
Prepaid benefit cost.................................. $ -- $ --
Accrued benefit liability............................. (1) (1)
---- ----
Net amount recognized................................. (1) (1)
==== ====
</TABLE>
The Timber Company's net periodic postretirement benefit cost consists of
service cost of benefits earned, interest cost on accumulated postretirement
benefit obligation and amortization of gains and losses. Total net periodic
postretirement benefit costs were $74,123 at January 1, 2000, $91,849 at
December 31, 1998 and $95,031 at December 31, 1997.
For measuring the expected postretirement benefit obligation, a 7%, 8% and
9% annual rate of increase in the per capita claims cost was assumed for 1999,
1998 and 1997, respectively. The rate was assumed to decrease 1% per year to
5.5% in 2001 and remain at that level thereafter. The weighted average discount
rate used in determining the accumulated postretirement benefit obligation was
7.0% at January 1, 2000, 6.0% at December 31, 1998 and 6.5% at December 31,
1997.
If the annual health care cost trend rate were increased by 1%, the
accumulated postretirement benefit obligation would have increased by 13% as of
January 1, 2000 and 10% as of both December 31, 1998 and 1997. The effect of
this change on the aggregate of service and interest costs would be an increase
of 13% for 1999, 10% for 1998 and 13% for 1997.
If the annual health care cost trend rate were decreased by 1%, the
accumulated postretirement benefit obligation would have decreased by 11% as of
January 1, 2000 and 9% as of both December 31, 1998 and 1997. The effect of this
change on the aggregate of service and interest costs would be a decrease of 12%
for 1999, 9% for 1998 and 12% for 1997.
F-18
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. STOCK BASED COMPENSATION
Georgia-Pacific's authorized capital stock includes 250 million shares of
Timber Company common stock. Prior to the mergers, Georgia-Pacific will have
transferred the assets and liabilities of The Timber Company to the
Subsidiaries. Georgia-Pacific will redeem all of the outstanding shares of
Timber Company common stock. In connection with the redemption, each outstanding
share of Timber Company common stock will be exchanged for a Unit. Also in
connection with the mergers, holders of the Units will receive 1.37 shares of
Plum Creek stock for each Unit and holders of stock options to purchase Timber
Company common stock will receive equivalent Unit options using the same
exchange ratio.
1997 LONG-TERM INCENTIVE PLANS. Georgia-Pacific reserved 2,300,000 shares
of Timber Company common stock for issuance under The Timber Company 1997
Long-Term Incentive Plan ("The Timber Company Plan"). Options covering 1,010,600
and 950 shares were granted under The Timber Company Plan on December 17, 1997
and January 28, 1999, respectively. These grants have a 10-year term and vest
ratably over a four-year period and three-year period, respectively.
1990 LONG-TERM INCENTIVE PLAN. Georgia-Pacific reserved 4,000,000 shares of
Timber Company common stock for issuance under the 1990 Long-Term Incentive Plan
(the 1990 Incentive Plan), which expired March 9, 1995. Shares were awarded to
employees at no cost, based on increases in average market value of the Existing
Common Stock. At the time shares were awarded, the market value of the stock was
added to common stock and additional paid-in capital and was deducted from
shareholders' equity (long-term incentive plan deferred compensation) on
Georgia-Pacific's consolidated financial statements. Shares were restricted
until they vested under the terms of the 1990 Incentive Plan. The long-term
incentive plan deferred compensation was amortized over the vesting
(restriction) period, generally five years, with adjustments made monthly for
market price fluctuations. At the time awarded shares became vested,
Georgia-Pacific paid on behalf of each participant a cash bonus in the amount of
the estimated income tax liability to be incurred by the participant as a result
of the award and cash bonus. Under the 1990 Incentive Plan, Georgia-Pacific
issued 1,018,740 shares of Timber Company common stock. All such shares were
vested as of October 1999.
Compensation expense allocated to The Timber Company was zero in 1999,
$0.1 million in 1998 and $0.4 million in 1997 related to the 1990 Incentive
Plan.
EMPLOYEE STOCK PURCHASE PLAN. Georgia-Pacific reserved 791,400 shares of
Timber Company common stock for issuance under the 1997 Employee Stock Purchase
Plan (the "1997 Purchase Plan"), which offered employees the right to subscribe
for shares of The Timber Company at a subscription price of $22.52 per share
representing 85% of the mean of the high and low prices of Georgia-Pacific's
Existing Common Stock on September 2, 1997. The subscription period expired on
November 14, 1997. A subscriber purchased and paid for shares no later than
November 30, 1999, but prior to the time of the subscriber's last contribution
he/she could obtain a refund of his/her payments plus interest at a rate of 6%
per annum in lieu of stock.
Under the 1997 Purchase Plan, Georgia-Pacific issued 698,500 shares of
Timber Company common stock in 1999.
1995 OUTSIDE DIRECTORS STOCK PLAN. Georgia-Pacific reserved 200,000 shares
of Timber Company common stock for issuance under the 1995 Outside Directors
Stock Plan (the Directors Plan), which provides for the issuance of shares of
common stock to nonemployee directors of Georgia-Pacific on a
F-19
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. STOCK BASED COMPENSATION (CONTINUED)
restricted basis. Each nonemployee director was issued 346 and 392 restricted
shares of Timber Company common stock in 1999 and 1998, respectively.
EMPLOYEE STOCK OPTION PLANS. The 1995 Shareholder Value Incentive Plan (the
"SVIP") provides for the granting of stock options having a term of either 5 1/2
or 10 years to officers and key employees. Under the amended and restated SVIP,
no further grants may be made under that plan. Options having a term of 10 years
become exercisable in 9 1/2 years unless certain performance targets tied to
Georgia-Pacific's common stock performance are met, in which case the holder
could exercise such options after 3, 4 or 5 years from the grant date. Options
having a term of 5 1/2 years may be exercised only if such performance targets
are met in the third, fourth or fifth year after such grant date. At the time
options are exercised, the exercise price is payable in cash or by surrender of
shares of common stock already owned by the optionee.
The 1994 Employee Stock Option Plan (the "1994 Option Plan") provided for
the granting of stock options to certain nonofficer key employees. Under the
1994 Option Plan, Georgia-Pacific issued 146,350 and 75,550 shares of Timber
Company common stock in 1999 and 1998, respectively. All remaining options were
exercised in February 1999.
Following the Letter Stock Recapitalization, each outstanding stock option
under the SVIP and the 1994 Option Plan was converted into separately
exercisable options to acquire a number of shares of Timber Company common
stock, each of which equaled the number of shares of Existing Common Stock
specified in the original option. The exercise prices for the resulting Timber
Company common stock options were calculated by multiplying the exercise price
under the original option from which they were converted by a fraction, the
numerator of which was the average of the high and low price of Timber Company
common stock on December 17, 1997 and the denominator of which was the sum of
such Georgia-Pacific Group and Timber Company common stock prices. This was
intended to ensure that the aggregate intrinsic value of the options was
preserved and the ratio of the exercise price per option to the market value per
share was not reduced. In addition, the vesting provisions and option periods of
the original grants remained the same following such conversion.
F-20
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. STOCK BASED COMPENSATION (CONTINUED)
Additional information relating to Georgia-Pacific's existing employee
Timber Company common stock options is as follows:
TIMBER COMPANY COMMON STOCK OPTIONS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 2000
-----------------------------
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Options outstanding at January 1, 1999............. 5,544,850 $22.26
Options granted/converted.......................... 950 22.56
Options exercised/surrendered...................... (417,150) 17.66
Options canceled................................... (164,100) 19.69
--------- ------
Options outstanding at January 1, 2000............. 4,964,550 $22.33
Options available for grant at January 1, 2000..... 1,288,450
---------
Total reserved shares.............................. 6,253,000
=========
Options exercisable at January 1, 2000............. 2,972,400 $22.32
Option prices per share:
Granted/converted................................ $23
Exercised/surrendered............................ $21-$23
Canceled......................................... $21-$23
Options outstanding by exercise price:
$20.95-$25.13...................................... 4,964,550 $22.33
Average remaining life............................. 7.0 years
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
----------- ----------------
<S> <C> <C>
Options outstanding at January 1, 1998............. 6,029,600 $22.20
Options granted.................................... -- --
Options exercised/surrendered...................... (180,400) 21.52
Options canceled................................... (304,350) 21.54
--------- ------
Options outstanding at December 31, 1998........... 5,544,850 $22.26
Options available for grant at December 31, 1998... 1,289,400
---------
Total reserved shares.............................. 6,834,250
=========
Options exercisable at December 31, 1998........... 1,448,975 $23.28
Average remaining life of options outstanding...... 6.3 years
Option prices per share:
Granted.......................................... $--
Exercised/surrendered............................ $17-$23
Canceled......................................... $17-$25
Outstanding...................................... $21-$25
=========
</TABLE>
F-21
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. STOCK BASED COMPENSATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
----------- ----------------
<S> <C> <C>
Options outstanding at December 17, 1997........... 5,021,200 $15.78
Options granted.................................... 1,010,600 25.13
Options exercised/surrendered...................... (300) 17.01
Options canceled................................... (1,900) 21.83
--------- ------
Options outstanding at December 31, 1997........... 6,029,600 $22.20
Options available for grant at December 31, 1997... 1,289,400
---------
Total reserved shares.............................. 7,319,000
========= ======
Options exercisable at December 31, 1997........... 391,100 $21.39
Average remaining life of options outstanding...... 6.3 years
Option prices per share (December 17 through
December 31, 1997):
Granted.......................................... $25
Exercised/surrendered............................ $17
Canceled......................................... $21-$23
Outstanding...................................... $17-$25
=========
</TABLE>
OTHER. The Timber Company has elected to continue to account for its
participation in stock-based compensation plans of Georgia-Pacific under APB
Opinion No. 25 and disclose pro forma effects of the plans on net income and
earnings per share as provided by SFAS No. 123. Accordingly, no compensation
cost has been recognized for the SVIP, The Timber Company Plan or the 1997
Purchase Plan. Had compensation cost for these plans been determined based on
the fair value at the grant dates in 1999, 1998 or 1997 under the plan
consistent with the method of SFAS No. 123, the pro forma net income and
earnings per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------
JANUARY 1, 2000
--------------------
PRO FORMA DECEMBER 31, DECEMBER 31,
INCOME 1998 1997
NET PER ------------ ------------
INCOME SHARE* NET INCOME NET INCOME
-------- --------- ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
As reported........................ $398 $3.65 $180 $215
Pro forma.......................... 397 3.64 179 215
</TABLE>
------------------------
* Basic pro forma earnings per share have been calculated after giving effect
to the mergers (see Note 1 of the Notes to Combined Financial Statements).
The fair-value-based method of accounting for stock-based compensation plans
under SFAS No. 123 recognizes the value of options granted as compensation cost
over the option's vesting period and has not been applied to options granted
prior to January 1, 1995. Accordingly, the resulting pro forma compensation cost
is not representative of what compensation cost will be in future years.
F-22
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. STOCK BASED COMPENSATION (CONTINUED)
Following are the weighted average assumptions used in connection with the
Black-Scholes option pricing model to estimate the fair value of options granted
in 1999, 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------
JANUARY 1, DECEMBER 31,
2000 1998 1997 1997
---------- --------------------------------
OPTIONS OPTIONS OPTIONS ESPP*
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Risk-free interest rate............. 4.9% 5.9% 6.4% 5.8%
Expected dividend yield............. 4.4% 3.9% 3.2% 2.3%
Expected life....................... 9 years 10 years 10 years 2 years
Expected volatility................. 0.32 0.37 0.27 0.29
Option forfeiture rate.............. 3% 3% 3% 28%
</TABLE>
------------------------
* 1997 Purchase Plan.
The weighted average grant date fair value per share, including
modifications, of Timber Company common stock options granted during the year
using the Black-Scholes option pricing model was $5.80, $8.55, and $7.54 for
1999, 1998 and 1997, respectively. The weighted average grant date fair value
per share of shares subscribed under the 1997 Purchase Plan was $6.52 for The
Timber Company. The total pro forma compensation cost calculated under SFAS No.
123 was allocated between the Georgia-Pacific Group and The Timber Company based
on the number of employees in each group for periods prior to December 17, 1997.
Management believes that this method of allocation is equitable and provides a
reasonable estimate of the costs attributable to The Timber Company.
NOTE 8. OTHER COMPREHENSIVE INCOME
In 1998, The Timber Company adopted SFAS No. 130, which establishes
standards for reporting and display of comprehensive income and its components.
For the years ended January 1, 2000 and December 31, 1998 and 1997, The Timber
Company's total comprehensive income was $398 million, $180 million and $215
million, respectively. Other comprehensive income was insignificant for The
Timber Company during 1999, 1998 and 1997.
NOTE 9. COMMITMENTS AND CONTINGENCIES
The Timber Company is subject to various legal proceedings and claims that
arise in the ordinary course of its business. Although the ultimate outcome of
these matters and legal proceedings cannot be determined with certainty, based
on presently available information, management of Georgia-Pacific believes that
the final outcome of such matters and legal proceedings will not have a material
adverse effect on the results of operations, liquidity or financial position of
The Timber Company.
NOTE 10. RELATED-PARTY TRANSACTIONS
For all periods in which the separate accompanying combined statements of
income of the groups are presented, timber has been transferred from
Georgia-Pacific's timberlands at prices intended to reflect fair market prices
based on prices paid by independent purchasers and sellers for similar kinds of
timber.
F-23
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. RELATED-PARTY TRANSACTIONS (CONTINUED)
During the second quarter of 1998, the Georgia-Pacific Group and The Timber
Company revised the operating policy, which they had entered into in 1997, with
respect to sales of timber by The Timber Company to the Georgia-Pacific Group.
These revisions arose from sharp changes in the prices of timber from the first
quarter to the second quarter of 1998, a significant decrease in the volume of
timber purchased by the Georgia-Pacific Group in the second quarter, and other
issues in the policy. At the time these revisions were negotiated, The Timber
Company sold a timber deed to the Georgia-Pacific Group in the amount of
approximately $23 million, and the Georgia-Pacific Group made a one-time $3
million payment to The Timber Company for 1998 second quarter adjustments due
under the revised policy.
Under the revised policy, beginning July 1, 1998, the prices for Southern
timber sold by The Timber Company are adjusted monthly, rather than quarterly,
and represent the average of prices paid by the Georgia-Pacific Group for timber
purchased from third parties in a particular forest over the most recent
three-month period. In most of The Timber Company's Southern forests, it must
offer 80% of its projected annual harvest from those forests to the
Georgia-Pacific Group, and the Georgia-Pacific Group must purchase not less than
60% nor more than 80% of that projected annual harvest. In addition, premiums
charged by The Timber Company for the right to harvest a significant percentage
of wood from its Southern forests have been reduced.
In two key Southern forests, the price paid by the Georgia-Pacific Group for
timber purchased from The Timber Company will be based on the average prices
paid over the most recent three months by the Georgia-Pacific Group for timber
purchased from third parties, and prices received by The Timber Company for
timber sold to third parties, in each forest. In those same forests, the
Georgia-Pacific Group has agreed to purchase, each quarter, 20% of the annual
volume of timber it has committed to purchase from The Timber Company during
that year. The revised policy reduces the volume of timber that the
Georgia-Pacific Group can purchase in these same two forests from 80% to 70% of
The Timber Company's annual harvest in those forests, and also reduces the
Georgia-Pacific Group's minimum annual purchase obligation in those forests from
60% to 50% of the annual harvest in 1999 and 2000.
These changes are intended to cause prices paid by the Georgia-Pacific Group
for timber sold by The Timber Company to more quickly reflect market prices in
particular forests, to allow the Georgia-Pacific Group more flexibility in
purchasing wood from third parties, and to allow The Timber Company greater
flexibility in the timing of sales of its annual harvest on the open market. The
revised policy also contains additional provisions that resolve issues related
to certain operating practices of The Timber Company and the Georgia-Pacific
Group. This policy will remain in effect through 2000.
During 2000, Georgia-Pacific Group and The Timber Company negotiated a new
timber supply agreement which will be effective for 10 years following the
completion of the mergers. This agreement covers four key southern timber
basins. Under the agreement, The Timber Company must offer to Georgia-Pacific
Group specified percentages of its annual harvest, subject to absolute minimum
and maximum limitations in each basin. Georgia-Pacific Group can elect between
36%-65% of The Timber Company's annual harvest each year, depending on the
timber basin. The total annual volume will range from a minimum of 3.3 million
tons to a maximum of 4.2 million tons. The price for such timber will be
negotiated at arms length between The Timber Company and Georgia-Pacific Group
every six months, and will be set by a third party arbitration of the parties
cannot agree.
F-24
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. RELATED-PARTY TRANSACTIONS (CONTINUED)
Also during 2000, The Timber Company entered into a ten-year supply contract
to deliver 50 million board feet annually of Douglas Fir and Western Hemlock
sawtimber and 68 MGT annual of pulpwood to Georgia-Pacific Group. Prices will be
based on prevailing market prices with recourse to arbitration if the parties do
not agree that the pricing formula reflects market prices.
NOTE 11. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
SECOND
FIRST QUARTER QUARTER
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................................... $140 $145 $134 $143
Gross profit (net sales minus cost of sales)................ 116 126 113 120
Income before extraordinary item............................ 46 52 97 51
Net income.................................................. 46 50 97 51
Basic pro forma earnings per share:
Income before extraordinary item............................ 0.42 0.89
Net income.................................................. 0.42 0.89
Diluted pro forma earnings per share:
Income before extraordinary item............................ 0.42 0.88
Net income.................................................. 0.42 0.88
</TABLE>
<TABLE>
<CAPTION>
FOURTH
THIRD QUARTER QUARTER
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................................... $139 $133 $109 $120
Gross profit (net sales minus cost of sales)................ 119 93 104 88
Income before extraordinary item............................ 49 35 206 44
Net income.................................................. 49 35 206 44
Basic pro forma earnings per share:
Income before extraordinary item............................ 0.45 1.89
Net income.................................................. 0.45 1.89
Diluted pro forma earnings per share:
Income before extraordinary item............................ 0.45 1.88
Net income.................................................. 0.45 1.88
</TABLE>
The first quarter of 1998 included an after-tax extraordinary loss of
$2 million on early retirement of debt.
F-25
<PAGE>
THE TIMBER COMPANY
COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------
JULY 1, JULY 3,
2000 1999
-------- --------
(IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net sales
Timber-Georgia-Pacific.................................... $ 126 $ 169
Timber-unrelated parties
Delivered............................................... 22 26
Stumpage................................................ 53 68
Other..................................................... 4 10
------ ------
Total net sales............................................. 205 273
------ ------
Costs and expenses
Cost of sales, excluding depreciation and depletion....... 27 45
Depreciation and depletion................................ 14 21
General and administrative................................ 20 20
Interest.................................................. 21 35
Other Income.............................................. -- (84)
------ ------
Total costs and expenses.................................... 82 37
------ ------
Income before income taxes.................................. 123 236
Provision for income taxes.................................. 48 93
------ ------
Net income.................................................. $ 75 $ 143
====== ======
Basic and diluted pro forma net income per share............ $ 0.69
Basic pro forma shares outstanding.......................... 109.1
Diluted pro forma shares outstanding........................ 109.5
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
THE TIMBER COMPANY
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
JULY 1, 2000 JULY 3, 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 75 $ 143
Adjustments to reconcile net income to cash provided by
operations:
Depreciation and depletion................................ 14 21
Other income.............................................. -- (84)
Deferred income taxes..................................... 4 14
Gain on disposal of assets, net........................... (22) (11)
Change in other assets and other liabilities.............. 27 (1)
----- -----
Cash provided by operations................................. 98 82
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment investments................... (1) (1)
Timber and timberlands purchases............................ (37) (25)
Proceeds from sales of assets............................... 6 95
Other....................................................... (6) --
----- -----
Cash (used for) provided by investing activities............ (38) 69
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash returned to Georgia-Pacific Corporation............ (117) (128)
Additions to (repayments of) long-term debt................. 57 (20)
----- -----
Cash used for financing activities.......................... (60) (148)
----- -----
Increase in cash............................................ -- 3
Balance at beginning of period............................ -- --
----- -----
Balance at end of period.................................. $ -- $ 3
===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
THE TIMBER COMPANY
COMBINED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JULY 1, JANUARY 1,
2000 2000
-------- ----------
(IN MILLIONS)
<S> <C> <C>
Assets
Timber and timberlands
Timberlands............................................. $ 318 $ 318
Fee timber.............................................. 517 523
Reforestation........................................... 280 259
Other................................................... 51 27
------ ------
Total timber and timberlands.............................. 1,166 1,127
------ ------
Property, plant and equipment, less accumulated
depreciation of $42 and $44, respectively............... 18 19
------ ------
Note receivable........................................... 351 350
------ ------
Other assets.............................................. 11 25
------ ------
Total assets.............................................. $1,546 $1,521
====== ======
Liabilities and Parent's Equity
Debt...................................................... $1,027 $ 970
------ ------
Other liabilities......................................... 53 47
------ ------
Deferred income tax liabilities........................... 381 377
------ ------
Total liabilities......................................... 1,461 1,394
------ ------
Commitments and Contingencies
Parent's equity........................................... 85 127
------ ------
Total liabilities and parent's equity..................... $1,546 $1,521
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
JULY 1, 2000
1. ORGANIZATION AND MERGERS.
On December 16, 1997, shareholders of Georgia-Pacific Corporation
("Georgia-Pacific") approved the creation of two classes of common stock
intended to reflect separately the performance of Georgia-Pacific manufacturing
and timber businesses (the "Letter Stock Recapitalization"). Georgia-Pacific's
Articles of Incorporation were amended and restated to, among other things,
(i) create a new class of stock designated as Georgia-Pacific
Corporation--Timber Group common stock, $0.80 par value per share and
(ii) authorize the distribution of one share of The Timber Company stock for
each outstanding share of Georgia-Pacific.
The Timber Company's assets consist of approximately 4.7 million acres of
timberlands owned or leased by Georgia-Pacific, together with related facilities
and equipment. The accompanying financial statements present the historical
results of operations and financial condition of the timberlands and operations
that compose The Timber Company.
On July 18, 2000, Georgia-Pacific signed a definitive agreement to combine
The Timber Company with Plum Creek Timber Company, Inc. ("Plum Creek"). Prior to
the mergers, Georgia-Pacific will have transferred the assets and liabilities of
The Timber Company to six wholly owned subsidiaries (the "Subsidiaries").
Georgia-Pacific will redeem all of the outstanding shares of Timber Company
common stock. In connection with the redemption, each outstanding share of
Timber Company common stock will be exchanged for one unit (a "Unit"), which
will represent one outstanding share of common stock of each of the
Subsidiaries. Also in connection with the mergers, holders of the Units will
receive 1.37 shares of Plum Creek stock for each Unit. This transaction, which
includes the incurrence by Plum Creek of $1.0 billion to extinguish the debt
attributed to The Timber Company by Georgia-Pacific, is valued at approximately
$4 billion. Plum Creek will assume a ten-year timber supply agreement between
Georgia-Pacific Group and The Timber Company. The mergers are subject to
approval by the stockholders of Plum Creek and the holders of Timber Company
common stock, and receipt of a ruling from the Internal Revenue Service that the
redemption of all of the outstanding shares of Timber Company common stock is
tax-free to Georgia-Pacific and to the holders of Timber Company common stock
and the receipt of opinions of counsel of Plum Creek and Georgia-Pacific,
respectively, that the mergers will be treated as tax-free reorganizations under
the Internal Revenue Code. The mergers are also subject to receipt of applicable
governmental approvals and the satisfaction of customary closing conditions. The
mergers are expected to be completed by the end of the first quarter of 2001.
2. BASIS OF PRESENTATION.
The combined financial statements include the accounts of The Timber Company
and subsidiaries. All significant intercompany balances and transactions are
eliminated in consolidation. The interim financial information included herein
is unaudited; however, such information reflects all adjustments which are, in
the opinion of management, necessary for a fair presentation of The Timber
Company's financial position, results of operations, and cash flows for the
interim periods. All such adjustments are of a normal, recurring nature. Certain
1999 amounts have been reclassified to conform with the 2000 presentation. These
combined financial statements should be read in conjunction with the audited
combined financial statements of The Timber Company for the three years ended
January 1, 2000.
F-29
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JULY 1, 2000
3. OTHER INCOME.
During the second quarter of 1999, The Timber Company sold approximately
390,000 acres of timberlands in the Canadian province of New Brunswick and
approximately 440,000 acres of timberlands in Maine for approximately
$92 million and recognized a pretax gain of $84 million ($50 million after tax).
4. PRO FORMA EARNINGS PER SHARE.
Prior to the mergers, Georgia-Pacific will have transferred the assets and
liabilities of The Timber Company to the Subsidiaries. Georgia-Pacific will
redeem all of the outstanding shares of Timber Company common stock. In
connection with the redemption, each outstanding share of Timber Company common
stock will be exchanged for one Unit. Also in connection with the mergers,
holders of the Units will receive 1.37 shares of Plum Creek stock for each Unit.
The pro forma basic earnings per share have been calculated after giving effect
to the mergers. Furthermore, the diluted pro forma earnings per share include
the dilutive effect of 7,503,833 outstanding options (after adjusting for the
mergers) using the treasury stock method at exercise prices ranging from $15.29
to $18.34 (after adjusting for the mergers). The actual shares issued in the
mergers will depend on the number of shares of Timber Company common stock
outstanding on the date the mergers are completed.
5. COMPREHENSIVE INCOME.
The Timber Company's total comprehensive income was $75 million and
$143 million, respectively, for the six months ended July 1, 2000 and July 3,
1999. Other comprehensive income was insignificant for The Timber Company during
the six months ended July 1, 2000 and July 3, 1999.
6. COMMITMENTS AND CONTINGENCIES WITH RESPECT TO THE TIMBER COMPANY.
The Timber Company is subject to various legal proceedings and claims that
arise in the ordinary course of its business. Although the ultimate outcome of
these matters and legal proceedings cannot be determined with certainty, based
on presently available information, management of Georgia-Pacific believes that
the final outcome of such matters and legal proceedings will not have a material
adverse effect on the results of operations, liquidity or financial position of
The Timber Company.
7. RELATED PARTY TRANSACTIONS.
During the six months ended 2000 and 1999, The Timber Company sold timber to
Georgia-Pacific Group totaling $126 million and $169 million, respectively.
During 2000, Georgia-Pacific Group and The Timber Company negotiated a new
timber supply agreement which will be effective for 10 years following the
completion of the mergers. This agreement covers four key southern timber
basins. Under the agreement, The Timber Company must offer to Georgia-Pacific
Group specified percentages of its annual harvest, subject to absolute minimum
and maximum limitations in each basin. Georgia-Pacific Group can elect between
36%-65% of The Timber Company's annual harvest each year, depending on the
timber basin. The total annual volume will range from a minimum of 3.3 million
tons to a maximum of 4.2 million tons. The price for such timber will be
negotiated at arms length between The Timber Company and Georgia-Pacific Group
every six months, and will be set by a third party arbitration if the parties
cannot agree.
F-30
<PAGE>
THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JULY 1, 2000
7. RELATED PARTY TRANSACTIONS. (CONTINUED)
Also during 2000, The Timber Company entered into a ten-year supply contract
to deliver 50 million board feet annually of Douglas Fir and Western Hemlock
sawtimber and 68 MGT annual of pulpwood to Georgia-Pacific Group. Prices will be
based on prevailing market prices with recourse to arbitration if the parties do
not agree that the pricing formula reflects market prices.
F-31
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GEORGIA-PACIFIC CORPORATION,
NORTH AMERICAN TIMBER CORP.,
NPI TIMBER, INC.
GNN TIMBER, INC.
GPW TIMBER, INC.
LRFP TIMBER, INC.
NPC TIMBER, INC.
AND
PLUM CREEK TIMBER COMPANY, INC.
