As filed with the Securities and Exchange Commission on November 19, 1996
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
AMENDMENT NO. 1
TO
FORM 10/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
----------------
DELTIC TIMBER CORPORATION
(Exact name of registrant as specified in its charter)
----------------
DELAWARE 71-0795870
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
200 PEACH STREET
P.O. BOX 7000
EL DORADO, ARKANSAS
(Address of Principal 71731-7000
executive offices) (Zip Code)
(501) 881-6634
(Registrant's telephone number, including area code)
Securities to be registered
pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
The New York Stock Exchange, The New York Stock Exchange, Inc.
Preferred Stock Purchase Rights The New York Stock Exchange, Inc.
Securities to be registered
pursuant to Section 12(g) of the Act:
None.
==============================================================================
Deltic Timber Corporation
Information Included In Information Statement
And Incorporated In Form 10 By Reference
Cross-Reference Sheet Between Information Statement
And Items of Form 10
<TABLE>
<CAPTION>
Item Location In Information Statement
---- ---------------------------------
<S> <C> <C>
Item 1. Business......................................... Summary; Risk Factors; The Distribution;
Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business; Consolidated Financial Statements
Item 2. Financial Information............................ Summary; Risk Factors; Pro Forma Capitalization;
Pro Forma Consolidated Financial Statements;
Selected Historical Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Consolidated Financial
Statements
Item 3. Properties....................................... Business
Item 4. Security Ownership of Certain Beneficial
Owners and Management............................ Security Ownership of Certain Beneficial Owners
and Management
Item 5. Directors and Executive Officers................. Management
Item 6. Executive Compensation........................... Management; Security Ownership of Certain
Beneficial Owners and Management
Item 7. Certain Relationships and Related Transactions... Summary; Relationship Between the Company
and Murphy; The Distribution; Management
Item 8. Legal Proceedings................................ Business
Item 9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters.............................. Summary; Risk Factors; The Distribution; Trading
Market; Dividends; Security Ownership of Certain
Beneficial Owners and Management; Description
of Capital Stock
Item 10. Recent Sales of Unregistered Securities.......... Description of Capital Stock
Item 11. Description of Registrant's Securities to be
Registered....................................... Risk Factors; Description of Capital Stock;
Certain Statutory, Charter and Bylaw Provisions
and Rights Agreement
Item 12. Indemnification of Directors and Officers........ Liability and Indemnification of Directors and
Officers
Item 13. Financial Statements and Supplementary Data...... Summary; Management's Discussion and Analysis
of Financial Condition and Results of Operations;
Consolidated Financial Statements
Item 14. Changes in and Disagreements with
Accountants on Accounting and Financial None
Disclosure.......................................
Item 15. Financial Statements and Exhibits
(a)Financial Statements.......................... See Index To Consolidated Financial Statements
(b)Exhibits...................................... See Exhibit Index
</TABLE>
EXHIBIT INDEX
<TABLE>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Form of Distribution Agreement between Murphy Oil Corporation ("Murphy") and the Registrant.
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant.
3.2 Form of Amended and Restated Bylaws of the Registrant.
4.1 Form of Rights Agreement between the Registrant and Harris Trust and Savings Bank, as Rights
Agent.
10.1 Form of Tax Sharing Agreement between Murphy and the Registrant.
10.2 Fiber Supply Agreement dated as of February 21, 1995 between Del-Tin Fiber L.L.C. and the
Registrant.*
21.1 Subsidiaries of the Registrant.*
27.1 Financial Data Schedule.*
<FN>
- -----------
*Previously filed.
</TABLE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
DELTIC TIMBER CORPORATION
By: /s/ W. Bayless Rowe
----------------------------------------
Name: W. Bayless Rowe
Title: Vice President and Secretary
Date: November 19, 1996
[Murphy Oil Corporation Letterhead]
, 1996
Dear Stockholder:
I am pleased to inform you that the Board of Directors of Murphy Oil
Corporation ("Murphy") has approved a distribution to our stockholders of
all the outstanding shares of common stock of Murphy's wholly-owned
subsidiary, Deltic Timber Corporation ("Deltic"), to holders of record of
Murphy common stock on December 2, 1996. In the distribution, you will
receive one share of Deltic common stock for every 3.5 shares of Murphy
common stock you hold on the record date. Shares of Deltic are expected to
trade on the New York Stock Exchange under the symbol "DEL".
Deltic is a natural resources company engaged primarily in the growing and
harvesting of timber and the manufacture and marketing of lumber in the
southern United States. In addition, Deltic owns a real estate development
project in Little Rock, Arkansas and approximately 33,000 acres of
farmland.
Your Board of Directors has concluded that the distribution is in the best
interests of Murphy, Deltic and Murphy's stockholders in light of various
factors, including increasing the ability of Deltic to finance growth
plans, allowing the management of each company to focus attention and
financial resources on its respective businesses, enabling the financial
markets to evaluate the companies more effectively, and permitting the
companies to offer management incentives in a manner that is more directly
linked to the performance of the respective companies, thereby better
aligning these incentives with the interests of stockholders.
The enclosed Information Statement explains the proposed distribution in
detail and provides important financial and other information regarding
Deltic. We urge you to read it carefully. Holders of Murphy common stock
are not required to take any action to participate in the distribution. A
stockholder vote is not required in connection with this matter and,
accordingly, your proxy is not being sought. Very truly yours,
Claiborne P. Deming
President and Chief Executive Officer
Preliminary and Subject to Completion, Dated November 19, 1996
INFORMATION STATEMENT
DELTIC TIMBER CORPORATION
COMMON STOCK
(par value $.01 per share)
This Information Statement relates to the distribution (the
"Distribution") by Murphy Oil Corporation ("Murphy") of 100% of the shares of
common stock, par value $.01 per share, including associated preferred stock
purchase rights (the "Company Common Stock"), of Deltic Timber Corporation, a
Delaware corporation ("Deltic" or the "Company"), outstanding on the
Distribution Date (as defined below) to holders of Murphy's common stock, par
value $1.00 per share ("Murphy Common Stock"). Such shares of Company Common
Stock will represent all of the Company Common Stock owned by Murphy on the
Distribution Date and will be distributed by Murphy to its stockholders of
record as of the close of business on December 2, 1996 (the "Record Date") on
the basis of one share of Company Common Stock for every 3.5 shares of Murphy
Common Stock held of record on the Record Date. No consideration will be paid
to Murphy or the Company by Murphy stockholders for the shares of Company
Common Stock received in the Distribution. Following the Distribution, Murphy
will own no shares of Company Common Stock or other securities of the Company.
The Distribution is currently expected to be effected on or
about December 31, 1996 (the date on which the Distribution is effected being
the "Distribution Date"). Certificates representing the shares of Company
Common Stock will be mailed to Murphy stockholders on the Distribution Date or
as soon thereafter as practicable.
There has been no trading market for the Company Common
Stock, although it is expected that a "when-issued" trading market may
develop prior to the Distribution Date. The Company Common Stock has been
approved for listing on the New York Stock Exchange, subject to official
notice of issuance, under the symbol "DEL".
In reviewing this Information Statement, stockholders should
carefully consider the matters described under the section entitled "Risk
Factors" on page 9.
STOCKHOLDER APPROVAL IS NOT REQUIRED IN CONNECTION WITH THE
DISTRIBUTION. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS INFORMATION STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Information Statement is , 1996.
TABLE OF CONTENTS
PAGE
----
Introduction........................................................... 1
Summary................................................................ 2
Risk Factors........................................................... 9
The Distribution.......................................................13
Relationship Between the Company and Murphy............................16
Trading Market.........................................................19
Dividends..............................................................20
Pro Forma Consolidated Financial Statements............................21
Pro Forma Capitalization...............................................27
Selected Historical Financial and Operating Data.......................28
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................31
Business...............................................................39
Management.............................................................47
Security Ownership of Certain Beneficial Owners and Management.........52
Description of Capital Stock...........................................53
Certain Statutory, Charter and Bylaw Provisions and Rights Agreement...54
Independent Auditors...................................................58
Additional Information.................................................58
Index to Financial Statements.........................................F-i
INTRODUCTION
On November 11, 1996, the Board of Directors of Murphy declared
a dividend payable to holders of record of Murphy Common Stock at the close of
business on December 2, 1996 (the "Record Date") of one share of Company
Common Stock for every 3.5 shares of Murphy Common Stock owned of record on
the Record Date. It is expected that certificates representing shares of
Company Common Stock will be mailed to Murphy stockholders on the Distribution
Date or as soon thereafter as practicable.
As a result of the Distribution, 100% of the outstanding shares
of Company Common Stock will be distributed to Murphy stockholders. Murphy
will not own any securities of the Company immediately after the Distribution.
Murphy stockholders with inquiries relating to the Distribution
should contact Harris Trust and Savings Bank (the "Distribution Agent"), 111
West Monroe, P.O. Box 755, Chicago, Illinois 60690-0755; or Murphy Oil
Corporation, Secretary, 200 Peach Street, P.O. Box 7000, El Dorado, Arkansas
71731-7000. The Distribution Agent's telephone number is (312) 461-2121.
Murphy's telephone number is (501) 862-6411. After the Distribution,
stockholders of the Company with inquiries relating to the Distribution should
contact Deltic Timber Corporation, W. Bayless Rowe, Secretary, 200 Peach
Street, P.O. Box 7000, El Dorado, Arkansas 71731-7000. The Company's
telephone number is (501) 881-6634.
No action is required by Murphy stockholders in order to
receive the Company Common Stock to which they are entitled in the
Distribution.
SUMMARY
The following is a brief summary of the matters covered by this
Information Statement and is qualified in its entirety by the more detailed
information (including the consolidated financial statements and the notes
thereto) included elsewhere herein. Unless the context indicates
otherwise, the "Company" or "Deltic" means Deltic Timber Corporation and
its subsidiaries.
The Company
Deltic is a natural resources company engaged primarily in the
growing and harvesting of timber and the manufacture and marketing of lumber.
The Company owns approximately 341,000 acres of timberland in Arkansas and
northern Louisiana (the "Timberlands"), much of which was acquired in the
1920s. The Company's sawmill operations commenced in 1971 and now consist of
two mills, one located at Ola in central Arkansas (the "Ola Mill") and another
at Waldo in southern Arkansas (the "Waldo Mill"). The Company also holds a
50-percent interest in a joint venture to manufacture and market medium
density fiberboard, which is expected to be operational in early 1998. In
addition to its timber and lumber operations, the Company is engaged in a real
estate development project in Little Rock, Arkansas, and owns approximately
33,000 acres of farmland.
The Company believes that its primary strengths are its
strategically located Timberlands, its efficient sawmill operations, its
experienced management team and its capacity to pursue a timber-based
acquisition strategy.
The Timberlands consist primarily of Southern Yellow Pine.
Management considers the Timberlands to be the Company's most valuable assets,
and the harvest of this stumpage to be the Company's most significant source
of income. Estimated pine sawtimber inventory as of December 31, 1995 was 8.1
million tons. The southern United States, in which all of the Company's
operations are located, is a major timber and lumber producing region.
Although there can be no assurance, management expects that the southern U.S.
timber resource will be subject to particularly strong demand in the future
and believes that the South will have a strategic advantage over other U.S.
timber producing regions due to regulatory, geographic and other factors.
Unlike other major timber-producing areas in North America, most timber
acreage in the southern United States is privately held, rendering it
potentially available for acquisition. The Company's current growth strategy
emphasizes a significant timberlands acquisition program in such region, which
will facilitate an increase in harvest levels.
The Company harvests timber from the Timberlands in accordance
with its harvest plans and either sells timber in the domestic market or
converts timber to lumber in its sawmills. In 1995, the Company harvested
approximately 268,000 tons of pine sawtimber from the Timberlands. The
Company's two sawmills employ modern technology in order to improve
efficiency, reduce labor costs, maximize utilization of the timber resource
and maintain high-quality standards of production. In addition, each sawmill
is strategically located near significant portions of the Timberlands. In
1995, the Company's sawmills processed approximately 671,000 tons of timber,
some of which came from the Timberlands and the remainder of which was obtained
from public and private landowners. The Company selects logs for processing
in its sawmills based on size, grade and the then prevailing market price.
The Ola Mill is equipped for maximum utilization of smaller diameter logs,
while the Waldo Mill can process both smaller and larger diameter logs.
Approximately $15 million has been invested in upgrades of the two sawmills
over the past five years, expanding both production and product lines.
Combined annual capacity is currently 165 million board feet. The Company's
sawmills produce a wide variety of products, including dimension lumber,
boards, timbers and decking. The lumber is sold primarily to wholesalers and
treaters in the South and Midwest and is used in residential construction,
roof trusses, laminated beams and remanufactured items.
Deltic owns a 50-percent interest in Del-Tin Fiber L.L.C., a
joint venture with Temple-Inland Forest Products Corporation to manufacture
and market medium density fiberboard ("MDF"). The plant will be located near
El Dorado, Arkansas. Construction commenced in mid-1996, with initial
production scheduled for early 1998. MDF, which is used in the furniture,
flooring and molding industries, is manufactured from sawmill residuals such
as chips, shavings, and sawdust held together by an adhesive bond. The plant
is designed to have an annual production capacity of approximately 150 million
square feet (3/4" basis), making it one of the largest of its type in the
world. The plant is also expected to add value to and provide an additional
outlet for wood chip production from the Waldo Mill.
The Company's real estate operations, Chenal Valley, were
started in 1985 to take advantage of timberland strategically located in the
growth corridor of Little Rock, Arkansas. Since that time, the Company has
been developing a 4,300-acre planned community centered around a Robert Trent
Jones, Jr. designed golf course. The property is being developed in stages,
and real estate sales to date have consisted primarily of residential lots.
Commercial development began in 1996 with the construction of a Deltic-owned,
50,000 square-foot office building, half of which has been leased to General
Motors Acceptance Corporation.
The Company owns 33,000 acres of farmland in northeastern
Louisiana. Approximately 23,000 acres of the total are farmed by Deltic,
while the remaining 10,000 acres are rented to third parties. The primary
crops are cotton, soybeans, corn, wheat, and rice.
The Company was incorporated in September 1996 and, prior to
the Distribution, will become the successor to Deltic Farm & Timber Co., Inc.,
an Arkansas corporation.
The Distribution
The following is a brief summary of certain terms of the Distribution.
Distributing Company............. Murphy Oil Corporation. After the
Distribution, Murphy will own no shares of
Company Common Stock.
Primary Purposes of the
Distribution.................... Murphy has concluded that the
Distribution is in the best interests of
Murphy, the Company and Murphy's
stockholders in light of various factors,
including increasing the ability of
Deltic to finance growth plans, allowing
the management of each company to focus
attention and financial resources on its
respective businesses, enabling the
financial markets to evaluate both Murphy
and the Company more effectively, and
permitting Murphy and the Company to
offer management incentives that are more
directly linked to the performance of the
respective businesses. See "The
Distribution--Background to and Reasons
for the Distribution."
Securities To Be Distributed..... All of the outstanding shares of Company
Common Stock. Based on the number of shares
of Murphy Common Stock outstanding as of
September 30, 1996, it is estimated that
approximately 12.8 million shares of Company
Common Stock will be distributed to Murphy
stockholders in the Distribution. After the
Distribution, the Company estimates that the
Company Common Stock will be held by
approximately 4,200 stockholders of record,
although some of the shares may be
registered in nominee names representing an
additional number of stockholders.
Distribution Ratio............... One share of Company Common Stock for every
3.5 shares of Murphy Common Stock held by
Murphy stockholders of record on the Record
Date.
Record Date...................... December 2, 1996 (close of business New York
time).
Distribution Date................ December 31, 1996. Certificates
representing the shares of Company Common
Stock will be mailed to Murphy stockholders
on the Distribution Date or as soon
thereafter as practicable.
Distribution Agent............... Prior to the Distribution Date, the Company
will appoint Harris Trust and Savings Bank
to serve as Distribution Agent in
connection with the Distribution.
Trading Market and Symbol........ There has been no trading market for the
Company Common Stock, although it is
expected that a "when-issued" trading market
may develop prior to the Distribution Date.
The Company Common Stock has been
approved for listing on the New York
Stock Exchange, subject to official
notice of issuance, under the symbol
"DEL". See "Trading Market."
Tax Consequences................. Murphy has received a ruling from the
Internal Revenue Service to the effect that
the Distribution will qualify as a tax-free
distribution for federal income tax
purposes. See "The Distribution--Certain
Federal Income Tax Consequences" for a more
detailed description of the federal income
tax consequences of the Distribution.
Risk Factors..................... Stockholders should carefully consider the
matters discussed under the section entitled
"Risk Factors" in this Information Statement.
No Fractional Shares............. No fractional shares of Company Common Stock
will be distributed. All fractional share
interests will be aggregated and sold by the
Distribution Agent on behalf of stockholders
and the cash proceeds distributed to those
stockholders otherwise entitled to a
fractional interest. See "The
Distribution-- Description of the
Distribution."
Relationship with Murphy
After the Distribution.......... In connection with the Distribution, Murphy
and the Company will enter into the
Distribution Agreement and the Tax Sharing
Agreement described under "Relationship
Between the Company and Murphy." These
agreements are not the result of arm's
length negotiations. Additional or modified
agreements, arrangements and transactions
may be entered into between Murphy and the
Company after the Distribution, which will
be negotiated at arm's length.
Summary Selected Historical Financial and Operating Data
The following table sets forth for the periods and at the dates
indicated selected historical financial and operating data for the Company on
a consolidated basis. The selected historical financial data as of December
31, 1993, 1992 and 1991 and for each of the years in the two-year period ended
December 31, 1992 are derived from the Company's unaudited historical
financial statements not included in this Information Statement. The selected
historical financial data as of December 31, 1995 and 1994 and for each of the
years in the three-year period ended December 31, 1995 are derived from the
Company's audited historical consolidated financial statements and should be
read in conjunction with such financial statements included elsewhere in this
Information Statement. The historical financial data as of September 30, 1996
and 1995 and for the nine-month periods ended September 30, 1996 and 1995 are
derived from the unaudited historical consolidated financial statements of the
Company, which are included elsewhere in the Information Statement. In the
opinion of the Company's management, these nine-month consolidated financial
statements include all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim periods. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Consolidated Financial Statements."
Earnings per share data are presented elsewhere in this Information Statement
on a pro forma basis only. See "Unaudited Pro Forma Consolidated Financial
Statements." The historical financial data presented below reflect periods
during which the Company did not operate as an independent company.