DATED AS OF JULY 18, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01 Definitions................................................. A-1
ARTICLE II
SPINOFF AND THE MERGERS
Section 2.01 The Spinoff................................................. A-8
Section 2.02 The Mergers................................................. A-8
Section 2.03 Certificate of Incorporation of the Surviving Corporation... A-8
Section 2.04 By-Laws of the Surviving Corporation........................ A-8
Section 2.05 Directors and Officers of the Surviving Corporation......... A-8
Section 2.06 Closing..................................................... A-9
ARTICLE III
CONVERSION OF SHARES AND RELATED MATTERS
Section 3.01 Conversion of Capital Stock................................. A-9
Section 3.02 Exchange of Certificates.................................... A-9
Section 3.03 G-P Stock Options........................................... A-12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF G-P
Section 4.01 Due Organization, Good Standing and Corporate Power......... A-13
Section 4.02 Authorization and Validity of Agreement..................... A-13
Section 4.03 Capitalization.............................................. A-14
Section 4.04 Consents and Approvals; No Violations....................... A-15
Section 4.05 G-P SEC Filings; Financial Statements....................... A-15
Section 4.06 No Undisclosed Liabilities.................................. A-16
Section 4.07 Information to Be Supplied.................................. A-16
Section 4.08 Absence of Certain Events................................... A-16
Section 4.09 Litigation.................................................. A-16
Section 4.10 Title to Properties; Encumbrances........................... A-17
Section 4.11 Compliance with Laws........................................ A-17
Section 4.12 G-P Employee Benefit Plans.................................. A-17
Section 4.13 Employment Relations........................................ A-19
Section 4.14 Taxes....................................................... A-19
Section 4.15 Intellectual Property....................................... A-20
Section 4.16 Environmental Matters....................................... A-21
Section 4.17 State Takeover Statutes..................................... A-21
Section 4.18 Voting Requirements; Board Approval; Appraisal Rights....... A-22
Section 4.19 Opinion of Financial Advisor................................ A-22
Section 4.20 Rights Agreement............................................ A-22
Section 4.21 Insurance................................................... A-22
Section 4.22 Transactions with Affiliates................................ A-22
Section 4.23 Material Contracts.......................................... A-22
Section 4.24 Redemption.................................................. A-23
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Section 4.25 Policies with Respect to Allocation of Expenses............. A-23
Section 4.26 Disclosure.................................................. A-23
Section 4.27 Broker's or Finder's Fee.................................... A-23
Section 4.28 Solvency.................................................... A-23
Section 4.29 Installment Note............................................ A-24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PLUM CREEK
Section 5.01 Due Organization, Good Standing and Corporate Power......... A-24
Section 5.02 Authorization and Validity of Agreement..................... A-24
Section 5.03 Capitalization.............................................. A-24
Section 5.04 Consents and Approvals; No Violations....................... A-25
Section 5.05 Plum Creek SEC Filings; Financial Statements................ A-26
Section 5.06 No Undisclosed Liabilities.................................. A-26
Section 5.07 Information to Be Supplied.................................. A-26
Section 5.08 Absence of Certain Events................................... A-27
Section 5.09 Litigation.................................................. A-27
Section 5.10 Voting Requirements; SPO Approval; Board Approval........... A-27
Section 5.11 Title to Properties: Encumbrances........................... A-28
Section 5.12 Compliance with Laws........................................ A-28
Section 5.13 Material Contracts.......................................... A-28
Section 5.14 Environmental Matters....................................... A-28
Section 5.15 Taxes....................................................... A-29
Section 5.16 Tax Comfort................................................. A-30
Section 5.17 Transactions with Affiliates................................ A-30
Section 5.18 Insurance................................................... A-30
Section 5.19 Employment Relations........................................ A-30
Section 5.20 Plum Creek Employee Benefit Plans........................... A-30
Section 5.21 Broker's or Finder's Fee.................................... A-31
ARTICLE VI
COVENANTS
Section 6.01 Access to Information Concerning Properties and Records..... A-32
Section 6.02 Confidentiality............................................. A-32
Section 6.03 Conduct of the Business of G-P Pending the Effective Time... A-33
Conduct of the Business of Plum Creek Pending the Effective
Section 6.04 Time...................................................... A-35
Conduct of the Business of G-P After the Notice of
Section 6.05 Redemption Date........................................... A-36
Method of Allocating the Assets and Liabilities of the
Section 6.06 Timber Group.............................................. A-36
Section 6.07 Shareholders' Meetings...................................... A-37
Preparation of Joint Proxy Statement/Prospectus;
Section 6.08 Registration Statement.................................... A-37
Section 6.09 Commercially Reasonable Efforts............................. A-38
Section 6.10 Board Recommendations....................................... A-38
Section 6.11 No Solicitation............................................. A-39
Section 6.12 Notification of Certain Matters............................. A-40
Section 6.13 Public Announcements........................................ A-40
Section 6.14 NYSE and PE Listing......................................... A-40
Section 6.15 Coordination of Dividends................................... A-40
Section 6.16 Separation Agreement........................................ A-40
Section 6.17 Ancillary Contracts......................................... A-41
</TABLE>
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<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Section 6.18 Affiliates.................................................. A-41
Section 6.19 Method of Effecting the Merger.............................. A-41
Section 6.20 Timber Agreements........................................... A-41
ARTICLE VII
CONDITIONS TO THE NOTICE OF REDEMPTION AND MERGERS
Section 7.01 Conditions to the Notice of Redemption...................... A-41
Section 7.02 Conditions of Plum Creek.................................... A-42
Section 7.03 Conditions to Obligations of G-P............................ A-43
Conditions to Obligations of Plum Creek to Effect the
Section 7.04 Merger.................................................... A-44
Section 7.05 Conditions to Obligations of G-P to Effect the Mergers...... A-44
ARTICLE VIII
TERMINATION AND ABANDONMENT
Section 8.01 Termination................................................. A-45
Section 8.02 Effect of Termination....................................... A-46
ARTICLE IX
MISCELLANEOUS
Section 9.01 Fees and Expenses........................................... A-47
Section 9.02 Survival of Representations and Warranties.................. A-47
Section 9.03 Notices..................................................... A-47
Section 9.04 Entire Agreement............................................ A-49
Section 9.05 Binding Effect; Benefit; Assignment......................... A-49
Section 9.06 Amendment and Modification.................................. A-49
Section 9.07 Further Actions............................................. A-49
Section 9.08 Headings.................................................... A-49
Section 9.09 Enforcement................................................. A-49
Section 9.10 Counterparts................................................ A-50
Section 9.11 Applicable Law.............................................. A-50
Section 9.12 Severability................................................ A-50
Section 9.13 Waiver of Jury Trial........................................ A-50
Exhibits (Omitted)
Exhibit A Human Resources Agreement
Exhibit B Noncompete Agreement
Exhibit C Tax Matters Agreement
Exhibit D-1 Master Timber Agreement
Exhibit D-2 Master Stumpage Agreement
Exhibit D-3 Security Agreement
Exhibit E Transition Services Agreement
Exhibit F Amended Certificate of Incorporation
Exhibit G Form of G-P Legal Opinions
Exhibit H Form of Plum Creek Legal Opinions
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 18, 2000 (this "Agreement"),
by and among Plum Creek Timber Company, Inc., a Delaware corporation ("Plum
Creek"), Georgia-Pacific Corporation, a Georgia corporation ("G-P"), and North
American Timber Corp., NPI Timber, Inc., GNN Timber, Inc., GPW Timber, Inc.,
LRFP Timber, Inc., and NPC Timber, Inc., each a Delaware corporation and a
wholly owned subsidiary of G-P (each a "Spinco" and, collectively, the
"Spincos").
WHEREAS, G-P and each of the Spincos below are parties to a Separation
Agreement (as defined below), pursuant to which the Spincos own or shall own all
of the assets and have assumed all of the liabilities (whether accrued,
absolute, contingent or otherwise) of G-P's Timber Group (as defined below)
prior to the Redemption (as defined below);
WHEREAS, immediately prior to the Effective Time (as defined below), G-P
shall redeem all of the outstanding shares of Timber Group Common Stock (as
defined below) in exchange for all of the outstanding shares of each Spinco by
delivery of one unit (a "Unit"), consisting of one share of common stock of each
Spinco, for each share of Timber Group Common Stock outstanding (the
"Redemption");
WHEREAS, pursuant to the Redemption, each option to purchase one share of
Timber Group Common Stock shall be converted into an option to purchase one Unit
on the terms described herein;
WHEREAS, each of the Board of Directors of Plum Creek, G-P and each of the
Spincos, has approved and declared advisable the merger of each of the Spincos
with and into Plum Creek (each, a "Merger" and collectively, the "Mergers"),
with Plum Creek as the surviving corporation, in each case, upon the terms and
subject to the conditions set forth in this Agreement and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, pursuant to resolutions duly adopted, each of the Board of
Directors of Plum Creek, G-P and each of the Spincos has approved and adopted
this Agreement and the transactions contemplated hereby; and
WHEREAS, pursuant to resolutions duly adopted, G-P, as the sole stockholder
of each of the Spincos, has approved and adopted this Agreement and the
transactions contemplated hereby.
WHEREAS, as a condition to, and in connection with the execution of this
Agreement, SPO (as defined below) has entered into a Voting Agreement and
Consent with Plum Creek and G-P dated as of the date hereof (the "Voting
Agreement").
NOW THEREFORE, in consideration of the foregoing premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. When used in this Agreement, the following terms
shall have the respective meanings specified therefor below (such meanings to be
equally applicable to both the singular and plural forms of the terms defined).
"Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by, or under common control with, such Person; provided
that, for the purposes of this definition, "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or partnership
interests, by contract or otherwise.
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"Affiliated Entity" shall mean any corporation or other entity in which G-P
or Plum Creek or any of its respective Subsidiaries owns capital stock, a
limited partnership interest or other security which constitutes at least 10% of
all of such outstanding securities or class of securities.
"Agreement" shall have the meaning set forth in the preamble hereto.
"Allocation Policies" shall have the meaning set forth in Section 4.25.
"Ancillary Contracts" shall mean the (i) Timber Group Timber Agreements;
(ii) Tax Matters Agreement; (iii) Human Resources Agreement; (iv) Transition
Services Agreements; (v) Noncompete Agreement and (vi) Voting Agreement.
"Business Day" means a day other than a Saturday, a Sunday or a day on which
banks in New York, New York are permitted or required to close.
"Certificate" shall have the meaning set forth in Section 3.02.
"Certificates of Merger" shall have the meaning set forth in
Section 2.02(a).
"Closing" shall have the meaning set forth in Section 2.06.
"Closing Date" shall have the meaning set forth in Section 2.06.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts" shall have the meaning set forth in Section 4.04.
"DGCL" shall have the meaning set forth in the fourth recital hereto.
"Effective Time" shall have the meaning set forth in Section 2.02(a).
"Environmental Claim" shall mean any claim, action, cause of action,
investigation or notice by any Person or entity alleging potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (a) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned or operated by G-P
or Plum Creek, as the case may be, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" shall mean any applicable Federal, state, local and
foreign laws and regulations, including common law, relating to pollution or
protection of human health or the environment, including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata, and
natural resources, and including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon and each law and regulation
with regard to record keeping, notification, disclosure, and reporting
requirements respecting Materials of Environmental Concern.
"ERISA" shall have the meaning set forth in Section 4.12(a).
"ERISA Affiliate" shall have the meaning set forth in Section 4.12(a).
"ERISA Plans" shall have the meaning set forth in Section 4.12(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 3.02(a).
"Exchange Fund" shall have the meaning set forth in Section 3.02(b).
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"Exchange Ratio" shall have the meaning set forth in Section 3.01(a).
"Fort Bragg Note" shall have the meaning set forth in Section 6.03(d)(x).
"GAAP" shall mean generally accepted accounting principles of the United
States of America, as in effect from time to time.
"GCC" shall mean the Georgia Business Corporation Code.
"Georgia-Pacific Group" shall mean, as of any date:
(a) the interest of G-P or any of its subsidiaries on such date in all
of the assets, liabilities and businesses of G-P or any of its subsidiaries
(and any successor companies), other than any assets, liabilities and
businesses attributed in accordance with Articles of Incorporation of G-P to
the Timber Group;
(b) all properties and assets transferred to the Georgia-Pacific Group
from the Timber Group pursuant to transactions in the ordinary course of
business of both the Georgia-Pacific Group and the Timber Group or otherwise
as the Board of Directors of G-P may have directed as permitted by the
Articles of Incorporation of G-P; and
(c) the interest of G-P or any of its subsidiaries in any business or
asset acquired and any liabilities assumed by G-P or any of its subsidiaries
outside the ordinary course of business and attributed to the
Georgia-Pacific Group, as determined by the Board of Directors of G-P.
"Georgia-Pacific Group Common Stock" shall mean the Georgia-Pacific
Corporation-Georgia-Pacific Group Common Stock, par value $0.80 per share.
"Governmental Authority" shall have the meaning set forth in Section 4.04.
"G-P" shall have the meaning set forth in the preamble hereto.
"G-P Acquisition Transaction" shall have the meaning set forth in
Section 6.11(a).
"G-P Bona Fide Proposal" shall mean a proposal from a third party which
G-P's Board of Directors determines in good faith, and after receipt and
consideration of advice from its legal and financial advisors, is reasonably
capable of being consummated by the Person making the proposal, taking into
account regulatory, legal, financial and other relevant matters.
"G-P Common Stock" shall mean, collectively, (i) the Georgia-Pacific Group
Common Stock and (ii) the Timber Group Common Stock.
"G-P Disclosure Letter" shall have the meaning set forth in Section 4.01.
"G-P Junior Preferred Stock" shall have the meaning set forth in
Section 4.03(a).
"G-P Preferred Stock" shall have the meaning set forth in Section 4.03(a).
"G-P SEC Filings" shall have the meaning set forth in Section 4.05(a).
"HSR Act" shall have the meaning set forth in Section 4.04.
"Human Resources Agreement" shall mean the agreement substantially in the
form attached hereto as Exhibit A.
"IRS" shall mean the United States Internal Revenue Service.
"Issuance Obligation" shall have the meaning set forth in Section 4.03(a).
"Joint Proxy Statement/Prospectus" shall mean the joint proxy
statement/prospectus relating to the Timber Group Shareholder Meeting and the
Plum Creek Stockholder Meeting.
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"Laws" shall have the meaning set forth in Section 4.04.
"Liens" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, option, right of first refusal, security interest or encumbrance of any
kind in respect of such asset. Liens shall not include hunting leases, easements
for roads or public utilities, railroads, licenses or permits or other matters
that do not materially detract from the value of or impair such assets.
"Material of Environmental Concern" shall mean chemicals, pollutants,
contaminants, wastes, toxic or hazardous substances or wastes, petroleum and
petroleum products, asbestos or asbestos-containing materials, polychlorinated
biphenyls, lead or lead-based paints or materials, or radon.
"Material Transaction" shall have the meaning set forth in Section 6.05(b).
"Merger" or "Mergers" shall have the meaning set forth in the fourth recital
hereto.
"Merger Registration Statement" shall have the meaning set forth in
Section 5.07(a).
"Noncompete Agreement" shall mean the agreement substantially in the form
attached hereto as Exhibit B.
"Non-Plum Creek Optionees" shall have the meaning set forth in
Section 3.03(c).
"Notice of Redemption" shall have the meaning set forth in Section 2.01(a).
"Notice of Redemption Date" shall have the meaning set forth in
Section 2.01(a).
"NYSE" shall mean the New York Stock Exchange, Inc.
"Offeror" shall have the meaning set forth in Section 6.11(c).
"Orders" shall have the meaning set forth in Section 4.04.
"PBGC" shall have the meaning set forth in Section 4.12(c).
"PE" shall mean the Pacific Exchange, Inc.
"Permits" shall have the meaning set forth in Section 4.11(b).
"Person" shall mean and include an association, an individual, a
partnership, a joint venture, joint stock company, a corporation, a trust, an
unincorporated organization, a limited liability company, a group, a government
or other department or agency thereof and any other entity.
"Plans" shall have the meaning set forth in Section 4.12(a).
"Plum Creek" shall have the meaning set forth in the preamble hereto.
"Plum Creek Acquisition Transaction" shall have the meaning set forth in
Section 6.11(d).
"Plum Creek Bona Fide Proposal" shall mean a proposal from a third party
which Plum Creek's Board of Directors determines in good faith, and after
receipt and consideration of advice from its legal and financial advisors, is
reasonably capable of being consummated by the Person making the proposal,
taking into account regulatory, legal, financial and other relevant matters.
"Plum Creek Common Equity" shall mean, collectively, the Plum Creek Common
Stock and the Plum Creek Special Voting Common Stock.
"Plum Creek Common Stock" shall mean Plum Creek's common stock, par value
$0.01 per share.
"Plum Creek Disclosure Letter" shall have the meaning set forth in
Section 5.03(a).
"Plum Creek ERISA Affiliate" shall have the meaning set forth in
Section 5.20.
"Plum Creek Excess Stock" shall have the meaning set forth in
Section 5.03(a).
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"Plum Creek Material Adverse Effect" shall mean a material adverse effect on
the business, operations, assets, financial condition or results of operations
of Plum Creek and its Subsidiaries taken as a whole, but shall exclude any
material adverse effect arising out of (i) any changes in U.S. general economic
or securities markets conditions; (ii) any changes that affect the timber
industry in general; or (iii) any changes resulting from the announcement of
this Agreement, each Merger or the transactions contemplated thereby.
"Plum Creek Material Contract" shall mean a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC), which requires
expenditures or the performance of services in an amount in excess of
$5 million and is not cancellable within one year.
"Plum Creek Option" shall have the meaning set forth in Section 3.03(b).
"Plum Creek Plans" shall have the meaning set forth in Section 5.20.
"Plum Creek Preferred Stock" shall have the meaning set forth in
Section 5.03(a).
"Plum Creek Real Property" shall mean all of the real property, interests in
real property and improvements that are owned, leased, or operated by Plum Creek
or any of its Subsidiaries or Affiliates.
"Plum Creek SEC Filings" shall have the meaning set forth in
Section 5.05(a).
"Plum Creek Special Voting Common Stock" shall have the meaning set forth in
Section 5.03(a).
"Plum Creek Stockholder Approval" shall have the meaning set forth in
Section 5.10(a).
"Plum Creek Stockholder Meeting" shall have the meaning set forth in
Section 6.07(b).
"Preferred Stock Subsidiary" shall mean a "preferred stock subsidiary" or
any other subsidiary from which a Person that is a Real Estate Investment Trust
under the Code derives a majority of the economic benefit, but which such Person
does not control in order to comply with the rules and regulations applicable to
Real Estate Investment Trusts under the Code, whether or not such Person's
interest is held through ownership of preferred stock or through non-voting
common stock.
"Private Letter Ruling" shall have the meaning set forth in
Section 7.01(e).
"Redemption" shall have the meaning set forth in the second recital hereto.
"Redemption Date" shall mean the date on which the shares of Timber Group
Common Stock shall be redeemed in exchange for Units.
"Rights" shall mean, collectively (i) the rights of the holders of the
Georgia-Pacific Group Common Stock to purchase the Series B Junior Preferred
Stock of G-P issued pursuant to the Rights Agreement and (ii) the rights of the
holders of the Timber Group Common Stock to purchase the Series C Junior
Preferred Stock of G-P issued pursuant to the Rights Agreement.
"Rights Agreement" shall mean the Amended and Restated Rights Agreement
dated as of December 16, 1997, by and between G-P and First Chicago Trust
Company of New York, as Rights Agent, as amended.
"Rule 145 Affiliates" shall have the meaning set forth in Section 6.18.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Separation" shall have the meaning set forth in Section 2.01(a).
"Separation Agreement" shall have the meaning set forth in Section 2.01(a).
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"Solvency Opinions" shall mean the opinion of a nationally recognized
investment banking or appraisal firm in form and substance reasonably
satisfactory to the G-P Board of Directors to the effect that, after giving
effect to the Spinoff, G-P will be able to pay its debts as they come due in the
usual course of business and its total assets will exceed the sum of its total
liabilities, such opinions to be dated as of the date the G-P Board of Directors
declares the Redemption and the Redemption Date.
"Spinco" or "Spincos" shall have the meaning set forth in the preamble
hereto.
"Spinco Options" shall have the meaning set forth in Section 3.03(a).
"Spinoff" shall mean the Separation together with the Redemption.
"SPO" shall mean, collectively, PC Advisory Partners I, L.P. and PC
Intermediate Holdings, L.P.
"Subsidiary" with respect to a Person shall mean (x) any partnership of
which such Person or any of its Subsidiaries is a general partner or (y) any
other entity in which such Person or any of its Subsidiaries owns or has the
power to vote more than 50% of the equity interests in such entity having
general voting power to participate in the election of the governing body of
such entity; PROVIDED, HOWEVER, that a Preferred Stock Subsidiary shall be
considered a Subsidiary for the purposes of this Agreement whether or not such
subsidiary otherwise falls within this definition of "Subsidiary."
"Surviving Corporation" shall have the meaning set forth in
Section 2.02(b).
"Tax Authority" shall mean the IRS and any other domestic or foreign
Governmental Authority responsible for the administration of any Taxes.
"Taxes" shall mean all Federal, state, local and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"Tax Matters Agreement" shall mean the agreement substantially in the form
attached hereto as Exhibit C.
"Tax Returns" shall mean all Federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and information returns and
any amended Tax Return relating to Taxes.
"Timber Group" shall mean, as of any date:
(a) all assets and liabilities of G-P and its subsidiaries attributed by
the Board of Directors of G-P to the Timber Group;
(b) all properties and assets transferred to the Timber Group from the
Georgia-Pacific Group pursuant to transactions in the ordinary course of
business of the Georgia-Pacific Group and the Timber Group or otherwise as
the Board of Directors of G-P may have directed as permitted by the Articles
of Incorporation of G-P; and
(c) the interest of G-P or any of its subsidiaries in any business or
asset acquired and any liabilities assumed by G-P or any of its subsidiaries
outside of the ordinary course of business and attributed to the Timber
Group, as determined by the Board of Directors of G-P.
"Timber Group Common Stock" shall mean the Georgia-Pacific
Corporation-Timber Group Common Stock, par value $0.80 per share.
"Timber Group Equity Interest" shall have the meaning set forth in
Section 4.03(a).
"Timber Group Employees" shall mean those individuals who, immediately prior
to the Redemption Date, were employees of Timber Group.
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"Timber Group Financial Statements" shall mean the financial statements
included in the G-P SEC Filings which reflect separately the operations, assets
and liabilities, and cash flows of the Timber Group.
"Timber Group Intellectual Property" shall have the meaning set forth in
Section 4.15(a).
"Timber Group Material Adverse Effect" shall mean a material adverse effect
on the business, operations, assets, financial condition or results of
operations of the Timber Group, taken as a whole, but shall exclude any material
adverse effect arising out of (i) any changes in U.S. general economic or
securities markets conditions; (ii) any changes that affect the timber industry
in general; or (iii) any changes resulting from the announcement of this
Agreement, each Merger or the transactions contemplated thereby.
"Timber Group Material Contract" shall have the meaning set forth in
Section 4.23.
"Timber Group Options" shall have the meaning set forth in Section 3.03(a).
"Timber Group Real Property" shall mean all of the real property, interests
in real property and improvements attributed to the Timber Group that are owned,
leased, or operated by G-P, any of the Spincos or any of their Subsidiaries or
Affiliates.
"Timber Group Shareholder Approval" shall mean the approval of the Merger
Agreement by the holders of a majority of the outstanding shares of Timber Group
Common Stock.
"Timber Group Shareholder Meeting" shall have the meaning set forth in
Section 6.07(a).
"Timber Group Timber Agreements" shall mean the agreements, in the form
attached hereto as Exhibits D-1 through D-3, with such changes as are necessary
to comply with section 631(b) of the Code, without materially altering the
economics of such agreements.
"Trading Day" shall mean any day on which securities are traded on the NYSE.
"Transaction Termination Event" shall mean (i) the issuance of any Treasury
regulation, revenue ruling or notice of the IRS or Treasury or any other
published pronouncement, including in proposed form, (ii) the enactment or
proposal of any legislation or, (iii) based on the reasonable knowledge and
belief of any party hereto, the likelihood of the issuance of any of the
foregoing, that in any such case creates a substantial risk that principles that
are similar to those of section 1374 of the Code would apply to the cutting of
timber transferred by the Spincos to the Surviving Corporation pursuant to the
Mergers during the ten year period following the Effective Date.
"Transition Services Agreement" shall mean the agreement substantially in
the form attached hereto as Exhibit E.
"Treasury" shall mean the United States Department of Treasury.
"Unit" shall have the meaning set forth in the second recital hereto.
"Voting Agreement" shall have the meaning set forth in the seventh recital
hereto.
"Voting Debt" shall have the meaning set forth in Section 4.03(a).
"WARN Act" shall have the meaning set forth in Section 4.13(c).
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ARTICLE II
SPINOFF AND THE MERGERS
Section 2.01 THE SPINOFF.
(a) As of the Redemption Date, the Spincos shall own all of the assets and
have assumed all of the liabilities (whether accrued, absolute, contingent or
otherwise) of the Timber Group and no other assets and liabilities (the
"Separation"). The Spincos have entered into the Separation Agreement with G-P
dated as of the date hereof (the "Separation Agreement"). A notice of redemption
shall be sent by G-P to the holders of Timber Group Common Stock (the "Notice of
Redemption") 30 "trading days" (as defined in G-P's Articles of Incorporation)
prior to the Redemption upon satisfaction or waiver of the conditions set forth
in Section 7.01, 7.02 and 7.03 hereof (excluding conditions that, by their
nature, cannot be satisfied until the date that such notice is given (the
"Notice of Redemption Date")), and subject to the satisfaction or waiver of the
conditions set forth in Section 7.04 and 7.05, the Redemption shall occur on the
last fiscal day of the month on the thirtieth trading day after the Notice of
Redemption Date.
(b) The Units shall be evidenced by the certificates formerly representing
shares of Timber Group Common Stock until exchanged for certificates
representing the consideration provided for by Section 3.01(a) in accordance
with Section 3.02 and the shares of common stock of each Spinco shall not be
separately transferrable.
Section 2.02 THE MERGERS.
(a) Upon the terms and subject to the conditions of this Agreement,
immediately following the Spinoff, certificates of merger (the "Certificates of
Merger") shall be duly prepared, executed and acknowledged by Plum Creek and
each of the Spincos in accordance with Section 251 of the DGCL and shall be
filed with the Secretary of State of Delaware. Each of the Mergers shall be
evidenced by separate Certificates of Merger. The consideration to be received
in connection with the Mergers shall be allocated with respect to each Spinco in
an amount that will be agreed upon in good faith by the parties hereto. The
Mergers shall become effective at the opening of business on the first Business
Day following the Redemption Date as provided in such Certificates of Merger (or
at such later time reflected in such Certificates of Merger as shall be agreed
to by Plum Creek and G-P). The date and time when the Mergers shall become
effective on Business Day after the Redemption Date and is hereinafter referred
to as the "Effective Time."
(b) At the Effective Time, each Spinco shall be merged with and into Plum
Creek and the separate corporate existence of each Spinco shall cease, and Plum
Creek shall continue as the surviving corporation under the laws of the State of
Delaware (the "Surviving Corporation").
(c) At the Effective Time, the effect of the Mergers shall be as provided in
this Article II and in the applicable provisions of the DGCL.
Section 2.03 CERTIFICATE OF INCORPORATION OF THE SURVIVING
CORPORATION. The Certificate of Incorporation of Plum Creek as amended pursuant
to the Merger shall read in its entirety as set forth in Exhibit F and shall be
the Certificate of Incorporation of the Surviving Corporation.
Section 2.04 BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of Plum
Creek, as in effect immediately prior to the Effective Time, shall be the
By-Laws of the Surviving Corporation.
Section 2.05 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the directors and officers of Plum Creek immediately prior to
the Effective Time and up to three directors designated by G-P prior to the
Effective Time who are reasonably acceptable to Plum Creek shall be the
directors and officers of the Surviving Corporation, each of such directors and
officers to hold office, subject to the applicable provisions of the DGCL and
the Certificate of Incorporation and
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By-Laws of the Surviving Corporation, until the next annual stockholders'
meeting of the Surviving Corporation and until their respective successors shall
be duly elected or appointed and qualified. As soon as practicable after the
Effective Time, the number of directors of the Surviving Corporation shall be
increased from eight to eleven.
Section 2.06 CLOSING. Subject to the terms and conditions contained in
this Agreement, the closing of the Mergers (the "Closing") shall be held at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York,
New York 10036 on the day immediately prior to the Effective Time on which the
last of the conditions (excluding conditions that, by their nature, cannot be
satisfied until the Closing Date) set forth in Article VII hereof is satisfied
or waived or at such other time and date as the parties hereto shall agree in
writing; PROVIDED, HOWEVER, that the Closing shall not occur prior to
January 1, 2001, except as otherwise mutually agreed by the parties hereto in
writing. Such date is herein referred to as the "Closing Date."
ARTICLE III
CONVERSION OF SHARES AND RELATED MATTERS
Section 3.01 CONVERSION OF CAPITAL STOCK. At the Effective Time, by virtue
of the Mergers and without any action on the part of Plum Creek, the Spincos or
the holders of any of the following securities:
(a) Each Unit, including each share of common stock of each Spinco
represented thereby, issued and outstanding immediately prior to the
Effective Time (other than any Units to be cancelled pursuant to
Section 3.01(b)) shall be converted, subject to Section 3.02(f), into the
right to receive 1.37 shares of Plum Creek Common Stock (as adjusted
pursuant to Section 3.01(c), the "Exchange Ratio"). Following the Effective
Time, all Units, including each share of common stock of each Spinco
represented thereby, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist. No fractional share of
Plum Creek Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made pursuant to Section 3.02(f) hereof.
(b) Each Unit owned by G-P and each Unit owned by Plum Creek or any
direct or indirect wholly owned subsidiary of Plum Creek or G-P (other than,
in each case, shares in trust accounts, managed accounts, custodial accounts
and the like that are beneficially owned by third parties) immediately prior
to the Effective Time shall be cancelled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(c) If between the date of this Agreement and the Effective Time, the
outstanding shares of Plum Creek Common Stock or, between the date of this
Agreement and the Redemption Date, the outstanding shares of Timber Group
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares
or the record date therefor or the effective date thereof shall be prior to
the Effective Time, the Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(d) The shares of Plum Creek Common Equity issued and outstanding
immediately prior to the Effective Time shall remain outstanding and be
unchanged in the Mergers except as contemplated by Section 2.03.
Section 3.02 EXCHANGE OF CERTIFICATES. (a) Prior to the Effective Time,
Plum Creek shall appoint a bank or trust company reasonably acceptable to G-P as
exchange agent (the "Exchange Agent") for the purposes of exchanging the
certificates formerly representing the Timber Group Common Stock which
subsequent to the Spinoff but prior to the Effective Time evidence the Units
(each a
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"Certificate") for whole number of shares of Plum Creek Common Stock into which
the Units evidenced by such Certificate have been converted pursuant to
Section 3.01(a) and cash in lieu of fractional shares of Plum Creek Common Stock
in accordance with Section 3.02(f). Promptly after the Effective Time, Plum
Creek will send, or will cause the Exchange Agent to send, to each holder of
record of Timber Group Common Stock as of the Effective Time (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in customary form and have such
other customary provisions as Plum Creek may reasonably specify) and
(ii) instructions for use in effecting the surrender of Certificates in exchange
for the whole number of shares of Plum Creek Common Stock into which the Units
have been converted and cash in lieu of fractional shares of Plum Creek Common
Stock.
(b) As soon as practicable but in any event no later than three Business
Days following the Effective Time, Plum Creek shall deposit with the Exchange
Agent as nominee for the benefit of the holders of Timber Group Common Stock,
certificates representing the shares of Plum Creek Common Stock (such shares of
Plum Creek Common Stock, together with cash in lieu of fractional shares and any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") to be issued pursuant to Section 3.01(a). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the Plum Creek Common
Stock contemplated to be issued pursuant to Section 3.01(a) out of the Exchange
Fund. Subject to Section 3.02(g), the Exchange Fund shall not be used for any
other purposes.
(c) Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with the letter of transmittal referred to in Section 3.02(a), duly
executed and completed in accordance with its terms, the holder of such
Certificate shall be entitled to receive in exchange therefor (i) a certificate
or certificates representing the whole number of shares of Plum Creek Common
Stock into which the Units represented by such Certificate have been converted
in accordance with Section 3.01(a), (ii) the amount of dividends or other
distributions, if any, with a record date on or after the Effective Time which
theretofore became payable with respect to such shares of Plum Creek Common
Stock, and (iii) the cash amount payable in lieu of fractional shares of Plum
Creek Common Stock in accordance with Section 3.02(f), in each case which such
holder has the right to receive pursuant to the provisions of this Article III,
and the Certificate so surrendered shall forthwith be canceled. In no event
shall the holder of any Certificate be entitled to receive interest on any funds
to be received in the Mergers. Until surrendered as contemplated by this
Section 3.02(c) and subject to Section 3.02(d), each Certificate shall, after
the Effective Time, represent for all purposes only the right to receive the
whole number of shares of Plum Creek Common Stock into which the Units
represented by such Certificate has been converted in accordance with
Section 3.01(a), plus the cash amount payable in lieu of fractional shares of
Plum Creek Common Stock in accordance with Section 3.02(f), plus the amount of
dividends or other distributions, if any, with a record date on or after the
Effective Time, which theretofore became payable with respect to such shares of
Plum Creek Common Stock.
(d) No dividends or other distributions declared, made or paid after the
Effective Time with respect to shares of Plum Creek Common Stock with a record
date on or after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Plum Creek Common Stock
represented thereby and no cash payment in lieu of fractional shares of Plum
Creek Common Stock shall be paid to any such holder pursuant to Section 3.02(f)
until the holder of record of such Certificate shall surrender such Certificate
in accordance with this Section 3.02. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing shares of Plum Creek Common Stock,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions, if any, with a record date on or after the Effective Time
which theretofore became payable, but which were not paid by reason of the
immediately preceding sentence, with respect to such shares of Plum Creek Common
Stock and (ii) at
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the appropriate payment date, the amount of dividends or other distributions
with a record date on or after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such shares of Plum
Creek Common Stock. Dividends or other distributions with a record date on or
after the Effective Time but prior to surrender of Certificates by holders
thereof payable in respect of shares of Plum Creek Common Stock held by the
Exchange Agent shall be held in trust for the benefit of such holders of
Certificates.
(e) All shares of Plum Creek Common Stock issued upon conversion of the
Units in accordance with the terms hereof (including any cash paid pursuant to
Section 3.02(d) or (f)) shall be deemed to have been issued at the Effective
Time in full satisfaction of all rights pertaining to the Units represented
thereby. At the Effective Time, the stock transfer books of G-P solely with
respect to the shares of Timber Group Common Stock evidencing the Units shall be
closed and there shall be no further registration of transfers thereon of such
shares. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 3.02.
(f) No certificate or scrip representing fractional shares of Plum Creek
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional shares will not entitle the owner thereof to vote or to any
rights of a holder of shares of Plum Creek Common Stock. In lieu of any such
fractional shares of Plum Creek Common Stock, each holder of Certificates who
would otherwise have been entitled to a fraction of a share of Plum Creek Common
Stock in exchange for such Certificates (after taking into account all
Certificates delivered by such holder) pursuant to this Section 3.02 shall
receive from the Exchange Agent, as applicable, a cash payment in lieu of such
fractional share of Plum Creek Common Stock, determined by multiplying (A) the
average of the per share closing sale price of Plum Creek Common Stock, as
reported on the NYSE, on each of the twenty Trading Days ending on the third
Trading Day immediately preceding the Effective Time by (B) the fractional share
of Plum Creek Common Stock to which such holder would otherwise be entitled.
(g) Any portion of the Exchange Fund which remains undistributed to the
holders of Certificates for six (6) months after the Effective Time shall be
delivered to Plum Creek, upon demand, and any holders of Certificates who have
not theretofore complied with this Article III shall thereafter look only to
Plum Creek (subject to abandoned property, escheat and other similar laws) as a
general creditor for payment of their claim for shares of Plum Creek Common
Stock, any cash in lieu of fractional shares of Plum Creek Common Stock and any
dividends or distributions with respect to shares of Plum Creek Common Stock.
Plum Creek shall not be liable to any holder of any Certificate for shares of
Plum Creek Common Stock (or dividends or distributions with respect thereto) or
cash payable in respect of fractional shares of Plum Creek Common Stock,
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. Any securities or cash amounts remaining unclaimed by
holders of Certificates shall immediately prior to such time as such amounts
would otherwise escheat to or become property of any Governmental Authority, to
the extent permitted by applicable law, become the property of Plum Creek free
and clear of any claims or interest of any Person previously entitled thereto.
(h) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if required by Plum Creek, the posting by such
Person of a bond in such reasonable amount as Plum Creek may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate, the whole number of shares of Plum Creek Common Stock into which
the Units represented by such Certificate have been converted, any cash in lieu
of fractional shares of Plum Creek Common Stock, and unpaid dividends and
distributions in respect of or on shares of Plum Creek Common Stock deliverable
in respect thereof, pursuant to this Agreement.
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(i) Plum Creek shall be entitled to deduct and withhold from the shares of
Plum Creek Common Stock (and any dividends or distributions thereon) and cash in
lieu of fractional shares of Plum Creek Common Stock otherwise payable hereunder
to any holder of Certificates such amounts as it is required to deduct and
withhold with respect to the making of such payment under any provision of
Federal, state, local or foreign income tax law. To the extent that Plum Creek
so withholds those amounts, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Certificates
in respect of which such deduction and withholding was made by Plum Creek.
Section 3.03 G-P STOCK OPTIONS.
(a) Prior to the Effective Time, G-P shall cause each outstanding option
granted to an employee of G-P or its Subsidiaries to purchase Timber Group
Common Stock ("Timber Group Options") to be amended to substitute one Unit for
each share of Timber Group Common Stock subject to such option (the "Spinco
Options").
(b) Each Spinco Option which is outstanding and unexercised immediately
prior to the Effective Time, whether or not vested or exercisable, shall be
automatically converted at the Effective Time into an option (a "Plum Creek
Option") to purchase a number of shares of Plum Creek Common Stock equal to the
number of Units subject to such Spinco Option multiplied by the Exchange Ratio
(rounded to the nearest whole number), at a price per share of Plum Creek Common
Stock equal to the per-Unit option exercise price specified in the Spinco Option
divided by the Exchange Ratio (rounded to the nearest whole cent); PROVIDED,
HOWEVER, that all other terms and conditions of the Plum Creek Options shall
continue to be determined by reference to the applicable G-P stock plan and
Timber Group Option, PROVIDED, FURTHER, HOWEVER, that all Spinco Options shall
become vested and exercisable as of the Effective Time. From and after the
Effective Time, (i) except as otherwise provided herein, all references to G-P
in the Spinco Options shall be deemed to refer to Plum Creek and (ii) no Plum
Creek Option holder shall be deemed to have suffered a termination of employment
under such plans or agreements solely by reason of the consummation of the
transactions contemplated hereunder.
(c) In respect of those Plum Creek Option holders who do not become
employees of the Surviving Corporation at the Effective Time ("Non-Plum Creek
Optionees"), (i) any references in the Plum Creek Option to G-P as the employer
of Non-Plum Creek Optionees or to employment by Non-Plum Creek Optionees by G-P
shall not be deemed to refer to Plum Creek as the employer or to employment with
Plum Creek and (ii) G-P shall provide Plum Creek, in a timely manner, with such
information as Plum Creek shall reasonably require in order to assume its
obligations and enforce its rights under the Plum Creek Options.
(d) Plum Creek shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Plum Creek Common Stock for delivery
upon exercise of the Plum Creek Options. As promptly as reasonably practicable
after the Effective Time, Plum Creek shall issue to each holder of a Spinco
Option that was converted into a Plum Creek Option pursuant to this
Section 3.03 a document evidencing the foregoing assumption by Plum Creek. At or
prior to the Effective Time, to the extent necessary to provide for registration
of shares of Plum Creek Common Stock subject to Plum Creek Options other than
Plum Creek Options held by Non-Plum Creek Optionees, Plum Creek shall file a
registration statement on Form S-8 (or other applicable or successor form), with
respect to such shares of Plum Creek Common Stock and shall use its commercially
reasonable efforts to maintain such registration statement (or other applicable
or successor form), including the current status of any related prospectus or
prospectuses, for so long as such Plum Creek Options remain outstanding. In
respect of shares of Plum Creek Common Stock subject to Plum Creek Options held
by Non-Plum Creek Optionees, Plum Creek shall file, at or prior to the Effective
Time, to the extent necessary to provide for the registration of such shares, a
registration statement on Form S-3 (or other
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applicable or successor form), and shall use its commercially reasonable efforts
to maintain such registration statement (or other applicable or successor form),
including the current status of any required prospectus or prospectuses, for so
long as such Plum Creek Options remain outstanding.
(e) Prior to the Effective Time, G-P shall use commercially reasonable
efforts to take all actions (including, if appropriate, amending the terms of
G-P's stock plans) and obtain such consents as are necessary to give the effect
to the transactions contemplated by this Section 3.03.
(f) Prior to the date hereof, G-P shall take such steps to give effect to
the acceleration of the vesting and exercisability of the Spinco Options as such
is described above.
(g) In respect of those employees of the Surviving Corporation who at the
Effective Time hold options to purchase Georgia-Pacific Group Stock
("Georgia-Pacific Options"), (i) G-P shall amend such options to extend the
exercise period to include any period of employment as an employee of the
Surviving Corporation and (ii) Plum Creek shall provide G-P, in a timely manner,
with such information as G-P shall reasonably require in order to enforce its
rights under the Georgia-Pacific Options.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF G-P
Except as otherwise set forth in the G-P Disclosure Letter specifying the
section to which it relates, G-P hereby represents and warrants to Plum Creek as
follows:
Section 4.01 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Each of
G-P and the Spincos is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and each
such Person has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. Each
of G-P and the Spincos is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions where the failure to be so
qualified or licensed and in good standing would not reasonably be expected to
have, individually or in the aggregate, a Timber Group Material Adverse Effect.
Section 4.01 of the letter delivered by G-P to Plum Creek concurrently with the
delivery of this Agreement (the "G-P Disclosure Letter") sets forth a list of
all of the Persons holding as of the date hereof, directly or indirectly, any of
the assets and liabilities of the Timber Group and their respective
jurisdictions of incorporation or organization and identifies G-P's (direct or
indirect) percentage of equity ownership therein.
Section 4.02 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of G-P and the
Spincos has full corporate power and authority to execute and deliver this
Agreement and the Separation Agreement, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Separation
Agreement by each of G-P and the Spincos, and the consummation by each of them
of the transactions contemplated hereby and thereby, have been duly authorized
and unanimously approved by their respective Boards of Directors and by G-P as
the sole stockholder of each of the Spincos and no other corporate action on the
part of G-P or any of the Spincos is necessary to authorize the execution,
delivery and performance of this Agreement and the Separation Agreement by G-P
or the Spincos and the consummation of the transactions contemplated hereby and
thereby. This Agreement and the Separation Agreement have been duly executed and
delivered by each of G-P and the Spincos and each is a valid and binding
obligation of each of G-P and the Spincos enforceable against each of G-P and
the Spincos in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
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Section 4.03 CAPITALIZATION.
(a) The authorized capital stock of G-P consists of 685,000,000 shares, of
which (i) 400,000,000 shares are designated as Georgia-Pacific Group Common
Stock, (ii) 250,000,000 shares are designated as Timber Group Common Stock,
(iii) 10,000,000 shares are designated as preferred stock, no par value per
share (the "G-P Preferred Stock"), and (iv) 25,000,000 shares are designated as
junior preferred stock, no par value per share (the "G-P Junior Preferred
Stock"). As of the date hereof: (i) 170,751,428 shares of Georgia-Pacific Group
Common Stock were issued and outstanding, (ii) 79,619,482 shares of Timber Group
Common Stock were issued and outstanding, (iii) no shares of G-P Preferred Stock
were issued and outstanding, (iv) no shares of G-P Junior Preferred Stock were
issued and outstanding, (v) 25,200,000 shares of Georgia-Pacific Group Common
Stock were reserved for issuance under G-P's stock option and stock benefit
plans and arrangements, (vi) 21,501,300 shares of Georgia-Pacific Group Common
Stock were held by G-P in its treasury, (vii) 8,400,000 shares of Timber Group
Common Stock were reserved for issuance under G-P's stock option and stock
benefit plans and arrangements and (viii) 14,387,850 shares of Timber Group
Common Stock were held by G-P in its treasury. All issued and outstanding shares
of capital stock of G-P have been duly authorized and validly issued and are
fully paid and nonassessable. Except as set forth in the immediately preceding
sentence and other than the Rights or pursuant to the Spinoff, there are no
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to the Timber Group
Common Stock or any capital stock equivalent or other nominal interest in G-P or
any of its Subsidiaries which relate to the Timber Group (collectively, "Timber
Group Equity Interests") pursuant to which G-P or any of its Subsidiaries is or
may become obligated to issue shares of its capital stock or other equity
interests or any securities convertible into, exchangeable for, or evidencing
the right to subscribe for, any Timber Group Equity Interests ("Issuance
Obligation"). None of the Rights granted pursuant to the Rights Agreement have
at any time been triggered. Except for the Redemption, there are no outstanding
obligations of G-P to repurchase, redeem or otherwise acquire any outstanding
securities of Timber Group Equity Interests. G-P has no authorized or
outstanding bonds, debentures, notes or other indebtedness the holders of which
have the right to vote (or are convertible or exchangeable into or exercisable
for securities the holders of which have the right to vote) with the holders of
the Timber Group Common Stock on any matter ("Voting Debt"). Except as set forth
in Section 4.03(a) of the Disclosure Letter, there are no restrictions of any
kind which prevent or restrict the payment of dividends by G-P with respect to
the Timber Group Common Stock and there are no limitations or restrictions on
the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests.
(b) The authorized capital stock of each of the Spincos consists of 100
shares, par value $.01 per share. As of the date hereof, each of the Spincos had
25 shares issued and outstanding. Other than as contemplated by Section 3.03,
none of the Spincos have any shares reserved for issuance under a stock option
or stock benefit and arrangement plan. Prior to the Redemption, G-P will be the
sole stockholder of all of the issued and outstanding shares of stock of each of
the Spincos. All of the issued and outstanding shares of capital stock of each
of the Spincos are validly existing, fully paid and non-assessable. Other than
as contemplated by Section 3.03, none of the Spincos have outstanding Voting
Debt or are bound by, obligated under, or party to an Issuance Obligation with
respect to any security of the Spincos and there are no obligations of the
Spincos to repurchase, redeem or otherwise acquire any outstanding securities of
the Spincos.
(c) Except as set forth in Section 4.03(c) of the G-P Disclosure Letter or
as contemplated by this Agreement or the Separation Agreement, none of the
Spincos own, directly or indirectly, any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture, limited
liability company or other business association or entity.
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Section 4.04 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming (a) the
filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), are made and the waiting periods thereunder (if
applicable) have been terminated or expired, (b) the applicable requirements of
the Securities Act and the Exchange Act are met, (c) the requirements under any
applicable state securities or blue sky laws are met, (d) the filing of the
Certificates of Merger and other appropriate merger documents, if any, as
required by the DGCL, are made, and (e) the Plum Creek Stockholder Approval, the
execution and delivery of this Agreement by each of G-P and the Spincos and the
consummation by each of G-P and the Spincos of the transactions contemplated
hereby do not and will not: (i) violate or conflict with any provision of G-P's
or the Spincos' Certificate of Incorporation or G-P's or the Spincos' By-Laws or
the comparable governing documents of any of their Subsidiaries; (ii) violate or
conflict with any statute, law, ordinance, rule or regulation (together, "Laws")
or any order, judgment, decree, writ, permit or license (together, "Orders"), of
any court, tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of the United States or any domestic or foreign state,
county, city or other political subdivision (a "Governmental Authority")
applicable to G-P, the Spincos or any of their Subsidiaries or by which any of
their respective properties or assets may be bound; (iii) except as set forth in
Section 4.04(e)(iii) of the G-P Disclosure Letter, require any filing with, or
permit, consent or approval of, or the giving of any notice to, any Governmental
Authority; or (iv) result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, payment or acceleration) under, or
result in the creation of any Lien upon any of the properties or assets of the
Timber Group, the Spincos or any of their Subsidiaries under, or give rise to
any obligation, right of termination, cancellation, acceleration or increase of
any obligation or a loss of a material benefit under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, contract, lease, franchise agreement or other
instrument or obligation of any kind ("Contracts") to which G-P, any of the
Spincos or any of their Subsidiaries, in each case on behalf of the Timber
Group, is a party, or by which any such Person or any of its properties or
assets are bound, excluding from the foregoing clauses (ii), (iii) and
(iv) conflicts, violations, breaches, defaults, rights of payment and
reimbursement, terminations, modifications, accelerations and creations and
impositions of Liens which would not reasonably be expected to, individually or
in the aggregate, have a Timber Group Material Adverse Effect.
Section 4.05 G-P SEC FILINGS; FINANCIAL STATEMENTS.
(a) G-P has timely filed all registration statements, prospectuses, forms,
reports and documents and related exhibits required to be filed by it under the
Securities Act or the Exchange Act, as the case may be, since November 1, 1997
(collectively, the "G-P SEC Filings"). The G-P SEC Filings (i) as they relate to
the Timber Group, were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed contain any untrue statement of a
material fact with respect to the Timber Group or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein with respect to the Timber Group, in the light of the circumstances
under which they were made, not misleading. No liabilities attributable to the
Georgia-Pacific Group as set forth in the G-P SEC Filings are attributable to
the Timber Group. No G-P Subsidiary is subject to the periodic reporting
requirements of the Exchange Act.
(b) Each of the Timber Group Financial Statements (including, in each case,
any notes thereto) contained in the G-P SEC Filings was prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q under the Exchange Act and to normal and
recurring adjustments) and each presented fairly in all material respects the
consolidated financial position of the Timber Group as of the respective dates
thereof and for the respective periods indicated therein, except as otherwise
noted therein (subject, in the case of unaudited statements, to
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normal and recurring year-end adjustments). The books and records of each of
G-P, the Spincos and their Subsidiaries as they relate to the Timber Group have
been, and are being, maintained in accordance with GAAP and any other applicable
legal and accounting requirements.
Section 4.06 NO UNDISCLOSED LIABILITIES. Except as and to the extent set
forth on the consolidated balance sheet of the Timber Group, as of April 1,
2000, included in G-P's Form 10-Q for the period ended April 1, 2000, including
the notes thereto, neither G-P, any of the Spincos nor any Subsidiaries of G-P
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) relating to the Timber Group that would be required to
be reflected on a balance sheet or in the notes thereto prepared in accordance
with GAAP, except for liabilities or obligations incurred since April 1, 2000 in
the ordinary course of business that would neither, individually or in the
aggregate, (i) reasonably be expected to have a Timber Group Material Adverse
Effect nor (ii) reasonably be expected to prevent or materially delay the
performance by G-P of its obligations under this Agreement, each Merger or the
transactions contemplated thereby.
Section 4.07 INFORMATION TO BE SUPPLIED.
(a) The Joint Proxy Statement/Prospectus and the other documents required to
be filed by G-P with the SEC in connection with the Mergers and the other
transactions contemplated hereby will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act, as the case
may be, and will not, on the date that it is filed, on the date it is first
mailed to the shareholders of Timber Group Common Stock and stockholders of Plum
Creek and at the time of the Timber Group Shareholder Meeting and the Plum Creek
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
(b) Notwithstanding the foregoing provisions of this Section 4.07, no
representation or warranty is made by G-P with respect to statements made or
incorporated by reference in the Merger Registration Statement or the Joint
Proxy Statement/Prospectus based on information supplied by Plum Creek expressly
for inclusion or incorporation by reference therein or based on information
which is not made in or incorporated by reference in such documents but which
should have been disclosed pursuant to Section 5.07.
Section 4.08 ABSENCE OF CERTAIN EVENTS. Except as expressly permitted by
this Agreement, since January 1, 2000, each of G-P, the Spincos and their
Subsidiaries have operated their respective Timber Group businesses only in the
ordinary course of business and there has not occurred (i) any event, occurrence
or condition which would reasonably be expected to, individually or in the
aggregate, have a Timber Group Material Adverse Effect or (ii) other than in the
ordinary course of business in a manner consistent with past practices, any
increase in the compensation of, or change of control agreement with, any
officer of G-P, the Spincos or any of their Subsidiaries or any general salary
or benefits increase to the employees of G-P, the Spincos or any of their
Subsidiaries, except those employees that will not be Timber Group Employees.
Section 4.09 LITIGATION. Except as set forth in Section 4.09 of the G-P
Disclosure Letter, there are no investigations, actions, suits or proceedings
pending against G-P, the Spincos or any of their Subsidiaries or, to the
knowledge of G-P, threatened against G-P, the Spincos or any of their
Subsidiaries (or any of their respective properties, rights or franchises), at
law or in equity, or before or by any Federal or state commission, board,
bureau, agency, regulatory or administrative instrumentality or other
Governmental Authority or any arbitrator or arbitration tribunal, that would
reasonably be expected to have, individually or in the aggregate, a Timber Group
Material Adverse Effect, and, to the knowledge of G-P, no development has
occurred with respect to any pending or threatened action, suit or proceeding
that would reasonably be expected to have a Timber Group Material Adverse Effect
or would reasonably be expected to prevent, materially impair or materially
delay the consummation of
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the transactions contemplated hereby. Neither G-P, any of the Spincos nor their
Subsidiaries is subject to any judgment, order or decree entered in any lawsuit
or proceeding which would reasonably be expected to, individually or in the
aggregate, have a Timber Group Material Adverse Effect.
Section 4.10 TITLE TO PROPERTIES; ENCUMBRANCES. Section 4.10 of the G-P
Disclosure Letter sets forth a complete list of all of the material Timber Group
Real Property. Except as set forth in Section 4.10 of the G-P Disclosure Letter,
each of G-P, the Spincos and their Subsidiaries has good, valid and marketable
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all tangible properties and assets of the Timber Group except
where the failure to have such good, valid and marketable title would not
reasonably be expected to, individually or in the aggregate, have a Timber Group
Material Adverse Effect; in each case subject to no Liens, except for (a) Liens
reflected in G-P's consolidated balance sheet as of April 1, 2000, (b) Liens
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto which do not materially detract from the value of, or impair the
use of, such property by G-P, any of the Spincos or any of their Subsidiaries in
the operation of the Timber Group, (c) Liens for current Taxes, assessments or
governmental charges or levies on property not yet due or which are being
contested in good faith and for which appropriate reserves in accordance with
GAAP have been created and (d) Liens which would not reasonably be expected to,
individually or in the aggregate, have a Timber Group Material Adverse Effect.
Except as would not reasonably be expected to, individually or in the aggregate,
have a Timber Group Material Adverse Effect, each of G-P, the Spincos and their
Subsidiaries are in compliance with the terms of all leases of tangible
properties to which they are a party and under which they are in occupancy that
relate to the operation of the Timber Group, and all such leases are in full
force and effect.
Section 4.11 COMPLIANCE WITH LAWS.
(a) Each of G-P, the Spincos and their Subsidiaries are in compliance with
all applicable Federal, state, local and foreign statutes, laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
reasonably be expected to, individually or in the aggregate, have a Timber Group
Material Adverse Effect.
(b) Except as set forth in Section 4.11(b) of the G-P Disclosure Letter,
each of G-P, the Spincos and their Subsidiaries hold, to the extent legally
required, all Federal, state, local and foreign permits, approvals, licenses,
authorizations, certificates, rights, exemptions and orders from Governmental
Authorities (the "Permits") that are required for the operation of the Timber
Group by G-P, the Spincos and their Subsidiaries as now conducted, except where
the failure to hold any such Permit would not reasonably be expected to,
individually or in the aggregate, have a Timber Group Material Adverse Effect,
and there has not occurred any default under any such Permit, except to the
extent that such default would not reasonably be expected to, individually or in
the aggregate, have a Timber Group Material Adverse Effect.