Therefore, such data may not reflect the results of operations or the
financial condition which would have resulted if the Company had operated as a
separate, independent company during such periods, and are not necessarily
indicative of the Company's future results of operation or financial condition.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(dollars in thousands, except ratios and operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
Financial Data:
Income Statement Data:
Net sales........................... $ 64,462 $ 61,996 $ 80,662 $ 92,457 $ 69,448 $ 60,528 $ 50,553
-------- -------- -------- -------- -------- -------- --------
Costs and expenses:
Cost of sales..................... 44,045 42,475 58,731 56,521 43,925 42,416 38,464
Depreciation, amortization,
and cost of fee timber
harvested....................... 3,104 3,010 4,053 3,886 3,488 3,152 3,231
Selling and general expenses...... 3,583 3,281 4,535 3,675 4,657 5,596 4,674
Total costs and expenses........ 50,732 48,766 67,319 64,082 52,070 51,164 46,369
-------- -------- -------- -------- -------- -------- --------
Operating income.................... 13,730 13,230 13,343 28,375 17,378 9,364 4,184
Interest income..................... 2,209 1,975 2,668 1,634 1,075 1,202 1,225
Interest expense.................... (210) (216) (309) (5) (14) (50) (87)
Other income........................ 1,173 127 192 572 100 474 200
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes and accounting
changes........................... 16,902 15,116 15,894 30,576 18,539 10,990 5,522
Income tax expense.................. (6,621) (5,877) (5,878) (12,434) (7,128) (4,329) (1,934)
-------- -------- -------- -------- -------- -------- --------
Income before accounting
changes........................... 10,281 9,239 10,016 18,142 11,411 6,661 3,588
Cumulative effect of
accounting changes................ -- -- -- -- (4,076) -- --
-------- -------- -------- -------- -------- -------- --------
Net income.......................... $ 10,281 $ 9,239 $ 10,016 $ 18,142 $ 7,335 $ 6,661 $ 3,588
======== ======== ======== ======== ======== ======== ========
Balance Sheet Data and Ratios:
Total assets........................ $194,109 $184,714 $185,247 $169,373 $150,761 $139,478 $133,547
Working capital..................... 13,644 11,035 6,822 11,314 11,520 9,824 8,041
Current ratio....................... 3.4 to 1 2.6 to 1 1.9 to 1 3.4 to 1 4.5 to 1 3.9 to 1 3.9 to 1
Long-term debt (noncurrent
portion).......................... $ 2,685 $ 3,634 $ 2,817 $163 $ 54 $ 174 $ 570
Stockholder's equity................ 180,570 169,512 170,289 160,273 142,131 134,796 129,493
Debt to stockholder's equity
ratio............................. .015 to 1 .021 to 1 .017 to 1 .001 to 1 .001 to 1 .001 to 1 .004 to 1
Cash Flow and Other Data:
Cash flow from operations........... $ 13,566 $ 10,327 $ 16,865 $ 23,894 $ 16,200 $ 11,679 $ 8,855
Cash required by
investing activities.............. 9,131 11,523 16,134 23,875 16,215 10,835 9,240
Cash required by
financing activities.............. 419 77 1,644 101 401 379 370
EBITDA(1)........................... 16,834 16,240 17,396 32,261 20,866 12,516 7,415
Capital expenditures
requiring cash.................... 5,886 5,792 7,361 10,176 10,682 8,849 4,194
Cash and equivalents at end
of period......................... 5,447 1,071 1,431 2,344 2,426 2,842 2,377
Operating Data:
Thousands of acres
owned at end of
period............................ 383 386 386 387 387 388 387
Pine sawtimber harvested
from fee lands
(MBF-DS)(2)....................... 32,437 31,138 35,736 40,616 37,635 30,177 32,956
Average pine sawtimber
prices ($/MBF-DS)................. 342 422 406 372 310 274 202
Finished lumber
production (MBF)(3).............. 107,697 108,572 140,555 136,713 112,365 101,203 92,846
Annual sawmill capacity at
end of period (MBF)............... 165,000 165,000 165,000 165,000 122,600 100,100 100,100
Finished lumber sales (MBF)......... 108,693 108,278 140,549 138,377 115,136 105,619 95,024
Average finished lumber
sales prices ($/MBF).............. 330 329 318 363 335 259 215
Residential lots sold............... 78 51 71 163 81 134 50
Average price for
residential lots sold
($/lot)........................... 55,000 53,800 52,900 56,700 60,000 38,800 61,400
Commercial acres sold(4)............ 2 -- -- -- -- -- 17
Average price for commercial
acres sold ($/acre)............... 199,500 -- -- -- -- -- 32,700
Number of employees at
end of period..................... 350 360 358 317 301 296 266
<FN>
- ----------------
(1) EBITDA is defined as earnings before interest and other income,
interest expense, depreciation, amortization and cost of fee timber
harvested, and income taxes. EBITDA is presented by the Company
because it is one measure commonly used by Company management and
certain investors to analyze companies based on operating performance.
EBITDA does not represent net income or cash flows as defined by
generally accepted accounting principles and it should not be
considered as an alternative to, or more meaningful than, net income or
cash flows as an indicator of the Company's operating performance or
liquidity. EBITDA does not necessarily indicate that operating results
are sufficient to fund all of the Company's cash needs. Since
presentation of EBITDA is not defined within generally accepted
accounting principles, there can be no assurance that EBITDA as
presented by the Company is comparable to similarly titled disclosures
provided by other companies.
(2) "MBF-DS" means thousand board feet (Doyle Log Scale).
(3) "MBF" means thousand board feet.
(4) The commercial acres sold in 1991 were sold for church sites.
</TABLE>
Summary Selected Pro Forma Financial Data
The following summary pro forma financial data include
adjustments to the historical statements of income of the Company for nine
months ended September 30, 1996 and the year ended December 31, 1995 as if the
Distribution had occurred on January 1, 1995 and to the historical balance
sheet of the Company as of September 30, 1996 as if the Distribution had
occurred on September 30, 1996. Such adjustments result from, among other
things, increased expenses associated with operating as an autonomous entity
rather than as a wholly-owned subsidiary of Murphy and elimination of an
intercompany receivable from Murphy. See "Pro Forma Consolidated Financial
Statements" and the notes thereto. The following pro forma financial data are
provided for information purposes only and should not be construed to be
indicative of the Company's results of operations or financial condition had
the Distribution occurred on the dates assumed, may not reflect the results of
operations or financial condition which would have resulted had the Company
been operated as a separate, independent company during such period, and are
not necessarily indicative of the Company's future results of operations or
financial condition.
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1996 December 31, 1995
------------------- -----------------
(dollars in thousands, except earnings per share)
<S> <C> <C>
Income Statement Data:
Net sales.................................... $ 64,462 $ 80,662
Operating income............................. 13,415 13,014
Net income................................... 9,482 8,965
Earnings per share........................... 0.74 0.70
Balance Sheet Data:
Total assets................................. $ 177,106
Total long-term debt (including
current portion)........................... 4,383
Stockholders' equity......................... 164,839
</TABLE>
RISK FACTORS
In addition to the other information contained in this
Information Statement, stockholders should carefully review the following
factors.
This Information Statement contains certain forward looking
statements regarding the Company's operations, economic performance and
financial condition, including, in particular, statements made as to the
Company's strategy for growth through significant timberland acquisitions, an
increase in harvest levels and expansion into engineered wood products. Such
forward looking statements are subject to known and unknown risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors, including those identified under "Risk
Factors" and elsewhere in this Information Statement.
Cyclicality of Forest Products Industry
The Company's results of operations are, and will continue to
be, affected by the cyclical nature of the forest products industry. Prices
and demand for logs and manufactured wood products have been, and in the
future can be expected to be, subject to cyclical fluctuations. The demand
for logs and lumber is primarily affected by the level of new residential
construction activity, which activity is subject to fluctuations due to
changes in economic conditions, interest rates, population growth, weather
conditions and other factors. Decreases in the level of residential
construction activity will be reflected in reduced demand for logs and lumber
resulting in lower prices for the Company's products and lower revenues,
profits and cash flows. In addition to housing starts, demand for wood
products is also significantly affected by repair and remodeling activities
and industrial uses, demand for which has historically been less cyclical.
Furthermore, changes in industry supply of timber have an effect on prices. In
the recent past the United States government has significantly reduced its
sales of timber in response to environmental and endangered species concerns,
resulting in increased prices for logs and lumber. Such reduction is
continuing to affect prices for logs and lumber. Although the Company
believes that sales of timber by United States government agencies will remain
at historically low levels for the foreseeable future, any reversal of policy
that substantially increased such sales could significantly reduce prices for
logs and lumber, which could have a material adverse effect on the Company.
Furthermore, increased imports from Canada and other foreign countries could
reduce the prices the Company receives for its products.
Decline in Availability of Federal Timber
Various factors, including environmental and endangered species
concerns, have limited, and will likely continue to limit, the amount of
timber offered for sale by certain United States government agencies, which
historically have been major suppliers of timber to the United States forest
products industry. During 1995 and the nine months ended September 30, 1996,
the Company acquired approximately nine percent of its timber supply for its
Ola, Arkansas sawmill (the "Ola Mill") from federal sources (the Ouachita and
Ozark National Forests). Any future decline in the availability of timber
from federally owned lands will require that the Company, in order to supply
the Ola Mill, rely more heavily on harvests from the Company's timberlands
(including harvests from timberlands acquired in the future to the extent that
suitable opportunities arise) and on the acquisition of timber from other
sources, such as private timber owners. The Company's Waldo, Arkansas sawmill
does not currently process any timber acquired from federal sources.
Limitations on the Company's Ability to Harvest Timber
Revenues from the Company's future operations will depend to a
significant extent on its ability to harvest timber pursuant to its harvest
plans from its approximately 341,000 acres of timberlands (the "Timberlands").
The Company's harvest plans through the year 2000 currently anticipate
harvesting certain of the Timberlands at an accelerated pace. The
implementation of such harvest plans, however, will require the Company to
increase its timber inventory through significant timberland acquisitions.
See "Business--Growth Strategy." There can be no assurance that such
acquisitions will be made or that the Company will in the future achieve the
levels contemplated by current harvest plans.
Harvesting of the Timberlands may be affected by various
natural factors, including damage by fire, insect infestation, disease,
prolonged drought, severe weather conditions and other causes. The effects of
such natural disasters may be particularly damaging to young timber. To the
extent possible, the Company implements measures to limit the risk of damage
from such natural causes. The Company is a participant with state agencies
and other timberland owners in cooperative fire fighting and fire surveillance
programs. In addition, the Timberlands' extensive system of access roads and
the physical separation of various tracts provide some protection against fire
damage. Nonetheless, one or more major fires on the Timberlands could
adversely affect Deltic's operating results. In addition, the Timberlands may
also be affected by insect infestation, particularly by the southern pine
beetle, and disease. In recent years, there have not been significant
outbreaks of either insect infestation or disease. The outbreaks that have
occurred have been addressed by the harvesting of affected trees and buffer
areas to prevent spreading, and the injection of surrounding trees.
Additionally, the Timberlands may be affected by severe weather conditions,
especially tornados, ice storms and heavy winds. 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
Timberlands will, in fact, be so limited. As is typical in the forest
products industry, the Company does not maintain insurance coverage with
respect to damage to the Timberlands. The Company does, however, maintain
insurance for loss of logs due to fire and other occurrences following their
receipt at the Company's sawmills.
In conducting its harvesting activities, the Company
voluntarily complies with the "Best Management Practices" recommended by the
Arkansas Forestry Commission. From time to time, proposals have been made in
state legislatures regarding the regulation of timber harvesting methods.
There can be no assurance that such proposals, if adopted, will not adversely
affect the Company or its ability to harvest and sell logs or timber in the
manner currently contemplated. However, the impact, if any, if such proposals
were enacted should not be unique to the Company.
Operation of Sawmills
The Company's sawmills are located at Ola in central Arkansas
and Waldo in southern Arkansas. The operations of the sawmills are dependent
on various factors and there can be no assurance that the Company will be able
to continue such operations at current levels of production or that suspension
of such operations may not be required in the future. One such factor is the
ability of the Company to procure sufficient logs at favorable prices. The
Company obtains logs for its sawmills from the Timberlands, other private
sources and federal lands. As discussed above, prices for logs are cyclical
and affected primarily by demand for lumber and other products produced from
logs. Another such factor is the ability of the Company to find an outlet for
the large volume of residual wood products that result from the milling
process. The Company currently markets such products to third parties for the
production of paper and other uses. In the future, the Company expects to
sell a significant portion of its residue wood chips to Del-Tin Fiber L.L.C.
("Del-Tin"), a joint venture for the construction and operation of a medium
density fiberboard plant near El Dorado, Arkansas in which the Company owns a
50-percent interest. Such facility is expected to be operational in early
1998. In addition, the continued operation of the sawmills is subject
generally to the risk of business interruption in the event of a fire or other
natural disaster, regulatory actions or other causes. The Company mitigates
this risk through the procurement of business interruption insurance.
Competition
The forest products industry is highly competitive in terms of
price and quality. Many of the Company's competitors are fully integrated
companies with substantially greater financial and operating resources than the
Company. The products of the Company are subject to increasing competition
from a variety of non-wood and engineered wood products. In addition, the
Company is subject to a potential increase in competition from lumber products
and logs imported from foreign sources. Any significant increase in
competitive pressures from substitute products or other domestic or foreign
suppliers could have a material adverse effect on the Company. See
"Business--Products and Competition."
Federal and State Environmental Regulation
The Company is subject to extensive and changing federal, state
and local environmental laws and regulations relating to the protection of
human health and the environment, the provisions and enforcement of which are
expected to become more stringent in the future. The Company has made and
will continue to make non-material expenditures to comply with such
provisions. In addition, the Federal Endangered Species Act protects species
threatened with possible extinction and restricts the Company's harvesting
activities on certain of the Timberlands on which the Red Cockaded Woodpecker,
a protected species, is present. Based on currently available information,
including the fact that the Company is not presently aware of any facts that
indicate that the Company will be required to incur any material costs
relating to environmental matters, the Company believes that environmental
regulation will not materially adversely effect the Company, but there can be
no assurances that environmental regulation will not have a material adverse
effect on the financial condition, results of operations or liquidity of the
Company in the future. See "Business--Environmental Matters."
Geographic Concentration of Real Estate Development
The Company's real estate development project ("Chenal Valley")
is a 4,300-acre planned community in western Little Rock, Arkansas.
Accordingly, the Company's real estate operations are particularly vulnerable
to any economic downturns or other adverse events that may occur in this
region and to competition from nearby residential housing developments. From
the project's commencement, the Company has developed and sold lots on the
Chenal Valley property primarily for the construction of residences, although
the sale of commercial tracts has also begun. As a result, the Company's
results of operations may be affected by the cyclicality of the homebuilding
and real estate industries generally. Factors include changes in general and
local economic conditions, such as employment levels, consumer confidence and
income, housing demand, availability of financing and interest rates, and
changes in government regulation regarding the environment, zoning, real
estate taxes and other local government fees.
The Chenal Valley residential properties are centered around
the Chenal Country Club golf course. In connection with its residential
development activities, the Company entered into an agreement with the Chenal
Country Club (the "Club"), whereby the Company developed the golf course, a
clubhouse and related facilities (collectively, the "Club Facilities") for use
by Club members, and the Club agreed to purchase the Club Facilities with
payments to be made on specified terms through 1999. The Company has a made a
proposal to the Club for restructuring the existing agreement. Pursuant to
the proposal, the Company would retain ownership of the Club Facilities, and
the Club members would make ongoing membership fee payments to the Company.
In addition, the Company would agree to undertake substantial remodeling and
expansion of the Club Facilities. The proposal was endorsed by the Club's
Board of Directors and has been submitted to the Club members for approval.
There can be no assurance that such approval will be obtained.
Risk Inherent in the Farming Industry
The Company's farming operations consist of approximately
33,000 acres in northeastern Louisiana, about 70 percent of which is farmed by
the Company and 30 percent of which is rented to third parties. The Company's
primary crops are cotton, soybeans, corn, wheat and rice. The Company's
farming operations are subject to numerous variable factors, including weather
conditions, insect infestation, crop disease, animal damage, the timing and
amount of rainfall, and environmental factors relating to pesticides, among
other things. Although the Company, to the extent possible, takes measures to
mitigate the potential risk of loss, there can be no assurance that the
Company's farming operations will not be adversely affected by any one or a
combination of these factors. In addition, agricultural products are subject
to rapid and significant price fluctuations. Such fluctuations can impact
revenues, operating costs and cash flow, thereby impacting profitability.
Seasonality
The Company's forest products and agriculture segments are
subject to variances in financial results due to several seasonal factors.
The majority of timber sales are generated in the first half of the year due
primarily to weather conditions and stronger timber prices. Increased housing
starts during the spring usually push lumber prices up and, in turn, can
result in higher timber prices. Forestry operations generally incur expenses
related to silvicultural treatments which are applied during the fall season
to achieve maximum effectiveness. Farming operations do not generate
significant sales and operating income until crops are harvested and sold in
the second half of the year.
Lack of Operating History as a Independent Company
Prior to the Distribution, the Company has been operated as a wholly-owned
subsidiary of Murphy. As such, the Company does not have an operating history
as an independent public company. The Company has historically relied upon
Murphy for certain administrative services in areas such as financial affairs,
environmental affairs, human resources, information systems, insurance, law,
purchasing, treasury and tax. Following the consummation of the Distribution,
the Company will be responsible for maintaining its own administrative
functions, except for certain services to be provided by Murphy for a
transitional period after the Distribution. See "Relationship between the
Company and Murphy--Terms of the Distribution Agreement--Transitional
Services." There can be no assurance as to the Company's future operating
results as an independent public company.
Reliance on Key Personnel
The Company believes that its continued success will depend in
large part on its ability to attract and retain highly skilled and qualified
personnel. The Company believes that the Distribution will, among other
things, permit the Company to offer management incentives in a manner that is
more directly linked to the Company's performance, which the Company believes
will facilitate the attraction, retention and motivation of highly skilled and
qualified personnel. In this regard, the Company has taken steps to retain
its key personnel, including the provision of competitive employee benefit
programs. See "Management." Although the Company will seek to employ a
qualified person to fill his or her position with the Company in the event
that any officer or director of the Company ceases to be associated with the
Company, there can be no assurance that such individuals could be engaged by
the Company.
Dividend Policy
The Company currently intends to pay modest quarterly cash
dividends. However, the Company anticipates that future earnings will for the
most part be used to support operations and finance growth of the business.
The payment of any dividends will be at the discretion of the Company's Board
of Directors (the "Company Board"). The declaration of dividends and the
amount thereof will depend on a number of factors, including the Company's
financial condition, capital requirements, funds from operations, future
business prospects and such other factors as the Company Board may deem
relevant, and no assurance can be given as to the timing or amount of any
dividend payments.
No Prior Market for Common Stock
Prior to the Distribution, there has been no public market
for the Company Common Stock, and there can be no assurance that an active
trading market will develop or be sustained in the future. The Company
Common Stock has been approved for listing on the New York Stock Exchange,
subject to official notice of issuance, under the symbol "DEL". There can
be no assurance as to the price at which the Company Common Stock will
trade. See "Trading Market."
There can be no assurance that the Company Common Stock will
not experience substantial price volatility, particularly as a result of
quarter to quarter variations in the actual or anticipated financial results
of the Company or other companies in the forest products industry. In
addition, the stock market has experienced extreme price and volume
fluctuations that have affected the market price of many stocks and that have
often been unrelated or disproportionate to the operating performance of
individual companies. These and other factors, such as investor perception of
the Company, the depth and liquidity of the market for shares of the Company
Common Stock, changes in economic conditions in the forest products industry
and general economic and market conditions, may influence and adversely affect
the market price of the Company Common Stock.
Possibility of Substantial Sales of Common Stock
The Distribution will involve the distribution of an aggregate
of approximately 12.8 million shares of Company Common Stock to the
stockholders of Murphy. Substantially all of such shares would be eligible
for immediate resale in the public market. The Company is unable to
predict whether substantial amounts of Company Common Stock will be sold in
the open market in anticipation of, or following, the Distribution. Any
sales of substantial amounts of Company Common Stock in the public market,
or the perception that such sales might occur, whether as a result of the
Distribution or otherwise, could materially adversely affect the market
price of the Company Common Stock.
Anti-Takeover Effects of Certain Statutory, Charter, Bylaw and Contractual
Provisions
Several provisions of the Company's Certificate of
Incorporation and Bylaws (as will be in effect as of the Distribution) and of
the Delaware General Corporation Law could discourage potential acquisition
proposals and could deter or delay unsolicited changes in control of the
Company, including provisions creating a classified Board of Directors,
limiting the stockholders' powers to remove directors, and prohibiting the
taking of action by written consent in lieu of a stockholders' meeting. The
preferred stock purchase rights attached to the Company Common Stock could
have similar anti-takeover effects. In addition, the Company Board has the
authority, without further action by the stockholders, to fix the rights and
preferences of and to issue preferred stock. The issuance of preferred stock
could adversely affect the voting power of the owners of Company Common Stock,
including the loss of voting control to others. Pursuant to the Tax Sharing
Agreement, the Company will agree to refrain from engaging in certain
transactions for two years following the Distribution Date unless it shall
first provide Murphy with a ruling from the Internal Revenue Service or an
unqualified opinion acceptable to Murphy of a nationally recognized
independent tax counsel that the transaction will not cause Murphy or its
stockholders to recognize taxable income by virtue of the Distribution.
Transactions subject to these restrictions will include, among other things,
the liquidation of the Company, the merger, consolidation or other combination
or affiliation of the Company with another company, discontinuance of or
material change in the conduct of a material portion of its businesses
independently and with its own employees, redemption or other reacquisition of
Company Common Stock, and the sale, distribution or other disposition of
assets of the Company out of the ordinary course of business. The Company
will generally agree to indemnify Murphy against any tax liability resulting
from the Company's breach of any covenant or representation contained in the
Tax Sharing Agreement.
These provisions and others that could be adopted in the future
could discourage unsolicited acquisition proposals or delay or prevent changes
in control or management of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices. In addition, these provisions could limit the ability
of stockholders to approve transactions that they may deem to be in their best
interests. See "Description of Capital Stock" and "Certain Statutory,
Charter, Bylaw Provisions and Rights Agreement."
THE DISTRIBUTION
Background to and Reasons for the Distribution
Murphy's Board of Directors (the "Murphy Board") has
determined, for the reasons set forth below, that it is in the best interests
of Murphy, Deltic and Murphy's stockholders to undertake the Distribution.
In early 1996, Murphy began to consider strategies for
improving the performance of the Company's timber, farming and real estate
businesses. At a series of meetings, the Murphy Board, assisted by Murphy's
financial advisors and the management of Murphy and the Company, explored
various alternatives for effecting such improvement, including the separation
of the Company's businesses from Murphy. The Murphy Board concluded, among
other things, that the Company's timber business offers substantial
opportunity for growth, primarily by significantly increasing the harvest of
the Company's Southern Yellow Pine sawtimber in combination with an aggressive
but flexible timberland acquisition program, while continuing to add value to
timber production through downstream investment. The Murphy Board further
concluded that to take advantage of such opportunities, the Company will
require significant capital investment. The Murphy Board reviewed a variety
of alternative approaches for providing for the capital needs of the Company's
business and determined that the most efficient way to raise the needed
additional capital is through the Distribution and a subsequent offering of
equity of the Company. The Company currently intends to make an offering of
$30-40 million of equity of the Company within one year of the Distribution,
consistent with representations made to the Internal Revenue Service for
purposes of receiving a ruling that the Distribution will qualify as tax-free
to Murphy and its stockholders under Section 355 of the Internal Revenue Code
of 1986, as amended (the "Code"). The equity may be in the form of Company
Common Stock, convertible preferred stock or straight preferred stock, which
may be sold to the public or in a private placement to financial institutions
depending on the then-existing market conditions. There can be no assurance,
however, that the Company will be able to successfully complete an offering or
otherwise fund its expansion plans. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources." In addition, the Distribution will create the opportunity for
the Company to use its capital stock as an "acquisition currency" to finance
all or a part of any future timberland acquisitions and other capital needs.
Before concluding that an equity offering as a stand-alone
entity was the preferable means of satisfying the Company's capital needs, the
Murphy Board considered several alternative transactions, including (i) an
offering of Murphy Common Stock, with the Company remaining a wholly-owned
subsidiary of Murphy; (ii) an offering of less than 100% of the Company, with
Murphy retaining the remaining interest; (iii) an offering of 100% of the
Company; and (iv) reconfiguring the Company's assets into a partnership, with
an offering of master limited partnership ("MLP") units. The current
strategy was considered preferable to each of these alternatives. First,
unlike the first and second alternatives, the Distribution will permit the
Company to efficiently raise additional capital because the Company will
become a stand-alone entity. As such, the Distribution is intended to enable
the financial markets to evaluate both the Company and Murphy more effectively
by using valuation methods suitable to each particular industry. Further, the
Distribution will allow the management of each company to focus attention and
financial resources on its respective businesses, and will provide each
company with greater flexibility to pursue its independent business
objectives. And, the Distribution will permit the Company and Murphy to offer
management incentives in a manner more directly linked to the performance of
the respective companies, thereby better aligning these incentives with the
interests of stockholders. Second, unlike the second and third alternatives,
the Distribution will allow the market to evaluate the Company as a public
entity prior to any equity offering, thereby maximizing the efficiency of any
such offering. Finally, the current strategy was preferable to the fourth
alternative because the Company's growth objectives and resulting cash flow
needs were considered not optimal for meeting the expectations of MLP
investors.
Description of the Distribution
The general terms and conditions relating to the Distribution
are set forth in the Distribution Agreement between Murphy and the Company.
See "Relationship between the Company and Murphy--Terms of the Distribution
Agreement."
Murphy will effect the Distribution on December 31, 1996 (the
"Distribution Date") by the delivery of the shares of Company Common Stock to
the Distribution Agent for distribution to the holders of record of Murphy
Common Stock on December 2, 1996 (the "Record Date"). The Distribution will
be made on the basis of one share of Company Common Stock for every 3.5 shares
of Murphy Common Stock outstanding on the Record Date. The actual total
number of shares of Company Common Stock to be distributed will depend on the
number of shares of Murphy Common Stock outstanding on the Record Date. Based
upon the number of shares of Murphy Common Stock outstanding on September 30,
1996, approximately 12.8 million shares of Company Common Stock will be
distributed to Murphy stockholders, which will constitute all of the shares of
Company Common Stock owned by Murphy. As a result of the Distribution, 100%
of the outstanding shares of Company Common Stock will be distributed to
Murphy stockholders. The shares of Company Common Stock will be fully paid
and nonassessable, and the holders thereof will not be entitled to preemptive
rights. See "Description of Capital Stock." Certificates representing the
shares of the Company Common Stock will be mailed to Murphy stockholders on
the Distribution Date or as soon as practicable thereafter.
No certificates or scrip representing fractional shares of
Company Common Stock will be issued to Murphy stockholders as part of the
Distribution. The Distribution Agent will aggregate fractional shares into
whole shares and sell them in the open market at then prevailing prices on
behalf of holders who otherwise would be entitled to receive fractional share
interests, and such persons will receive instead a cash payment in the amount
of their pro rata share of the total sale proceeds thereof. Proceeds from
sales of fractional shares will be paid by the Distribution Agent based upon
the average gross selling price per share of Company Common Stock of all such
sales. See "The Distribution--Federal Income Tax Consequences." Such sales
are expected to be made as soon as practicable after the Distribution Date.
None of Murphy, the Company or the Distribution Agent will guarantee any
minimum sale price for the fractional shares of Company Common Stock, and no
interest will be paid on the proceeds of such shares.
Certain Federal Income Tax Consequences
The following is a summary of the material federal income tax
consequences of the Distribution to Murphy and its stockholders. Murphy has
received a ruling from the Internal Revenue Service to the effect that the
Distribution will qualify as tax-free to Murphy and its stockholders under
Section 355 of the Code, and accordingly, for federal income tax purposes:
(i) Except as described below with respect to fractional shares, a
Murphy stockholder will not recognize gain or loss as a result of the
Distribution. Gain or loss will be recognized to the recipient
stockholder to the extent of the difference between the stockholder's
basis in the fractional share and the amount received for the
fractional share. Provided the fractional share interest is held as a
capital asset by the recipient stockholder, such gain or loss will
constitute capital gain or loss.
(ii) A Murphy stockholder will apportion its tax basis for its Murphy
Common Stock between such Murphy Common Stock and Company Common Stock
received in the Distribution in proportion to the relative fair market
values of such Murphy Common Stock and Company Common Stock on the
Distribution Date.
(iii) A Murphy stockholder's holding period for the Company Common
Stock received in the Distribution will include the period during which
such stockholder held the Murphy Common Stock with respect to which the
Distribution was made, provided that such Murphy Common Stock is held
as a capital asset by such stockholder as of the Distribution Date.
Current Treasury regulations require each Murphy stockholder
who receives Company Common Stock pursuant to the Distribution to attach to
its federal income tax return for the year in which the Distribution occurs a
descriptive statement concerning the Distribution. Murphy will make available
on a timely basis requisite information to each such stockholder.
ALL STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS
REGARDING THE PARTICULAR FEDERAL, FOREIGN, STATE AND LOCAL TAX CONSEQUENCES OF
THE DISTRIBUTION TO THEM.
For a description of agreements pursuant to which Murphy and
the Company have provided for certain tax sharing and other tax matters, see
"Relationship Between the Company and Murphy--Terms of the Tax Sharing
Agreement."
RELATIONSHIP BETWEEN THE COMPANY AND MURPHY
This section of the Information Statement describes certain
agreements between the Company and Murphy that will govern certain of the
on-going relationships between Murphy and the Company after the Distribution
and will provide for an orderly transition to the status of two separate,
independent companies. To the extent that they relate to the Distribution
Agreement or the Tax Sharing Agreement (collectively, the "Distribution
Documents"), the following descriptions describe the Distribution Documents as
they will be in effect as of the Distribution, do not purport to be complete
and are qualified in their entirety by reference to the Distribution
Documents, which are filed as exhibits to the Registration Statement on Form
10 (the "Form 10") filed with the Securities and Exchange Commission (the
"Commission") of which this Information Statement is a part, and are
incorporated herein by reference. For purposes of this section of the
Information Statement only, the "Company" means Deltic Timber Corporation and
the "Company Group" means Deltic Timber Corporation and its subsidiaries.
The Distribution Documents will be entered into in connection
with the Distribution and are, therefore, not the result of arm's length
negotiation between independent parties. Additional or modified agreements,
arrangements and transactions may be entered into between Murphy and the
Company after the Distribution, which will be negotiated at arm's length.
Terms of the Distribution Agreement
Murphy and the Company will enter into a Distribution Agreement
(the "Distribution Agreement") prior to the Distribution, among other things,
to provide for the principal corporate transactions and certain procedures for
effecting the Distribution, to define certain aspects of the relationship
between Murphy and the Company after the Distribution and to provide for the
allocation of certain assets and liabilities between Murphy and the Company.
Transfer of Assets
Subject to receipt of any necessary consents of third parties
or regulatory bodies, (i) the Company will use its best efforts to transfer to
Murphy and its subsidiaries (other than the Company Group) (Murphy and such
subsidiaries being the "Murphy Group") all assets, if any, not already owned
by the Murphy Group and that relate solely to the business of the Murphy Group
(and not to that of the Company Group) and Murphy will assume all liabilities
associated with such assets and (ii) Murphy will use its best efforts to
transfer to the Company Group all assets, if any, not already owned by the
Company Group and that relate solely to the business of the Company Group (and
not to that of the Murphy Group) and the Company will assume all liabilities
associated with such assets.
Cross Indemnification
The Company and Murphy have agreed to indemnify one another
against certain liabilities. The Company has agreed to indemnify the Murphy
Group and the directors, officers, employees and affiliates of the Murphy
Group (collectively, the "Murphy Indemnitees") from and against any and all
damage, loss, liability and expense incurred or suffered by any of the Murphy
Indemnitees (i) arising out of or due to the failure of the Company Group to
pay, perform or otherwise discharge any obligations and liabilities, whenever
arising, of or relating to the Company Group (including all liabilities of the
Company Group under the Distribution Agreement) or arising from or in
connection with the conduct of the Company Group's business or the ownership
or use of assets in connection therewith and (ii) arising out of or in
connection with the provision by the Murphy Group of Services (as defined
below) to the Company Group pursuant to the Distribution Agreement.
Murphy has agreed to indemnify the Company Group and the
directors, officers, employees and affiliates of the Company Group
(collectively, the "Company Indemnitees") from and against any and all damage,
loss, liability and expense incurred or suffered by any of the Company
Indemnitees arising out of, or due to the failure of the Murphy Group to pay,
perform or otherwise discharge any obligations and liabilities, whenever
arising, of or relating to the Murphy Group (including all liabilities of the
Murphy Group under the Distribution Agreement) or arising from or in
connection with the conduct of the Murphy Group's business or the ownership
or use of assets in connection therewith.
The Company and Murphy have generally agreed to indemnify the
other and the other's affiliates and controlling persons from certain
liabilities under the securities laws in connection with the Form 10 and this
Information Statement or to contribute under certain circumstances to the
amount payable by the other in respect thereof.
None of the foregoing indemnities applies to indemnification
for tax liabilities, which are addressed in the Tax Sharing Agreement
described below. The Company does not believe that any of the foregoing
indemnities will have a material adverse effect on the business, financial
condition or results of operations of the Company.
The Distribution Agreement also includes procedures for notice
and payment of indemnification claims and provides that the indemnifying party
may assume the defense of a claim or suit brought by a third party. Any
indemnification paid under the foregoing indemnities is to be paid net of the
amount of any insurance or other amounts that would be payable by any third
party to the indemnified party in the absence of such indemnity.
Conditions to the Distribution
The Distribution Agreement provides that the Distribution is
subject to the following conditions being satisfied prior to or as of the
Distribution Date: (i) the Form 10 filed with the Commission shall have become
effective under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); (ii) the Company Common Stock shall have been approved for listing on
the New York Stock Exchange, subject to official notice of issuance; (iii) the
Murphy Board shall be satisfied that (A) both before and after giving effect
to the Distribution, Murphy is not and would not be insolvent, (B) after
giving effect to the Distribution, Murphy would be able to pay its liabilities
as they mature and become absolute, and Murphy would not have an unreasonably
small amount of capital with which to engage in its business and (C) the
Distribution will be made out of surplus within the meaning of Section 170 of
the Delaware General Corporation Law; (iv) the Murphy Board shall have
approved the Distribution and shall not have abandoned, deferred or modified
the Distribution at any time prior to the Distribution Date; (v) the Company
Board, as named in this Information Statement, shall have been elected by
Murphy as sole stockholder of the Company and the Company's Certificate of
Incorporation and Bylaws (each as defined under "Description of Capital Stock"
below) shall be in effect; (vi) the Tax Sharing Agreement shall have been duly
executed and delivered by the parties thereto; (vii) Murphy shall have
received a favorable private letter ruling issued by the Internal Revenue
Service or an opinion of counsel satisfactory to Murphy, in either case
relating to the tax-free nature of the Distribution; and (viii) a credit
facility shall have been made available to the Company by its lenders on terms
and in an amount satisfactory to Murphy and the Company.
Transitional Services
Murphy has agreed to provide or cause to be provided to the
Company Group certain specified services for a transitional period after the
Distribution. The transitional services to be provided (the "Services") will
be (i) rental of the office facilities that are occupied and in use by the
Company Group as of the Distribution Date (the "Office Facilities"); (ii)
services related to the use of the Office Facilities, including provision of
utilities, supplies and office equipment, certain maintenance services,
payment of property taxes and maintenance of insurance on the Office
Facilities; (iii) administrative services in certain areas, including
financial affairs, environmental affairs, human resources, information
systems, insurance, law, purchasing, treasury and tax; and (iv) insurance
administration services related to policies existing as of the Distribution
Date and covering the activities and assets of the Company Group. The
Services are to be provided in a manner generally consistent with the nature
of the Murphy Group's services and practices prior to the Distribution. The
Services are to be offered for a six-month period after the Distribution Date,
unless earlier terminated by the Company upon thirty days' notice to Murphy.
The total fee for the Services will be approximately $92,600 per month,
subject to adjustment by mutual agreement between Murphy and the Company.
Employee Benefits
Prior to the Distribution, the Company intends to establish new
benefit plans for its employees that substantially replicate the benefit plans
maintained by Murphy. The new plans will include the Retirement Plan of
Deltic Timber Corporation (the "Company Retirement Plan"), a defined benefit
retirement plan, and the Thrift Plan for Employees of Deltic Timber
Corporation (the "Company 401(k) Plan"), a defined contribution retirement
plan permitting elective pre-tax or after-tax plan contributions. In addition,
the Company will establish new medical, disability and similar plans. After
the distribution, the Retirement Plan of Murphy Oil Corporation will transfer
to the Company Retirement Plan liabilities equal to the accrued benefits of
active employees of the Company, along with a proportionate share of plan
assets. The Thrift Plan for Employees of Murphy Oil Corporation will transfer
to the Company 401(k) Plan the accounts of active employees of the Company.
Prior to the Distribution, the Company expects to establish new stock-based
management incentive arrangements. These arrangements will likely provide for
the grant of restricted shares of Company Common Stock, as well as options
with respect to such shares. It is expected that such grants will be made on
terms similar to those applicable to awards with respect to Murphy Common
Stock under the Murphy 1992 Stock Incentive Plan.
For a period after the Distribution Date, it is expected that
Murphy will continue to provide administrative services with respect to the
Company's benefits plans, in accordance with the agreement to provide
transitional services described above.
Intercompany Accounts
At September 30, 1996, the Company accounts reflected a $34.4
million receivable from Murphy. Prior to the Distribution, all indebtedness
between Murphy and the Company will be settled by a combination of a $17
million dividend by the Company to Murphy and a cash repayment by Murphy to
the Company to the extent of the remaining receivable. For additional
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and Note A to the
Company's Unaudited Pro Forma Consolidated Balance Sheet.
Access to Information; Provision of Witnesses; Confidentiality
Pursuant to the Distribution Agreement, each of the Company
Group and the Murphy Group will afford the other and certain of their agents
reasonable access to all records in its possession relating to the business
and affairs of the other party as reasonably required, including, for
auditing, accounting, litigation, disclosure and reporting purposes, subject
to limited exceptions. Each party will also use its best efforts to make
available to the other, its officers, directors, employees and agents as
witnesses, and will otherwise cooperate with the other party, in connection
with any proceeding arising out of the business of it or the other party prior
to the Distribution.
Except as otherwise provided in the Distribution Agreement, the
Company, Murphy, and their respective officers, directors, employees and
agents will hold all information in its possession concerning the other party
in strict confidence.
Terms of the Tax Sharing Agreement
Prior to the Distribution, Murphy and the Company will enter
into a tax sharing agreement (the "Tax Sharing Agreement") that will set forth
each party's rights and obligations with respect to payments and refunds, if
any, with respect to taxes for periods before and after the Distribution and
related matters such as the filing of tax returns and the conduct of audits or
other proceedings involving claims made by taxing authorities.
In general, Murphy will be responsible for filing state and
consolidated federal income tax returns for periods through the Distribution
Date, and, in the case of federal tax returns, paying the associated taxes.
The Company will reimburse Murphy for the portion of such taxes, if any,
relating to the Company's businesses computed on a stand-alone basis. The
Company will be responsible for paying the taxes associated with all other tax
returns relating to pre-Distribution tax periods relating solely to the
Company's businesses. Murphy, however, will be responsible for preparing all
tax returns to be filed by the Company for tax periods that end on or before
the Distribution Date.
In general, the Company will agree to indemnify Murphy for
taxes, if any, imposed as a result of an audit adjustment and relating to a
pre-Distribution tax period to the extent such taxes are attributable to the
Company's businesses. The Tax Sharing Agreement will also provide that Murphy
will generally pay to the Company the net benefit, if any, realized by Murphy
relating to the Company's businesses from the carryback to pre-Distribution
tax periods of certain tax attributes, if any, of the Company arising in
post-distribution tax periods.
Pursuant to the Tax Sharing Agreement the Company will agree to
refrain from engaging in certain transactions for two years following the
Distribution Date unless it shall first provide Murphy with a ruling from the
Internal Revenue Service or an unqualified opinion acceptable to Murphy of a
nationally recognized independent tax counsel that the transaction will not
cause Murphy or its stockholders to recognize taxable income by virtue of the
Distribution. Transactions subject to these restrictions will include, among
other things, the liquidation of the Company, the merger, consolidation or
other combination or affiliation of the Company with another company,
discontinuation of or material change in the conduct of a material portion of
its businesses independently and with its own employees, redemption or other
reacquisition of Company Common Stock, and the sale, distribution or other
disposition of assets of the Company out of the ordinary course of business.
Certain transactions regarding the sale by the Company of certain of its
farmland holdings will not be subject to the above-described restrictions.