Section 4.12 G-P EMPLOYEE BENEFIT PLANS. Except as would not pertain to or
materially affect the Timber Group:
(a) Section 4.12(a) of the G-P Disclosure Letter contains a true and
complete list of each employment, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation right or
other stock-based incentive, severance, change-in-control, or termination
pay, hospitalization or other medical, disability, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement
plan, program, agreement or arrangement and each other employee benefit
plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by G-P, the Spincos or any
of their subsidiaries, or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with G-P or any of its
subsidiaries would be deemed a "single employer" within the meaning of
Section 4001(b)(1) of the Employee Retirement Income Security Act of
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1974 ("ERISA"), for the benefit of any current or former employee or
director of a Spinco or any Spinco subsidiary, whether formal or informal
and whether legally binding or not (the "Spinco Plans").
(b) With respect to each Spinco Plan, G-P has made available or will
make available to Plum Creek a current, accurate and complete copy thereof
and, to the extent applicable: (i) the most recent determination letter,
(ii) any summary plan description and (iii) for the two most recent years
(A) the form 5500 and attached schedules, (B) audited financial statements
and (C) actuarial valuation reports.
(c) The Spinco Plans are in compliance in all material respects with all
applicable requirements of ERISA, the Code, and other applicable laws and
have been administered in accordance with their terms and such laws, except
where the failure to so comply would not reasonably be expected to have a
Timber Group Material Adverse Effect. Each Spinco Plan which is intended to
be qualified within the meaning of Section 401 of the Code has received a
favorable determination letter as to its qualification, and, to the
knowledge of G-P, nothing has occurred that would reasonably be expected to
affect such qualification.
(d) There are no pending, or to the knowledge of G-P, threatened claims
and no pending or, to the knowledge of the Spincos, threatened litigation
with respect to any Spincos Plans that would reasonably be expected to have
a Timber Group Material Adverse Effect, other than ordinary and usual claims
for benefits by participants and beneficiaries.
(e) No liability under Title IV of ERISA has been incurred by G-P, any
of its Subsidiaries or any ERISA Affiliate since the Effective Date of ERISA
that has not been satisfied in full, and no condition exists that presents a
material risk to G-P, the Spincos or any of their subsidiaries or any ERISA
Affiliate of incurring any liability under such Title, other than liability
for premiums due to the Pension Benefit Guaranty Corporation ("PBGC"), which
payments have been or will be made when due, that would reasonably be
expected to have a Timber Group Material Adverse Effect. G-P shall take such
steps as are necessary to prevent Spinco assets from being subject to a lien
as a result of any liability G-P or any ERISA Affiliate may incur under
Title IV of ERISA. To the extent this representation applies to Sections
4064, 4069 or 4204 of Title IV of ERISA, it is made not only with respect to
the Plans but also with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which G-P, the
Spincos, any of their subsidiaries or any ERISA Affiliate made, or was
required to make, contributions during the past six years.
(f) No lien has been imposed under section 412(n) of the Code or
Section 302(f) of ERISA on the assets of G-P, any of the Spincos, any of
their subsidiaries or any ERISA Affiliate, and no event or circumstance has
occurred that is reasonably likely to result in the imposition of any such
lien on any such assets on account of any Spinco Plan.
(g) Except for liabilities that would not reasonably be expected to have
a Timber Group Material Adverse Effect, with respect to any Spinco Plan that
is a "multiemployer pension plan," as such term is defined in Section 3(37)
of ERISA, (i) neither G-P, any of its subsidiaries nor any ERISA Affiliate
has, since September 26, 1980, made or suffered a "complete withdrawal" or a
"partial withdrawal," (as such terms are respectively defined in Sections
4203 and 4205 of ERISA) pursuant to which all liability in respect thereof
has not been satisfied, (ii) no event (including the transactions
contemplated hereunder) is reasonably expected to occur that presents a
material risk of a complete or partial withdrawal, and (iii) neither G-P,
the Spincos, each of their subsidiaries nor any ERISA Affiliate has any
contingent material liability under Section 4204 of ERISA.
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Section 4.13 EMPLOYMENT RELATIONS.
(a) Except as would not reasonably be expected to, individually or in the
aggregate, have a Timber Group Material Adverse Effect or as set forth in
Section 4.13(a) of the G-P Disclosure Letter, (i) neither G-P, the Spincos or
any Subsidiary is a party to any collective bargaining agreement or other labor
union contract with respect to any employee of the Timber Group, (ii) there are
no organizational campaigns, demands or proceedings pending or, to G-P's
knowledge, threatened by any labor organization or group of employees seeking
recognition or certification as collective bargaining representatives of any
group of employees of the Timber Group, and (iii) there are no strikes,
controversies, slowdowns, work stoppages or material labor disputes, or, to
G-P's knowledge, threatened involving any site of employment of the Timber
Group. A true and correct list of the employees employed exclusively with
respect to the Timber Group as of the date hereof is attached as Exhibit 2.1(b)
to the Human Resources Agreement.
(b) Except as would not pertain to or affect the Timber Group or as set
forth in the G-P Disclosure Letter, each of G-P and its Subsidiaries is, and has
at all times been, in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and is not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation. Except as set forth in Section 4.09 of
the Gulf Disclosure Letter, to the knowledge of G-P, there are no complaints,
controversies, charges, investigations, lawsuits or other proceedings relating
to the Timber Group pending in any court or with any agency responsible for the
enforcement of Federal, state, local or foreign labor or employment laws
regarding breach of any express or implied contract or employment, any law or
regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship.
(c) Except as would not pertain to or affect the Timber Group, since
January 1, 2000, neither G-P nor any of its Subsidiaries has effectuated (i) a
"plant closing" as defined in the Worker Adjustment and Retraining Notification
Act of 1988 (the "WARN Act") affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of G-P
or any of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of G-P or any of its Subsidiaries;
nor has G-P nor any of its Subsidiaries been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local law.
Section 4.14 TAXES. Except as otherwise set forth in Section 4.14 of the
G-P Disclosure Letter:
(a) G-P and each of its Subsidiaries and each of its Affiliated
Entities:
(i) have timely paid or caused to be paid all material Taxes required
to be paid by it. The accruals for Taxes payable in G-P's most recent
consolidated financial statements are adequate to cover all material
Taxes attributable to periods (or portions thereof) ending on the date of
such financial statements, and no material Taxes attributable to periods
following the date of such financial statements have been incurred other
than in the ordinary course of business;
(ii) have filed or caused to be filed in a timely manner all material
Tax Returns required to be filed by such entities with the appropriate
Tax Authority in all jurisdictions in which Tax Returns are required to
be filed, and all such Tax Returns are true, correct and complete in all
material respects; and
(iii) have not requested or caused to be requested any extension of
time within which to file any material Tax Return, which Tax Return has
not since been filed.
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(b) There are no pending material Tax audits relating to G-P or any of
its Subsidiaries and no waivers of statutes of limitations have been given
or requested by G-P or any of its Subsidiaries that are currently
outstanding. All tax years for the consolidated Federal income tax group of
which G-P is the common parent have been closed up to and including the year
ending on December 31, 1996.
(c) No Liens for Taxes have been filed against G-P or any of its
Subsidiaries, except for Liens for Taxes not yet due or payable for which
adequate reserves have been provided for in the latest balance sheet of G-P.
(d) No unresolved deficiencies or additions to Taxes have been proposed,
asserted, or assessed against G-P or any of its Subsidiaries.
(e) Neither G-P nor any of its Subsidiaries has received notice within
the last three years from any Tax Authority in a jurisdiction in which G-P
or any of its Subsidiaries does not file Tax Returns that G-P or any of its
Subsidiaries is or may be subject to taxation by that jurisdiction.
(f) Neither G-P nor any of its Subsidiaries is (i) a party to any Tax
sharing, Tax allocation or similar agreement, or (ii) bound by any closing
agreement, offer in compromise or other agreement with any Tax Authority.
(g) The facts, representations, and other information contained and
referred to in G-P's request, dated March 16, 2000, for rulings from the IRS
concerning certain intra-group restructuring transactions, including all
exhibits thereto, were true, correct and complete when the ruling request
was filed and to the date hereof.
Section 4.15 INTELLECTUAL PROPERTY. Except as would not, individually or
in the aggregate, reasonably be expected to have a Timber Group Material Adverse
Effect:
(a) G-P, the Spincos or their Subsidiaries own, without material
restrictions, or are licensed to use, the rights to all patents, trademarks,
trade names, service marks, copyrights together with any registrations and
applications therefor, Internet domain names, net lists, schematics,
inventories, technology, trade secrets, source codes, know-how, computer
software programs or applications including, without limitation, all object
and source codes and tangible or intangible proprietary information or
material that are used in the operation of the Timber Group (the "Timber
Group Intellectual Property"). Section 4.15(a) of the G-P Disclosure Letter
sets forth a complete list of all of the material Timber Group Intellectual
Property. Neither G-P, the Spincos nor any of its Subsidiaries is, or as a
result of the execution, delivery or performance of G-P's obligations
hereunder will be, in violation of, or lose any rights pursuant to, any
Timber Group Intellectual Property.
(b) No material claims with respect to the Timber Group Intellectual
Property have been asserted or, to the knowledge of G-P, are threatened by
any Person nor does G-P or any of its Subsidiaries know of any valid grounds
for any bona fide claims against the use by G-P or any of its Subsidiaries
of any of the Timber Group Intellectual Property, or challenging the
ownership, validity, enforceability or effectiveness of any of the Timber
Group Intellectual Property. All granted and issued patents and all
registered trademarks and service marks and all copyrights held by G-P or
any of its Subsidiaries that are included in the Timber Group Intellectual
Property are valid, enforceable and subsisting. To G-P's knowledge, there
has not been and there is not any unauthorized use, material infringement or
misappropriation of any of the Timber Group Intellectual Property by any
third Person, including, without limitation, any employee or former
employee.
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(c) No Timber Group Intellectual Property is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting in any manner
the licensing thereof by G-P or any of its Subsidiaries.
(d) At the Effective Time, the Spincos collectively shall own or be
licensed to use all of the Timber Group Intellectual Property.
Section 4.16 ENVIRONMENTAL MATTERS. Except as specifically set forth in
Section 4.16 of the G-P Disclosure Letter or except as would not pertain to or
affect the Timber Group:
(a) G-P is in material compliance with all Environmental Laws. Such
compliance includes, but is not limited to, the possession by G-P of all
permits and other governmental authorizations required under all applicable
Environmental Laws, and compliance with the terms and conditions thereof.
All permits and other governmental authorizations currently held by G-P
pursuant to the Environmental Laws are identified in Section 4.16(a) of the
G-P Disclosure Letter.
(b) G-P has not received and there does not remain pending any
communication or notice, whether from a Governmental Authority, citizens
group, employee or otherwise, that alleges that G-P is not in compliance
with any Environmental Laws, and there are no circumstances that may
materially prevent or interfere with such compliance in the future.
(c) There is no Environmental Claim relating to the Timber Group Real
Property or the operations currently conducted or proposed to be conducted
thereon that is pending or threatened against G-P or against any Person or
entity whose liability for any Environmental Claim G-P has retained or
assumed either contractually or by operation of law.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that would reasonably be expected to form the basis of any material
Environmental Claim against G-P or against any Person or entity whose
liability for any Environmental Claim G-P has retained or assumed either
contractually or by operation of law.
(e) Without in any way limiting the generality of the foregoing,
(i) all material on-site and off-site locations where G-P has (previously or
currently) stored, disposed or arranged for the disposal of Materials of
Environmental Concern are identified in Section 4.16(e)(i) of the G-P
Disclosure Letter, and (ii) all material underground storage tanks, and the
capacity and contents of such tanks, located on (x) any property owned or
(y) leased or any other property used by G-P that are operated or controlled
by G-P, are identified in Section 4.16(e)(ii) of the G-P Disclosure Letter.
(f) G-P has provided or otherwise made available to Plum Creek all
material assessments, reports, data, results of investigations or audits,
and other information that is in the possession of or reasonably available
to G-P regarding environmental matters pertaining to, or the environmental
condition of, the business of G-P, or the compliance (or noncompliance) by
G-P with any Environmental Laws in each of the foregoing as related to the
Timber Group.
(g) G-P is not required by virtue of the transactions set forth herein
and contemplated hereby, or as a condition to the effectiveness of any
transactions contemplated hereby, (i) to perform a site assessment for
Materials of Environmental Concern, (ii) to remove or remediate Materials of
Environmental Concern, (iii) to give notice to or receive approval from any
Governmental Authority pertaining to environmental matters, or (iv) to
record or deliver to any Person or entity any disclosure document or
statement pertaining to environmental matters.
Section 4.17 STATE TAKEOVER STATUTES. The provisions of Section 14-2-1132
of the GCC are inapplicable to each Merger, this Agreement and the transactions
contemplated hereby. The Board of Directors of G-P has unanimously approved this
Agreement and the transactions contemplated hereby,
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including the Mergers, and has taken all appropriate action so that the
transactions contemplated by this Agreement will be effected in accordance with
the provisions of Section 14-2-1110 through 14-2-1133 of the GCC. Each of the
Board of Directors of the Spincos has approved the Mergers and this Agreement
and such approvals are sufficient to render inapplicable to the Mergers, this
Agreement and the transactions contemplated hereby the provisions of
Section 203 of the DGCL.
Section 4.18 VOTING REQUIREMENTS; BOARD APPROVAL; APPRAISAL RIGHTS.
(a) The affirmative vote of G-P as the sole stockholder of each of the
Spincos is the only vote of any class of capital stock of G-P or any of its
Subsidiaries necessary to approve this Agreement, the Mergers and the
transactions contemplated hereby.
(b) The Board of Directors of G-P has (i) determined that the Mergers are
advisable and fair to, and in the best interests of G-P and its shareholders,
taken as a whole, (ii) approved this Agreement and the transactions contemplated
hereby, (iii) resolved to recommend that the holders of Timber Group Common
Stock approve and adopt this Agreement and (iv) approved the Spinoff.
(c) The Board of Directors of each Spinco has approved this Agreement and
the transactions contemplated hereby. G-P, as sole stockholder of each of the
Spincos, has approved this Agreement, the Mergers and the transactions
contemplated hereby.
(d) No holder of G-P Common Stock and no holder of a Unit will have
appraisal rights under Section 14-2-1301 of the GCC or Section 262 of the DGCL
as a result of, or in connection with this Agreement, each Merger and the
transactions contemplated hereby.
Section 4.19 OPINION OF FINANCIAL ADVISOR. G-P has received the opinion of
Morgan Stanley & Co. Incorporated to the effect that, as of the date of this
Agreement (i) the Spinoff and the Mergers are fair to G-P from a financial point
of view and (ii) the Exchange Ratio is fair to the holders of Timber Group
Common Stock from a financial point of view, and a copy of such opinion has been
delivered to Plum Creek.
Section 4.20 RIGHTS AGREEMENT. G-P has amended the Rights Agreement to
provide that (i) neither Plum Creek nor any of its "Affiliates" or "Associates"
(as such terms are defined in the Rights Agreement) shall be deemed an
"Acquiring Person" (as defined in the Rights Agreement) as a result of either
the execution and delivery of this Agreement or the consummation of the
transactions contemplated thereby, and (ii) the provisions of Section 11(q) of
the Rights Agreement shall not apply to the Redemption.
Section 4.21 INSURANCE. Section 4.21 of the G-P Disclosure Letter sets
forth a complete list of all of the insurance policies held by G-P, the Spincos
or their respective Subsidiaries that insure any assets of the Timber Group. G-P
maintains insurance coverage for the Timber Group with reputable insurers in
such amounts and covering such risks as are in accordance with normal industry
practice for companies engaged in business similar to that of G-P.
Section 4.22 TRANSACTIONS WITH AFFILIATES. Except as set forth in
Section 4.22 of the G-P Disclosure Letter or as otherwise disclosed in the G-P
SEC filings, since December 31, 1997, there have been no transactions,
agreements, arrangements or understandings between G-P or its Subsidiaries, on
the one hand, and G-P's Affiliates (other than wholly-owned Subsidiaries of G-P)
or other Persons, on the other hand, pertaining to or affecting the Timber
Group, that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act.
Section 4.23 MATERIAL CONTRACTS. Except as disclosed in or attached as
exhibits to the G-P SEC Filings or as disclosed in Section 4.23 of the G-P
Disclosure Letter, neither G-P, any of the Spincos nor any of their Subsidiaries
is a party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral), (a) as of the date hereof, which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC) pertaining to or affecting in any
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material respect the Timber Group, which requires expenditures or the
performance of services in an amount in excess of $5 million and is not
cancellable within one year, that has not been filed or incorporated by
reference in the G-P SEC Filings, (b) which contains any material non-compete
provisions with respect to any line of business or geographic area in which the
Timber Group business is conducted or which restricts the conduct of G-P, any of
the Spincos or any of their Subsidiaries with respect to any Timber Group
business conducted by G-P, any of the Spincos or any of their Subsidiaries or
any geographic area in which G-P, any of the Spincos or any of their
Subsidiaries may conduct Timber Group business, in each case in any material
respect, or (c) which would prohibit or materially delay the consummation of the
Mergers or any of the transactions contemplated by this Agreement. Each
contract, arrangement, commitment or understanding of the type described in this
Section 4.23, whether or not set forth in Section 4.23 of the G-P Disclosure
Letter, is referred to herein as a "Timber Group Material Contract." Each Timber
Group Material Contract is valid and binding on G-P, the Spincos or any of their
Subsidiaries, as applicable, and in full force and effect, and G-P, the Spincos
and their Subsidiaries have in all material respects performed all obligations
required to be performed by them to date individually or in the aggregate,
except for violations or defaults that would not reasonably be expected to have
a Timber Group Material Adverse Effect. Neither G-P, any of the Spincos nor any
of their Subsidiaries knows of, or has received notice of, any violation or
default under (nor to their knowledge does there exist any condition which with
the passage of time or the giving of notice would cause such a violation of or
default under) any Timber Group Material Contract or any other Contract to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that would not, individually or in the aggregate,
reasonably be expected to have a Timber Group Material Adverse Effect.
Section 4.24 REDEMPTION. Upon completion of the Redemption, the Spincos
collectively will hold all of the assets and have assumed all of the liabilities
(whether accrued, absolute, contingent or otherwise) attributed to the Timber
Group. As of July 1, 2000, the aggregate outstanding indebtedness attributed to
the Timber Group was $1.027 billion. Between July 1, 2000 and the date hereof,
G-P and its Subsidiaries have incurred no indebtedness for borrowed money
attributable to the Timber Group other than borrowings in the ordinary course of
business.
Section 4.25 POLICIES WITH RESPECT TO ALLOCATION OF EXPENSES. G-P has
provided Plum Creek with a copy of all written management and allocation
policies adopted by the G-P Board of Directors since November 1, 1997 and a
summary of the methodology used in implementing those policies (the "Allocation
Policies").
Section 4.26 DISCLOSURE. No representation or warranty by G-P contained in
this Agreement and no statement contained in any document (including financial
statements and the G-P Disclosure Letter), certificate, or other writing
furnished or to be furnished by G-P to Plum Creek or any of its representatives
pursuant to the provisions hereof or in connection with this Agreement and the
transactions contemplated thereby, contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
Section 4.27 BROKER'S OR FINDER'S FEE. Except for the fees of Morgan
Stanley & Co. Incorporated, no agent, broker, Person or firm acting on behalf of
G-P is, or will be, entitled to any investment banking or broker's or finder's
fees from any of the parties hereto, or from any Person controlling, controlled
by, or under common control with any of the parties hereto, in connection with
this Agreement or any of the transactions contemplated hereby. G-P has provided
Plum Creek a copy of the Morgan Stanley & Co. Incorporated engagement letter
with G-P and such engagement letter will not be amended without the consent of
Plum Creek.
Section 4.28 SOLVENCY. (a) The consummation of the transactions
contemplated hereby will not cause G-P to be unable to pay its debts as they
come due in the usual course of business or cause its
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total assets to become less than the sum of its total liabilities in accordance
with Section 14-2-640 of the GCC.
(b) G-P shall use its commercially reasonable efforts to obtain the Solvency
Opinions.
Section 4.29 INSTALLMENT NOTE. On or about June 24, 2000, if the
installment note received in connection with the sale of the Fort Bragg
timberlands (the "Fort Bragg Note") were to be monetized at that point in time
based upon the then existing facts and circumstances, G-P believes that the
proceeds from such monetization would have been not less than $350 million, and
the interest earned on the Fort Bragg Notes would have been greater than or
equal to the interest paid on the note issued in such monetization.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PLUM CREEK
Except as otherwise set forth in the Plum Creek Disclosure Letter specifying
the section to which it relates, Plum Creek hereby represents and warrants to
G-P and the Spincos as follows:
Section 5.01 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Plum
Creek is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Plum Creek is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such jurisdictions
where the failure to be so qualified or licensed and in good standing would not
reasonably be expected to have, individually or in the aggregate, a Plum Creek
Material Adverse Effect.
Section 5.02 AUTHORIZATION AND VALIDITY OF AGREEMENT. Plum Creek has full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and, subject to obtaining the Plum Creek Stockholder
Approval, to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Plum Creek, and the consummation
by Plum Creek of the transactions contemplated hereby, have been duly authorized
and unanimously approved by the Board of Directors of Plum Creek and no other
corporate action on the part of Plum Creek is necessary to authorize the
execution, delivery and performance of this Agreement by Plum Creek and the
consummation of the transactions contemplated hereby other than obtaining the
Plum Creek Stockholder Approval. This Agreement has been duly executed and
delivered by Plum Creek and is a valid and binding obligation of Plum Creek,
enforceable against Plum Creek in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
Section 5.03 CAPITALIZATION.
(1) The authorized capital stock of Plum Creek consists of 525,634,567
shares of which (i) 300,000,000 shares are designated Plum Creek Common Stock,
(ii) 634,566 shares are designated special voting common stock, par value $0.01
per share ("Plum Creek Special Voting Common Stock"), (iii) 150,000,001 shares
are designated excess stock, par value $0.01 per share ("Plum Creek Excess
Stock"), and (iv) 75,000,000 shares designated preferred stock, par value $0.01
per share ("Plum Creek Preferred Stock"). As of the date hereof: (i) 68,572,009
shares of Plum Creek Common Stock were issued and outstanding, (ii) 3,425,000
shares of Plum Creek Common Stock were reserved for issuance under Plum Creek's
stock option and stock benefit plans and arrangements, (iii) 634,566 shares of
Plum Creek Special Voting Common Stock were issued and outstanding; (iv) no
shares of Plum Creek Special Voting Common Stock were reserved for issuance
under Plum Creek's stock option and stock
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benefit plans and arrangements, (v) no shares of Plum Creek Excess Stock were
issued and outstanding and (vi) no shares of Plum Creek Preferred Stock were
issued and outstanding. All issued and outstanding shares of capital stock of
Plum Creek are, and all shares of Plum Creek Common Stock to be issued hereunder
will be, upon issuance, duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in the preceding sentence or as set forth in
Section 5.03(a) of the letter delivered by Plum Creek to G-P concurrently with
the delivery of this Agreement (the "Plum Creek Disclosure Letter"), (i) Plum
Creek is not bound by, obligated under, or party to an Issuance Obligation with
respect to any security of Plum Creek or any Subsidiary of Plum Creek and
(ii) there is no outstanding Voting Debt of Plum Creek. There are no outstanding
obligations of Plum Creek to repurchase, redeem or otherwise acquire any
outstanding securities of Plum Creek. Except as set forth in Section 5.03(a) of
the Plum Creek Disclosure Letter, there are no restrictions of any kind which
prevent or restrict the payment of dividends by Plum Creek or any of its
Subsidiaries and there are no limitations or restrictions on the right to vote,
sell or otherwise dispose of such capital stock or other ownership interests.
(b) All of the issued and outstanding shares of capital stock of each of
Plum Creek's Subsidiaries are validly existing, fully paid and non-assessable.
No Subsidiary of Plum Creek has outstanding Voting Debt and no Subsidiary of
Plum Creek is bound by, obligated under, or party to an Issuance Obligation with
respect to any security of Plum Creek or any Subsidiary of Plum Creek and there
are no obligations of Plum Creek or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding securities of any of its
Subsidiaries or any capital stock of, or other ownership interests in, any of
its Subsidiaries.
(c) Except as set forth in Section 5.03(c) of the Plum Creek Disclosure
Letter, Plum Creek does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any corporation, partnership, joint venture,
limited liability company or other business association or entity which is
material to Plum Creek and its Subsidiaries, taken as a whole.
(d) Plum Creek does not directly or indirectly own any equity securities of
G-P.
Section 5.04 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming (a) the
filings required under the HSR Act are made and the waiting periods thereunder
(if applicable) have been terminated or expired, (b) the applicable requirements
of the Securities Act and the Exchange Act are met, (c) the requirements under
any applicable state securities or blue sky laws are met, (d) the requirements
of the NYSE and the PE in respect of the listing of the shares of Plum Creek
Common Stock to be issued hereunder are met, (e) the filing of the Certificates
of Merger and other appropriate merger documents, if any, as required by the
DGCL, are made, and (f) the valid waiver and consent of SPO of its voting rights
as holder of the Plum Creek Special Voting Common Stock, the execution and
delivery of this Agreement by Plum Creek and the consummation by Plum Creek of
the transactions contemplated hereby do not and will not: (i) violate or
conflict with any provision of Plum Creek's Certificate of Incorporation or Plum
Creek's By-Laws or the comparable governing documents of any of its
Subsidiaries; (ii) violate or conflict with any Laws or Orders of any
Governmental Authority applicable to Plum Creek or any of its Subsidiaries or by
which any of their respective properties or assets may be bound; (iii) except as
set forth in Section 5.04(f)(iii) of the Plum Creek Disclosure Letter, require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any Governmental Authority; or (iv) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default under, or give rise to any right of termination, cancellation or
acceleration, or result in the creation of any Lien upon any of the properties
or assets of Plum Creek or any of its Subsidiaries under, or give rise to any
obligation, right of termination, cancellation, acceleration or increase of any
obligation or a loss of a material benefit under, any of the terms, conditions
or provisions of any Contracts to which Plum Creek or any of its Subsidiaries is
a party, or by which any such Person or any of its properties or assets are
bound, excluding from the
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foregoing clauses (ii), (iii) and (iv) conflicts, violations, breaches,
defaults, rights of payment and reimbursement, terminations, modifications,
accelerations and creations and impositions of Liens which would not reasonably
be expected to, individually or in the aggregate, have a Plum Creek Material
Adverse Effect.
Section 5.05 PLUM CREEK SEC FILINGS; FINANCIAL STATEMENTS.
(a) Plum Creek has timely filed all registration statements, prospectuses,
forms, reports and documents and related exhibits required to be filed by it
under the Securities Act or the Exchange Act, as the case may be, since
December 31, 1997 (collectively, the "Plum Creek SEC Filings"). The Plum Creek
SEC Filings (i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Plum Creek
Subsidiary is subject to the periodic reporting requirements of the Exchange
Act.
(b) Each of the consolidated financial statements of Plum Creek (including,
in each case, any notes thereto) contained in the Plum Creek SEC Filings was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q under the
Exchange Act and to normal and recurring adjustment) and each presented fairly
in all material respects the consolidated financial position of Plum Creek and
the consolidated Plum Creek's Subsidiaries as of the respective dates thereof
and for the respective periods indicated therein, except as otherwise noted
therein (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments). The books and records of Plum Creek and its Subsidiaries
have been, and are being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements.
Section 5.06 NO UNDISCLOSED LIABILITIES. Except as and to the extent set
forth on the consolidated balance sheet of Plum Creek as of March 31, 2000
included in Plum Creek's Form 10-Q for the period ended March 31, 2000,
including the notes thereto, neither Plum Creek nor any of its Subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in the notes thereto prepared in accordance with GAAP, except for
liabilities or obligations incurred since April 1, 2000 in the ordinary course
of business that would neither, individually or in the aggregate,
(i) reasonably be expected to have a Plum Creek Material Adverse Effect nor
(ii) reasonably be expected to prevent or materially delay the performance of
its obligations under this Agreement, the Mergers or the transactions
contemplated thereby.