The above-described restrictions are intended to ensure, consistent with
representations made to the Internal Revenue Service for purposes of receiving
a favorable ruling, that the Distribution is not being used as a device for
distributing earnings and profits of Murphy or the Company, and that the
Company will continue to conduct the active business required to qualify the
Distribution as tax-free to Murphy and its stockholders under Section 355 of
the Code. The Company does not believe that these restrictions, including
restrictions on combination of the Company with another company, will
materially affect the Company's ability to pursue its growth strategy or to
effect acquisitions that are consistent with its growth strategy.
The Company will agree that, within one year of the
Distribution Date, it will use its best efforts to make an offering of $30-$40
million of equity of the Company, consistent with representations made to the
Internal Revenue Service for purposes of receiving a ruling that the
Distribution will qualify as tax-free to Murphy and its stockholders under
Section 355 of the Code. The equity may be in the form of Company Common
Stock, convertible preferred stock or straight preferred stock, which may be
sold to the public or in a private placement to financial institutions
depending on the then-existing market conditions. The Company will agree that
it will diligently undertake to effect its growth strategy, including the
acquisition of timber properties. The Company will generally agree to
indemnify Murphy against any tax liability resulting from the Company's breach
of any covenant or representation contained in the Tax Sharing Agreement.
TRADING MARKET
There has been no trading market for the Company Common
Stock, and there can be no assurances as to the establishment or continuity
of any such market. However, it is expected that a "when-issued" trading
market may develop prior to the Distribution Date. The Company Common
Stock has been approved for listing on the New York Stock Exchange, subject
to official notice of issuance, under the symbol "DEL".
Prices at which the Company Common Stock may trade prior to the
Distribution, on a "when-issued" basis, or after the Distribution cannot be
predicted. Prices at which trading in shares of Company Common Stock occurs
may fluctuate significantly. See "Risk Factors--No Prior Market for Common
Stock." The prices at which the Company Common Stock trades will be determined
by the marketplace and may be influenced by many factors, including, among
others, quarter to quarter variations in the actual or anticipated financial
results of the Company or other companies in the forest products industry.
See "Risk Factors." In addition, the stock market has experienced extreme
price and volume fluctuations that have affected the market price of many
stocks and that have often been unrelated or disproportionate to the operating
performance of individual companies. These and other factors, such as
investor perception of the Company, the depth and liquidity of the market for
shares of the Company Common Stock, changes in economic conditions in the
forest products industry and general economic and market conditions, may
influence and adversely affect the market price of the Company Common Stock.
The Company Common Stock received by Murphy stockholders
pursuant to the Distribution will be freely transferable, except for shares of
such Company Common Stock received by any person who may be deemed an
"affiliate" of the Company within the meaning of Rule 144 ("Rule 144") under
the Securities Act of 1933, as amended (the "Securities Act"). Persons who
may be deemed to be affiliates of the Company after the Distribution generally
include individuals or entities that directly, or indirectly through one or
more intermediaries, control, are controlled by, or are under common control
with, the Company, and may include the directors and principal executive
officers of the Company as well as any principal stockholder of the Company.
Persons who are affiliates of the Company will be permitted to sell their
Company Common Stock received pursuant to the Distribution only pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration under the Securities Act, such as the exemption
afforded by Rule 144.
Except for the shares of Company Common Stock distributed in
the Distribution, no securities of the Company will be outstanding as of or
immediately following the Distribution. Except for the Rights Agreement, the
Company has not entered into any agreement or otherwise committed to register
any shares of Company Common Stock under the Securities Act for sale by
security holders. Except for the shares registered on this Registration
Statement in connection with the Distribution, no common equity of the Company
is being publicly registered or offered by the Company. The Company currently
intends within one year of the Distribution, however, to make an offering of
$30-$40 million of equity of the Company, consistent with representations made
to the Internal Revenue Service for purposes of receiving a ruling that the
Distribution will qualify as tax-free to Murphy and its stockholders under
Section 355 of the Code. The equity may be in the form of Company Common
Stock, convertible preferred stock or straight preferred stock, which may be
sold to the public or in a private placement to financial institutions
depending on the then-existing market conditions.
DIVIDENDS
The Company currently intends to pay modest quarterly cash
dividends. However, the Company anticipates that future earnings will for the
most part be used to support operations and finance growth of the business.
The payment of any dividends will be at the discretion of the Company Board.
The declaration of dividends and the amount thereof will depend on a number of
factors, including the Company's financial condition, capital requirements,
funds from operations, future business prospects and such other factors as the
Company Board may deem relevant, and no assurance can be given as to the
timing or amount of any dividend payments.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Prior to the Distribution Date, the Company has been operated
as part of Murphy. The following Unaudited Pro Forma Consolidated Statements
of Income set forth the historical statements of income of the Company for the
year ended December 31, 1995 and for the nine months ended September 30, 1996,
and as adjusted for the Distribution and the related transactions and events
described in the Notes to such Unaudited Pro Forma Consolidated Statements of
Income as if the Distribution and such transactions and events had been
consummated on January 1, 1995. The following Unaudited Pro Forma Consolidated
Balance Sheet sets forth the historical balance sheet of the Company as of
September 30, 1996, and as adjusted for the Distribution and the related
transactions and events described in the Notes to such Unaudited Pro Forma
Consolidated Balance Sheet as if the Distribution and such transactions and
events had been consummated on September 30, 1996.
The Pro Forma Consolidated Financial Statements set forth below
reflect pro forma adjustments as if the Company had operated as an independent
company. See the accompanying notes to Pro Forma Consolidated Financial
Statements.
Management believes that the assumptions used provide a
reasonable basis on which to present such Pro Forma Consolidated Financial
Statements. The Pro Forma Consolidated Financial Statements should be read in
conjunction with the historical Consolidated Financial Statements and Notes
thereto included elsewhere in this Information Statement and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Pro Forma Consolidated Financial Statements are provided for information
purposes only and should not be construed to be indicative of the Company's
results of operations or financial condition had the Distribution and the
transactions and events described above been consummated on the dates assumed,
may not reflect the results of operations or financial condition which would
have resulted had the Company been operated as a separate, independent company
during such period, and are not necessarily indicative of the Company's future
results of operations or financial condition.
Deltic Timber Corporation
Unaudited Pro Forma Consolidated Statement of Income
Year Ended December 31, 1995
($ in thousands, except per share
amounts and number of shares)
<TABLE>
<CAPTION>
Adjustments Pro Forma
for for
Historical Distribution Distribution
---------- ------------ ------------
<S> <C> <C> <C>
Net sales................................................... $80,662 $80,662
------- -------
Costs and expenses:
Cost of sales.............................................. 58,731 $160 (A) 58,571
Depreciation, amortization, and cost of fee timber
harvested................................................ 4,053 4,053
Selling and general expenses............................... 4,535 (523) (B) 5,024
34 (A)
------- -------
Total costs and expenses................................. 67,319 67,648
------- -------
Operating income......................................... 13,343 13,014
Interest income............................................. 2,668 (1,400) (C) 1,268
Interest expense............................................ (309) (309)
Other income................................................ 192 192
------- -------
Income before income taxes.................................. 15,894 14,165
Income taxes................................................ (5,878) 678 (D) (5,200)
------- ------- -------
Net income............................................... $10,016 $(1,051) $8,965
======= ======= =======
Earnings per share.......................................... $ .70
==========
Weighted average number of common shares outstanding (E).... 12,800,000
==========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Income.
Deltic Timber Corporation
Unaudited Pro Forma Consolidated Statement of Income
Nine Months Ended September 30, 1996
($ in thousands, except per share
amounts and number of shares)
<TABLE>
<CAPTION>
Adjustments Pro Forma
for for
Historical Distribution Distribution
---------- ------------ ------------
<S> <C> <C> <C>
Net sales................................................... $64,462 $64,462
------- ----------
Costs and expenses:
Cost of sales.............................................. 44,045 44,045
Depreciation, amortization, and cost of fee timber
harvested................................................ 3,104 3,104
Selling and general expenses............................... 3,583 $(315) (B) 3,898
------- ----------
Total costs and expenses................................. 50,732 51,047
------- ----------
Operating income......................................... 13,730 13,415
Interest income............................................. 2,209 (1,000) (C) 1,209
Interest expense............................................ (210) (210)
Other income................................................ 1,173 1,173
------- ----------
Income before income taxes.................................. 16,902 15,587
Income taxes................................................ (6,621) 516 (D) (6,105)
------- ----- ----------
Net income............................................... $10,281 $(799) $9,482
======= ===== ==========
Earnings per share.......................................... $ .74
==========
Weighted average number of common shares outstanding (E).... 12,800,000
==========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Income.
Deltic Timber Corporation
Notes to Unaudited Pro Forma Consolidated Statements of Income
For the Year Ended December 31, 1995 and the
Nine Months Ended September 30, 1996
The Unaudited Pro Forma Consolidated Statements of Income of
the Company for the year ended December 31, 1995 and the nine months ended
September 30, 1996 assume that the Company had operated as an autonomous
entity rather than as a wholly-owned subsidiary of Murphy, and this mode of
operation was effective at January 1, 1995. The pro forma adjustments, as
described below, are keyed to the corresponding amounts shown in the
"Adjustments for Distribution" columns of these statements.
(A) To reduce expenses for retirement plan and postretirement benefits to
reflect only the costs related to active employees of the Company.
Murphy intends to retain such obligations related to former employees of
the Company. Such amounts were not significant in 1996.
(B) To reflect anticipated additional costs associated with being an
autonomous entity rather than a wholly-owned subsidiary of Murphy. The
additional expenses primarily consist of costs associated with being a
public company.
(C) To reduce interest income for interest earned on the portion of the
receivable from Murphy that will be declared a dividend to Murphy prior
to the Distribution. Prior to the Distribution, such amounts owed by
Murphy to the Company will be settled by a combination of a $17 million
dividend by the Company to Murphy and a cash repayment by Murphy to the
Company to the extent of the remaining receivable.
(D) To record a reduction in federal and state income taxes related to pro
forma adjustments (A) through (C) above.
(E) To reflect an approximation of the weighted average number of common
shares outstanding based on the Distribution ratio times the number of
shares of Murphy Common Stock outstanding on September 30, 1996.
Deltic Timber Corporation
Unaudited Pro Forma Consolidated Balance Sheet
September 30, 1996
($ in thousands)
<TABLE>
<CAPTION>
Adjustments for Pro Forma for
Historical Distribution Distribution
---------- --------------- -------------
<S> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents....................... $ 5,447 $17,363 (A) $ 22,810
Trade accounts receivable....................... 4,630 4,630
Inventories..................................... 5,448 5,448
Deferred income taxes........................... 947 947
Prepaid expenses and other current assets....... 2,949 2,949
-------- --------
Total current assets........................... 19,421 36,784
Noncurrent receivable from Murphy................ 34,363 (34,363)(A) --
Property, plant, and equipment - net............. 27,063 27,063
Timber and timberlands - net..................... 89,637 89,637
Real estate held for development and sale........ 18,271 18,271
Other assets..................................... 5,354 661 (B) 5,351
(664)(C)
-------- -------- --------
Total assets................................... $194,109 $(17,003) $177,106
======== ======== ========
Liabilities and Stockholder's Equity:
Current liabilities:
Current maturities of long-term debt............ $ 1,698 $ 1,698
Trade accounts payable.......................... 1,614 1,614
Accrued insurance obligations................... 887 887
Accrued taxes other than income taxes........... 804 804
Other accrued liabilities....................... 499 499
State income taxes.............................. 275 275
-------- -- --------
Total current liabilities...................... 5,777 5,777
Long-term debt................................... 2,685 2,685
Accrued postretirement benefits.................. 3,531 $(1,291)(B) 2,240
Deferred credits and other liabilities........... 1,546 19 (C) 1,565
Stockholders' equity:
Common stock.................................... 321 (193)(D) 128
Capital in excess of par value.................. 66,108 193 (D) 66,301
Retained earnings............................... 114,141 (15,731)(E) 98,410
-------- ------- --------
Total stockholders' equity..................... 180,570 164,839
-------- -------- --------
Total liabilities and stockholders' equity..... $194,109 $(17,003) $177,106
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet.
Deltic Timber Corporation
Notes to Unaudited Pro Forma Consolidated Balance Sheet
at September 30, 1996
The Unaudited Pro Forma Consolidated Balance Sheet of Deltic as
of September 30, 1996 assumes that the Company was an autonomous entity rather
than a wholly-owned subsidiary of Murphy at that date. The pro forma
adjustments, as described below, are keyed to the corresponding amounts shown
in the "Adjustments for Distribution" column in the statement.
(A) To reduce the noncurrent receivable from Murphy prior to the
Distribution to effect an anticipated settlement of the receivable
by a combination of a $17 million dividend by the Company to Murphy
and a cash repayment by Murphy to the Company to the extent of the
remaining receivable. The cash balance is expected to be used to
fund an anticipated investment in Del-Tin and existing capital
expenditure commitments after the date of the Distribution. The
cash position is projected to be reduced significantly after payment
for such capital expenditure commitments.
(B) To adjust retirement plan and postretirement benefit account
balances to reflect anticipated retention by Murphy of plan
obligations related to former employees of the Company.
(C) To adjust deferred income tax balances associated with adjustments
described in (B) above.
(D) To reflect the recapitalization of the Company as an autonomous
entity based on changes to (i) the number of shares outstanding
(based on the Distribution ratio times the number of shares of
Murphy Common Stock to be outstanding on September 30, 1996) and
(ii) the par value of such shares.
(E) To adjust retained earnings of the Company to effect the pro forma
adjustments described in (A) through (C) above.
PRO FORMA CAPITALIZATION
Prior to the Distribution Date, the Company has been
operated as part of Murphy. The following table sets forth the
capitalization of the Company as of September 30, 1996, and as adjusted to
give effect to the Distribution and the related transactions and events
described in the notes hereto and the Notes to the Unaudited Pro Forma
Consolidated Balance Sheet included in this Information Statement as if the
Distribution and such transactions and events had been consummated on
September 30, 1996.
Management believes that the assumptions used provide a
reasonable basis on which to present such Pro Forma Capitalization. The Pro
Forma Capitalization table below should be read in conjunction with the
historical Financial Statements and Notes thereto included elsewhere in this
Information Statement, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Pro Forma Consolidated Financial
Statements." The Pro Forma Capitalization table below is provided for
information purposes only and should not be construed to be indicative of the
Company's capitalization or financial condition had the Distribution and such
related transactions and events been consummated on the date assumed, may not
reflect the capitalization or financial condition which would have resulted
had the Company been operated as a separate, independent company during such
period, and are not necessarily indicative of the Company's future
capitalization or financial condition.
<TABLE>
<CAPTION>
September 30, 1996
($ in thousands)
--------------------------------------------------------------
Adjustments
for Pro Forma
Historical Distribution for Distribution
---------- ------------ ----------------
<S> <C> <C> <C>
Current maturities of long-term debt............ $ 1,698 $ 1,698
======== ========
Long-term debt:
Installment timber notes....................... $ 1,905 $ 1,905
Other notes payable............................ 780 780
-------- --------
Total long-term debt....................... 2,685 2,685
Stockholders' Equity:
Preferred stock, par value $.01,
20,000,000 shares authorized, none issued.... N/A --
Common stock................................... 321 $ (193)(A) 128
Capital in excess of par value................. 66,108 193 (A) 66,301
Retained earnings.............................. 114,141 (15,731)(B) 98,410
-------- -------- --------
Total stockholders' equity................. 180,570 -- 164,839
-------- -------- --------
Total capitalization....................... $183,255 $(15,731) $167,524
======== ======== ========
</TABLE>
(A) To reflect the recapitalization of the Company as an autonomous entity
based on changes to the number of shares outstanding and the par value of
such shares. On a historical basis, the Company had authorized and issued
5,000 shares of common stock, no par value. On a pro forma basis upon the
Distribution, the Company will have authorized 50,000,000 shares of common
stock, $.01 par value, of which approximately 12.8 million will be issued
and outstanding (based on the Distribution ratio times the number of shares
of Murphy Common Stock outstanding on September 30, 1996).
(B) To reflect changes to Retained earnings for pro forma adjustments at
September 30, 1996.
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth for the periods and at the dates
indicated selected historical financial and operating data for the Company on
a consolidated basis. The selected historical financial data as of December
31, 1993, 1992 and 1991 and for each of the years in the two-year period ended
December 31, 1992 are derived from the Company's unaudited historical
financial statements not included in this Information Statement. The selected
historical financial data as of December 31, 1995 and 1994 and for each of the
years in the three-year period ended December 31, 1995 are derived from the
Company's audited historical consolidated financial statements and should be
read in conjunction with such financial statements included elsewhere in this
Information Statement. The historical financial data as of September 30, 1996
and 1995 and for the nine-month periods ended September 30, 1996 and 1995 are
derived from the unaudited historical consolidated financial statements of the
Company, which are included elsewhere in the Information Statement. In the
opinion of the Company's management, these nine-month consolidated financial
statements include all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim periods. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Consolidated Financial Statements."
Earnings per share data are presented elsewhere in this Information Statement
on a pro forma basis only. See "Unaudited Pro Forma Consolidated Financial
Statements." The historical financial data presented below reflect periods
during which the Company did not operate as an independent company.
Therefore, such data may not reflect the results of operations or the
financial condition which would have resulted if the Company had operated as a
separate, independent company during such periods, and are not necessarily
indicative of the Company's future results of operation or financial
condition.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ---------
(dollars in thousands, except ratios and operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
Financial Data:
Income Statement Data:
Net sales..................... $64,462 $61,996 $80,662 $92,457 $69,448 $60,528 $50,553
------- ------- ------- ------- ------- ------- -------
Costs and expenses:
Cost of sales............... 44,045 42,475 58,731 56,521 43,925 42,416 38,464
Depreciation,
amortization, and
cost of fee
timber harvested.......... 3,104 3,010 4,053 3,886 3,488 3,152 3,231
Selling and general
expenses.................. 3,583 3,281 4,535 3,675 4,657 5,596 4,674
------- ------- ------- ------- ------- ------- -------
Total costs and expenses.. 50,732 48,766 67,319 64,082 52,070 51,164 46,369
------ ------- ------- ------- ------- ------- -------
Operating income.............. 13,730 13,230 13,343 28,375 17,378 9,364 4,184
Interest income............... 2,209 1,975 2,668 1,634 1,075 1,202 1,225
Interest expense.............. (210) (216) (309) (5) (14) (50) (87)
Other income.................. 1,173 127 192 572 100 474 200
------- ------- ------- ------- ------- ------- -------
Income before income
taxes and accounting
changes..................... 16,902 15,116 15,894 30,576 18,539 10,990 5,522
Income tax expense............ (6,621) (5,877) (5,878) (12,434) (7,128) (4,329) (1,934)
------- ------- ------- ------- ------- ------- -------
Income before accounting
changes..................... 10,281 9,239 10,016 18,142 11,411 6,661 3,588
Cumulative effect of
accounting changes.......... -- -- -- -- (4,076) -- --
------- ------- ------- ------- ------- ------- -------
Net income.................... $10,281 $9,239 $10,016 $18,142 $7,335 $6,661 $3,588
======= ======= ======= ======= ======= ======= =======
Balance Sheet Data and Ratios:
Total assets.................. $194,109 $184,714 $185,247 $169,373 $150,761 $139,478 $133,547
Working capital............... 13,644 11,035 6,822 11,314 11,520 9,824 8,041
Current ratio................. 3.4 to 1 2.6 to 1 1.9 to 1 3.4 to 1 4.5 to 1 3.9 to 1 3.9 to 1
Long-term debt (noncurrent
portion).................... $2,685 $3,634 $2,817 $163 $54 $174 $570
Stockholder's equity.......... 180,570 169,512 170,289 160,273 142,131 134,796 129,493
Debt to stockholder's equity
ratio....................... .015 to 1 .021 to 1 .017 to 1 .001 to 1 .001 to 1 .001 to 1 .004 to 1
Cash Flow and Other Data:
Cash flow from operations..... $13,566 $10,327 $16,865 $23,894 $16,200 $11,679 $8,855
Cash required by
investing activities........ 9,131 11,523 16,134 23,875 16,215 10,835 9,240
Cash required by
financing activities........ 419 77 1,644 101 401 379 370
EBITDA(1)..................... 16,834 16,240 17,396 32,261 20,866 12,516 7,415
Capital expenditures
requiring cash.............. 5,886 5,792 7,361 10,176 10,682 8,849 4,194
Cash and equivalents at end
of period................... 5,447 1,071 1,431 2,344 2,426 2,842 2,377
Operating Data:
Thousands of acres
owned at end of
period...................... 383 386 386 387 387 388 387
Pine sawtimber harvested
from fee lands
(MBF-DS)(2)................. 32,437 31,138 35,736 40,616 37,635 30,177 32,956
Average pine sawtimber prices
($/MBF-DS).................. 342 422 406 372 310 274 202
Finished lumber
production (MBF)(3)........ 107,697 108,572 140,555 136,713 112,365 101,203 92,846
Annual sawmill capacity at
end of period (MBF)......... 165,000 165,000 165,000 165,000 122,600 100,100 100,100
Finished lumber sales (MBF)... 108,693 108,278 140,549 138,377 115,136 105,619 95,024
Average finished lumber
sales prices ($/MBF)........ 330 329 318 363 335 259 215
Residential lots sold......... 78 51 71 163 81 134 50
Average price for
residential lots sold
($/lot)..................... 55,000 53,800 52,900 56,700 60,000 38,800 61,400
Commercial acres sold(4)...... 2 -- -- -- -- -- 17
Average price for
commercial acres sold
($/acre).................... 199,500 -- -- -- -- -- 32,700
Number of employees at
end of period............... 350 360 358 317 301 296 266
</TABLE>
(1) EBITDA is defined as earnings before interest and other income, interest
expense, depreciation, amortization and cost of fee timber harvested, and
income taxes. EBITDA is presented by the Company because it is one
measure commonly used by Company management and certain investors to
analyze companies based on operating performance. EBITDA does not
represent net income or cash flows as defined by generally accepted
accounting principles and it should not be considered as an alternative
to, or more meaningful than, net income or cash flows as an indicator
of the Company's operating performance or liquidity. EBITDA does not
necessarily indicate that operating results are sufficient to fund all
of the Company's cash needs. Since presentation of EBITDA is not
defined within generally accepted accounting principles, there can be
no assurance that EBITDA as presented by the Company is comparable to
similarly titled disclosures provided by other companies.