Section 5.07 INFORMATION TO BE SUPPLIED.
(a) Each of the Joint Proxy Statement/Prospectus registration statement on
Form S-4 to be filed with the SEC by Plum Creek in connection with the issuance
of Plum Creek Common Stock in the Mergers, as amended or supplemented from time
to time (as so amended and supplemented, the "Merger Registration Statement")
and the other documents required to be filed by Plum Creek with the SEC in
connection with the Mergers and the other transactions contemplated hereby will
comply as to form, in all material respects, with the requirements of the
Exchange Act and the Securities Act, as the case may be, and will not, on the
date of its filing or, in the case of the Merger Registration Statement, at the
time it becomes effective under the Securities Act, or on the dates the Joint
Proxy Statement/Prospectus is mailed to the shareholders of the Timber Group
Common Stock and the stockholders of Plum Creek Common Equity and at the time of
the G-P Shareholder Meeting and Plum Creek Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any
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material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(b) Notwithstanding the foregoing provisions of this Section 5.07, no
representation or warranty is made by Plum Creek with respect to statements made
or incorporated by reference in the Merger Registration Statement based on
information supplied by G-P expressly for inclusion or incorporation by
reference therein or based on information which is not made in or incorporated
by reference in such documents but which should have been disclosed pursuant to
Section 4.07.
Section 5.08 ABSENCE OF CERTAIN EVENTS. Except as disclosed in
Section 5.08 of the Plum Creek Disclosure Letter or as required or expressly
permitted by this Agreement, since January 1, 2000, Plum Creek and its
Subsidiaries have operated their respective businesses only in the ordinary
course of business and there has not occurred (i) any event, occurrence or
conditions which would reasonably be expected to, individually or in the
aggregate, have a Plum Creek Material Adverse Effect or (ii) other than in the
ordinary course of business in a manner consistent with past practices, any
increase in the compensation of, or change of control agreement with, any
officer of Plum Creek or any of its Subsidiaries or any general salary or
benefits increase to the employees of Plum Creek or any of its Subsidiaries.
Section 5.09 LITIGATION. Except as disclosed in Plum Creek's Form 10-K
dated December 31, 1999, there are no investigations, actions, suits or
proceedings pending against Plum Creek or its Subsidiaries or, to the knowledge
of Plum Creek, threatened against Plum Creek or its Subsidiaries (or any of
their respective properties, rights or franchises), at law or in equity, or
before or by any Federal or state commission, board, bureau, agency, regulatory
or administrative instrumentality or other Governmental Authority or any
arbitrator or arbitration tribunal, that would reasonably be expected to,
individually or in the aggregate, have a Plum Creek Material Adverse Effect,
and, to the knowledge of Plum Creek, no development has occurred with respect to
any pending or threatened action, suit or proceeding that would reasonably be
expected to have a Plum Creek Material Adverse Effect or would reasonably be
expected to prevent, materially impair or materially delay the consummation of
the transactions contemplated hereby. Neither Plum Creek nor any of its
Subsidiaries is subject to any judgment, order or decree entered in any lawsuit
or proceeding which would reasonably be expected to have, individually or in the
aggregate, a Plum Creek Material Adverse Effect.
Section 5.10 VOTING REQUIREMENTS; SPO APPROVAL; BOARD APPROVAL.
(a) The affirmative vote of (i) the holders of at least a majority of the
votes entitled to be cast by the holders of the Plum Creek Common Equity (voting
together as a single class, with each share of Plum Creek Common Stock and Plum
Creek Special Voting Common Stock having one vote) and (ii) the holders of at
least a majority of the outstanding shares of Plum Creek Special Voting Common
Stock (voting as a separate class with each share of Plum Creek Special Voting
Common Stock having one vote) are the only votes of any class or series of Plum
Creek's capital stock necessary to approve this Agreement, the Mergers and the
transactions contemplated hereby (the "Plum Creek Stockholder Approval").
(b) SPO, as the sole stockholder of the Plum Creek Special Voting Common
Stock, has agreed pursuant to the Voting Agreement to approve this Agreement,
the Mergers and the transactions contemplated hereby and to convert all of its
Plum Creek Special Voting Common Stock to Plum Creek Common Stock immediately
prior to the Mergers.
(c) The Board of Directors of Plum Creek has, as of the date of this
Agreement, (i) determined that the Mergers are advisable and fair to, and in the
best interests of Plum Creek and its stockholders, (ii) approved this Agreement,
the Mergers and the transactions contemplated hereby, (iii) resolved to
recommend that the stockholders of Plum Creek approve and adopt this Agreement,
the Mergers, and the transactions contemplated hereby and (iv) upon receipt of
acceptable undertakings from both Southeastern Asset Management, Inc. and
Capital Research and Management Company, has waived
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the ownership limitation with respect to shares of Plum Creek Common Stock as
set forth in Article IV of Plum Creek's Certificate of Incorporation.
Section 5.11 TITLE TO PROPERTIES: ENCUMBRANCES. Each of Plum Creek and its
Subsidiaries has good, valid and marketable title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets except where the failure to have such good, valid and
marketable title would not reasonably be expected to, individually or in the
aggregate, have a Plum Creek Material Adverse Effect; in each case subject to no
Liens, except for (a) Liens reflected in Plum Creek's consolidated balance sheet
as of March 31, 2000, (b) Liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract from
the value of, or impair the use of, such property by Plum Creek or any of its
Subsidiaries, (c) Liens for current Taxes, assessments or governmental charges
or levies on property not yet due or which are being contested in good faith and
for which appropriate reserves in accordance with GAAP have been created and
(d) Liens which would not reasonably be expected to, individually or in the
aggregate, have a Plum Creek Material Adverse Effect. Except as would not
reasonably be expected to, individually or in the aggregate, have a Plum Creek
Material Adverse Effect, each of Plum Creek and its Subsidiaries are in
compliance with the terms of all leases of tangible properties to which it is a
party and under which it is in occupancy, and all such leases are in full force
and effect.
Section 5.12 COMPLIANCE WITH LAWS.
(a) Each of Plum Creek and its Subsidiaries are in compliance with all
applicable Federal, State, local and foreign statutes, laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
reasonably be expected to, individually or in the aggregate, have a Plum Creek
Material Adverse Effect.
(b) Each of Plum Creek and its Subsidiaries hold, to the extent legally
required, all Permits that are required for its operation as now conducted,
except where the failure to hold any such Permit would not reasonably be
expected to, individually or in the aggregate, have a Plum Creek Material
Adverse Effect, and there has not occurred any default under any such Permit,
except to the extent that such default would not reasonably be expected to,
individually or in the aggregate, have a Plum Creek Material Adverse Effect.
Section 5.13 MATERIAL CONTRACTS. Plum Creek and its Subsidiaries have in
all material respects performed all obligations required to be performed by them
to date individually or in the aggregate with respect to any Plum Creek Material
Contract, except for violations or defaults that would not reasonably be
expected to have a Plum Creek Material Adverse Effect. Neither Plum Creek nor
any of its Subsidiaries knows of, or has received notice of, any violation or
default under (nor to their knowledge does there exist any condition which with
the passage of time or the giving of notice would cause such a violation of or
default under) any Plum Creek Material Contract to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate, reasonably be
expected to have a Plum Creek Material Adverse Effect. Each Plum Creek Material
Contract is valid and binding on Plum Creek or any of its Subsidiaries, as
applicable, and in full force and effect, and Plum Creek and its Subsidiaries
have in all material respects performed all obligations required to be performed
by them to date individually or in the aggregate, except for violations or
defaults that would not reasonably be expected to have a Plum Creek Material
Adverse Effect.
Section 5.14 ENVIRONMENTAL MATTERS. Except as would not have a Plum Creek
Material Adverse Effect or is not otherwise disclosed in the Plum Creek SEC
Filings:
(a) Plum Creek is in material compliance with all Environmental Laws.
Such compliance includes, but is not limited to, the possession by Plum
Creek of all permits and other governmental
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authorizations required under all applicable Environmental Laws, and
compliance with the terms and conditions thereof.
(b) Plum Creek has not received and there does not remain pending any
communication or notice, whether from a Governmental Authority, citizens
group, employee or otherwise, that alleges that Plum Creek is not in
compliance with any Environmental Laws, and there are no circumstances that
may materially prevent or interfere with such compliance in the future.
(c) There is no Environmental Claim relating to the Plum Creek Real
Property or the operations currently conducted or proposed to be conducted
thereon that is pending or threatened against Plum Creek or against any
Person or entity whose liability for any Environmental Claim Plum Creek has
retained or assumed either contractually or by operation of law.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that could reasonably be expected to form the basis of any material
Environmental Claim against Plum Creek or against any Person or entity whose
liability for any Environmental Claim Plum Creek has retained or assumed
either contractually or by operation of law.
(e) Plum Creek is not required by virtue of the transactions set forth
herein and contemplated hereby, or as a condition to the effectiveness of
any transactions contemplated hereby, (i) to perform a site assessment for
Materials of Environmental Concern, (ii) to remove or remediate Materials of
Environmental Concern, (iii) to give notice to or receive approval from any
Governmental Authority pertaining to environmental matters, or (iv) to
record or deliver to any Person or entity any disclosure document or
statement pertaining to environmental matters.
Section 5.15 TAXES. Except as otherwise set forth in Section 5.15 of the
Plum Creek Disclosure Letter:
(a) Plum Creek and each of its Subsidiaries and each of its Affiliated
Entities:
(i) have timely paid or caused to be paid all material Taxes required
to be paid by it. The accruals for Taxes payable in Plum Creek's most
recent consolidated financial statements are adequate to cover all
material Taxes attributable to periods (or portions thereof) ending on
the date of such financial statements, and no material Taxes attributable
to periods following the date of such financial statements have been
incurred other than in the ordinary course of business;
(ii) have filed or caused to be filed in a timely manner all material
Tax Returns required to be filed by such entities with the appropriate
Tax Authority in all jurisdictions in which Tax Returns are required to
be filed, and all such Tax Returns are true, correct and complete in all
material respects; and
(iii) have not requested or caused to be requested any extension of
time within which to file any material Tax Return, which Tax Return has
not since been filed.
(b) There are no pending Tax audits relating to Plum Creek or any of its
Subsidiaries and no waivers of statutes of limitations have been given or
requested by Plum Creek or any of its Subsidiaries that are currently
outstanding.
(c) No Liens for Taxes have been filed against Plum Creek or any of its
Subsidiaries, except for Liens for Taxes not yet due or payable for which
adequate reserves have been provided for in the latest balance sheet of Plum
Creek.
(d) Neither Plum Creek nor any of its Subsidiaries has received notice
within the last three years from any Tax Authority in a jurisdiction in
which Plum Creek or any of its Subsidiaries does
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not file Tax Returns that Plum Creek or any of its Subsidiaries is or may be
subject to taxation by that jurisdiction.
(e) Plum Creek (i) for all taxable years commencing with the taxable
year ending December 31, 1999, has been subject to taxation as a Real Estate
Investment Trust within the meaning of section 856 of the Code and has
qualified as a Real Estate Investment Trust for all such years, and
(ii) has operated since December 31, 1999 to the date of this
representation, and intends to continue to operate, in such a manner as to
qualify as a Real Estate Investment Trust for the taxable year that includes
the Closing Date and thereafter.
Section 5.16 TAX COMFORT. Plum Creek has received advice from its tax
counsel, that, based on the Federal income tax laws in effect at the time of the
execution of this Agreement and the facts and circumstances known to Plum Creek
on the date hereof, the cutting of timber transferred by the Spincos to the
Surviving Corporation pursuant to the Mergers during the ten year period
following the Effective Date should not be subject to section 1374 of the Code.
Section 5.17 TRANSACTIONS WITH AFFILIATES. Except as disclosed in the Plum
Creek SEC filings, since December 31, 1997, there have been no transactions,
agreements, arrangements or understandings between Plum Creek or its
Subsidiaries, on the one hand, and Plum Creek's Affiliates (other than
wholly-owned Subsidiaries of Plum Creek) or other Persons, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act.
Section 5.18 INSURANCE. Plum Creek maintains insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in business similar to that
of Plum Creek.
Section 5.19 EMPLOYMENT RELATIONS.
(a) Except as would not reasonably be expected to, individually or in the
aggregate, have a Plum Creek Material Adverse Effect or as set forth in
Section 5.19(a) of the Plum Creek Disclosure Letter, (i) Plum Creek is not a
party to any collective bargaining agreement or other labor union contract,
(ii) there are no organizational campaigns, demands or proceedings pending or,
to Plum Creek's knowledge, threatened by any labor organization or group of
employees seeking recognition or certification as collective bargaining
representatives of any group of employees of Plum Creek, and (iii) there are no
strikes, controversies, slowdowns, work stoppages or material labor disputes,
or, to Plum Creek's knowledge, threatened involving any site of employment of
Plum Creek.
(b) Plum Creek is, and has at all times been, in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and is not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation.
To the knowledge of Plum Creek, there are no complaints, controversies, charges,
investigations, lawsuits or other proceedings relating to Plum Creek pending in
any court or with any agency responsible for the enforcement of Federal, state,
local or foreign labor or employment laws regarding breach of any express or
implied contract or employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship.
Section 5.20 PLUM CREEK EMPLOYEE BENEFIT PLANS.
(a) "Plum Creek Plans" shall mean each employment, bonus, deferred
compensation, incentive compensation, stock purchase, stock option, stock
appreciation right or other stock-based incentive, severance, change-in-control,
or termination pay, hospitalization or other medical, disability, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by Plum Creek
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or any of its subsidiaries, or by any trade or business, whether or not
incorporated, that together with Plum Creek or any of its subsidiaries would be
deemed a "single employer" within the meaning of Section 4001(b)(1) of ERISA (a
"Plum Creek ERISA Affiliate"), for the benefit of any current or former employee
or director of Plum Creek, whether formal or informal and whether legally
binding or not.
(b) With respect to each Plum Creek Plan, Plum Creek has made available or
will make available to G-P a current, accurate and complete copy thereof and, to
the extent applicable: (i) the most recent determination letter, (ii) any
summary plan description and (iii) for the two most recent years (A) the
form 5500 and attached schedules, (B) audited financial statements and
(C) actuarial valuation reports.
(c) The Plum Creek Plans are in compliance in all material respects with all
applicable requirements of ERISA, the Code, and other applicable laws and have
been administered in accordance with their terms and such laws, except where the
failure to so comply would not reasonably be expected to have a Plum Creek
Material Adverse Effect. Each Plum Creek Plan which is intended to be qualified
within the meaning of Section 401 of the Code has received a favorable
determination letter as to its qualification, and, to the knowledge of Plum
Creek, nothing has occurred that would reasonably be expected to affect such
qualification.
(d) There are no pending, or to the knowledge of Plum Creek, threatened
claims and no pending or, to the knowledge of Plum Creek, threatened litigation
with respect to any Plum Creek Plans that would reasonably be expected to have a
Plum Creek Material Adverse Effect, other than ordinary and usual claims for
benefits by participants and beneficiaries.
(e) No liability under Title IV of ERISA has been incurred by Plum Creek,
any of its Subsidiaries or any Plum Creek ERISA Affiliate since the Effective
Date of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to Plum Creek or any of its subsidiaries or any Plum
Creek ERISA Affiliate of incurring any liability under such Title, other than
liability for premiums due to the PBGC, which payments have been or will be made
when due, that would reasonably be expected to have a Plum Creek Material
Adverse Effect. To the extent this representation applies to Sections 4064, 4069
or 4204 of Title IV of ERISA, it is made not only with respect to the Plum Creek
Plans but also with respect to any employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to which Plum Creek, any of its
subsidiaries or any Plum Creek ERISA Affiliate made, or was required to make,
contributions during the past six years.
(f) No lien has been imposed under section 412(n) of the Code or
Section 302(f) of ERISA on the assets of Plum Creek, any of its subsidiaries or
any Plum Creek ERISA Affiliate, and no event or circumstance has occurred that
is reasonably likely to result in the imposition of any such lien on any such
assets on account of any Plum Creek Plan.
(g) Except for liabilities that would not reasonably be expected to have a
Plum Creek Material Adverse Effect, with respect to any Plum Creek Plan that is
a "multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, (i) neither Plum Creek, any of its subsidiaries nor any Plum Creek ERISA
Affiliate has, since September 26, 1980, made or suffered a "complete
withdrawal" or a "partial withdrawal," (as such terms are respectively defined
in Sections 4203 and 4205 of ERISA) pursuant to which all liability in respect
thereof has not been satisfied, (ii) no event (including the transactions
contemplated hereunder) is reasonably expected to occur that presents a material
risk of a complete or partial withdrawal, and (iii) neither Plum Creek, each of
its subsidiaries nor any Plum Creek ERISA Affiliate has any contingent material
liability under Section 4204 of ERISA.
Section 5.21 BROKER'S OR FINDER'S FEE. Except for Goldman, Sachs & Co.
(whose fees and expenses will be paid by Plum Creek in accordance with their
agreement with such firm, a true and correct copy of which has been previously
delivered to G-P by Plum Creek), no agent, broker, Person or firm acting on
behalf of Plum Creek is, or will be, entitled to any investment banking or
broker's or
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finder's fees from any of the parties hereto, or from any Person controlling,
controlled by, or under common control with any of the parties hereto, in
connection with this Agreement or any of the transactions contemplated hereby.
ARTICLE VI
COVENANTS
Section 6.01 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS.
(a) Subject to compliance with applicable law, during the period commencing
on the date hereof and ending on the earlier of (i) the Closing Date and
(ii) the date on which this Agreement is terminated pursuant to Section 8.01
hereof, each of G-P, the Spincos and Plum Creek shall, and each shall cause each
of its Subsidiaries to, upon reasonable notice, afford the other party, and its
respective counsel, accountants, consultants and other authorized
representatives, access during normal business hours to its and its
Subsidiaries' employees, properties, books and records only to the extent that
they relate to the Timber Group in order that they may have the opportunity to
make such investigations as they shall desire of its and its Subsidiaries'
affairs; such investigation shall not, however, affect the representations and
warranties made by G-P, the Spincos or Plum Creek in this Agreement.
(b) G-P shall furnish promptly to Plum Creek and Plum Creek shall furnish
promptly to G-P (i) a copy of each form, report, schedule, statement,
registration statement and other document filed by it or its Subsidiaries during
such period pursuant to the requirements of Federal, state or foreign securities
laws and (ii) all other information concerning the Timber Group's business,
properties and personnel as Plum Creek or G-P may reasonably request.
(c) Each of G-P and Plum Creek agrees to cause its officers and employees to
furnish such additional financial and operating data and other information and
respond to such inquiries as the other party shall from time to time reasonably
request (in each case, as such data, information and inquiries relate to the
Timber Group or Plum Creek, as the case may be).
(d) G-P shall comply with the disclosure and information requirements set
forth in Section 2 of the Tax Matters Agreement.
Section 6.02 CONFIDENTIALITY. Each of Plum Creek, the Spincos and G-P will
hold, and will use commercially reasonable efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the other party furnished to it or its Affiliates in
connection with the transactions contemplated by this Agreement, except to the
extent that such information can be shown to have been (i) previously known on a
nonconfidential basis by such party, (ii) in the public domain through no fault
of such party or (iii) later lawfully acquired by such party from sources other
than the other party not in violation of any obligation of confidentiality;
provided that each of Plum Creek, the Spincos and G-P may disclose such
information to its officers, directors, employees, accountants, counsel,
consultants, advisors, lenders and agents in connection with the transactions
contemplated by this Agreement so long as such party informs such Persons of the
confidential nature of such information and directs them to treat it
confidentially and any breach of this Section 6.02 or by such Person shall be
deemed a breach by Plum Creek, the Spincos or G-P, as the case may be. If this
Agreement is terminated, each of Plum Creek, the Spincos and G-P will, and will
use commercially reasonable efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
the other party, upon request, all documents and other materials, and all copies
thereof, that it or its Affiliates obtained, or that were obtained on their
behalf, from the other party in connection with this Agreement and that are
subject to such confidence.
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Section 6.03 CONDUCT OF THE BUSINESS OF G-P PENDING THE EFFECTIVE
TIME. Except as set forth in Section 6.03 of the G-P Disclosure Letter:
(a) Except as would not pertain to or affect the Timber Group in any
material way, G-P agrees that, between the date of this Agreement and the
Effective Time, except as contemplated by any other provision of this
Agreement, G-P and each of its Subsidiaries shall use their commercially
reasonable efforts to conduct the Timber Group operations in all material
respects only according to their ordinary and usual course of business in a
manner consistent with past practice, preserve intact the Timber Group
business organization, keep available the services of the Timber Group
officers and employees and maintain satisfactory relationships with
licensors, suppliers, distributors, clients, joint venture partners and
others having significant business relationships with the Timber Group.
(b) Except as provided in Section 6.03(a) herein, or except as shall be
mutually agreed in writing by G-P and Plum Creek, G-P agrees that, between
the date of this Agreement and the Effective Time, (i) G-P and each of its
Subsidiaries shall use commercially reasonable efforts to (x) cause the
transactions contemplated by this Agreement to qualify as a series of
substantially tax-free transactions under the Code and (y) not take, and
prevent any Affiliate from taking any actions that could prevent such
transactions from qualifying as substantially tax-free transactions under
the Code, and (ii) neither G-P nor any of its Subsidiaries shall issue any
equity interests if it would cause the transactions contemplated by this
Agreement to fail to qualify as a series of tax-free transactions under the
Code.
(c) Except as provided in Section 6.03(a), (d)(iii), (d)(v) or (d)(vi),
or except as shall be mutually agreed in writing by G-P and Plum Creek, G-P
agrees that, between the date of this Agreement and the Effective Time, G-P
and each of its Subsidiaries shall use any cash generated from the
operations, financing transactions, asset dispositions or investments of the
Timber Group to pay expenses and reserve for Taxes allocated to the Timber
Group in accordance with the Allocation Policies, or use any such cash for
permitted expenditures under this Agreement or to reduce indebtedness
attributed to the Timber Group.
(d) Without limiting the generality of the foregoing, and except as
would not pertain to or affect in any material way the Timber Group or as
otherwise provided in this Agreement, before the Notice of Redemption Date,
G-P shall not, without the prior written consent of Plum Creek (which
consent shall not be unreasonably withheld or delayed), nor shall it permit
any of its subsidiaries to:
(i) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(ii) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, guarantee or encumbrance of (A) any
shares of Timber Group Common Stock or securities convertible or
exchangeable or exercisable for any shares of Timber Group Common Stock,
or any options, warrants or other rights of any kind to acquire any
shares of such Timber Group Common Stock or any Timber Group Equity
Interests except (i) the issuance of Timber Group Common Stock or Units
upon the exercise of G-P Options or (ii) the issuance of Timber Group
Common Stock under any stock purchase plan or (B) other than in the
ordinary course of business and in a manner consistent with past practice
and not in excess of $5 million individually, any property or assets of
the Timber Group;
(iii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of the Timber Group Common Stock (other than regular quarterly
cash dividends at a rate not in excess of $.25 per share of Timber Group
Common Stock declared and paid in the ordinary course and consistent with
past
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practice) or enter into any agreement with respect to the voting of the
Timber Group Common Stock;
(iv) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of the Timber Group Common
Stock;
(v) (A) except as permitted under Section 6.03(d)(vi) or other than
in the ordinary course of business in a manner consistent with past
practice and not in excess of $10 million individually, acquire
(including, without limitation, by merger, consolidation, or acquisition
of stock or assets) any interest in any corporation, partnership, other
business organization, Person or any division thereof (other than a
wholly owned Subsidiary or any preferred stock of a Subsidiary) or any
assets for and on behalf of the Timber Group; (B) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any Person for borrowed money, except for
(1) indebtedness for borrowed money incurred in the ordinary course of
business or in connection with transactions otherwise permitted under
this Section 6.03, (2) indebtedness incurred to refinance any existing
indebtedness or (3) other indebtedness for borrowed money under existing
credit facilities or (4) as contemplated by the Separation Agreement; or
(C) enter into or amend any contract, agreement, commitment or
arrangement that, if fully performed, would not be permitted under this
Section 6.03(d)(v);
(vi) except as set forth in Section 6.03(d)(vi) of the G-P Disclosure
Letter, acquire any interest in timberlands; PROVIDED, HOWEVER, that
subject to prior written notice to Plum Creek, G-P may acquire an
interest in timberlands at or below fair market value if such acquisition
does not otherwise jeopardize the intended tax consequences of the
transactions contemplated by this Agreement;
(vii) change its accounting policies or procedures with respect to the
Timber Group, other than in the ordinary course of business in a manner
consistent with past practice or except as required by changes in GAAP;
(viii) except to the extent required under existing plans or agreements
or by law or as contemplated by this Agreement or any Ancillary Contract
(A) increase the compensation payable or to become payable to any of the
officers, directors, employees, agents or consultants of the Timber Group
(other than general increases in wages to officers and employees in the
ordinary course consistent with past practice) or to Persons providing
management services to the Timber Group; (B) make any loans from the
assets of the Timber Group to any of its officers, directors, employees,
Affiliates, agents or consultants not in the ordinary course of business
and consistent with past practice or make any change in its existing
borrowing or lending arrangements that are part of the Timber Group for
or on behalf of any such Persons not in the ordinary course of business
and consistent with past practice, whether pursuant to an employee
benefit plan or otherwise; or (C) adopt or materially amend, any new or
existing Plan relating to employees of the Timber Group;
(ix) amend, modify or terminate any Ancillary Contracts;
(x) enter into any monetization transaction with respect to the
installment note received in connection with the sale of the Fort Bragg
timberlands (the "Fort Bragg Note");
(xi) take any action that is intended or may reasonably be expected
to result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Notice of Redemption Date, or in any of the conditions set
forth in Article VII not being satisfied or in a violation of any
provision of this Agreement, except, in every case, as may be required by
applicable Law; or
(xii) agree, in writing or otherwise, to take any of the foregoing
actions.
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Section 6.04 CONDUCT OF THE BUSINESS OF PLUM CREEK PENDING THE EFFECTIVE
TIME.
(a) Except as set forth in Section 6.04(a) of the Plum Creek Disclosure
Letter, Plum Creek agrees that, between the date of this Agreement and the
Effective Time, except as contemplated by any other provision of this Agreement,
Plum Creek and each of its Subsidiaries shall use their commercially reasonable
efforts to conduct their respective operations in all material respects only
according to their ordinary and usual course of business consistent with past
practice, preserve intact their respective business organization, keep available
the services of their officers and employees, maintain satisfactory
relationships with licensors, suppliers, distributors, clients, joint venture
partners and others having significant business relationships with them.
(b) Except as provided in Section 6.04(a) herein, or except as shall be
mutually agreed in writing by G-P and Plum Creek, Plum Creek agrees that,
between the date of this Agreement and the Effective Time, (i) Plum Creek and
each of its Subsidiaries shall use commercially reasonable efforts to (x) cause
the transactions contemplated by this Agreement to qualify as a series of
substantially tax-free transactions under the Code, (y) not take, and prevent
any Affiliate from taking, any actions that could prevent such transactions from
qualifying as substantially tax-free transactions under the Code and
(z) maintain its status as a Real Estate Investment Trust under the Code, and
(ii) neither Plum Creek nor any of its Subsidiaries shall issue any equity
interests if it would cause the transactions contemplated by this Agreement to
fail to qualify as a series of tax-free transactions under the Code.
(c) Except as provided in Section 6.04(a), (d)(iii), (d)(v) or (d)(vi), or
except as shall be mutually agreed in writing by G-P and Plum Creek, Plum Creek
agrees that, between the date of this Agreement and the Effective Time, Plum
Creek and each of its Subsidiaries shall retain any cash generated from
operations, financing transactions, asset dispositions or investments of Plum
Creek, other than cash used to pay expenses, make permitted expenditures under
this Agreement or retire or refinance indebtedness of Plum Creek.
(d) Without limiting the generality of the foregoing, and except as
otherwise provided in this Agreement, before the Notice of Redemption Date, Plum
Creek shall not, without the prior written consent of G-P (which consent will
not be unreasonably withheld or delayed), nor will it permit any of its
subsidiaries to:
(i) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(ii) sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the sale, pledge, disposition, grant,
transfer, lease, guarantee or encumbrance of, other than in the ordinary
course of business and consistent with past practice and not in excess of
$5 million individually, any property or assets of Plum Creek or any of its
Subsidiaries;
(iii) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (other than regular quarterly cash dividends at a rate not in
excess of $.57 per share of Plum Creek Common Equity declared and paid in
the ordinary course and consistent with past practice) or enter into any
agreement with respect to the voting of its capital stock;
(iv) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(v) (A) except as permitted under Section 6.04(d)(vi) or other than in
the ordinary course of business in a manner consistent with past practice
not in excess of $10 million individually, acquire (including, without
limitation, by merger, consolidation, or acquisition of stock or assets) any
interest in any corporation, partnership, other business organization,
Person or any division thereof (other than a wholly owned Subsidiary or any
preferred stock of a Subsidiary) or any assets;
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(B) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any Person for borrowed money, except
for (1) indebtedness for borrowed money incurred in the ordinary course of
business or in connection with transactions otherwise permitted under this
Section 6.04, (2) indebtedness incurred to refinance any existing
indebtedness or (3) other indebtedness for borrowed money under existing
credit facilities; or (C) enter into or amend any contract, agreement,
commitment or arrangement that, if fully performed, would not be permitted
under this Section 6.04(d)(v);
(vi) acquire any interest in timberlands or ancillary mills; PROVIDED,
HOWEVER, that subject to prior written notice to G-P, Plum Creek may acquire
an interest in timberlands or ancillary mills at or below fair market value
if such acquisition does not otherwise jeopardize the intended tax
consequences of the transactions contemplated by this Agreement;
(vii) change its accounting policies or procedures, other than in the
ordinary course of business in a manner consistent with past practice or
except as required by changes in GAAP;
(viii) amend, modify or terminate any Ancillary Contracts;
(ix) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior
to the Effective Time, or in any of the conditions set forth in Article VII
not being satisfied or in a violation of any provision of this Agreement,
except, in every case, as may be required by applicable Law; or
(x) agree, in writing or otherwise, to take any of the foregoing
actions.
Section 6.05 CONDUCT OF THE BUSINESS OF G-P AFTER THE NOTICE OF REDEMPTION
DATE. Except as would not pertain to or affect the Timber Group,
(a) Between the Notice of Redemption Date and the Effective Time, each of
G-P and its Subsidiaries shall conduct the Timber Group operations only in the
ordinary course of business consistent with past practice; provided, however,
that each of G-P or its Subsidiaries shall not (i) enter into, amend, modify or
terminate in the ordinary course of business in a manner consistent with past
practice any Contract in which the market value of such Contract exceeds
$1,000,000 without the prior written consent of Plum Creek and (ii) take any of
the actions prohibited by Section 6.03(d)(i), (ii)(A), (iii), (iv) or (vii).
(b) Between the Notice of Redemption Date and the Effective Time, each of
G-P and its Subsidiaries shall obtain Plum Creek's prior written consent before
entering into any Material Transaction whether or not in the ordinary course of
business. For purposes of this section, "Material Transaction" shall mean any
expenditure or commitment to expend in excess of $1,000,000.
Section 6.06 METHOD OF ALLOCATING THE ASSETS AND LIABILITIES OF THE TIMBER
GROUP. G-P shall not, without the prior written consent of Plum Creek (which
consent shall not be unreasonably withheld or delayed):
(a) change the Allocation Policies;
(b) change its capital expenditure budget for the Timber Group for the
fiscal year 2000; or
(c) except as set forth on Section 6.06(c) of the G-P Disclosure Letter,
with respect to items that are allocable between the Georgia-Pacific Group
and the Timber Group and are not subject to any objective allocation
practice (including allocations based on historical usage) utilized to
allocate expenses pursuant to the Allocation Policies, change the percentage
of total expenses allocable to the Timber Group for the fiscal year 2001 so
that the percentage exceeds the percentage allocable to the Timber Group for
the fiscal year 2000.
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Section 6.07 SHAREHOLDERS' MEETINGS.
(a) G-P shall call and hold a meeting of the Timber Group Common Stock
shareholders (the "Timber Group Shareholder Meeting") promptly following the
receipt of the Private Letter Ruling for the purpose of voting upon the approval
of this Agreement.
(b) Plum Creek shall call and hold a meeting of the Plum Creek Common Equity
stockholders (the "Plum Creek Stockholder Meeting") promptly following the
receipt of the Private Letter Ruling for the purposes of voting upon the
approval of this Agreement, the Mergers and the transactions contemplated
hereby.
Section 6.08 PREPARATION OF JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION
STATEMENT.
(a) As promptly as practicable after the execution of this Agreement,
(i) G-P and Plum Creek shall prepare and file with the SEC the Joint Proxy
Statement/Prospectus relating to the Timber Group Shareholder Meeting and the
Plum Creek Stockholder Meeting to be held in connection with the Mergers and
(ii) Plum Creek shall prepare and file with the SEC the Merger Registration
Statement in which the Joint Proxy Statement/Prospectus shall be included as a
prospectus, in connection with the registration under the Securities Act of the
shares of Plum Creek Common Stock to be issued to the shareholders of the Timber
Group Common Stock pursuant to the Mergers. Each of Plum Creek and G-P will use
commercially reasonable efforts to cause the Merger Registration Statement to
become effective as promptly as practicable, and, prior to the effective date of
the Merger Registration Statement, Plum Creek shall take all or any action
required under any applicable Federal or state securities laws in connection
with the issuance of shares of Plum Creek Common Stock in the Mergers. Each of
Plum Creek and G-P shall furnish all information concerning it and the holders
of its capital stock as the other may reasonably request in connection with such
actions and the preparation of the Merger Registration Statement and the Joint
Proxy Statement/Prospectus. As promptly as practicable after the Merger
Registration Statement shall have become effective, but in no event prior to the
receipt of the Private Letter Ruling, each of Plum Creek and G-P shall mail the
Joint Proxy Statement/ Prospectus to the holders of Plum Creek Common Equity or
Timber Group Common Stock, as the case may be. Subject to Section 6.10, the
Joint Proxy Statement/Prospectus shall include the recommendation of the Board
of Directors of each of Plum Creek and G-P in favor of the Mergers.
(b) No amendment or supplement to the Joint Proxy Statement/Prospectus or
the Merger Registration Statement will be made by Plum Creek or G-P without the
consent of the other party (which consent shall not be unreasonably withheld or
delayed). Plum Creek and G-P each will advise the other, promptly after it
receives notice thereof, of the time when the Merger Registration Statement has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Plum Creek Common
Stock issuable in connection with the Mergers for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Joint Proxy
Statement/Prospectus or the Merger Registration Statement or comments thereon
and responses thereon or requests by the SEC for additional information.
(c) The information supplied by Plum Creek for inclusion in the Merger
Registration Statement and the Joint Proxy Statement/Prospectus shall not, at
(i) the time the Merger Registration Statement is declared effective, (ii) the
time the Joint Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of Plum Creek and the
Timber Group shareholders and (iii) the time of each of the Timber Group
Shareholder Meeting and the Plum Creek Stockholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time, any event or
circumstance relating to Plum Creek or any of its Subsidiaries, or their
respective officers or directors, should be discovered by Plum Creek and such
information should be set forth in an amendment or a supplement to the Merger
Registration Statement or Joint Proxy Statement/Prospectus, Plum Creek shall
promptly inform G-P. All documents
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that G-P is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material aspects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(d) The information supplied by G-P for inclusion in the Merger Registration
Statement and the Joint Proxy Statement/Prospectus shall not, at (i) the time
the Merger Registration Statement is declared effective, (ii) the time the Joint
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to the Timber Group shareholders and stockholders of Plum Creek and
(iii) the time of each of the Timber Group Shareholder Meeting and the Plum
Creek Stockholder Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. If at any time prior to the
Effective Time, any event or circumstance relating to the Timber Group should be
discovered by G-P and such information should be set forth in an amendment or a
supplement to the Merger Registration Statement or Joint Proxy
Statement/Prospectus, G-P shall promptly inform Plum Creek. All documents that
Plum Creek is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
Section 6.09 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions provided herein, each of G-P and Plum Creek shall, and shall cause
each of its Subsidiaries to, cooperate and use their commercially reasonable
efforts to take, or cause to be taken, all appropriate action, and to make, or
cause to be made, all filings, necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement including, without limitation, G-P's and Plum
Creek's commercially reasonable efforts to cause the conditions in Article VII
to be satisfied, to obtain, prior to the Closing Date, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Authorities and parties to contracts with G-P or Plum Creek, as the case may be,
and their respective Subsidiaries as are necessary for consummation of the
transactions contemplated by this Agreement and in order to comply with
applicable Laws.
Section 6.10 BOARD RECOMMENDATIONS.
(a) Prior to the Timber Group Shareholder Approval, subject to their
fiduciary duties under applicable law, G-P's Board of Directors shall
(i) recommend approval and adoption by the Timber Group Common Stock
shareholders of this Agreement and (ii) cause G-P to take all lawful action to
solicit the Timber Group Shareholder Approval.
(b) Prior to the Plum Creek Stockholder Approval, subject to their fiduciary
duties under applicable law, Plum Creek's Board of Directors shall
(i) recommend approval and adoption by the Plum Creek Common Equity stockholders
of this Agreement and (ii) cause Plum Creek to take all lawful action to solicit
the Plum Creek Stockholder Approval.
(c) Subject to their fiduciary duties under applicable law, neither the
Board of Directors of G-P nor any committee thereof shall withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Plum Creek, the approval
or recommendation by the Board of Directors of G-P or any such committee of this
Agreement, the Mergers or the transactions contemplated hereby.
(d) Subject to their fiduciary duties under applicable law, neither the
Board of Directors of Plum Creek nor any committee thereof shall withdraw or
modify, or propose to withdraw or modify, in a manner adverse to G-P, the
approval or recommendation by the Board of Directors of Plum Creek or any such
committee of this Agreement, the Mergers, the issuance of shares of Plum Creek's
Common Stock in the Mergers or the transactions contemplated hereby.
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Section 6.11 NO SOLICITATION.
(a) Except as provided in this Section, G-P will not, and will cause its
respective Affiliates, officers, directors, employees, financial advisors,
attorneys and other advisors, representatives and agents not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, or provide any non-public information to, any Person
(other than Plum Creek) relating to any transaction involving the sale of any of
the assets of the Timber Group (other than in the ordinary course of business),
or any of the capital stock of the Timber Group, or any merger, consolidation,
business combination, or similar transaction involving the Timber Group or any
of the Timber Group's Subsidiaries (a "G-P Acquisition Transaction").
(b) G-P will promptly (and in any event within three days) advise Plum Creek
in writing of the receipt of any inquiries or proposals relating to a G-P
Acquisition Transaction, including the identity of the Person submitting such
inquiry or proposal and the terms thereof.
(c) Notwithstanding the foregoing, nothing in this Agreement shall prohibit
(i) G-P from furnishing information to, and engaging in discussions or
negotiations with, any Person (an "Offeror") that makes an unsolicited and
written G-P Bona Fide Proposal to acquire G-P, the Timber Group or any of G-P's
Subsidiaries or any significant portion of the assets or securities of G-P, the
Timber Group or any of G-P's Subsidiaries pursuant to a merger, consolidation,
share exchange, tender offer or other similar transaction or (ii) G-P's Board of
Directors from failing to make or withdrawing or modifying its recommendation
referred to in Section 6.10 in response to a G-P Bona Fide Proposal, but only to
the extent in any such case as is referred to in clause (i) and (ii) that G-P's
Board of Directors, after consultation with, and based upon advice of,
independent legal counsel (who may be G-P's regularly engaged outside legal
counsel), determines in good faith that furnishing such information to, or
engaging in such discussions or negotiations with, such Offeror or recommending
such G-P Bona Fide Proposal or changing its recommendation or failing to make
its recommendation referred to in Section 6.10 is necessary for G-P's Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law; PROVIDED, HOWEVER, that prior to taking any action referred to in
clause (i), G-P's Board of Directors notifies Plum Creek of its intention and
obtains an executed confidentiality agreement from the Offeror and such other
appropriate parties substantially similar to the confidentiality agreement
entered into with Plum Creek. G-P's or the G-P's Board of Director's exercise of
its rights under this clause (c), shall not constitute a breach by G-P or G-P's
Board of Directors of this Agreement.
(d) Except as provided in this Section, Plum Creek will not, and will cause
its respective Affiliates, officers, directors, employees, financial advisors,
attorneys and other advisors, representatives and agents not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, or provide any non-public information to, any Person
(other than G-P) relating to any transaction involving the sale of any of the
assets of Plum Creek (other than in the ordinary course of business), or any of
the capital stock of Plum Creek, or any merger, consolidation, business
combination, or similar transaction involving Plum Creek or any of its
Subsidiaries (a "Plum Creek Acquisition Transaction").
(e) Plum Creek will promptly (and in any event within three days) advise G-P
in writing of the receipt of any inquiries or proposals relating to a Plum Creek
Acquisition Transaction, including the identity of the Person submitting such
inquiry or proposal and the terms thereof.
(f) Notwithstanding the foregoing, nothing in this Agreement shall prohibit
(i) Plum Creek from furnishing information to, and engaging in discussions or
negotiations with an Offeror that makes an unsolicited and written Plum Creek
Bona Fide Proposal to acquire Plum Creek or any of Plum Creek's Subsidiaries or
any significant portion of the assets or securities of Plum Creek or any of its
Subsidiaries pursuant to a merger, consolidation, share exchange, tender offer
or other similar transaction or (ii) Plum Creek's Board of Directors from
failing to make or withdrawing or modifying
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its recommendation referred to in Section 6.10 in response to a Plum Creek Bona
Fide Proposal, but only to the extent that in any such case as is referred to in
clause (i) and (ii) that Plum Creek's Board of Directors, after consultation
with and based upon the advice of independent legal counsel (who may be Plum
Creek's regularly engaged outside legal counsel) determines in good faith that
furnishing such information to, or engaging in such discussions or negotiations
with, such Offeror or recommending such Plum Creek Bona Fide Proposal or
changing its recommendation or failing to make its recommendation referred to in
Section 6.10 is necessary for Plum Creek's Board of Directors to comply with its
fiduciary duties to stockholders under applicable law; PROVIDED, HOWEVER, that
prior to taking such action referred to in clause (i), Plum Creek's Board of
Directors notifies G-P of its intention and obtains an executed confidentiality
agreement from the Offeror and such other appropriate parties substantially
similar to the confidentiality agreement entered into with G-P. Plum Creek's or
the Plum Creek's Board of Director's exercise of its rights under this
clause (f), shall not constitute a breach by Plum Creek or Plum Creek's Board of
Directors of this Agreement.
(g) Nothing contained in any provision of this Agreement shall prohibit G-P
or Plum Creek, as the case may be, in response to G-P Bona Fide Proposal or a
Plum Creek Bona Fide Proposal, from taking and disclosing to its shareholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
from making any disclosure to G-P shareholders or Plum Creek shareholders, as
the case may be, if, in the good faith judgment (based on the advise of outside
counsel) of the Board of Directors of G-P or Plum Creek, as the case may be,
failure so to disclose would be inconsistent with applicable law.
Section 6.12 NOTIFICATION OF CERTAIN MATTERS. Each of G-P and Plum Creek
shall give prompt notice to the other of (i) any notice or other communication
from any Person alleging that the consent of such Person is or may be required
in connection with the Mergers; (ii) any notice or other communication from any
Governmental Authority in connection with the Mergers; (iii) any action, suits,
claims, investigations or proceedings commenced or threatened in writing
against, relating to or involving or otherwise affecting it or any of its
Subsidiaries that relate to the consummation of the Mergers; and (iv) any change
that is reasonably likely to have a Timber Group Material Adverse Effect or a
Plum Creek Material Adverse Effect, as the case may be, or is likely to delay or
impede the ability of either Plum Creek or G-P, as the case may be, to
consummate the transactions contemplated by this Agreement or to fulfill its
obligations set forth herein.
Section 6.13 PUBLIC ANNOUNCEMENTS. Plum Creek and G-P shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation and review by the other party of such release or statement,
except as may be required by law, court process or by obligations pursuant to
any listing agreement with a national securities exchange.
Section 6.14 NYSE AND PE LISTING. Plum Creek shall cause the Plum Creek
Common Stock to be issued in connection with the Mergers to be listed on the
NYSE and the PE as of the Effective Time, subject to official notice of
issuance.
Section 6.15 COORDINATION OF DIVIDENDS. Each of G-P and Plum Creek shall
coordinate with the other regarding the declaration and payment of any dividends
in respect of the Timber Group Common Stock and Plum Creek Common Equity and the
record dates and the payment dates relating thereto, it being the intention of
G-P and Plum Creek that holders of the Timber Group Common Stock shall not
receive two dividends, or fail to receive a dividend, for any single calendar
quarter with respect to their shares of Timber Group Common Stock and/or any
shares of Plum Creek Common Stock that any such holder receives in exchange
therefore pursuant to the Merger.
Section 6.16 SEPARATION AGREEMENT. The Separation Agreement, executed on
the date hereof, shall not be amended, modified or terminated without the prior
written consent of Plum Creek.
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Section 6.17 ANCILLARY CONTRACTS. The parties hereto agree to execute,
deliver and perform their respective obligations under each of the Ancillary
Contracts at or prior to the Effective Time.
Section 6.18 AFFILIATES. At least ten days prior to the mailing of the
Joint Proxy Statement/ Prospectus, (a) G-P shall deliver to Plum Creek a letter
identifying all persons who may be deemed to be affiliates of G-P under
Rule 145 of the Securities Act as of the record date for the Timber Group
Shareholder Meeting, including, without limitation, all of its directors and
executive officers (the "Rule 145 Affiliates") and (b) G-P shall advise the
persons identified in such letter of the resale restrictions imposed by
applicable securities laws and shall use commercially reasonable efforts to
obtain from each person identified in such letter a written agreement in
customary form and substance.
Section 6.19 METHOD OF EFFECTING THE MERGER. Plum Creek may, with G-P's
consent (which will not be unreasonably withheld), at any time change the method
of effecting the acquisition of the Spincos by Plum Creek, and, upon providing
such consent, G-P shall cooperate in such efforts, if and to the extent Plum
Creek deems such change to be desirable including, without limitation, to
provide for a merger of each of the Spincos with and into a wholly owned
subsidiary of Plum Creek, or to provide for mergers among certain of the
Subsidiaries of Plum Creek and the Spincos to occur substantially simultaneously
with the Effective Time; provided, however, that no such change shall (i) alter
or change the amount or kind of consideration to be issued to holders of Units
as provided for in this Agreement, (ii) adversely affect the proposed accounting
treatment for the Mergers or the proposed tax-free treatment for the Mergers and
to the holders of the Units, (iii) materially delay the consummation of the
transactions contemplated by this Agreement or (iv) adversely affect the
Georgia-Pacific Group.
Section 6.20 TIMBER AGREEMENTS. Prior to the Redemption Date, G-P and its
Subsidiaries shall not enter into, modify or amend any timber supply agreement
attributed to the Timber Group that would not allow such contract to qualify
under section 631(b) of the Code. G-P will cause each timber cutting contract to
be entered into by any entity in the Timber Group to be assignable to any
Affiliate that has access and the legal or equitable right to harvest the trees
that are the subject of such contract and will release the contracting entity
from any liability upon such assignment.
ARTICLE VII
CONDITIONS TO THE NOTICE OF REDEMPTION AND MERGERS
Section 7.01 CONDITIONS TO THE NOTICE OF REDEMPTION. The obligations of
G-P and Plum Creek to effect the Notice of Redemption and the Mergers are
subject to the satisfaction or waiver of the following conditions on or prior to
the Notice of Redemption Date:
(a) the requisite Plum Creek Stockholder Approval and Timber Group
Shareholder Approval shall have been obtained at the Plum Creek Stockholder
Meeting and Timber Group Shareholder Meeting, respectively;
(b) no Governmental Authority or Federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, judgment, injunction
or other order (whether temporary, preliminary or permanent), in any case
which is in effect and which prevents or prohibits consummation of the
Mergers or any other transactions contemplated in this Agreement; PROVIDED,
HOWEVER, that the parties shall use commercially reasonable efforts to cause
any such decree, judgment, injunction or other order to be vacated or
lifted;
(c) the Plum Creek Common Stock to be issued in the Mergers shall have
been authorized for listing on the NYSE and the PE, subject to official
notice of issuance;
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(d) the Merger Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, no stop order
suspending the effectiveness of the Merger Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated by the SEC and not concluded or withdrawn and all state securities
or blue sky authorizations necessary to carry out the transactions
contemplated hereby shall have been obtained and be in effect;
(e) the receipt of a private letter ruling from the IRS (the "Private
Letter Ruling") reasonably satisfactory to both Plum Creek and G-P
concluding that the Redemption will be governed by sections 355(a) and
(c) and, if applicable, section 361(c) of the Code and that the Mergers
shall not alter such conclusion;
(f) the applicable waiting period, together with any extensions thereof,
under the HSR Act shall have expired or been terminated;
(g) neither Plum Creek nor G-P shall be advised by its respective
counsel that a Transaction Termination Event exists as of the Notice of
Redemption Date; and
(h) Southeastern Asset Management shall have provided assurances with
respect to their intent with respect to any shares of Timber Group Common
Stock that it owns immediately prior to the Redemption which are reasonably
required so that section 355(e) of the Code does not apply to the Separation
and the Redemption.
Section 7.02 CONDITIONS OF PLUM CREEK. The obligations of Plum Creek to
effect the Notice of Redemption and the Mergers are also subject to the
satisfaction or waiver of the following conditions on or prior to the Notice of
Redemption Date (provided that if such conditions are satisfied or waived on or
prior to such date and the Notice of Redemption is sent, such conditions will be
deemed to be satisfied with respect to the Mergers):
(a) Each of the representations and warranties of G-P contained in this
Agreement that are qualified as to materiality must be true and correct in
all respects and those representations and warranties not so qualified must
be true and correct in all material respects, other than with respect to the
representations and warranties contained in Section 4.16 which must be true
and correct except as would not be reasonably expected to have a G-P
Material Adverse Effect, in each case, when made and at the Notice of
Redemption Date as if made again at that time (except to the extent that any
representation or warranty speaks as of an earlier date, in which case it
must be true and correct only as of that earlier date);
(b) G-P shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Notice of Redemption Date;
(c) G-P shall have delivered to Plum Creek an officer's certificate
certifying that as of the Notice of Redemption Date, all conditions set
forth in Section 7.02(a) and (b) have been satisfied;
(d) Plum Creek shall have received the favorable opinions of G-P's
outside legal counsel, King & Spalding, and the General Counsel of G-P, each
dated the Notice of Redemption Date substantially in the form of Exhibit G;
(e) Plum Creek shall have received the opinion of Skadden Arps, Slate,
Meagher & Flom LLP, special counsel to Plum Creek, dated as of the Notice of
Redemption Date, in form and substance reasonably satisfactory to Plum
Creek, based upon facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Notice
of Redemption Date, to the effect that (i) the Mergers will be treated for
Federal income tax purposes as reorganizations qualifying under the
provisions of section 368(a) of the Code, and Plum Creek and the Spincos
will each be a party to a reorganization, and (ii) after the Mergers,
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the Surviving Corporation will continue to qualify as a Real Estate
Investment Trust for U.S. income tax purposes. Plum Creek may unilaterally
waive any of the conditions in the preceding sentence. In rendering such
opinion, counsel may require and rely upon certain representations contained
in certificates of officers of Plum Creek, G-P and certain stockholders of
Plum Creek and shareholders of G-P;
(f) The "earnings and profits" (as defined for U.S. income tax purposes)
of the Spincos, collectively, immediately following the Separation shall not
exceed the agreed-upon amount (as defined in Section 7.02(f) of the G-P
Disclosure Letter and the Plum Creek Disclosure Letter);
(g) G-P shall have delivered to Plum Creek, executed by G-P and the
Spincos, as the case may be:
(i) the Timber Group Timber Agreements;
(ii) the Tax Matters Agreement;
(iii) Human Resources Agreement;
(iv) Transition Services Agreement; and
(v) Noncompete Agreement; and
(h) Since the date of this Agreement, there shall not have been any
event, occurrence or condition which would reasonably be expected to have a
Timber Group Material Adverse Effect.
Section 7.03 CONDITIONS TO OBLIGATIONS OF G-P. The obligations of G-P to
effect the Notice of Redemption and the Mergers are also subject to the
satisfaction or wavier of the following conditions on or prior to the Notice of
Redemption Date (provided that if such conditions are satisfied or waived on or
prior to such date and the Notice of Redemption is sent, such conditions will be
deemed to be satisfied or waived with respect to the Mergers):
(a) Each of the representations and warranties of Plum Creek contained
in this Agreement that are qualified as to materiality must be true and
correct in all respects and those representations and warranties not so
qualified must be true and correct in all material respects, in each case,
when made and at the Notice of Redemption Date, as if made again at that
time (except to the extent that any representation or warranty speaks as of
an earlier date, in which case it must be true and correct only as of that
earlier date);
(b) Plum Creek shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed
or complied with by it on or prior to the Notice of Redemption Date;
(c) G-P shall have received the favorable opinions of Plum Creek's
outside legal counsel, Skadden, Arps, Slate, Meagher & Flom, LLP, and the
General Counsel of Plum Creek each dated the Notice of Redemption Date
substantially in the form of Exhibit H;
(d) Plum Creek shall have delivered to G-P an officer's certificate
certifying that as of the Notice of Redemption Date, all conditions set
forth in Section 7.03(a) and (b) have been satisfied;
(e) G-P shall have received the opinion of McDermott Will & Emery,
special counsel to G-P, in form and substance reasonably satisfactory to
G-P, based upon facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Notice
of Redemption Date, to the effect that the Mergers will be treated for
Federal income tax purposes as reorganizations qualifying under the
provisions of section 368(a) of the Code, and Plum Creek and the Spincos
will each be a party to a reorganization;
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(f) Plum Creek shall have executed and delivered to G-P:
(i) the Timber Group Timber Agreements;
(ii) the Tax Matters Agreement;
(iii) Human Resources Agreement;
(iv) Transition Services Agreements; and
(v) Noncompete Agreement;
(g) Since the date of this Agreement, there shall not have been any
event, occurrence or condition which would reasonably be expected to have a
Plum Creek Material Adverse Effect; and
(h) The condition set forth in Section 7.02(e)(ii) shall have been
satisfied and not waived.
Section 7.04 CONDITIONS TO OBLIGATIONS OF PLUM CREEK TO EFFECT THE
MERGERS. The obligation of Plum Creek to effect the Mergers and the other
transactions contemplated in this Agreement is also subject to the satisfaction
or waiver of the following conditions:
(a) The Spinoff shall have occurred;
(b) G-P shall not have failed to perform or comply in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it after the Notice of Redemption Date and on
or prior to the Effective Time, the effect of which would be to prevent the
satisfaction of the condition contained in Section 7.02(e) had such failure
occurred prior to the Notice of Redemption Date;
(c) G-P shall have delivered to Plum Creek an officer's certificate
certifying that as of the Effective Date, all conditions set forth in
Section 7.04(a) and (b) have been satisfied;
(d) no Governmental Authority or Federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, judgment, injunction
or other order (whether temporary, preliminary or permanent), in any case
which is in effect and which prevents or prohibits consummation of the
Mergers or any other transactions contemplated in this Agreement; PROVIDED,
HOWEVER, that the parties shall use commercially reasonable efforts to cause
any such decree, judgment, injunction or other order to be vacated or
lifted;
(e) Southeastern Asset Management shall have confirmed the assurances
provided pursuant to Section 7.01(h);
(f) the Rights with respect to the Timber Group Common Stock have been
terminated or redeemed effective upon the Redemption; and
(g) G-P shall have complied with the provisions of Section 6.05(a)(ii).