(2) "MBF-DS" means thousand board feet (Doyle Log Scale).
(3) "MBF" means thousand board feet.
(4) The commercial acres sold in 1991 were sold for church sites.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's historical Consolidated Financial Statements and Pro Forma
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Information Statement.
General
Prior to the Distribution Date, the Company has been operated
as part of Murphy. The historical financial information presented herein
reflects periods during which the Company did not operate as an independent
company. Such information, therefore, may not necessarily reflect the results
of operations or the financial condition of the Company which would have
resulted had the Company been an independent, public company during the
reporting periods, and are not necessarily indicative of the Company's future
operating results or financial condition.
Deltic is a natural resources company engaged primarily in the
growing and harvesting of timber and the manufacture and marketing of lumber.
The Company owns approximately 341,000 acres of timberland in Arkansas and
northern Louisiana, much of which was acquired in the 1920s. The Company's
sawmill operations commenced in 1971 and now consist of two mills, one located
at Ola in central Arkansas (the "Ola Mill") and another at Waldo in southern
Arkansas (the "Waldo Mill"). The Company also holds a 50-percent interest in
a joint venture to manufacture and market medium density fiberboard, which is
expected to be operational in early 1998. In addition to its timber and
lumber operations, the Company is engaged in a real estate development project
in Little Rock, Arkansas, and owns approximately 33,000 acres of farmland.
The Company's results of operations are affected by several
factors, which include general industry conditions, prices for logs and
lumber, and other factors such as supply and demand for logs and lumber,
competition and seasonality. The primary factors affecting demand for lumber
is residential construction activity, including new home construction, and to
a lesser extent, home remodeling activity. The worldwide timber supply/demand
balance has tightened in recent years and such trend has continued through the
first nine months of 1996. This has been the result primarily of a number of
factors that have negatively impacted supply. The major factors impacting
supply include a significant reduction in the timber harvest from
government-owned lands in the western United States and British Columbia due
to environmental concerns, reduced exports from Southeast Asia, and a
continued decline in harvest levels in Russia.
Results of Operations
Summary
Net income for the nine months ended September 30, 1996 was
$10.3 million, an increase of $1.1 million from the same period in 1995. For
the first nine months of 1996, the Company's net sales increased $2.5 million
compared to the same period of 1995, from $62 million to $64.5 million.
Improvements in both real estate and agricultural operating results more than
offset a decline in forest products operating results, which were impacted by
a 19-percent decline in the average sales price for pine sawtimber.
Residential lot sales increased from 51 during the first nine months of 1995
to 78 in the same period of 1996, a 53 percent increase. Above-average
soybean prices in 1996 benefited farming operating results.
The Company earned $10 million of consolidated net income in
the year ended December 31, 1995 compared to $18.1 million in 1994 and $7.3
million in 1993. Results in 1993 included a $4.1 million after-tax charge
related to adoption of two accounting standards. Net sales amounted to $80.7
million in 1995, $92.5 million in 1994, and $69.4 million in 1993.
The decrease in net income in 1995 was primarily caused by a
12-percent decline in finished lumber sales prices. Lumber prices were
adversely affected by a reduction in housing starts and a general slowdown of
the economy in 1995. Lumber production at the Company's sawmills increased
three percent during the year. Pine sawtimber harvested from the Timberlands
declined 12 percent to 35.7 million board feet (Doyle Log Scale) ("MMBF-DS")
in 1995 compared to 40.6 MMBF-DS in 1994, which decline was partially offset
by a nine-percent increase in average pine sawtimber sales prices from $372
per thousand board feet (Doyle Log Scale) ("MBF-DS") in 1994 to $406 per
MBF-DS in 1995. Also, 1995 was unfavorably affected by a reduction in
operating income in the real estate and agriculture segments. Residential lot
sales declined 56 percent and adverse weather conditions hurt crop yields in
1995.
The improvement in 1994 earnings compared to 1993 was due to
improved operating results in all three of the Company's segments. Harvests
of pine sawtimber from the Timberlands increased eight percent in 1994 at a
sale price that averaged 20-percent higher than in 1993. Lumber production in
1994 increased 22 percent over 1993 levels primarily due to improved yields
which resulted from the upgrade of the Company's Ola Mill completed in 1993.
Although sales prices for finished lumber increased eight percent in 1994,
sawmill log supply costs increased almost as much during this same period.
The improvement in real estate earnings resulted from an increase in lot sales
- -- 163 in 1994 compared to 81 in 1993. Favorable weather during the 1994
growing season led to improved crop yields as compared to the prior year's
results.
The following table sets forth the Company's net sales and
operating income by segment and net income for the nine months ended September
30, 1996 and 1995 and the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
----------------------- -----------------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ -------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Net sales:
Forest products............................. $54.0 $55.6 $68.3 $73.7 $57.1
Real estate................................. 5.1 3.0 4.2 9.6 5.4
Agriculture................................. 5.4 3.4 8.2 9.2 6.9
------ ------ ------ ------ -------
Net sales............................... $64.5 $62.0 $80.7 $92.5 $69.4
====== ====== ====== ====== =======
Operating income and net income:
Forest products............................. $13.1 $14.4 $14.7 $24.8 $18.6
Real estate................................. 1.5 0.7 1.0 3.7 1.8
Agriculture................................. 1.4 0.1 0.4 1.9 (0.1)
Corporate and other......................... (2.3) (2.0) (2.8) (2.0) (2.9)
------ ------ ------ ------ -------
Operating income........................ 13.7 13.2 13.3 28.4 17.4
Net interest income.......................... 2.0 1.8 2.4 1.6 1.0
Other income................................. 1.2 0.1 0.2 0.6 0.1
Income tax expense........................... (6.6) (5.9) (5.9) (12.5) (7.1)
Cumulative effect of accounting changes, net. -- -- -- -- (4.1)
------ ------ ------ ------ -------
Net income.............................. $10.3 $9.2 $10.0 $18.1 $7.3
====== ====== ====== ====== =======
</TABLE>
Nine Months Ended September 30, 1996 Compared With Nine Months
Ended September 30, 1995
Net sales for the nine-month period ended September 30, 1996
amounted to $64.5 million, a four-percent increase over the same period in
1995. Net income for the nine-month period ended September 30, 1996 was $10.3
million compared to $9.2 million in the corresponding period of the prior
year. The increase in net income was attributable to improved operating
results for the real estate and agricultural segments, which offset lower
forest products segment operating results.
Net sales in the Company's forest products segment totaled $54
million during the first nine months of 1996, a decline of $1.6 million from
the same period in 1995. Net sales of pine sawtimber decreased $2.5 million,
representing the net impact of a $2.9 million decrease in net sales
attributable to a lower average sales price and a $.4 increase in net sales
attributable to higher sales volume. Net sales of pine pulpwood and hardwood
increased $.4 million in 1996 due to both higher volume and sales price. Net
sales of finished lumber increased $.2 million and was equally caused by an
increased sales price from $329 per MBF in 1995 to $330 per MBF in 1996 and
slightly higher sales volume. All other net sales in the forest products
segment increased $.3 million. Pine sawtimber sales prices declined 19
percent in 1996 from $422 per MBF-DS in 1995 to $342 per MBF-DS in the current
period. This decline in the price of pine sawtimber was caused by softness
in the market for logs and finished lumber due to a continuation of the prior
year's decline in new housing starts in the United States. Operating income
of $13.1 million for the nine months ended September 30, 1996 was $1.3 million
less than the comparable period of 1995, a nine-percent decline. The decline
in operating income was primarily attributable to the decline in net sales
discussed above, partially offset by lower log costs at the Company's
sawmills. The Company's sawmills produced slightly less finished lumber for
the nine-month period ended September 30, 1996 with production totaling 107.7
MMBF. The production decline was attributable to an increase in kiln downtime
at the Ola Mill. Total production at the Waldo Mill increased slightly from
the same period of 1995.
The Company's real estate operations at Chenal Valley in
western Little Rock had net sales of $5.1 million for the nine months ended
September 30, 1996, a 70-percent increase from $3 million for the comparable
1995 period. Operating income also increased from $.7 million in the first
nine months of 1995 to $1.5 million in the same period of 1996. The increase
was attributable to a 53-percent increase in the number of single-family
residential lots sold in 1996, 78 lots in the first nine months of 1996 versus
51 in the same period of 1995. The average price of lots sold in the first
nine months of 1996 was $55,000, an increase of $1,200 from the average sales
price in the prior year. The Company is developing an additional 72
residential lots which will be offered for sale at Chenal in the last quarter
of 1996. A 2.1 acre commercial tract was sold during the third quarter of
1996 for $199,500 per acre; no commercial tracts were sold during the nine
months ended September 30, 1995.
Farming operations generated net sales of $5.4 million for the
first nine months of 1996, a $2 million increase from the same period in 1995.
Operating income also increased from $.1 million for the nine-month period
ended September 30, 1995 to $1.4 million for the comparable period of 1996.
Higher sales prices for soybeans and corn, in addition to improved yields, in
1996 benefited agricultural results for the first nine months of 1996,
compared to hot, dry conditions which adversely affected 1995 crop yields. In
1996 harvests of soybeans increased 48 percent and corn harvested increased 23
percent, while sales prices for soybeans and corn increased 22 percent and 29
percent respectively.
Corporate operating expense was $2.3 million in the first nine
months of 1996 compared to $2 million in the comparable period of 1995, due to
increased general and administrative expenses.
Net interest income increased from $1.8 million in the nine
months ended September 30, 1995 to $2 million for the same period in 1996.
Interest income earned on interest-bearing amounts due from Murphy increased
$.3 million in 1996. Other income of $1.2 million for the first nine months
of 1996 was $1.1 million more than the comparable period of 1995, due
primarily to a $.7 million gain realized on the sale of approximately 3,200
acres of Arkansas farmland. Income tax expense increased to $6.6 million in
1996 from $5.9 million in 1995 due to a similar increase in pretax earnings.
The effective income tax rate was 39 percent in both periods.
Year Ended December 31, 1995 Compared With Year Ended December
31, 1994
The Company's 1995 net sales were $80.7 million, a 13-percent
decrease from the $92.5 million of 1994. As more fully explained in the
following paragraphs, the decline in net sales was primarily related to
reductions in the forest products and real estate segments. Net income was
$10 million in 1995 compared with $18.1 million in 1994.
The Company's forest products segment generated net sales of
$68.3 million, down seven percent from the $73.7 million in 1994. The $5.4
million decline in forest products net sales was primarily caused by lower
finished lumber sales of $5.5 million and lower pine sawtimber sales of $.6
million, partially offset by higher net sales of hardwood and pine pulpwood of
$.6 million. The $5.5 million decline in finished lumber net sales represents
the net impact of a $6.3 million decrease in net sales attributable to a lower
average sales price and a $.8 increase in net sales attributable to higher
sales volume. The $.6 million decline in pine sawtimber net sales represents
the net impact of a $2 million decrease in net sales attributable to lower
sales volume and a $1.4 million increase in net sales attributable to a higher
average sales price. Net sales of hardwood and pine pulpwood increased due to
higher sales volume. All other net sales in the forest products segment
increased $.1 million. Operating income from this segment was $14.7 million
in 1995 compared with $24.8 million in the prior year. The decrease in
operating income was primarily attributable to a 12-percent decline in average
finished lumber sales prices, which adversely affected sawmill margins during
the year. Although the Company's sawmills experienced a three-percent
increase in production of finished lumber to 140.6 MMBF in 1995, sales prices
for finished lumber averaged $318 per MBF as compared to $363 per MBF in 1994,
and were adversely affected by a general slowdown in the U.S. economy and a
decline nationwide in the number of housing starts as compared to 1994. The
Company harvested 35.7 MMBF-DS of pine sawtimber from the Timberlands in 1995,
down from 40.6 MMBF-DS in 1994. The Company's sales price for pine sawtimber
averaged $406 per MBF-DS in 1995 compared to $372 per MBF-DS in 1994.
Real estate operations generated net sales of $4.2 million in
1995, down from $9.6 million in the prior year. The decline in net sales was
caused by a 56-percent decrease in the number of lots sold from 163 in 1994
to 71 in 1995. Operating income for this segment decreased from $3.7 million
in 1994 to $1 million in 1995. Higher interest rates in the United States had
an adverse affect on the sale of lots at the Company's Chenal Valley
development. The average sales price for lots sold declined from $56,700 in
1994 to $52,900 in 1995. Neither year included sales of commercial acreage.
The Company continued to develop acreage in Chenal and readied 137 lots for
sale in 1995 versus 61 in 1994.
Agricultural operations contributed $8.2 million in net sales
during 1995, down $1 million from 1994. The decrease in net sales was
primarily due to a nine-percent reduction in harvests of cotton in 1995
compared to 1994, along with 30-percent and 27-percent declines in harvests of
soybeans and corn, respectively. Operating income also declined from $1.9
million in 1994 to $.4 million in 1995, primarily due to hot and dry
conditions during the last half of the 1995 growing season, which adversely
affected all crop yields. Region-wide reductions in crop yields did lead to
higher average crop prices in 1995, and the Company benefited from higher
sales prices for cotton and soybean production.
Corporate operating expense in 1995 was $2.8 million, an
increase of $.8 million from 1994 in which there had been a $1.1 million
reduction in administrative expense related to reallocation of certain
retirement plan assets among affiliates of Murphy.
Net interest income during 1995 increased 50 percent to $2.4
million primarily due to higher average interest-bearing amounts receivable
from Murphy during the year. Other income decreased from $.6 million in 1994
to $.2 million in 1995 due primarily to a $.6 million gain on a land sale in
1994. The Company's income tax expense declined from $12.5 million in 1994 to
$5.9 million in 1995 primarily due to lower pre-tax earnings. The Company's
effective income tax rate decreased from 41 percent in 1994 to 37 percent in
1995 due to prior period tax adjustments--a $.3 million credit in 1995 versus
a $.5 million charge in 1994.
Year Ended December 31, 1994 Compared With Year Ended December
31, 1993
Net sales in 1994 were $92.5 million versus $69.4 million in
1993, up 33 percent. Net income was $18.1 million in 1994 compared to $7.3
million in 1993. Net income in 1993 reflected a $4.1 million after-tax charge
related to adoption of two accounting standards.
Net sales for forest products operations increased 29 percent
in 1994 and totaled $73.7 million. This segment's operating income also rose
33 percent from $18.6 million in 1993 to $24.8 million in 1994. Total
production from the Company's sawmills was up 22 percent due primarily to an
additional shift being added following completion of the Company's Ola Mill
upgrade. The average sales price for the Company's finished lumber was $363
per MBF in 1994, an increase of eight percent from 1993. Sawmill operating
costs increased $9.2 million during 1994 due primarily to the increased cost
of logs. The Company benefited from continued economic prosperity in the
United States and from an increase in housing starts in 1994. Lumber prices
also were favorably affected during the year by shortfalls in available
sawmill feedstocks, primarily due to lower harvests from U.S. government lands
in the Pacific Northwest. Pine sawtimber harvested from the Timberlands
increased eight percent to 40.6 MMBF-DS and the average sales price rose 20
percent to $372 per MBF-DS.
The Company's real estate segment contributed net sales of $9.6
million in 1994, up from $5.4 million in 1993. Operating income for this
segment more than doubled in 1994 and amounted to $3.7 million. The Company
sold 163 single-family residential lots in 1994 at an average price of
$56,700, while 81 were sold at an average price of $60,000 in 1993. Neither
year included commercial sales.
Farming operations generated net sales of $9.2 million in 1994,
an increase of 33 percent from the previous year. Operating income of $1.9
million in 1994 represented a substantial improvement from the weather-related
loss of $.1 million in 1993. Yields in 1994 were improved for all crops.
Corporate operating expense of $2 million in 1994 was $.9
million less than in 1993 due primarily to an administrative expense reduction
of $1.1 million related to reallocation of certain retirement plan assets
among affiliates of Murphy in 1994.
Net interest income increased from $1 million in 1993 to $1.6
million in 1994 due to higher interest-earning receivable balances placed with
Murphy. Other income was $.6 million in 1994, $.5 million more than in 1993
due primarily to a $.6 million gain on land sales. Income tax expense
increased from $7.1 million in 1993 to $12.5 million in 1994, primarily
related to improved earnings before income taxes.
Seasonality
The Company's forest products and agriculture segments are
subject to variances in financial results due to several seasonal factors.
The majority of timber sales are generated in the first half of the year due
primarily to weather conditions and stronger timber prices. Increased housing
starts during the spring usually push lumber prices up and, in turn, can
result in higher timber prices. Forestry operations generally incur expenses
related to silvicultural treatments which are applied during the fall season
to achieve maximum effectiveness. Farming operations do not generate
significant sales and operating income until crops are harvested and sold in
the second half of the year.
Liquidity and Capital Resources
Cash Flows and Capital Expenditures
The Company's net cash provided by operating activities for the
nine-month period ended September 30, 1996 totaled $13.6 million, compared
with $10.3 million for the same period in 1995. The Company's accompanying
Consolidated Statements of Cash Flows identify major differences between net
income and cash provided by operating activities. Dispositions of assets
provided $2.8 million in the first nine months of 1996, primarily from the
sale of approximately 3,200 acres of Arkansas farmland. The noncurrent
receivable from Murphy increased by $2.8 million in the first nine months of
1996 and $5.6 million in the same period in 1995. Advances to the joint
venture formed to construct and operate a medium density fiberboard plant near
El Dorado, Arkansas required cash of $3.2 million during the first nine months
of 1996 and is included in other investing activities. Cash required to repay
long-term debt amounted to $.4 million in the first nine months of 1996
arising from installment payments on notes used to finance a portion of the
Company's timber requirements. Capital expenditures required $5.9 million of
cash for the nine months ended September 30, 1996 and $5.8 million in the
corresponding period of the prior year. Seller-financed capital expenditures
not requiring cash included $5.5 million for timber purchases in the first
nine months of 1995.