Section 7.05 CONDITIONS TO OBLIGATIONS OF G-P TO EFFECT THE MERGERS. The
obligation of G-P and each of the Spincos to effect the Spinoff and the Mergers
and the other transactions contemplated in this Agreement is also subject to the
following conditions:
(a) Plum Creek shall not have failed to perform or comply in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it after the Notice of
Redemption Date and on or prior to the Effective Time, the effect of which
would be to prevent the satisfaction of the condition contained in
Section 7.03(e) had such failure occurred prior to the Notice of Redemption
Date;
(b) Plum Creek shall have delivered to G-P an officer's certificate
certifying that as of the Effective Date, all conditions set forth in
Section 7.05(a) have been satisfied;
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(c) no Governmental Authority or Federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, judgment, injunction
or other order (whether temporary, preliminary or permanent), in any case
which is in effect and which prevents or prohibits consummation of the
Mergers or any other transactions contemplated in this Agreement; PROVIDED,
HOWEVER, that the parties shall use commercially reasonable efforts to cause
any such decree, judgment, injunction or other order to be vacated or
lifted; and
(d) Southeastern Asset Management shall have confirmed the assurances
provided pursuant to Section 7.01(h).
ARTICLE VIII
TERMINATION AND ABANDONMENT
Section 8.01 TERMINATION. Except as otherwise provided in this
Section 8.01, this Agreement may be terminated at any time prior to the
Effective Time, whether before or after Timber Group Shareholder Approval or
Plum Creek Stockholder Approval:
(a) by mutual written consent of Plum Creek and G-P;
(b) on or prior to the Notice of Redemption Date, by Plum Creek
(provided that Plum Creek is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), if
(i) there has been a breach by G-P of any of its representations,
warranties, covenants or agreements contained in this Agreement, or any such
representation and warranty shall have become untrue, in any such case that
Section 7.02(a) or Section 7.02(b) will not be satisfied and such breach or
condition has not been cured within thirty days following receipt by G-P of
written notice of such breach or (ii) the conditions contained in
Section 7.01(e) or 7.02(h) shall not be capable of being satisfied;
(c) on or prior to the Notice of Redemption Date, by G-P (provided that
G-P is not then in material breach of any representation, warranty, covenant
or other agreement contained herein), if (i) there has been a breach by Plum
Creek of any of its representations, warranties, covenants or agreements
contained in this Agreement, or any such representation and warranty shall
have become untrue, in any such case such that Section 7.03(a) or
Section 7.03(b) will not be satisfied and such breach or condition has not
been promptly cured within thirty days following receipt by Plum Creek of
written notice of such breach or (ii) the conditions contained in 7.01(e) or
7.03(g) shall not be capable of being satisfied;
(d) by either Plum Creek or G-P if any decree, permanent injunction,
judgment, order or other action by any court of competent jurisdiction or
any Governmental Authority preventing or prohibiting consummation of the
Mergers shall have become final and nonappealable;
(e) by either Plum Creek or G-P if the Mergers shall not have been
consummated prior to the twelve month anniversary of the execution of this
Agreement, unless the failure of the Closing to occur by such date shall be
due to the failure of the party seeking to terminate this Agreement to
perform or observe in all material respects the covenants and agreements of
such party set forth herein; PROVIDED, HOWEVER, that if Section 7.01(e) has
not been satisfied, this Agreement may be extended not more than three
months by Plum Creek or G-P by written notice to the other party; and
PROVIDED FURTHER, HOWEVER, that if Section 7.01(g) has not been satisfied
due to Plum Creek having received advice from its counsel that a Transaction
Termination Event under clause (iii) of such definition exists, this
Agreement may be extended for not more than three months by G-P by written
notice to Plum Creek and at the end of such three month period, if
Section 7.01(g) continues to remain unsatisfied and is not waived, this
Agreement may be extended for not more than another three months by G-P by
written notice to Plum Creek.
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(f) on or prior to the Notice of Redemption Date, by either Plum Creek
or G-P if the requisite Plum Creek Stockholder Approval or Timber Group
Shareholder Approval is not obtained at the Plum Creek Stockholder Meeting
or the Timber Group Shareholder Meeting, respectively;
(g) on or prior to the Notice of Redemption Date, by Plum Creek if the
Board of Directors of G-P shall not have recommended or shall have modified
in a manner materially adverse to Plum Creek its recommendation of this
Agreement, the Mergers and the transactions contemplated hereby in
accordance with Section 6.10, PROVIDED, HOWEVER, that Plum Creek notifies
G-P of termination pursuant to this subsection within 30 days of receipt of
written notice from G-P that the Board of Directors of G-P has failed to
recommend or so modified its recommendation;
(h) on or prior to the Notice of Redemption Date, by G-P if the Board of
Directors of Plum Creek shall not have recommended or shall have modified in
a manner materially adverse to G-P its recommendation of this Agreement, the
Mergers and the transactions contemplated hereby in accordance with
Section 6.10, PROVIDED, HOWEVER, that G-P notifies Plum Creek of termination
pursuant to this subsection within 30 days of receipt of written notice from
Plum Creek that the Board of Directors of Plum Creek has failed to recommend
or so modified its recommendation;
(i) by G-P, if the Board of Directors of G-P, after consultation with
and based upon the advice of outside legal counsel and its financial
advisers, shall have determined in good faith that approving and entering
into an agreement in connection with a G-P Bona Fide Proposal for a G-P
Acquisition Transaction in whole or in part, and consummating such proposal
would result in a transaction more favorable to its shareholders from a
financial point of view than the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that this Agreement may not be terminated
pursuant to this Section 8.01(i) unless (i) G-P shall have complied with
Section 6.11, (ii) concurrent with the termination, G-P pays to Plum Creek a
termination fee in the amount of $100 million by wire transfer of
immediately available funds and (iii) G-P shall have provided Plum Creek
with at least three Business Days advance notice of such termination; or
(j) by Plum Creek, if the Board of Directors of Plum Creek, after
consultation with and based upon the advice of outside legal counsel and its
financial advisers, shall have determined in good faith that approving and
entering into an agreement in connection with a Plum Creek Bona Fide
Proposal for a Plum Creek Acquisition Transaction, and consummating such
proposal would result in a transaction more favorable to its shareholders
from a financial point of view than the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that this Agreement may not be terminated
pursuant to this Section 8.01(i) unless (i) Plum Creek shall have complied
with Section 6.11, (ii) concurrent with the termination, Plum Creek pays to
G-P a termination fee in the amount of $100 million by wire transfer of
immediately available funds and (iii) Plum Creek shall have provided G-P
with at least three Business Days advance notice of such termination.
(k) by G-P, if the Board of Directors of G-P shall be unable, after
complying with the provisions of Section 4.28(b), to obtain either of the
Solvency Opinions when due; PROVIDED, HOWEVER, that this Agreement may not
be terminated pursuant to this Section 8.01(k) unless concurrent with the
termination, G-P pays to Plum Creek a termination fee in the amount of
$100 million by wire transfer of immediately available funds.
Section 8.02 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either G-P or Plum
Creek pursuant to Section 8.01, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of Plum Creek or
G-P, except to the extent that such termination results from the material breach
by a party of any of its representations, warranties, covenants or agreements
set
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forth in this Agreement; PROVIDED, HOWEVER, that the provisions of Sections 6.02
and 8.02 of this Agreement shall remain in full force and effect and shall
survive any termination of this Agreement.
(b) In the event of termination of this Agreement by Plum Creek pursuant to
Section 8.01(g), so long as at the time of such termination Plum Creek is not in
material breach of any representation, warranty or material covenant contained
herein, G-P shall make payment to Plum Creek (within two Business Days after
notice of demand for payment) by wire transfer of immediately available funds of
a termination fee in the amount of $100 million.
(c) In the event of termination of this Agreement by G-P pursuant to
Section 8.01(h), so long as at the time of such termination G-P is not in
material breach of any representation, warranty or material covenant contained
herein, Plum Creek shall make payment to G-P (within two Business Days of notice
of demand for payment) by wire transfer of immediately available funds of a
termination fee in the amount of $100 million.
(d) In the event of termination of this Agreement by either party pursuant
to Section 8.01(f) based upon G-P having failed to receive the requisite Timber
Group Shareholder Approval, then so long as (i) at the time of such termination
Plum Creek is not in material breach of any representation, warranty or material
covenant contained herein, (ii) prior to the Timber Group Shareholder Meeting a
G-P Bona Fide Proposal has been publicly announced, disclosed or communicated
and (iii) within nine months of such termination G-P shall consummate or enter
into any agreement with respect to a G-P Bona Fide Proposal, G-P shall make
payment to Plum Creek (within two Business Days after notice of demand for
payment) by wire transfer of immediately available funds of a termination fee in
the amount of $100 million.
(e) In the event of termination of this Agreement by either party pursuant
to Section 8.01(f) based upon Plum Creek having failed to receive the requisite
Plum Creek Stockholder Approval to approve this Agreement and Mergers, then so
long as (i) at the time of such termination G-P is not in material breach of any
representation, warranty or material covenant contained herein (ii) prior to the
Plum Creek Stockholder Meeting a Plum Creek Bona Fide Proposal has been publicly
announced, disclosed or communicated and (iii) within nine months of such
termination Plum Creek shall consummate or enter into any agreement with respect
to a Plum Creek Bona Fide Proposal, Plum Creek shall make payment to G-P (within
two Business Days of notice to demand for payment) by wire transfer of
immediately available funds of a termination fee in the amount of $100 million.
(f) In the event of termination of this Agreement pursuant to
Section 8.01(i), (j) or (k), a termination fee will be payable in accordance
with such sections.
ARTICLE IX
MISCELLANEOUS
Section 9.01 FEES AND EXPENSES.
(a) In the event of termination of this Agreement pursuant to Article IX
herein, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, including, without limitation, the fees
and disbursements of counsel, financial advisors, accountants, actuaries and
consultants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses, SEC and HSR filing fees shall be divided
equally between Plum Creek and G-P.
(b) If the Mergers and the transactions contemplated by this Agreement are
consummated, Plum Creek shall pay (i) its own costs and expenses, (ii) all HSR,
SEC and other filing fees, (iii) printing costs and (iv) the costs and expenses
listed on Section 9.01(b) of the G-P Disclosure Letter. Such schedule sets forth
a list of (A) the categories of costs and expenses expected to be incurred by
G-P in connection with this Agreement and the transactions contemplated by this
Agreement and (B) a good
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faith estimate of the amount of each listed cost and expense. In addition to
those expenses allocated to G-P pursuant to Section 4(c) of the Tax Matters
Agreement, G-P shall be responsible for (i) any legal and advisory fees and
expenses associated with G-P's obtaining comfort with respect to Section 4.28
and (ii) 25% of the legal fees and expenses incurred by it which are reasonably
allocable to the Spinoff.
Section 9.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Neither the
representations or warranties contained in this Agreement or in any certificate
or instrument delivered pursuant to this Agreement nor any covenant, agreement,
undertaking or obligation to be fully performed and complied with prior to the
Closing Date shall survive the Closing. After the Closing Date, neither G-P,
Spincos nor Plum Creek shall have any liability (for indemnification or
otherwise) with respect to any representation or warranty contained in this
Agreement or in any certificate or instrument delivered pursuant to this
certificate or with respect to any covenant, agreement, undertaking or
obligation to be fully performed and complied with prior to the Notice of
Redemption Date, PROVIDED, HOWEVER, that nothing contained in this Section 9.02
shall relieve any party of any liability for breach of any obligations to be
performed after the Notice of Redemption Date if written notice with respect to
any such liability as to which Plum Creek or G-P has actual knowledge is given
prior to the Effective Time.
Section 9.03 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or facsimile, as follows:
(a) if to G-P, to it at:
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: General Counsel
Facsimile: (404) 230-7543
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Mario A. Ponce
Facsimile: (212) 455-2500
and to
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: William R. Spalding
Facsimile: (404) 572-5100
(b) if to Plum Creek, to it at:
999 Third Avenue, Suite 2300
Seattle, Washington 98104
Attention: General Counsel
Facsimile: (206) 467-3799
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with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom, LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: Joseph J. Giunta
Gregg A. Noel
Facsimile: (213) 687-5600
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third Business Day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
Section 9.04 ENTIRE AGREEMENT. This Agreement and the schedules and other
documents referred to herein or delivered pursuant hereto, collectively contain
the entire understanding of the parties hereto with respect to the subject
matter contained herein and supersede all prior agreements and understandings,
oral and written, with respect thereto.
Section 9.05 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall
inure to the benefit of and be binding upon the parties hereto, their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
Section 9.06 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Effective Time (notwithstanding Timber
Group Shareholder Approval, approval of G-P as the sole stockholder of each of
the Spincos, and Plum Creek Stockholder Approval), by action taken by the
respective Boards of Directors of Plum Creek and G-P or by the respective
officers authorized by such Boards of Directors or otherwise, as the case may
be; PROVIDED, HOWEVER, that after the Plum Creek Stockholder Approval and the
Timber Group Shareholder Approval, no amendment shall be made which by law
requires further approval by the stockholders of Plum Creek Common Equity or
shareholders of G-P Common Stock without such further approval.
Section 9.07 FURTHER ACTIONS. Each of the parties hereto agrees that,
except as otherwise provided in this Agreement and subject to its legal
obligations, it will use commercially reasonable efforts to fulfill all
conditions precedent specified herein, to the extent that such conditions are
within its control, and to do all things reasonably necessary to consummate the
transactions contemplated hereby.
Section 9.08 HEADINGS. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 9.09 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
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<PAGE>
Section 9.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
Section 9.11 APPLICABLE LAW. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflict of laws rules
thereof.
Section 9.12 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
Section 9.13 WAIVER OF JURY TRIAL. Each of the parties to this Agreement
hereby irrevocably waives all right to a trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement or the transactions
contemplated hereby.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, Plum Creek, G-P and each of the Spincos has caused this
Agreement to be executed by their respective officers thereunto duly authorized,
all as of the date first above written.
<TABLE>
<S> <C> <C>
PLUM CREEK TIMBER COMPANY, INC.
By: /s/ RICK R. HOLLEY
-----------------------------------------
Name: Rick R. Holley
Title: President and Chief Executive
Officer
GEORGIA-PACIFIC CORPORATION
By: /s/ A.D. CORRELL
-----------------------------------------
Name: A.D. Correll
Title: Chairman, Chief Executive Officer
and President
NORTH AMERICAN TIMBER CORP.
By: /s/ KENNETH F. KHOURY
-----------------------------------------
Name: Kenneth F. Khoury
Title: Vice President, Deputy General
Counsel and Secretary
NPI TIMBER, INC.
By: /s/ KENNETH F. KHOURY
-----------------------------------------
Name: Kenneth F. Khoury
Title: Vice President, Deputy General
Counsel and Secretary
GNN TIMBER, INC.
By: /s/ KENNETH F. KHOURY
-----------------------------------------
Name: Kenneth F. Khoury
Title: Vice President, Deputy General
Counsel and Secretary
</TABLE>
A-51
<PAGE>
<TABLE>
<S> <C> <C>
GPW TIMBER, INC.
By: /s/ KENNETH F. KHOURY
-----------------------------------------
Name: Kenneth F. Khoury
Title: Vice President, Deputy General
Counsel and Secretary
LRFP TIMBER, INC.
By: /s/ KENNETH F. KHOURY
-----------------------------------------
Name: Kenneth F. Khoury
Title: Vice President, Deputy General
Counsel and Secretary
NPC TIMBER, INC.
By: /s/ KENNETH F. KHOURY
-----------------------------------------
Name: Kenneth F. Khoury
Title: Vice President, Deputy General
Counsel and Secretary
</TABLE>
A-52
<PAGE>
ANNEX B
PERSONAL AND CONFIDENTIAL
July 18, 2000
Board of Directors
Plum Creek Timber Company, Inc.
999 Third Avenue, Suite 2300
Seattle, Washington 98104
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to Plum Creek Timber Company, Inc. (the "Company") of the Exchange Ratio (as
defined below) pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of July 18, 2000, by and among the Company,
Georgia-Pacific Corporation ("G-P") and North American Timber Corp., NPI
Timber, Inc., GNN Timber, Inc., GPW Timber, Inc., LRFP Timber, Inc. and NPC
Timber, Inc., each a wholly owned subsidiary of G-P (the "Spincos"). Pursuant to
the Merger Agreement, (1) prior to the Redemption (as defined below), the
Spincos will own all of the assets and liabilities of The Timber Company
(defined as the "Timber Group" in the Merger Agreement) pursuant to a Separation
Agreement (the "Separation Agreement"), dated as of July 18, 2000, between G-P,
each of the Spincos and the other parties thereto (the "Separation"),
(2) immediately prior to the consummation of the Mergers (as defined below), G-P
will redeem all of the outstanding shares of the class of its common stock, par
value $.80 per share, designated as "Georgia-Pacific Corporation--Timber Group
Common Stock" ("Timber Common Stock") in exchange for all of the outstanding
shares of the Spincos by delivery of one unit (a "Unit") consisting of one share
of common stock of each Spinco for each share of Timber Common Stock (the
"Redemption," and together with the Separation, the "Spinoff") and
(3) immediately following the Redemption, each of the Spincos will be merged
with and into the Company (the "Mergers") and each outstanding Unit will be
converted into a right to receive 1.37 shares of common stock, par value $.01
per share ("Company Common Stock"), of the Company (the "Exchange Ratio").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
and Plum Creek Timber Company L.P., a predecessor of the Company ("Plum Creek
L.P."), from time to time, including having acted as a co-managing underwriter
of a public offering of 5,000,000 shares of Company Common Stock in October
1999, and having acted as the Company's financial advisor in connection with,
and having participated in certain of the negotiations leading to, the Merger
Agreement. We also have acted as financial advisor to SPO Partners & Co., an
affiliate of the Company, in connection with the conversion in July 1999 of Plum
Creek L.P. from a master limited partnership (by way of a merger into an
indirect subsidiary of the Company). In addition, we have provided certain
investment banking services to G-P from time to time, including having acted as
a co-managing underwriter of G-P's offering of 15,000,000 7.50% Premium Equity
Participating Security Units in June 1999, and may provide certain investment
banking services to G-P in the future. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect
B-1
<PAGE>
Board of Directors
Plum Creek Timber Company, Inc.
July 18, 2000
Page Two
transactions and hold positions in securities, including derivative securities,
of the Company or G-P for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Merger Agreement; the Separation Agreement; the Company's Annual Report to
Stockholders and Annual Report on Form 10-K for the year ended December 31,
1999; Plum Creek L.P.'s Annual Reports to Unitholders and Annual Reports on Form
10-K for the four years ended December 31, 1998; the Company's Registration
Statement on Form S-4, dated January 28, 1999; G-P's separate Annual Reports to
holders of Timber Common Stock and to holders of G-P's Georgia-Pacific Group
common stock for the three years ended December 31, 1999, G-P's Annual Reports
to Shareholders for the two years ended December 31, 1996, and G-P's Annual
Reports on Form 10-K for the five years ended December 31, 1999; certain interim
reports to holders of shares or units and Quarterly Reports on Form 10-Q of the
Company, Plum Creek L.P. and G-P; certain other communications from the Company,
Plum Creek L.P. and G-P to the holders of their respective shares or units;
certain internal financial analyses and forecasts for The Timber Company
prepared by The Timber Company management, certain internal financial analyses
and forecasts for the Company prepared by Company management and certain
financial analyses and forecasts for The Timber Company prepared by Company
management (the financial analyses and forecasts prepared by Company management,
the "Forecasts"); and certain cost savings and operating synergies projected by
the managements of the Company and The Timber Company to result from the Mergers
(the "Synergies"). We also have held discussions with members of the senior
management of the Company, G-P and The Timber Company regarding their assessment
of the strategic rationale for, and the potential benefits of, the Mergers and
the past and current business operations, financial condition and future
prospects of the Company and The Timber Company. In addition, we have reviewed
the reported price and trading activity for the Company Common Stock and Timber
Common Stock, compared certain financial and stock market information for the
Company and The Timber Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the timber industry
specifically and other industries generally and performed such other studies and
analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, we have assumed with your consent that (1) the Forecasts and the
Synergies have been reasonably prepared on a basis reflecting the best available
estimates and judgments of Company management, and the Synergies will be
realized in the amounts and time periods contemplated thereby; (2) no gain will
be recognized for federal income tax purposes by the Spincos or the Company as a
result of the Spinoff; and (3) the Spinoff and the Mergers will be consummated
in accordance with the terms, without the waiver of any material conditions, of
the Merger Agreement and Separation Agreement as in effect on the date of this
letter.
Also, with your consent, we have relied upon the advice the Company has received
from its legal counsel, accountants and tax advisors as to all legal, accounting
and tax matters relating to the transactions contemplated by the Merger
Agreement and the Separation Agreement, including that (i) the Mergers will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and G-P and the
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<PAGE>
Board of Directors
Plum Creek Timber Company, Inc.
July 18, 2000
Page Three
Spincos will each be party to that reorganization; (ii) after consummation of
the Mergers, the Company will continue to qualify and be treated as a real
estate investment trust ("REIT") for federal income tax purposes; and
(iii) principles similar to Section 1374 of the Code will not apply to the
cutting of timber transferred by the Spincos to the Company pursuant to the
Mergers during the ten years after the consummation of the Mergers.
We have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or any of its subsidiaries or The Timber Company and
we have not been furnished with any such evaluation or appraisal. Our advisory
services and the opinion expressed herein are provided for the information and
assistance of the Board of Directors of the Company in connection with its
consideration of the Mergers and such opinion does not constitute a
recommendation as to how any holder of Company Common Stock should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Merger Agreement is fair from a financial point of view to
the Company.
Very truly yours,
B-3
<PAGE>
ANNEX C
July 18, 2000
Board of Directors
Georgia Pacific Corporation
133 Peachtree Street N.E.
Atlanta, GA 30348-5605
Members of the Board of Directors
We understand that Georgia-Pacific Corporation, a Georgia corporation
("G-P"), and North American Timber Corp., NPI Timber, Inc., GNN Timber, Inc.,
GPW Timber, Inc., LRFP Timber, Inc., and NPC Timber, Inc., each a Delaware
corporation and wholly owned subsidiary of G-P (each a "Spinco" and
collectively, the "Spincos"), and Plum Creek Timber Company, Inc., a Delaware
corporation ("Plum Creek") propose to enter into an Agreement and Plan of
Merger, substantially in the form of the draft dated July 18, 2000 (the "Merger
Agreement"), which provides, among other things, for (i) the Spincos owning all
of the assets and assuming all of the liabilities of the Timber Group (as
defined in the Merger Agreement and hereafter referred to as "TGP" or the
"Company") pursuant to the Separation Agreement (as defined in the Merger
Agreement) (the "Separation"), (ii) the redemption by G-P of each of the
outstanding shares of Timber Group Common Stock (as defined in the Merger
Agreement) in exchange for one unit (a "Unit") consisting of one share of common
stock of each Spinco subject to receipt of the IRS Ruling as defined herein (the
"Redemption" and, together with the Separation, the "Spinoff"), and (iii) the
subsequent mergers (the "Merger") of each Spinco with and into Plum Creek.
Pursuant to the Merger, each outstanding Unit, including each share of common
stock of each Spinco represented thereby, other than any Units owned by G-P or
Plum Creek or any direct or indirect wholly owned subsidiary of Plum Creek or
G-P (other than shares in trust accounts, managed accounts, custodial accounts,
and the like that are beneficially owned by third parties), will be converted
into the right to receive 1.37 shares (the "Exchange Ratio") of Plum Creek
common stock, par value $0.01 per share ("Plum Creek Common Stock"), subject to
adjustment in certain circumstances. We further understand that G-P and Plum
Creek and certain other parties propose to enter into the Ancillary Contracts
(as defined in the Merger Agreement) substantially in the form of the drafts
dated July 18, 2000. The terms and conditions of the Merger are more fully set
forth in the Merger Agreement. The terms and conditions of the ancillary
agreements are more fully set forth in the Ancillary Contracts. Capitalized
terms used and not defined herein have the same meaning as those terms used and
defined in the Merger Agreement.
You have asked for our opinion as to whether (i) the Spinoff and the Merger
pursuant to the Merger Agreement are fair from a financial point of view to G-P;
and (ii) the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to holders of Timber Group Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of G-P, the Company and Plum Creek;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company and Plum Creek prepared by the
managements of the Company and Plum Creek, respectively;
(iii) reviewed certain financial projections prepared by the management of
the Company;
C-1
<PAGE>
(iv) reviewed and discussed with the Company and Plum Creek information
relating to certain strategic financial and operational benefits
anticipated from the Spinoff and the Merger, prepared by the management
of the Company;
(v) participated in discussions of past and current operations and financial
condition and the prospects of the Company with senior executives of the
Company;
(vi) discussed with senior executives of G-P the impact of the Spinoff and
Merger on G-P;
(vii) reviewed with the management of TGP certain financial projections and
other operating data prepared by the management of Plum Creek;
(viii) participated in discussions of past and current operations and
financial condition and the prospects of Plum Creek with senior
executives of Plum Creek;
(ix) reviewed the pro forma impact of the Merger on Plum Creek's funds flow
from operations per share;
(x) reviewed the reported prices and trading activity for the Timber Group
Common Stock and the Plum Creek Common Stock;
(xi) compared the financial performance of Plum Creek and Timber Group and
the prices and trading activity of Plum Creek Common Stock and Timber
Group Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(xii) participated in discussions and negotiations among representatives of
the Company, G-P, Plum Creek and their financial and legal advisors;
(xiii) reviewed drafts of each of the Merger Agreement, the Noncompete
Agreement, the Voting Agreement, the Tax Matters Agreement, the Timber
Group Timber Agreements, each as defined in the Merger Agreement; and
other related documents; and
(xiv) considered such other factors and performed such other analyses 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 Spinoff 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 Plum Creek. We
have also relied upon G-P management's assessment of conversations between
management of G-P and selected credit rating agencies with respect to the effect
of the Spinoff and the Merger. In addition, we assumed that the Merger and the
Spinoff will be consummated in accordance with the terms set forth in the Merger
Agreement including, among other things, that G-P will receive a ruling (the
"IRS Ruling") from the Internal Revenue Service concluding that the Redemption
will be governed by Sections 355 (a) and (c) and, if applicable,
Section 361(c) of the Internal Revenue Service Code of 1986 (the "Code") and
that the Merger shall not alter such conclusion and that the Merger will be
treated as a tax-free reorganization pursuant to the Code. Morgan Stanley has
assumed that in connection with the receipt of all the necessary regulatory
approvals for the proposed Spinoff and Merger, including the IRS Ruling referred
to above, no restrictions will be imposed that would have a material adverse
effect on the contemplated benefits expected to be derived in the proposed
Spinoff and 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. We are aware of the contemplated transaction involving G-P and
Fort James (the "Fort James Transaction"). In rendering our opinion, we have not
considered the effect of the Fort James Transaction on G-P or the Company or on
the Spinoff or the Merger and we
C-2
<PAGE>
do not express any opinion as to the fairness of the Fort James Transaction to
G-P or to the holders of Timber Group Common Stock. 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
Plum Creek, which expressed interest to us in the possible acquisition of the
Company.
We have acted as financial advisor to the Board of Directors and the
Governance Committee of G-P in connection with this transaction and will receive
a fee for our services. In the past, Morgan Stanley & Co. Incorporated and its
affiliates have provided financial advisory and financing services for G-P and
Plum Creek and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors and the Governance Committee of G-P only 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 proxy or registration statement filed with the
Securities and Exchange Commission in connection with the Spinoff and Merger. In
addition, Morgan Stanley expresses no opinion or recommendation as to how the
holders of Timber Group Common Stock should vote at the shareholders meeting
held in connection with the Spinoff and the Merger.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that (i) the Spinoff and Merger pursuant to the Merger Agreement are fair
from a financial point of view to G-P and (ii) the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to holders of Timber
Group Common Stock.