During the year ended December 31, 1995, the Company's net cash
provided by operating activities totaled $16.9 million, compared with $23.9
million in 1994 and $16.2 million in 1993. The decline in 1995 compared to
1994, and the increase in 1994 compared to 1993, is mainly due to similar
variances in net income. Changes in operating working capital other than cash
and cash equivalents provided cash of $1.6 million in 1995 and $.2 million in
1994; such changes required cash of $1.8 million in 1993. The noncurrent
receivable from Murphy increased by $8.7 million in 1995, $14.7 million in
1994, and $5.5 million in 1993. Cash required to repay long-term debt
amounted to $1.6 million in 1995, $.1 million in 1994, and $.4 million in
1993. Larger cash requirements to repay debt in the latest year arose from
installment payments on notes used to finance a portion of the Company's
timber requirements. Capital expenditures required $7.4 million of cash in
1995, $10.2 million in 1994, and $10.7 million in 1993. Other seller-financed
capital expenditures not requiring cash included a land acquisition of $.7
million in 1995, and timber purchases in 1995 and 1994 amounting to $5.5
million and $.1 million, respectively. Total capital expenditures, including
those not requiring cash, are presented by segment in the following table for
the nine months ended September 30, 1996 and for the years ended December 31,
1995, 1994 and 1993.
Nine Months
Ended
September 30, Years Ended December 31,
------------- -----------------------------
1996 1995 1994 1993
------------- ------ ------ -------
(dollars in millions)
Forest products............. $1.1 $7.2 $6.1 $4.6
Real estate................. 4.2 4.7 3.8 5.7
Agriculture................. 0.2 0.2 0.3 0.4
Corporate and other......... 0.4 1.5 0.1 --
---- ----- ----- -----
$5.9 $13.6 $10.3 $10.7
==== ===== ===== =====
Capital expenditures for timber operations included $1.8
million in 1995 and $6.5 million in 1994 for expansion of the Waldo Mill;
expenditures in 1993 included $2.3 million related to upgrading the Ola Mill
which allowed a more valuable mix of finished lumber to be produced. Timber
capital expenditures also included net cash and non-cash costs of $4.5 million
in 1995 for purchase of the Company's timber requirements. Capital
expenditures for real estate operations related to costs of lot development
and construction of infrastructure at Chenal Valley, and a 40-acre land
acquisition. Agricultural expenditures are mainly replacements of machinery
and equipment. Capital expenditures in 1995 for corporate and other
operations consisted of mineral leases acquisitions in Union and Columbia
Counties in Arkansas.
At December 31, 1995 the Company had commitments for capital
expenditures in the amount of $11.4 million.
The Company has been a subsidiary of an integrated oil and gas
company. As such, its capital expenditure program has historically been
subject to periodic review and adjustment based in part on the operating
results of affiliated companies. The Company expects to have capital
expenditures of approximately $16 million during 1996, including $7.3 million
related to lot development, infrastructure construction, and amenity
improvements at Chenal Valley and $3.6 million of the initial stages of a
planer upgrade at the Waldo Mill. In addition, the Company has committed to
invest $10 million in Del-Tin during late 1996. This investment, along with
similar amounts to be invested by the other joint venturer and third-party
borrowings, will be used to finance construction of a medium density
fiberboard plant near El Dorado, Arkansas.
Financial Condition
Working capital was $13.6 million at September 30, 1996, an
improvement of $6.8 million since December 31, 1995. The improvement was
primarily caused by a decrease in accounts payable of $2.3 million and a $.3
million decrease in the current portion of long-term debt since the prior year
end. The change in accounts payable was affected by timing of cash
disbursements. The current ratio improved from 1.9 to 1 at December 31, 1995
to 3.4 to 1 at September 30, 1996. The debt to stockholder's equity ratio
was .02 to 1 at September 30, 1996, essentially unchanged from December 31,
1995.
Working capital amounted to $6.8 million and $11.3 million,
respectively, at December 31, 1995 and 1994. The Company's current ratio was
1.9 to 1 at the end of 1995 and was 3.4 to 1 at the end of 1994. The major
factors causing the $4.5 million decline in working capital in 1995 were an
increase in the current portion of long-term debt of $2 million, an increase
in accounts payable of $1.4 million, and a reduction in accounts receivable of
$l million. The current portion of long-term debt relates to financing a
portion of long-term timber requirement purchases. The decline in accounts
receivable is primarily due to timing of collection of agricultural products
sales.
Liquidity
The Company's primary source of liquidity has been internal
funds generated by operations. Internal funds are generated by net earnings
adjusted by certain non-cash items such as depreciation, amortization, and cost
of fee timber harvested, deferred income taxes, and recoveries of development
costs on real estate sales. The Company was named as a potential borrower
under Murphy's committed credit facilities at September 30, 1996. Such credit
facilities will not be available to the Company subsequent to the
Distribution. The Company is currently negotiating other credit facilities
which are expected to ultimately replace the credit facilities available
through Murphy.
The Company expects that cash flows from operations and
borrowings under the anticipated credit facilities described above will be
adequate to meet the Company's working capital needs; however, the significant
growth plans of the Company's business will require additional capital
financing. The Company believes that it will be able to obtain sufficient
debt and equity financing on competitive terms for its growth and capital
projects, but debt and equity markets may, at any particular time, be
unattractive or unavailable to the Company. The Company currently intends to
make an offering of $30-40 million of equity of the Company within one year
of the Distribution, consistent with representations made to the Internal
Revenue Service for purposes of receiving a ruling that the Distribution will
qualify as tax-free to Murphy and its stockholders under Section 355 of the
Code. The equity may be in the form of Company Common Stock, convertible
preferred stock or straight preferred stock, which may be sold to the public
or in a private placement to financial institutions depending on the
then-existing market conditions. The Company intends to use the proceeds of
such offering to finance its growth plans. See "Business--Growth Strategy."
There can be no assurance, however, that the Company will be able to
successfully complete an offering or otherwise fund its expansion plans. The
successful completion of such offering will depend on the facts and
circumstances at that time relating to market conditions, the Company's
financial condition and capital needs, and the availability and cost of
suitable acquisitions and other expansion opportunities. The inability to
obtain necessary capital could limit the Company's ability to fully implement
its growth strategy.
Since the mid-1980's, Deltic has transferred excess cash
generated by operations above its operating and capital needs to Murphy.
Since December 31, 1992, the Company has transferred to Murphy under this
arrangement $31.7 million of net available excess funds generated from
operations. Such transfers have given rise to a net noncurrent,
interest-bearing receivable from Murphy of $34.4 million at September 30,
1996. This receivable from Murphy is expected to be settled prior to the
Distribution. The settlement is expected to entail a combination a $17
million dividend by the Company to Murphy and a repayment by Murphy to the
Company to the extent of the remaining receivable. As a result, the Company
will no longer generate interest income from such intercompany receivable from
Murphy after the Distribution.
Other Matters
General inflation has not had a significant effect on the
Company's operating results during the three years ended December 31, 1995.
The Company's timber operations are more significantly impacted by the forces
of supply and demand in the southern United States than by changes in
inflation. Sales of real estate are affected by changes in the general
economy and long-term interest rates.
As shown in the Pro Forma Consolidated Financial Statements,
the Company expects that operating expenses will increase when Deltic operates
as an autonomous entity, rather than as a wholly owned subsidiary of Murphy.
BUSINESS
Introduction
Deltic is a natural resources company engaged primarily in the
growing and harvesting of timber and the manufacture and marketing of lumber.
The Company owns approximately 341,000 acres of timberland in Arkansas and
northern Louisiana (the "Timberlands"), much of which was acquired in the
1920s. The Company's sawmill operations commenced in 1971 and now consist of
two mills, one located at Ola in central Arkansas and another at Waldo in
southern Arkansas. The Company also holds a 50-percent interest in a joint
venture to manufacture and market medium density fiberboard, which is expected
to be operational in early 1998. In addition to its timber and lumber
operations, the Company is engaged in a real estate development project in
Little Rock, Arkansas, and owns approximately 33,000 acres of farmland.
The Company believes that its primary strengths are its
strategically located Timberlands, its efficient sawmill operations, its
experienced management team and its capacity to pursue a timber-based
acquisition strategy.
The Timberlands consist primarily of Southern Yellow Pine.
Management considers the Timberlands to be the Company's most valuable assets,
and the harvest of this stumpage to be the Company's most significant source
of income. Estimated pine sawtimber inventory as of December 31, 1995 was 8.1
million tons. The southern United States, in which all of the Company's
operations are located, is a major timber and lumber producing region.
Although there can be no assurance, management expects that the southern U.S.
timber resource will be subject to particularly strong demand in the future
and believes that the South will have a strategic advantage over other U.S.
timber producing regions due to regulatory, geographic and other factors.
Unlike other major timber-producing areas in North America, most timber
acreage in the southern United States is privately held, rendering it
potentially available for acquisition. The Company's current growth strategy
emphasizes a significant timberlands acquisition program in such region, which
will facilitate an increase in harvest levels.
The Company harvests timber from the Timberlands in accordance
with its harvest plans and either sells timber in the domestic market or
converts timber to lumber in its sawmills. In 1995, the Company harvested
approximately 268,000 tons of pine sawtimber from the Timberlands. The
Company's two sawmills employ modern technology in order to improve
efficiency, reduce labor costs, maximize utilization of the timber resource
and maintain high-quality standards of production. In addition, each sawmill
is strategically located near significant portions of the Timberlands. In
1995, the Company's sawmills processed approximately 671,000 tons of timber,
some of which came from the Timberlands and the remainder of which was
obtained from public and private landowners. The Company selects logs for
processing in its sawmills based on size, grade and the then prevailing
market price. The Ola Mill is equipped for maximum utilization of smaller
diameter logs, while the Waldo Mill can process both smaller and larger
diameter logs. Approximately $15 million has been invested in upgrades of
the two sawmills over the past five years, expanding both production and
product lines. Combined annual capacity is currently 165 MMBF. The
Company's sawmills produce a wide variety of products, including dimension
lumber, boards, timbers and decking. The lumber is sold primarily to
wholesalers and treaters in the South and Midwest and is used in
residential construction, roof trusses, laminated beams and remanufactured
items.
Deltic owns a 50-percent interest in Del-Tin Fiber L.L.C.
("Del-Tin"), a joint venture with Temple-Inland Forest Products Corporation,
to manufacture and market medium density fiberboard ("MDF"). The plant will
be located near El Dorado, Arkansas. Construction commenced in mid-1996, with
initial production scheduled for early 1998. MDF, which is used in the
furniture, flooring and molding industries, is manufactured from sawmill
residuals such as chips, shavings, and sawdust held together by an adhesive
bond. The plant is designed to have an annual production capacity of
approximately 150 million square feet ( 3/4" basis), making it one of the
largest of its type in the world. The plant is also expected to add value to
and provide an additional outlet for wood chip production from the Waldo Mill.
The Company's real estate operations ("Chenal Valley") were
started in 1985 to take advantage of timberland strategically located in the
growth corridor of Little Rock, Arkansas. Since that time, the Company has
been developing a 4,300-acre planned community centered around a Robert Trent
Jones, Jr. designed golf course. The property is being developed in stages,
and real estate sales to date have consisted primarily of residential lots.
Commercial development began in 1996 with the construction of a Deltic-owned,
50,000 square-foot office building, half of which has been leased to General
Motors Acceptance Corporation.
The Company owns 33,000 acres of farmland in northeastern
Louisiana. Approximately 23,000 acres of the total are farmed by Deltic,
while the remaining 10,000 acres are rented to third parties. The primary
crops are cotton, soybeans, corn, wheat, and rice.
The Company was incorporated in September 1996 and, prior to
the Distribution, will become the successor to Deltic Farm & Timber Co., Inc.,
an Arkansas corporation.
Timber Industry Overview
The demand for, and prices of, logs and manufactured wood
products depend upon international and domestic market forces, the value of
the U.S. dollar in foreign exchange markets, competition and other factors.
In particular, the demand for logs and various commodity wood products,
including dimension lumber and boards, is affected by the level of residential
construction activity. Residential construction activity is subject to
cyclical fluctuations due to changes in economic conditions, interest rates,
population growth, weather conditions and other economic and demographic
factors. Reductions in levels of residential construction activity are
generally followed by declining lumber prices, which are ordinarily followed
by declining log prices within two or three months.
The worldwide timber supply/demand balance has tightened in
recent years and such trend has continued through the first nine months of
1996. This has been the result primarily of a number of factors that have
negatively impacted supply. The major factors impacting supply include a
significant reduction in the timber harvest from government-owned lands in the
western United States and British Columbia due to environmental concerns,
reduced exports from Southeast Asia, and a continued decline in harvest levels
in Russia.
The southern United States, in which all of the Company's
operations are located, is a major timber and lumber producing region. There
are an estimated 209 million acres of timberland in such region, of which
approximately 91 million represent softwood, predominately Southern Yellow
Pine. Unlike other major producing areas in North America, most of this
acreage is privately held. The estimated breakdown of ownership of softwood
timberland in the southern United States is 61-percent private, 28-percent
forest products industry, 7-percent national forest, and 4-percent other
public. Although there can be no assurance, management anticipates that the
southern U.S. timber resource will be subject to particularly strong demand
in the future and believes that the South will have a strategic advantage over
other U.S. timber producing regions due to regulatory, geographic and other
factors.
The Timberlands
The Company owns 341,000 acres of timberland, primarily
consisting of Southern Yellow Pine, in Arkansas and northern Louisiana.
Management considers the Timberlands to be the Company's most valuable assets,
and the harvest of this stumpage to be the Company's most significant source
of income. The following table provides a breakdown of the acreage at
year-end 1995:
Timberland Acres
---------- -----
Pine Plantation (<15 years old).................... 79,594
Pine Forest....................................... 223,366
Hardwood Forest................................... 33,740
Other............................................. 4,389
-------
Total............................................. 341,089
=======
Timber Inventory. The Company's estimated standing timber
inventories on this acreage are calculated for each tract by utilizing growth
formulas based on representative sample tracts and tree counts for various
diameter classifications. The calculations of pine inventories are subject to
periodic adjustments based on sample cruises or actual volumes harvested from
related tracts. The hardwood inventories shown in the following table are
only approximations, so physical quantities of such timber may vary
significantly from these approximations. Estimated inventory of standing
timber as of December 31, 1995 was as follows:
Estimated
Volume
Timber (000s tons)
------ ----------
Pine sawtimber........................... 8,063
Hardwood sawtimber....................... 1,219
Pine pulpwood............................ 3,911
Hardwood pulpwood........................ 1,162
The majority of products manufactured from pine sawtimber, such
as dimension lumber, boards and timbers, are used in residential construction.
The hardwood sawtimber is sold to third parties and is primarily used in the
production of railroad ties, flooring and pallets. Pulpwood consists of logs
with a diameter of less than nine inches. Both pine and hardwood pulpwood are
chipped by the Company or third parties for use in the manufacture of paper.
In the future, the Company expects to sell certain of its residual wood
products to Del-Tin for the production of MDF. See "--Growth Strategy."
Timber Growth. Timber growth rate is a very important variable
for a forest products company as it ultimately determines how much timber can
be harvested. A higher growth rate permits larger annual harvests as
replacement timber regenerates or unharvested timber grows more quickly.
Growth rates vary depending on species, location, age and forestry practice.
The annual growth rate for the Company's Timberlands is on average
approximately four percent per annum of standing inventory.
The Company's Timberlands are well diversified by age
distribution. A significant portion of the Timberlands contains mature timber
that is ready to be harvested in the next several years. The Company
considers a 30 to 35-year rotation optimal for most of the Timberlands.
Timber under 15 years of age is generally considered premerchantable.
Access. Substantially all of the Timberlands are accessible by
a system of low-maintenance roads. The Company generally uses third-party
road crews to conduct construction and maintenance and the Company regularly
exchanges access easements and cooperates with the U.S. Forest Service.
Reforestation. The Company owns and operates a seed orchard.
Seeds from such orchard are grown by third parties under contract with the
Company for the purposes of producing genetically superior seedlings for
planting. Genetically superior seedlings are developed through selective
cross-pollination to produce trees with preferred characteristics, including
higher growth rates, fewer limbs, straighter trunks and greater resistance to
disease. The seedlings are introduced to the Company's Timberlands by means
of selective planting in all-aged stands or, in the case of a regeneration
harvest, the site is completely replanted with these superior seedlings. The
Company meets or exceeds in all material respects the reforestation
recommendations of the Arkansas Forestry Commission's Best Management
Practices.
Harvest Plans. Management views the Timberlands as assets with
substantial inherent value apart from the sawmills and intends to manage the
Timberlands on a basis that permits regeneration of the Timberlands over time.
During the next several years, certain of the Timberlands are expected to be
harvested at accelerated levels compared to recent years. However, the
Company intends to continue to manage the Timberlands on a sustainable yield
basis and has no plans to harvest timber at levels that exceed growth. Under
the current plan, the Company intends to increase its harvest level to 353,000
tons of pine sawtimber in 1997, an increase of 24 percent over 1996 levels.
See "--Growth Strategy."
The Company's harvest plans are generally designed to project
harvest schedules for ten-year periods. In addition, harvest plans are
updated at least annually and reviewed on a monthly basis to monitor
performance and to make any necessary modifications to the plans in response
to changing forestry conditions, market conditions, contractual obligations,
regulatory limitations and other relevant conditions. Development of annual
harvest plans begins approximately one year in advance and is completed by
mid-October of the calendar year preceding the period covered by the plans.
Since harvest plans are based on projections of demand, price,
availability of timber from other sources and other factors that may be
outside of the Company's control, actual harvesting levels may vary.
Management believes that the Company's harvest plans, which are reviewed
monthly and revised at least annually, are sufficiently flexible to permit
modification in response to fluctuations in the markets for logs and lumber.
Timber Resource Management
The Company's timber operations involve forest management,
harvesting operations and ongoing reforestation. Forest management decisions
are based upon information which includes site indices, classification of
soils, the types and number of trees by size and age classification and
stocking per acre, as well as information on forest management costs. From
this data, the Company develops its annual harvest plans, which are based upon
silvicultural considerations and existing and expected future economic and
market conditions, with a view toward maximizing the value of its timber and
timberland assets over time.
Particular forestry practices vary by geographic region and
depend upon factors such as soil productivity, weather, terrain, tree size,
age and stocking. Forest stands are thinned periodically to improve growth
and stand quality until they are harvested. Different areas within a forest
may be planted or seeded in successive years to provide a distribution of age
classes within the forest. A distribution of age classes will tend to provide
a regular source of cash flow, as the various timber stands reach harvestable
age.
The timing of harvest of merchantable timber depends in part on
growth cycles and in part on economic conditions. Growth cycles for timber
tend to change over time as a result of technological and genetic advances
that improve forest management practices. The Company will continue to
develop its forest management operations to take advantage of such advances
and to improve timber yields.
The Company actively utilizes commercial thinning timber
management practices. In the context of long-term value maximization,
commercial thinning can be a worthwhile investment. The Company has found that
such thinning improves the overall productivity of the Timberlands by
enhancing the growth of the remaining trees. In addition to enhancing growth,
commercial thinning also generates revenues.
Sawmills
The Company's two sawmills are located at Ola in central
Arkansas and at Waldo in southern Arkansas near significant portions of the
Timberlands. The Ola Mill is equipped for maximum utilization of smaller
diameter logs, while the Waldo Mill can process both smaller and larger
diameter logs. Approximately $15 million has been invested in the two
sawmills over the past five years, expanding both production and product
lines. Combined annual capacity is currently 165 MMBF.
The Company employs modern technology in its sawmills in order
to improve efficiency, reduce labor costs, maximize utilization of the timber
resource and maintain high-quality standards of production. Recent upgrades
to the Company's sawmills have expanded and diversified the output of the
mills. An expansion of the Waldo Mill, including the conversion of four
existing kilns to steam-dry and the addition of two steam-dry kilns, two
boilers and a band mill, was completed in the third quarter of 1995. The
expansion provides the Company the product flexibility needed to extract
maximum value from each log processed, and also has enabled the Company to
enter the export market in 1996. Replacement of the planing mill at the Waldo
Mill is scheduled to be completed in 1997. The Company also intends to
install a finger jointing operation in 1997 at the Waldo Mill. A sorter
system upgrade at the Ola Mill was completed in 1996.
The Company pursues waste minimization practices at its
sawmills. Sawdust, shavings and wood chips are usually sold to paper mills,
and bark is frequently sold to cogeneration plants for use as fuel. Bark,
sawdust, shavings and wood chips that cannot be sold are used as "hog fuel" to
fire the boilers that heat the drying kilns. In the future, the Company
expects to sell a significant portion of its residue wood chips to Del-Tin
pursuant to a fiber supply agreement. The Del-Tin MDF facility is expected to
be operational in early 1998.
Each mill facility has the capability to ship its lumber by
truck or rail.
While the cyclicality of the lumber market may from time to
time require the interruption of operations at one or both of the Company's
sawmills, a suspension of milling activities is unusual. Management is not
currently anticipating any interruption of operations at the Company's
sawmills, but no assurance can be given that market conditions or other
factors will not render such an action economically advisable in the future.
Growth Strategy
The Company's current strategy for growth emphasizes: (i) a
significant timberland acquisitions program, which will facilitate an increase
in harvest levels and (ii) expansion into engineered wood products.
Timberland Acquisitions and Increase in Harvest Levels. The
Company plans to combine a timberland acquisitions program with greater
utilization of even-aged management, the land management technique described
below. This combination will enable the Company to increase harvest levels
while expanding its timber inventory. In addition, it will allow the Company
to maintain or increase its level of self-sufficiency (its ability to fulfill
its requirements for harvested timber from its own timberlands) as it is
expanding lumber production.
Timberland acquisitions are necessary for continued growth in
harvest levels over the long term. The Company intends to focus such
acquisitions program on timberlands in the southern United States that range
from fully stocked to cut over tracts. Timberland in the southern United
States is 61-percent owned by private landowners, rendering it potentially
available for acquisition. In particular, the Company plans to fill a niche
in the acquisition market by pursuing tracts that are too small to be of
interest to the major companies but too large for the small private companies
and individual investors to finance. There can no assurance that timber
properties suitable for acquisition will be identified by the Company, or that
once identified, such properties will ultimately be acquired by the Company.
The Company currently anticipates a gradual conversion,
beginning in 1997, of a portion of the Timberlands to even-aged management.
This land management technique involves the cutting of timber tracts and the
replacement of the harvested timber with better, faster growing seedlings.
Even-aged management reduces the time required to reach full stocking,
accelerates the introduction of genetically superior seedlings, and results in
harvest rotations substantially shorter than those required under the
presently employed all-aged management technique. While shorter rotations
yield sawlogs with a reduced diameter, engineered wood products are
increasingly being substituted for long and wide lumber in many applications
thereby reducing the premium for large diameter logs. The vast majority of
Timberlands, however, will remain in all-aged forestry management.
Engineered Wood Products. Engineered wood products ("EWPs")
are structural products made from lumber, roundwood or residue materials
produced by wood processing operations. These materials are then adhered
together with an adhesive agent to produce products with specific definable
mechanical properties. Examples of EWPs include MDF, particleboard, laminated
veneer lumber, wood I-joists, laminated beams, plywood and oriented
strandboard. EWPs offer certain advantages over conventional lumber products,
including (i) a competitive price relative to lumber, (ii) a more consistent
range of performance and (iii) in certain cases, an ability to more
effectively implement certain complex construction features.
The Company's 50-percent interest in Del-Tin will permit
expansion of the Company's business into the EWPs market. Del-Tin is a joint
venture with Temple-Inland Forest Products Corporation to manufacture and
market MDF. The plant will be located near El Dorado, Arkansas. Construction
commenced in mid-1996, with initial production scheduled for early 1998. The
plant is designed to have an annual production capacity of 150 million square
feet ( 3/4" basis), making it one of the largest of its type in the world.
MDF, which is used in the furniture, flooring and molding industries, is
manufactured from sawmill residuals such as chips, shavings, and sawdust held
together by an adhesive bond. Although the technology has existed for
decades, recent improvements in the manufacture of MDF have increased both
the quality and consistency of the product. MDF, with its "real wood"
appearance and ability to be finely milled and accept a variety of
finishes, competes in the structural panel market against lumber. In
addition to providing an entry into the MDF market, the Del-Tin project is
expected to provide an outlet for a significant portion of the Company's
wood chips. Pursuant to a fiber supply agreement, the Company has agreed
to sell, and Del-Tin to buy, all residue wood chips from the Waldo Mill.
In addition, Del-Tin has an option to purchase residue wood chips from the
Ola Mill and roundwood chips, shavings and sawdust from the Waldo Mill.
Management intends to explore additional opportunities for
further expansion into engineered wood products.
Raw Materials
Logs processed by the Company's sawmills in 1995 totaled
671,000 tons, and were obtained from the Timberlands and also purchased from
public and private landowners. In 1995, the Company harvested 268,000 tons of
pine sawtimber from the Timberlands.
Various factors, including environmental and endangered species
concerns, have limited, and will likely continue to limit, the amount of
timber offered for sale by United States government agencies. Because of this
reduced availability of federal timber for harvesting, the Company believes
that its supply of timber from the Timberlands is a significant competitive
advantage. The Company has historically supplied a significant portion of the
timber processed in the sawmills from its Timberlands.
In order to operate its sawmills economically, the Company
relies on purchases of timber from third parties to supplement its own timber
harvests from the Timberlands. The Company has an active timber procurement
department for each of its sawmills. As of September 30, 1996, the Company
had under contract approximately 286,000 tons of timber on land owned by other
parties (including the U.S. Forest Service), which is expected to be cut in
the next three years. During the nine months ended September 30, 1996, the
Company harvested third-party stumpage or purchased logs from third parties
totaling 428,000 tons. Of this volume, purchases from the U.S. Forest Service
during this period represented seven percent. The balance of such purchases
was acquired from private lands.
As a result of the reduced availability of federal timber,
demand for privately owned timber has increased (along with prices), and the
Company has increased and foresees further increases in its harvesting and
purchasing activities from private timberlands. A number of these private
timber sources only occasionally sell their timber commercially, but have been
prompted to do so by rising prices. The Company's sources of private timber
are many and diverse. The key factors in a landowner's determination of
whether to sell timber to the Company are price, the Company's relationships
with logging contractors and the ability of the Company to demonstrate the
quality of its logging practices to adjacent landowners. As a result, a
landowner will be much more likely to sell his timber to a forest products
company whose own land has been responsibly managed and harvested. There is a
substantial amount of other private timber acreage in proximity to the
Company's sawmills.
Products and Competition
The Company's principal products are timber, lumber products
and residual wood products.
Timber. Timber harvested from the Timberlands is utilized by
the Company's sawmills or sold to third parties. The Company's timber sales
to third parties accounted for approximately 14 percent, 14 percent, 17
percent and 15 percent of net sales in 1993, 1994, 1995 and the first nine
months of 1996, respectively.
The Company competes in the domestic timber market with
numerous private industrial and non-industrial land and timber owners.
Competitive factors with respect to the domestic timber market generally
include price, species and grade, proximity to wood consuming facilities and
ability to meet delivery requirements.
Lumber Products. The Company's mills produce a wide variety
of products, including dimension lumber, boards, timbers and decking. The
lumber is sold primarily to wholesalers and treaters in the South and Midwest
and is used in residential construction, roof trusses, laminated beams and
remanufactured items. During 1993, 1994, 1995, and the first nine months of
1996, lumber sales accounted for approximately 56 percent, 54 percent, 55
percent and 56 percent, respectively, of net sales.
The forest products market is highly competitive with respect
to price and quality of products. In particular, competition in the
commodity-grade lumber market in which the Company competes is primarily based
on price. The Company competes with several major forest products companies
operating in Arkansas, many of which have significantly greater financial
resources than the Company, as well as privately-held lumber producers. In
addition, management expects the Company's products to experience increased
competition from engineered wood products and other substitute products. Due
to the geographic location of the Timberlands, its high-quality timber, its
active timber management, its strategically located sawmills, its efficient
sawmill operations and its highly motivated workforce, the Company has in the
past been able to compete effectively.
Chips. The Company's sawmills produce wood chips as
by-products of the applicable conversion process. Chips are typically sold to
paper mills. During the nine months ended September 30, 1996, the Company's
sawmills produced 227,400 tons of wood chips. During 1993, 1994, 1995 and the
first nine months of 1996, sales of wood chips and other by-products of the
Company's sawmills accounted for 11 percent, 10 percent, 11 percent and 9
percent, respectively, of the Company's net sales. In the future, the Company
expects to sell certain of its residual wood products to Del-Tin for the
production of MDF. See "--Growth Strategy."
Real Estate Operations
The Company's Chenal Valley real estate operations were started
in 1985 to take advantage of timberland strategically located in the growth
corridor of Little Rock, Arkansas. Since that time the Company has been
developing a 4,300-acre planned community centered around a Robert Trent
Jones, Jr. designed golf course. The golf course was completed in 1990. The
property has been developed in stages, and real estate sales to date have
consisted primarily of residential lots.
In connection with its residential development activities, the
Company entered into an agreement with the Chenal Country Club (the "Club"),
whereby the Company developed the above-described golf course, a clubhouse and
related facilities (collectively, the "Club Facilities") for use by club
members, and the Club agreed to purchase the Club Facilities with payments to
be made on specified terms through 1999. The Company has a made a proposal to
the Club for restructuring the existing agreement. Pursuant to the proposal,
the Company would retain ownership of the Club Facilities, and the Club
members would make ongoing membership fee payments to the Company. In
addition, the Company would agree to undertake substantial remodeling and
expansion of the Club Facilities. The proposal was endorsed by the Club's
Board of Directors and has been submitted to the Club members for approval.
There can be no assurance that such approval will be obtained.
Commercial development began in 1996 with the construction
of a Deltic-owned office building. The building has two-stories and 50,000
square feet of office space, 25,000 square feet of which are leased to
General Motors Acceptance Corporation for a term of five years with options
to renew for an additional 15 years. Residential development and
infrastructure investment are expected to result in additional commercial
activity.
Infrastructure and other improvements to support the
development and sale of residential and commercial property are provided by
the Company and/or through Real Property Improvement Districts. Such
properties are developed only when sufficient demand exists and all
infrastructure is completed as of such time. Future infrastructure
investments are necessary only for the development and sale of additional
property.
The combination of a number of factors have added significant
value to the undeveloped portion of the Company's property. Such factors
include the overall success of Chenal Valley as a residential development and
its image as one of the premier developments in Arkansas, the continued
westward growth of Little Rock, the Company's investment in infrastructure in
the area, and the established residential base which is now large enough to
support substantial commercial development. Management expects the
undeveloped portion of Chenal Valley will provide growth and development
opportunities in the future.
The table below summarizes developed and undeveloped tracts at
September 30, 1996:
Developed Undeveloped
----------------- -----------
Sold Unsold
------- ------
Residential:
Lots................................ 688 188 3,080
Average price ($/lot)............... 55,000
Commercial:(1)
Acres............................... 2 13 612
Average price ($/acre).............. 199,500
__________
(1) Excludes GMAC Building, church sites, "green" areas and school sites.
Of the 688 residential lots that have been sold, construction
has been completed on approximately 550 and is currently ongoing on
approximately 65. The Company has not been engaged in the construction of
residences on such lots.
Farming
Deltic owns 33,000 acres of farmland in northeastern Louisiana.
Approximately 23,000 acres of the total are farmed by Deltic, while the
remaining 10,000 acres are rented to third parties. The primary crops are
cotton, soybeans, corn, wheat, and rice.
Environmental Matters
The Company is subject to extensive and changing federal, state
and local environmental laws and regulations relating to the protection of
human health and the environment, including laws relating to air and water
emissions, the use of pesticides and herbicides on the farm and Timberlands,
regulation of "wetlands" and the protection of endangered species and is
subject to requirements which may be imposed by applicable federal, state and
local environmental agencies. Environmental legislation and regulations and
the interpretation and enforcement thereof are expected to become increasingly
stringent. The Company has made and will continue to make non-material
expenditures to comply with such requirements in the ordinary course of its
operations. Liability under certain environmental regulations may be imposed
without regard to fault or the legality of the original actions, and may be
joint and several with other responsible parties. As a result, in addition to
ongoing compliance costs, the Company may be subject to liability for
activities undertaken on its properties prior to its ownership or operation
and by third parties, including tenants. The Company currently leases the
rights to drill for oil and gas on some of its lands to third parties.
Pursuant to these leases, the lessee indemnifies the Company from
environmental liability relating to the lessee's operations of the wells.
Based on its present knowledge, including the fact that the Company is not
currently aware of any facts that indicate that the Company will be required
to incur any material costs relating to environmental matters, and currently
applicable laws and regulations, the Company believes that environmental
matters are not likely to have a material adverse effect on the Company's
financial condition, results of operations or liquidity.
In addition, the federal Endangered Species Act protects
species threatened with possible extinction and restricts timber harvesting
activities on private and federal lands. Certain of the Company's Timberlands
are subject to such restrictions due to the presence on the lands of the Red
Cockaded Woodpecker, a species protected under the Act. There can be no
assurance that the presence of this species or the discovery of other
protected species will not subject the Company to future harvesting
restrictions. However, based on the Company's knowledge of its Timberlands,
the Company does not believe that its ability to harvest its Timberlands will
be materially adversely effected by the protection of endangered species.
Litigation
There are no material legal proceedings pending against the
Company.
Employees
As of September 30, 1996, the Company had 350 employees.
MANAGEMENT
Structure of Company's Board of Directors
The Company will amend its Certificate of Incorporation prior
to the Distribution to provide for a classified board of directors consisting
of nine directors (as indicated in the table below). The Company Board will
be divided into three classes of directors. The term of office of the first
class ("Class I") expires at the 1997 annual meeting, the term of office of
the second class ("Class II") expires at the 1998 annual meeting and the term
of office of the third class ("Class III") expires at the 1999 annual meeting.
At each annual meeting held thereafter, a class of directors will be elected
for a three year term to replace the class whose term has then expired. See
"Certain Statutory, Charter and Bylaw Provisions and Rights
Agreement--Classified Board of Directors."
The Company Board further expects to establish an Audit
Committee, an Executive Committee, a Nominating Committee and an Executive
Compensation Committee following the Distribution.
Directors and Executive Officers
The following tables set forth certain information concerning
the directors and executive officers of the Company who will be serving or in
office as of the Distribution Date.
Name Age Position
---- --- --------
Robert C. Nolan 55 Chairman of the Board (Class I)
O.H. Darling, Jr. 68 Director (Class III)
Eric M. Heiner 51 Director (Class II)
Rev. Christoph Keller, III 41 Director (Class III)
Alex R. Lieblong 46 Director (Class I)
R. Madison Murphy 38 Director (Class III)
William L. Rosoff 50 Director (Class II)
John C. Shealy 68 Director (Class II)
Ron L. Pearce 55 President, Chief Executive Officer and
Director (Class I)
Emily R. Evers 46 Controller
W. Bayless Rowe 44 General Counsel and Secretary
Clefton D. Vaughan 55 Vice President, Finance and
Administration
Robert C. Nolan will serve as Chairman of the Board of the
Company as of the Distribution. For the past five years, Mr. Nolan has been
Managing Partner of Munoco Company, an Arkansas partnership principally
engaged in the exploration for and production of oil and gas. Mr. Nolan is a
director of First United Bancshares, Inc. and First National Bank of El Dorado.
O.H. Darling, Jr. will serve as a director of the Company as of
the Distribution. Mr. Darling was Division Manager, Crossett Division,
Georgia Pacific Corporation from 1978 until his retirement in April 1994.
Eric M. Heiner will serve as a director of the Company as of
the Distribution. Since 1975, Mr. Heiner has been involved in real estate
development and investments.
Rev. Christoph Keller, III will serve as a director of the
Company as of the Distribution. Rev. Keller has been a clergyman since 1982
and the Vicar of St. Margaret's Episcopal Church in Little Rock, Arkansas since
June 1990. Rev. Keller is also Chairman of Inglewood Land and Development
Company of Alexandria, Louisiana.
Alex R. Lieblong will serve as a director of the Company as of
the Distribution. Since 1987, Mr. Lieblong has been Branch Manager, Corporate
Vice President of PaineWebber, Inc.
R. Madison Murphy will serve as a director of the Company as of
the Distribution. Since October 1994, Mr. Murphy has been Chairman of the
Board of Murphy. Prior to such time, Mr. Murphy served as Executive Vice
President and Chief Financial and Administrative Officer of Murphy (from March
1992 to October 1994, with the Chief Administrative position added in February
1993), Vice President of Planning of Murphy (February 1988 to March 1992) and
Treasurer of Murphy (July 1990 to August 1991). Mr. Murphy is also a director
of First United Bancshares, Inc. After the Distribution, Mr. Murphy will
continue to serve as Chairman of the Board of Murphy and will receive
compensation from Murphy for such services. Mr. Murphy will also receive
compensation from the Company pursuant to the Company's compensation policy
for directors.
William L. Rosoff will serve as a director of the Company as of
the Distribution. Since 1985, Mr. Rosoff has been a partner of Davis Polk &
Wardwell, a law firm which has represented Murphy in various corporate
matters. Davis Polk & Wardwell has advised Murphy and the Company in
connection with the Distribution. Deltic expects to continue to retain the
services of Davis Polk & Wardwell following the Distribution.
John C. Shealy will serve as director of the Company as of the
Distribution. Mr. Shealy was Vice President and General Manager, Southern
Region of Willamette Industries, Inc. from 1981 until his retirement in 1994.
Mr. Shealy is also Chairman of American Bank of Ruston, Louisiana.
Ron L. Pearce will serve as President and Chief Executive
Officer and a director of the Company as of the Distribution. Since June
1993, Mr. Pearce has been President of Deltic Farm & Timber Co., Inc., the
predecessor corporation to the Company ("Deltic Farm & Timber"). Prior to
such time, Mr. Pearce was Manager of Operations and Planning for Deltic Farm &
Timber, a position he held beginning in February 1991.
Emily R. Evers will serve as Controller of the Company as of
the Distribution. Since 1989, Ms. Evers has been Controller of Deltic Farm &
Timber.
W. Bayless Rowe will serve as General Counsel and Secretary of
the Company as of the Distribution. Since 1988, Mr. Rowe has been Secretary
and General Attorney of Murphy.
Clefton D. Vaughan will serve as Vice President, Finance and
Administration of the Company as of the Distribution. Since October 1994, Mr.
Vaughan has been Vice President of Murphy, a position he also held from 1989
through October 1992. From October 1992 to October 1994, Mr. Vaughan was Vice
President of Murphy Exploration & Production Company.
Mr. Nolan, Mr. Murphy and Rt. Rev. Keller are first cousins.
Mr. Heiner is married to a first cousin of Messrs. Nolan and Murphy and Rt.
Rev. Keller.
Compensation of Directors
Directors who are not employees of the Company will be paid an
annual retainer fee of $16,000, a $1,000 fee for each meeting attended of the
Company Board and a $500 fee for each meeting attended of any committee
thereof.
Executive Compensation
The following sets forth the compensation earned by the
Company's President for the year ended December 31, 1995 (in such capacity, a
"Named Executive Officer"). No other executive officer of the Company received
more than $100,000 in annual compensation from the Company during such period.
Long-Term
Compensation Awards
------------------------
Securities
Name and Restricted Underlying All other
Position Salary(1) Bonus Stock Awards Options(2) Compensation(3)
- --------- --------- ----- ------------ ---------- ---------------
Ron L. Pearce $126,250 $ -- -- 5 ,000 $5,407
President
__________
(1) Includes amounts of cash compensation earned and received by Mr. Pearce as
well as amounts earned but deferred at his election.