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ CARL A. CONTIGUGLIA
-----------------------------------------
Carl A. Contiguglia
PRINCIPAL
</TABLE>
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<PAGE>
ANNEX D
VOTING AGREEMENT AND CONSENT
VOTING AGREEMENT AND CONSENT (this "Agreement"), dated as of July 18, 2000,
by and among Plum Creek Timber Company, Inc., a corporation organized under the
laws of the state of Delaware (the "Company"), Georgia-Pacific Corporation, a
corporation organized under the laws of the state of Georgia
("Georgia-Pacific"), and each other person set forth on the signature pages
hereof (each individually a "Securityholder", and collectively, the
"Securityholders"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Merger Agreement (as defined
below).
WHEREAS, concurrently with the execution and delivery of this Agreement, an
Agreement and Plan of Merger attached as Exhibit A hereto (the "Merger
Agreement") is being entered into by and among the Company, Georgia-Pacific and
the direct or indirect wholly owned subsidiaries of Georgia-Pacific party
thereto (collectively, the "Spincos"), pursuant to which each of the Spincos
will be merged with and into the Company, with the Company being the surviving
corporation in the merger (the "Merger");
WHEREAS, immediately prior to the Merger, Georgia-Pacific will redeem all of
the outstanding shares of the Triton Common Stock (as defined in the Merger
Agreement) in exchange for all of the outstanding shares of each Spinco by
delivery of one unit consisting of one share of common stock of each Spinco for
each share of Triton Common Stock outstanding;
WHEREAS, as a condition to, and in consideration for the Company's and
Georgia-Pacific's willingness to enter into the Merger Agreement and to
consummate the transactions contemplated thereby, the Company and
Georgia-Pacific have required that the Securityholders enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
representations, warranties, covenants and agreements contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any proposal or offer to acquire
all or a substantial part of the business or properties of the Company or
capital stock of the Company or any proposal or offer that, if consummated,
would cause the transactions contemplated by the Merger Agreement to fail to
qualify as a series of tax-free transactions, whether by merger, tender
offer, exchange offer, sale of assets or similar transactions involving the
Company, or any subsidiary, division or operating or principal business unit
of the Company.
(b) "Affiliate" shall mean any person directly or indirectly
controlling, controlled by, or under common control with, such person;
provided that, for the purposes of this definition, "control" (including
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or partnership interests, by contract or
otherwise.
(c) "Beneficially Own" or "Beneficial ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a person shall include
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<PAGE>
securities Beneficially Owned by all other persons with whom such person
would constitute a "group" within the meaning of Section13(d)(3) of the
Exchange Act.
(d) "Changed Board Recommendation" shall mean a majority of the board of
directors of the Company excluding John H. Scully, William J. Patterson and
William E. Oberndorf or any successors designated by the Securityholders
recommend that the stockholders of the Company vote against the Merger.
(e) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company.
(f) "Securities" shall mean the Common Stock and the Special Voting
Stock, collectively. In the event of any dividend or distribution consisting
of either the Common Stock or Special Voting Stock, or any change in the
capital structure of the Company by reason of any non-cash dividend,
split-up, recapitalization, combination, exchange of securities or the like,
the term "Securities" shall refer to and include the Common Stock and the
Special Voting Stock as well as all such dividends and distributions of
securities and any securities into which or for which any or all of the
Common Stock and/or Special Voting Stock may be changed or exchanged.
(g) "Special Voting Stock" shall mean the special voting common stock,
par value $.01 per share, of the Company.
2. Consent.
(a) Each Securityholder hereby irrevocably elects, pursuant to
Section C.6(a) of Article Fourth of the Certificate of Incorporation of the
Company, to convert each share of Special Voting Stock into one share of
Common Stock immediately prior to the Merger. Each Securityholder
understands and acknowledges that such conversion of Special Voting Stock
into Common Stock will permanently and irrevocably extinguish any separate
class voting rights of such Securityholders to approve Extraordinary
Transactions (as defined in the Certificate of Incorporation of the Company)
pursuant to Section C.3(c) of Article Fourth of the Certificate of
Incorporation of the Company. Each Securityholder understands and
acknowledges that following the irrevocable election in this Section 2(a),
such Securityholder will have only those rights of a holder of Common Stock
(other than with respect to (i) rights under the Registration Rights
Agreement among the Securityholders and the Company (the "Registration
Rights Agreement") and (ii) rights under Section 2(b) below).
(b) Each Securityholder hereby permanently and irrevocably waives,
simultaneously with the consummation of the Merger, any and all rights to
designate more than three nominees to the board of directors of the Company
under Section 3.5 "Control Rights" of the Amended and Restated Agreement and
Plan of Conversion, dated as of July 17, 1998, by and among the Company,
Plum Creek Timber Company, L.P. and Plum Creek Management Company, L.P. (the
"Conversion Agreement"). Each Securityholder understands and acknowledges
that such waiver of rights under Section 3.5 of the Conversion Agreement
will permanently and irrevocably extinguish any rights of the
Securityholders to designate a majority of the board of directors of the
Company under either the Conversion Agreement or Section C of Article Fifth
of the Certificate of Incorporation of the Company (unless three directors
would constitute a majority of the board of directors).
(c) Each Securityholder hereby affirms that such irrevocable elections
shall survive such Securityholder's death, incapacity or incompetence or the
transfer of any Security.
3. Voting Agreement. Prior to any Changed Board Recommendation, each
Securityholder shall, at any meeting of the stockholders of the Company, however
such meeting is called and regardless of whether such meeting is a special or
annual meeting of the stockholders of the Company, or in
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<PAGE>
connection with any written consent of the stockholders of the Company, vote (or
join the written consent) all Securities directly or indirectly Beneficially
Owned by such Securityholder (i) to approve the Merger Agreement, the Merger and
the transactions contemplated thereby, including, without limitation, the
amendments to the Company's Certificate of Incorporation as contemplated by the
Merger Agreement and the taking of any actions necessary or appropriate in
furtherance thereof, (ii) against any Acquisition Proposal, unless they shall
have received the prior written consent of the Company and Georgia-Pacific and
(iii) to aprove any proposed amendments to the Company's Certificate of
Incorporation to eliminate the Company's staggered board of directors.
4. No Inconsistent Arrangements. Each Securityholder hereby covenants and
agrees that it shall not (i) transfer (which term shall include without
limitation, any sale, gift, pledge, lien, mortgage, hypothecation or other
disposition), or consent to any transfer of, any or all of such Securityholder's
Securities, or any interest therein, (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
such Securities or any interest therein, (iii) grant any other proxy,
power-of-attorney or other authorization in or with respect to such Securities,
(iv) deposit such Securities into a voting trust or enter into a voting
agreement or arrangement the with respect to such Securities or (v) take any
other action that would in any way restrict, limit or interfere with the
performance of such Securityholders' obligations hereunder or the transactions
contemplated hereby or by the Merger Agreement. Notwithstanding this Section 4,
each Securityholder may sell Securities (A) pursuant to an effective
registration statement, Rule 144 or Rule 145 under the Securities Act of 1933,
as amended or (B) in any other transaction subject to the terms of this Voting
Agreement and Consent.
5. Grant of Proxy; Appointment of Proxies.
(a) Each Securityholder hereby grants to, and appoints, James F. Kelley
and Ken Khoury, or either of them, in their respective capacities as
officers of Georgia-Pacific, and any individual who shall hereafter succeed
to any such office of Georgia-Pacific, and each of them individually, such
Securityholder's proxy and attorney-in-fact (with full power of substitution
and resubstitution), for and in the name, place and stead of such
Securityholder, to vote or give written consent with respect to all of such
Securityholder's Securities (i) in favor of the Merger Agreement, the Merger
and the transactions contemplated by the Merger Agreement, including,
without limitation, the Amendments to the Company's Certificate of
Incorporation as contemplated by the Merger Agreement and the taking of any
actions necessary or appropriate in furtherance thereof, and (ii) against
any Acquisition Proposal. The proxy granted hereby is revocable (A) by each
Securityholder in the event of a Changed Board Recommendation and (B) with
respect to those Securities sold pursuant to an effective registration
statement, Rule 144 or Rule 145 under the Securities Act of 1933, as
amended.
(b) Each Securityholder represents that any proxies heretofore given in
respect of such Securityholder's Securities are not irrevocable, and that
all such proxies are hereby revoked.
(c) Each Securityholder understands and acknowledges that each of the
Company and Georgia-Pacific is entering into the Merger Agreement in
reliance upon such Securityholder's execution and delivery of this
Agreement. Each Securityholder hereby affirms that the proxy set forth in
this Section 5 is given in connection with the execution of the Merger
Agreement, and that such proxy is given to secure the performance of the
duties of such Securityholder under this Agreement. Each Securityholder
hereby affirms that such proxy shall survive such Securityholder's death,
incapacity or incompetence or the transfer of any Security other than those
Securities sold pursuant to an effective registration statement, Rule 144 or
Rule 145 under the Securities Act of 1933, as amended. Each Securityholder
hereby ratifies and confirms all that each such proxy may lawfully do or
cause to be done by virtue hereof.
D-3
<PAGE>
6. No Solicitation. Each Securityholder hereby agrees, in such
Securityholder's capacity as a stockholder of the Company, that neither such
Securityholder nor any of such Securityholder's Affiliates, subsidiaries,
successors or assigns of all or substantially all of the business of such
Securityholder shall (and such Securityholder shall use such Securityholder's
commercially reasonable efforts to instruct its officers, directors and
employees, if any, and its representatives and agents not to, and to not permit
any of them to), directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
person (other than Georgia-Pacific, any of its affiliates or representatives)
concerning any Acquisition Proposal.
7. Representations and Warranties of the Securityholders. Each
Securityholder, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) On the date hereof, such Securityholder is the record and Beneficial
Owner of the number of Securities as set forth opposite such
Securityholder's name on Schedule I of this Agreement. On the date hereof,
the Securities constitute all of the Securities held of record or
Beneficially Owned by such Securityholder. Each Securityholder has sole
voting power and sole power to issue instructions with respect to the
matters set forth in this Agreement, sole power of disposition, sole power
of conversion, and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of the Securities with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) Such Securityholder has the legal capacity, requisite limited
partnership power and authority to enter into and perform all of such
Securityholder's obligations under this Agreement. The execution, delivery
and performance of this Agreement by such Securityholder will not violate
any other agreement to which such Securityholder is a party including,
without limitation, the Conversion Agreement, any voting agreement, proxy
arrangement, pledge agreement, security agreement, partnership agreement,
shareholders' agreement, transfer restriction agreement, sale agreement or
voting trust. This Agreement has been duly and validly executed and
delivered by such Securityholder and constitutes a valid and binding
agreement of such Securityholder, enforceable against such Securityholder in
accordance with its terms. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which such
Securityholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Securityholder of the
transactions contemplated hereby.
8. Stop Transfer. Each Securityholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of its Securities, unless such transfer
is made in compliance with this Agreement. Each Securityholder understands and
acknowledges that the Company's transfer agent will be instructed not to
transfer such shares, unless such transfer is made in accordance with this
Agreement.
9. Termination. The covenants, agreements and proxy shall terminate upon
the earlier to occur of (i) a Changed Board Recommendation, (ii) the termination
of the Merger Agreement in accordance with Article VIII thereof or (iii) the
consummation of the transactions contemplated by the Merger Agreement.
10. Miscellaneous.
(a) Specific Performance. Each Securityholder recognizes and agrees that
if for any reason any of the provisions of this Agreement are not performed
by such Securityholder in accordance with its specific terms or are
otherwise breached, immediate and irreparable harm or injury would be caused
to the Company for which money damages would not be an adequate remedy.
Accordingly, each Securityholder agrees that, in addition to any other
available remedies, the Company and Georgia-Pacific shall be entitled to an
injunction restraining any violation or threatened violation of the
provisions of this Agreement without the necessity of the Company or
D-4
<PAGE>
Georgia-Pacific, as the case may be, posting a bond or other form of
security. In the event that any action should be brought in equity to
enforce the provisions of this Agreement, such Securityholder will not
allege, and hereby waives the defense, that there is an adequate remedy at
law.
(b) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of
this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction.
(c) Attorneys' Fees. If any action at law or equity, including an action
for declaratory relief, is brought to enforce or interpret any provision of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and expenses from the other party, which fees and expenses
shall be in addition to any other relief which may be awarded.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
(e) Entire Agreement. This Agreement together with the Registration
Rights Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or
any of them with respect to the subject matter hereof.
(f) Consent to Jurisdiction, Etc. Each of the parties hereto irrevocably
and unconditionally submits to the non-exclusive jurisdiction of the United
States District Court for the District of Delaware or in any Delaware state
court (in law or equity) having subject matter jurisdiction over such
matters, and each of the parties hereto consents and agrees to personal
jurisdiction and waives any objection as to the venue of such courts for
purposes of such action.
(g) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt by delivery in person, by
facsimile (which is confirmed), or by registered or certified mail (postage
prepaid, return receipt requested):
If to a Securityholder, to the address set forth below its name on
Schedule I of this Agreement:
If to the Company, to:
Plum Creek Timber Company, Inc.
999 Third Avenue
Seattle, Washington 98104
Attention: Vice President and General Counsel
Facsimile: (206) 467-3799
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: Joseph J. Giunta
Gregg A. Noel
Facsimile: (213) 687-5600
D-5
<PAGE>
If to Georgia-Pacific, to:
Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Vice President and Deputy General Counsel
Facsimile: (404) 230-1611
with a copy (which shall not constitute notice) to:
Simpson, Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Mario A. Ponce
Facsimile: (212) 455-2500
and to
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: William R. Spalding
Facsimile: (404) 572-5100
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(h) Descriptive Headings; Interpretation. The descriptive headings
herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this agreement.
(i) Assignment; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and the respective heirs,
legal representatives, estates, executors, successors and permitted assigns
of the parties and such persons. Nothing in this Agreement is intended or
shall be construed to confer upon any entity or person other than the
parties hereto and their respective heirs, legal representatives, estates,
executors, successors and permitted assigns any right, remedy or claim under
or by reason of their Agreement or any part hereof. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned
by any Securityholder without the prior written consent of the Company or by
the Company without the prior written consent of each Securityholder party
hereto.
(j) Amendment, Modification and Waiver. This Agreement may not be
amended, modified or waived except by an instrument or instruments in
writing signed and delivered on behalf of the party hereto against whom such
amendment, modification or waiver is sought to be entered.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
[signature pages follow]
D-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
<TABLE>
<S> <C> <C>
PLUM CREEK TIMBER COMPANY, INC.
By: /s/ RICK R. HOLLEY
-----------------------------------------
Name: Rick R. Holley
Title: President and Chief Executive
Officer
GEORGIA-PACIFIC CORPORATION
By: /s/ A.D. CORRELL
-----------------------------------------
Name: A.D. Correll
Title: Chairman, Chief Executive Officer
and President
PC ADVISORY PARTNERS I, L.P.
By: PC Advisory Corp. I
Its general partner
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ JOHN H. SCULLY
--------------------------------------
Name: John H. Scully
Title: President
</TABLE>
<TABLE>
<S> <C> <C>
PC INTERMEDIATE HOLDINGS, L.P.
By: PC Advisory Partners I, L.P.
Its general partner
By: PC Advisory Corp. I
Its general partner
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ JOHN H. SCULLY
--------------------------------------
Name: John H. Scully
Title: President
</TABLE>
D-7
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NUMBER OF SHARES SPECIAL
OF COMMON VOTING
SECURITYHOLDER STOCK STOCK
-------------- ---------------- ---------
<S> <C> <C>
PC Advisory Partners I, L.P................................. 164,987 6,346
c/o SPO Partners & Co.
591 Redwood Highway
Suite 3215
Mill Valley, California 94941
PC Intermediate Holdings, L.P............................... 16,333,722 628,220
c/o SPO Partners & Co.
591 Redwood Highway
Suite 3215
Mill Valley, California 94941
</TABLE>
D-8
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, other than
an action by or in the right of the corporation, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines,
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. A Delaware corporation may indemnify any person in connection with a
proceeding by or in the right of the corporation to procure judgment in its
favor against expenses, including attorneys' fees, actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action, except that indemnification shall not be made in respect thereof if such
person shall have been adjudged to be liable to the corporation unless, and then
only to the extent that, a court of competent jurisdiction shall determine upon
application that despite such adjudication such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper. A
Delaware corporation may pay for the expenses, including attorneys' fees,
incurred by a director or officer in defending a proceeding in advance of the
final disposition upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation. The statute
provides that it is not exclusive of other indemnification that may be granted
by a corporation's bylaws, disinterested director vote, stockholder vote,
agreement, or otherwise.
Under the Delaware General Corporation Law, to the extent that a person is
successful on the merits or otherwise in defense of a suit or proceeding brought
against such person by reason of the fact that such person is or was a director,
officer, employee or agent of Plum Creek, or is or was serving at the request of
Plum Creek as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, such person shall be
indemnified against expenses, including attorneys' fees, actually and reasonably
incurred in connection with such action.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) payment of unlawful dividends or unlawful stock purchases or redemptions,
or (iv) any transaction from which the director derived an improper personal
benefit. Plum Creek's certificate of incorporation provides that no director of
Plum Creek shall be liable to Plum Creek or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability for
(i) any breach of the director's duty of loyalty to Plum Creek or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payment of unlawful
dividends or unlawful stock purchases or redemptions, or (iv) any transaction
from which the director derived an improper personal benefit.
The Delaware General Corporation Law permits the purchase of insurance on
behalf of directors and officers against any liability asserted against
directors and officers and incurred by such persons in such capacity, whether or
not the corporation would have the power to indemnify such person against
II-1
<PAGE>
such liability. Plum Creek's bylaws permit Plum Creek to purchase and maintain
insurance on behalf of directors, officers and certain other parties against any
liability asserted against such person and incurred by such person in such
capacity, whether or not Plum Creek would have the power or the obligation to
indemnify such person.
In addition, Plum Creek maintains a directors' and officers' liability
policy.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
DESIGNATION NATURE OF EXHIBIT
--------------------- -----------------
<C> <S>
2.1 Agreement and Plan of Merger by and between Plum Creek
Timber Company, Inc., Georgia-Pacific Corporation, North
American Timber Corp., NPI Timber, Inc., GNN Timber, Inc.,
GPW Timber, Inc., LRFP Timber, Inc. and NPC Timber, Inc.,
dated as of July 18, 2000 (included in the joint proxy
statement/prospectus as Annex A).
2.2 Purchase and Sale Agreement by and between S.D. Warren
Company as seller and Plum Creek Timber Company, L.P. as
purchaser dated as of October 5, 1998. (incorporated herein
by reference to Exhibit 2.5 of the Registrant's Quarterly
Report on Form 10-Q, for the quarter ended September 30,
1998).
2.3 Amended and Restated Agreement of Plan of Conversion, dated
as of July 17, 1998, by and among Plum Creek Timber Company,
Inc., Plum Creek Timber Company, L.P. and Plum Creek
Management Company, L.P. (incorporated herein by reference
to Exhibit 2.1 of the Registrant's Registration Statement on
Form S-4, filed January 29, 1999).
2.4 Agreement and Plan of Merger, dated as of July 17, 1998, by
and among Plum Creek Timber Company, L.P., Plum Creek
Acquisitions Partners, L.P. and Plum Creek Timber Company,
Inc. (incorporated herein by reference to Exhibit 2.2 of the
Registrant's Registration Statement on Form S-4, filed
January 29, 1999).
2.5 Agreement and Plan of Merger, dated as of July 17, 1998, by
and among Plum Creek Timber Company, Inc. and Plum Creek
Management Company, L.P. (incorporated herein by reference
to Exhibit 2.3 of the Registrant's Registration Statement on
Form S-4, filed January 29, 1999).
3.1 Certificate of Incorporation of Plum Creek Timber Company,
Inc. (incorporated herein by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q, for the quarter
ended September 30, 1999).
3.2 Amended and Restated By-laws of Plum Creek Timber Company,
Inc. (incorporated herein by reference to Exhibit 3.4 of the
Registrant's Registration Statement on Form S-4, filed
January 29, 1999).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
DESIGNATION NATURE OF EXHIBIT
--------------------- -----------------
<C> <S>
4.1 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent
Senior Notes due June 8, 2007, Plum Creek Timber Company,
L.P. (Form 10-Q, No. 1-10239, for the quarter ended
June 30, 1989). Amendment No. 1, consent and waiver dated
January 1, 1991 to Senior Note Agreement, dated May 31,
1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum
Creek Timber Company, L.P. (Form 8 Amendment No. 1 for the
year ended December 31, 1990). Amendment No. 2, consent and
waiver dated September 1, 1993 to the Senior Note Agreement
(form 10-K/A, Amendment No. 1, for the year ended December
31, 1993). Amendment No. 3, Senior Note Agreement Amendment
dated May 20, 1994 (Form 10-K/A, Amendment No. 1 for the
year ended December 31, 1994). Senior Note Agreement
Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for
the quarter ended June 30, 1996). Senior Note Agreement
Amendment dated April 15, 1997 (Form 10-Q, No. 1-10239, for
the quarter ended September 30, 1997). Senior Note Agreement
Amendment effective July 1, 1999 (Form 10-Q, No. 1-10239,
for the quarter ended June 30, 1999).
4.2 Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent
First Mortgage Notes due June 8, 2007, Plum Creek
Manufacturing, Inc. (Form 10-Q, No. 1-10239, for the quarter
ended June 30, 1989). Amendment No. 1, consent and waiver
dated January 1, 1991 to Mortgage Note Agreement, dated May
31, 1989, 11 1/8 percent First Mortgage Note Agreement,
dated May 31, 1989, 11 1/8 percent First Mortgage Notes due
June 8, 2007, Plum Creek Manufacturing, Inc., now Plum Creek
Manufacturing, L.P. (Form 8 Amendment No. 1, for the year
ended December 31, 1990). Amendment No. 2, consent and
waiver dated September 1, 1993 to the Mortgage Note
Agreement (Form 10-K/A, Amendment No. 1, for the year ended
December 31, 1993). Amendment No. 3, Mortgage Note Agreement
Amendment dated May 20, 1994 (Form 10-K/A, Amendment No. 1,
for the year ended December 31 1994). Amendment to Mortgage
Note Agreement Amendment dated December 31, 1993). Amendment
No. 3, Mortgage Note Agreement Amendment dated May 20, 1994
(Form 10-K/A, Amendment No. 1, for the year ended December
31, 1994). Amendment to Mortgage Note Agreement Amendment
dated June 15, 1995 (Form 10-Q, No. 1-10239, for the quarter
ended September 30, 1995). Mortgage Note Agreement Amendment
dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter
ended June 30, 1996). Mortgage Note Agreement Amendment
dated April 15, 1997 (Form 10-Q, No. 1-10239, for the
quarter ended September 30, 1997). Mortgage Note Agreement
Amendment effective July 1, 1999 (Form 10-Q, No 1-10239, for
the quarter ended June 30, 1999).
4.3 Senior Note Agreement, dated August 1, 1994, 8.73% Senior
Notes due August 1, 2009, Plum Creek Timber Company, L.P.
(Form 10-K/A, Amendment No. 1, for the year ended December
31, 1994). Senior Note Agreement Amendment dated as of
October 15, 1995 (Form 10-K, No. 1-10239, for the year ended
December 31, 1995). Senior Note Agreement Amendment dated
May 31, 1996 (Form 10-Q, No.. 1-10239, for the quarter ended
June 30, 1996). Senior Note Agreement Amendment dated April
15, 1997 (Form 10-Q, No. 1-10239, for the quarter ended
September 30, 1997). Senior Note Agreement Amendment
effective July 1, 1999 (Form 10-Q, No. 1-10239, for the
quarter ended June 30, 1999).
4.4 Senior Note Agreement, dated as of November 13, 1996, $75
million Series A due November 13, 2006, $25 million Series B
due November 13, 200, $75 million Series C due November 13,
2011, $25 million Series D due November 13, 2016 (Form 10-K,
No. 1-10239, for the year ended December 31, 1996). Senior
Note Agreement Amendment effective July 1, 1999 (Form 10-Q,
No. 1-10239, for the quarter ended June 30, 1999).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
DESIGNATION NATURE OF EXHIBIT
--------------------- -----------------
<C> <S>
4.5 Senior Note Agreement, dated as of November 12, 1998, Series
due February 12, 2007, Series F due February 12, 2009,
Series G due February 12, 2011 (Form 8-K and 8K/A, File No.
1-10239, dated November 12, 1998). Senior Note Agreement
Amendment effective July 1, 1999 (Form 10-Q, No. 1-10239,
for the quarter ended June 30, 1999).
4.6. Form of Common Stock Certificate (incorporated herein by
reference to Exhibit 4.6 of the Registrant's Registration
Statement on Form S-4, filed January 9, 1999).
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain matters regarding the shares of Plum Creek common
stock offered by this registration statement.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding certain Federal income tax consequences relating
to the mergers.*
8.2 Opinion of McDermott, Will & Emery regarding certain Federal
income tax consequences relating to the mergers.*
10.1 Voting Agreement and Consent by and between Plum Creek
Timber Company, Inc., Georgia-Pacific Corporation, PC
Advisory Partners I, L.P. and PC Intermediate Holdings,
L.P., dated as of July 18, 2000 (included in the joint proxy
statement/prospectus as Annex D).
21.1 Subsidiaries of Plum Creek Timber Company, Inc.
(incorporated herein by reference to Exhibit 21 to the
Registrant's Annual Report on Form 10-K, for the year ended
December 31, 1999).
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in their opinions filed as Exhibits 5.1 and 8.1).*
23.4 Consent of McDermott, Will & Emery (included in their
opinion filed as Exhibit 8.2).*
23.5 Consent of Goldman, Sachs & Co.*
23.6 Consent of Morgan Stanley & Co. Incorporated
24.1 Power of Attorney (included in the signature page hereto).
99.1 Form of proxy card for Plum Creek Timber Company, Inc.
99.2 Form of proxy card for Georgia-Pacific Corporation.
</TABLE>
------------------------
* To be filed by amendment.
(b) Financial Data Schedules
None.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which,
II-4
<PAGE>
individually or in the aggregate, represent a fundamental change in
the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b), if, in the aggregate,
the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time be deemed to be the initial bona fide
offering thereof;
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
4. That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
5. That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form; and
6. That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
II-5
<PAGE>
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, on October 10, 2000.
<TABLE>
<S> <C> <C>
PLUM CREEK TIMBER COMPANY, INC.
BY: /S/ RICK R. HOLLEY
-----------------------------------------
Rick R. Holley
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Rick R. Holley, William R. Brown and James A.
Kraft and each of them, in his or her true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments, including post-effective amendments, to this Registration
Statement, and any registration statement relating to the offering covered by
this Registration Statement and filed pursuant to Rule 462 under the Securities
Act of 1933, and to cause the same to be filed, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents of their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID D. LELAND Chairman of the Board
------------------------------------------- October 10, 2000
David D. Leland
/s/ IAN B. DAVIDSON Director
------------------------------------------- October 10, 2000
Ian B. Davidson
/s/ RICK R. HOLLEY President and Chief
------------------------------------------- Executive Officer, October 10, 2000
Rick R. Holley Director
/s/ JOHN G. MCDONALD Director
------------------------------------------- October 10, 2000
John G. McDonald
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ HAMID R. MOGHADAM Director
------------------------------------------- October 10, 2000
Hamid R. Moghadam
/s/ WILLLIAM E. OBERNDORF Director
------------------------------------------- October 10, 2000
Willliam E. Oberndorf
/s/ WILLIAM J. PATTERSON Director
------------------------------------------- October 10, 2000
William J. Patterson
/s/ JOHN H. SCULLY Director
------------------------------------------- October 10, 2000
John H. Scully
Executive Vice President
/s/ WILLIAM R. BROWN and Chief Financial
------------------------------------------- Officer (Principal October 10, 2000
William R. Brown Financial and Accounting
Officer)
October 10, 2000
</TABLE>
II-8