(2) Represents options to purchase Murphy Common Stock. See "Option and
Restricted Stock Grants."
(3) Represents $1,625 in dividends on restricted shares of Murphy Common
Stock, $3,158 in contributions pursuant to the Thrift Plan for Employees
of Murphy Oil Corporation and $624 in a benefit attributable to a
Murphy-sponsored term life insurance policy. Cash dividends are paid on
restricted stock at the same rate paid to all other holders of Murphy
Common Stock. See "Option and Restricted Stock Grants."
Option and Restricted Stock Grants
Several of the Company's employees, including Ron L. Pearce,
have been awarded options to purchase shares of Murphy Common Stock, as well
as restricted shares of Murphy Common Stock, under Murphy's 1992 Stock
Incentive Plan (the "Murphy Stock Incentive Plan"). Options granted under
this plan vest in two equal installments on the second and third anniversaries
of the date of grant. In connection with the Distribution, the Executive
Compensation and Nominating Committee of Murphy's Board of Directors (the
"Murphy Compensation Committee") has determined to treat each employee of the
Company who holds options under the Murphy Stock Incentive Plan as if such
employee had retired from Murphy as of the Distribution Date. As a result,
all such options which are not vested, as of the Distribution Date, will be
forfeited by the Company employees. Company employees will have two years
from the Distribution Date in which to exercise their vested options.
During the fiscal year ended December 31, 1995, Mr. Pearce was
awarded options to purchase 5,000 shares of Murphy Common Stock, under the
Murphy Stock Incentive Plan. The exercise price for such options was $43.9375
per share. As of the Distribution Date, these options will not have vested;
accordingly, these options will be forfeited.
The value of each award of restricted stock under the Murphy
Stock Incentive Plan is based on a five-year performance period commencing
with the year of award, during which recipients are entitled to full voting and
cash dividend rights. Of each award, the number of shares to which
participants ultimately become entitled depends on the total return to
Murphy's stockholders in comparison to a peer group of companies over the
applicable five-year performance period. In connection with the Distribution,
the Murphy Compensation Committee has determined to treat each employee of the
Company who holds restricted stock under the Murphy Stock Incentive Plan as if
such employee had retired from Murphy as of the Distribution Date. As a
result, the number of restricted shares held by each Company employee will be
reduced pro-rata for the actual time of employment by Murphy of that employee
during each performance period. The number of shares earned by Company
employees with respect to each award will be determined at the end of the
relevant performance period. Holders of restricted shares of Murphy Common
Stock will not receive shares of Company Common Stock in connection with the
Distribution. Instead, the Murphy Compensation Committee has determined to
substitute shares of Murphy Common Stock of equivalent value for the shares of
Company Common Stock that would otherwise have been received by holders of
such restricted shares in connection with the Distribution.
During the fiscal year ended December 31, 1995, no awards of
restricted shares of Murphy Common Stock were made under the Murphy Stock
Incentive Plan.
Prior to the Distribution, the Company expects to establish a
new stock-based management incentive plan for its key employees. The plan will
likely provide for the grant of restricted shares of Company Common Stock, as
well as options to purchase shares of Company Common Stock, on terms similar
to those applicable to awards under the Murphy Stock Incentive Plan. It is
expected that awards with respect to up to one-half of one percent of the
outstanding Company Common Stock, determined as of December 31 of each year,
will be authorized for issuance under the new plan.
Retirement Plans
Prior to the Distribution, the Company's employees have been
participants in the Retirement Plan of Murphy Oil Corporation (the "Murphy
Retirement Plan") and the Murphy Oil Corporation Supplemental Benefit Plan
(the "Murphy Supplemental Benefit Plan"). Effective at the time of the
Distribution, the Company will adopt the Retirement Plan of Deltic Timber
Corporation (the "Company Retirement Plan") and the Deltic Timber Corporation
Supplemental Benefit Plan (the "Company Supplemental Benefit Plan"), which
will replicate, in all material respects, the Murphy Retirement Plan and
the Murphy Supplemental Benefit Plan, respectively. The Company Retirement
Plan will be a non-contributory pension plan that covers all employees who
meet certain minimum age and service requirements, including Mr. Pearce.
The Company Supplemental Benefit Plan will provide benefits otherwise
payable under the Company Retirement Plan, to the extent such benefits
exceed legislative limitations applicable to qualified retirement plans.
The following table shows the estimated annual pension benefit
payable, at age 65, under the Company Retirement Plan at December 31, 1996 for
the salary and length of service indicated.
Pension Plan Table
Years of Service
------------------------------------------------------------
Remuneration 15 20 25 30 35 40
- ------------ ------ ------ ------- ------- ------- -------
$100,000.... 24,000 32,000 40,000 48,000 56,000 64,000
$150,000.... 36,000 48,000 60,000 72,000 84,000 96,000
$200,000.... 48,000 64,000 80,000 96,000 112,000 128,000
$250,000.... 60,000 80,000 100,000 120,000 140,000 160,000
$300,000.... 72,000 96,000 120,000 144,000 168,000 192,000
The amounts shown above are computed on the basis of a
straight-life annuity, and are subject to reduction for Social Security
benefits. The amounts shown do not reflect any reductions in retirement
benefits that would result from the selection of one of the Company Retirement
Plan's various available survivorship options, nor the actuarial reductions
required by the Plan for retirement earlier than age 62. A portion of the
benefits shown above would be paid under the Company's Supplemental Benefit
Plan, to the extent such benefits exceed legislative limitations.
As of September 30, 1996, Mr. Pearce had five years of service
for which he will receive credit under the Company Retirement Plan.
Executive Compensation Committee Interlocks and Insider Participation
The Company does not currently have an Executive Compensation
Committee. Prior to the Distribution, compensation was determined by the
Company Board. Following the Distribution, the Company expects to establish
an Executive Compensation Committee, the majority of the members of which will
be independent directors.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Set forth in the table below is information as of September 30,
1996 (or as of the dates specified in the explanatory footnotes in the case of
five-percent stockholders) with respect to the number of shares of Murphy
Common Stock beneficially owned by (i) each person or entity known by the
Company to own more than five percent of the outstanding Murphy Common Stock,
(ii) each director (and nominee as director) of the Company, (iii) each of the
Named Executive Officers of the Company and (iv) all directors and executive
officers of the Company as a group. Also set forth below are the number of
shares of Company Common Stock that each such person or entity would own
immediately after the Distribution on a pro forma basis. To the Company's
knowledge, unless otherwise indicated, each person or entity has sole voting
and investment power with respect to the shares set forth opposite the
person's or entity's name.
<TABLE>
<CAPTION>
MURPHY COMPANY PRO FORMA
------------------------------------ ----------------------------
Number of Number of
Shares Percent of Shares Percent of
Beneficially Outstanding Beneficially Outstanding
Beneficial Owner Owned(1) Shares Owned Shares
---------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Directors and Named Executive Officers
Robert C. Nolan.......................... 598,946(2) 1.3% 171,127 1.3%
Ron L. Pearce............................ 6,385 * 1,824 *
O.H. Darling, Jr......................... -- -- -- --
Eric M. Heiner........................... 545,179(3) 1.2% 155,765 1.2%
Rev. Christoph Keller, III............... 347,736(4) * 99,353 *
Alex R. Lieblong......................... -- -- -- --
R. Madison Murphy........................ 1,418,561(5) 3.2% 405,303 3.2%
William L. Rosoff........................ -- -- -- --
John C. Shealy........................... -- -- -- --
All Directors and Executive Officers as a
Group (12 persons)...................... 2,950,353 6.6% 842,958 6.6%
Other 5% Stockholders
C.H. Murphy, Jr.
c/o Murphy Oil Corporation
200 Peach Street
El Dorado, Arkansas 71730................ 4,188,709(6) 9.3% 1,196,774 9.3%
First United Bancshares, Inc.
Main at Washington Street
El Dorado, Arkansas 71730................ 2,543,419(7) 5.7% 726,691 5.7%
The Capital Group Companies, Inc.
333 South Hope Street
Los Angeles, California 90071............ 3,583,300(8) 8.0% 1,023,800 8.0%
</TABLE>
__________
* Less than one percent
(1) Of the shares of stock shown as beneficially owned, the following shares
are not currently owned but are subject to options which were
outstanding on September 30, 1996 and were exercisable within 60 days
thereafter: Mr. Pearce, 6,000 shares; Mr. Heiner, 5,000 shares.
(2) Includes 87,902 shares with respect to which Mr. Nolan has sole voting and
dispositive power and 511,044 shares held by trusts of which Mr. Nolan is
either a beneficiary or trustee.
(3) Includes 24,789 shares with respect to which Mr. Heiner has sole voting
and dispositive power and 520,390 shares owned by Mr. Heiner's spouse or
other household members either directly or as beneficiaries of trusts.
(4) Includes 78,169 shares with respect to which Rev. Keller has sole voting
and dispositive power, 28,712 shares owned by Rev. Keller's spouse or
other household members and 240,855 shares held in trusts for the
benefit of Rev. Keller's family members, of which Rev. Keller is a
trustee.
(5) Includes 107,111 shares with respect to which Mr. Murphy has sole voting
and dispositive power, 619,052 shares held by trusts for others, of which
Mr. Murphy is a trustee, 610,862 shares held by a trust of which Mr.
Murphy is the beneficiary, and 81,536 shares owned by Mr. Murphy's
spouse or other household members.
(6) Includes 1,188,361 shares with respect to which Mr. Murphy has sole voting
and dispositive power, 3,036 shares owned by Mr. Murphy's spouse or other
household members and 2,997,312 shares held by trusts of which Mr. Murphy
is a trustee or by a corporation or other organization of which Mr. Murphy
is an officer.
(7) A Schedule 13G dated February 13, 1996 was filed with the Commission by
First United Bancshares, Inc. disclosing beneficial ownership of more than
five percent of Murphy Common Stock. According to the statement, First
United Bancshares, Inc. has (i) sole voting power with respect to 65,453
shares, (ii) shared voting power with respect to 2,477,956 shares, (iii)
sole dispositive power with respect to 70,856 shares and (iv) shared
dispositive power with respect to 2,472,553 shares, as the parent company
of First National Bank of El Dorado and First National Bank of Magnolia,
which held 2,543,409 shares and 10 shares, respectively, in various trust
accounts.
(8) A Schedule 13G dated February 6, 1996 was filed with the Commission by The
Capital Group Companies, Inc. and Capital Research and Management,
disclosing beneficial ownership of more than five percent of Murphy Common
Stock. According to the statement, The Capital Companies Group, Inc. has
sole dispositive power with respect to 3,583,300 shares as the parent
company of each of Capital Guardian Trust Company and Capital Research and
Management Company, which have sole dispositive power with respect to
232,900 and 3,350,400 shares, respectively.
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company
is based upon the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and its Amended and Restated Bylaws (the
"Bylaws") which are to be in effect as of the Distribution, and by applicable
provisions of law. The following description is qualified in its entirety by
reference to such Certificate of Incorporation and Bylaws, which are filed as
exhibits to the Form 10.
The Company's Certificate of Incorporation authorizes the
issuance of 50 million shares of Company Common Stock, par value $.01 per
share, and 20 million shares of preferred stock par value $.01 per share (the
"Company Preferred Stock"). The outstanding capital stock of the Company
currently consists of 100 shares of Company Common Stock, all of which are,
and will be prior to the Distribution, held beneficially and of record by
Murphy. Such shares were issued to Murphy on September 4, 1996 for a total of
$1.00 in connection with the incorporation of the Company. Such issuance was
exempt from registration under the Securities Act pursuant to Section 4(2) of
the Securities Act. Effective upon the filing of the Certificate of
Incorporation, each share of Company Common Stock then issued and outstanding
shall be subdivided and converted, without any action on the part of the
holder thereof, into a specified number of fully paid and nonassessable shares
of Company Common Stock issued and outstanding, such that the aggregate number
of shares issued and outstanding will be sufficient to permit the Distribution.
Company Common Stock
Subject to the rights of the holders of any Company Preferred
Stock which may be outstanding, each holder of Company Common Stock on the
applicable record date is entitled to receive such dividends as may be
declared by the Company Board out of funds legally available therefor, and, in
the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment or providing for the payment of liabilities and
the liquidation preference of any outstanding Company Preferred Stock. Each
holder of Company Common Stock is entitled to one vote for each share held of
record on the applicable record date on all matters presented to a vote of
stockholders, including the election of directors. Holders of Company Common
Stock have no cumulative voting rights or preemptive rights to purchase or
subscribe for any stock or other securities and there are no conversion rights
or redemption or sinking fund provisions with respect to such stock. Based on
the number of shares of Murphy Common Stock outstanding on September 30, 1996
and the distribution ratio of one share of Company Common Stock for every 3.5
shares of Murphy Common Stock, it is anticipated that there will be
approximately 12.8 million shares of Company Common Stock outstanding upon
consummation of the Distribution.
The shares of the Company Common Stock distributed in the
Distribution will be fully paid and nonassessable. The Company's Certificate
of Incorporation contains no restrictions on the alienability of the Company
Common Stock. For further information on the securities laws restrictions,
if any, on transferability of the Company Common Stock, see "Trading Market."
Except as disclosed in the section entitled "Certain Statutory, Charter and
Bylaw Provisions and Rights Agreement," no provision of the Certificate of
Incorporation and no provision of any agreement or plan involving the Company
is in effect that would discriminate against any existing or prospective
holder of such securities as a result of such security holder owning a
substantial amount of securities.
Preferred Stock
Under the Certificate of Incorporation, the Company Board will
have the authority to create one or more series of preferred stock, to issue
shares of preferred stock in such series up to the maximum number of shares
of preferred stock authorized, and to determine the preferences, rights,
privileges and restrictions of any series, including the dividend rights,
voting rights, rights and terms of redemption, liquidating preferences, the
number of shares constituting any such series and the designation of such
series. The authorized shares of Company Preferred Stock, as well as
authorized but unissued shares of Company Common Stock, will be available for
issuance without further action by the Company's stockholders, unless
stockholder action is required by applicable law or by the rules of a stock
exchange on which any series of the Company's stock may then be listed. No
shares of Company Preferred Stock will be issued in connection with the
Distribution, although 150,000 shares of Series A Preferred Stock (as defined
below) have been reserved for issuance in connection with the Rights Agreement
(as defined below).
Registrar and Transfer Agent
Harris Trust and Savings Bank will serve as the Registrar and
Transfer Agent for the Company Common Stock.
CERTAIN STATUTORY, CHARTER AND BYLAW PROVISIONS AND RIGHTS AGREEMENT
Certain provisions of the Certificate of Incorporation and
Bylaws of the Company and of the Rights Agreement summarized in the following
paragraphs may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that might result in a
premium over the market price for the shares held by stockholders. The
following is a summary of certain of these provisions. The Certificate of
Incorporation, the Bylaws and the Rights Agreement are filed as exhibits to
the Form 10, and the following summary is qualified in its entirety by
reference to such documents.
Charter and Bylaw Provisions
Classified Board of Directors; Removal of Directors. The
Certificate of Incorporation and the Bylaws provide for the Company Board to
be divided into three classes of directors. The term of office of the first
class expires at the 1997 annual meeting, the term of office of the second
class expires at the 1998 annual meeting, and the term of office of the third
class expires at the 1999 annual meeting. At each annual meeting held
thereafter, a class of directors will be elected to replace the class whose
term has then expired. As a result, approximately one-third of the members of
the Company Board will be elected each year and, except as described above,
each of the directors serves a staggered three-year term. See
"Management--Directors and Executive Officers." Moreover, as is permitted
under the Delaware General Corporation Law only in the case of a corporation
having a classified board, the Certificate of Incorporation and the Bylaws
provide that directors may be removed only for cause.
These provisions could prevent a stockholder (or group of
stockholders) having majority voting power from obtaining control of the
Company Board until the second annual stockholders' meeting following the date
the acquiror obtains such voting power. Accordingly, these provisions could
have the effect of discouraging a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company.
Stockholder Action by Written Consent; Special Meetings. The
Certificate of Incorporation and the Bylaws provide that no action required or
permitted to be taken at an annual or special meeting of stockholders may be
taken without a meeting, and that no action may be taken by the written
consent of stockholders in lieu of a meeting. The Certificate of
Incorporation also provides that special meetings of the Company's stockholders
may only be called by the Company Board or the Chairman of the Company Board.
These provisions may make it more difficult for stockholders to take action
opposed by the Board.
Advance Notice Provisions. The Bylaws establish an advance
written notice procedure for stockholders seeking to nominate candidates for
election as directors at an annual meeting of stockholders or to bring
business before an annual meeting of stockholders of the Company. The Bylaws
provide that only persons who are nominated by or at the direction of the
Company Board, or by a stockholder who has given timely written notice to the
Secretary of the Company prior to the meeting at which directors are to be
elected, will be eligible for election as directors of the Company. The
Bylaws also provide that at any meeting of stockholders only such business may
be conducted as has been brought before the meeting by or at the direction of
the Company Board or, in the case of an annual meeting of stockholders, by a
stockholder who has given timely written notice to the Secretary of the
Company of such stockholder's intention to bring such business before such
meeting. Under the Bylaws, for any such stockholder notice to be timely, such
notice must be received by the Company in writing not less than 90 days prior
to the first anniversary of the most recent annual meeting of stockholders.
Under the Bylaws, a stockholder's notice must also contain certain information
specified in the Bylaws. These provisions may preclude or deter some
stockholders from bringing matters before, or making nominations for directors
at, an annual meeting.
Preferred Stock. Under the Certificate of Incorporation, the
Company Board will have the authority, without further stockholder approval,
to create one or more series of preferred stock, to issue shares of preferred
stock in such series up to the maximum number of shares of preferred stock
authorized, and to determine the preferences, rights, privileges and
restrictions of any series, including the dividend rights, voting rights,
rights and terms of redemption, liquidating preferences, the number of shares
constituting any such series and the designation of such series. Pursuant to
this authority, the Company Board could create and issue a series of preferred
stock with rights, privileges or restrictions having the effect of
discriminating against an existing or prospective holder of such securities as
a result of such security holder beneficially owning or commencing a tender
offer for a substantial amount of Company Common Stock. One of the effects of
authorized but unissued and unreserved shares of capital stock may be to
render more difficult or discourage an attempt by a potential acquiror to
obtain control of the Company by means of a merger, tender offer, proxy
contest or otherwise, and thereby protect the continuity of the Company's
management. The issuance of such shares of capital stock may have the effect
of delaying, deferring or preventing a change in control of the Company
without any further action by the stockholders of the Company.
Amendment of Certain Charter and Bylaw Provisions. The
Certificate of Incorporation provides that the Company Board may adopt, amend
or repeal any provision of the Bylaws. The Certificate of Incorporation and
the Bylaws also provide that Bylaw provisions may be adopted, amended or
repealed by the affirmative vote of stockholders holding not less than 80
percent of the total number of votes entitled to be cast in the election of
directors.
Any amendment, modification or repeal of the provisions of the
Certificate of Incorporation relating to the election and removal of
directors, the right to call special meetings, the prohibition on action by
written consent, amendment of the Bylaws and the limitation of liability and
indemnification of officers and directors will require approval by the
affirmative vote of stockholders holding at least 80 percent of the total
number of votes entitled to vote generally in the election of directors.
Rights Agreement
Prior to the Distribution, the Company Board will declare a
dividend of one right (a "Right") for each outstanding share of Company Common
Stock. As a result, each share of Company Common Stock distributed in the
Distribution will also represent one Right. Each Right, under certain
circumstances as described below, will entitle the registered holder to
purchase from the Company one one-hundredth of a share (each such
one-hundredth, a "Unit") of Series A Participating Cumulative Preferred Stock,
par value $.01 per share (the "Series A Preferred Stock"), at a purchase price
of $75.00 per Unit, subject to adjustment (the "Purchase Price"). One Unit
entitles the holder thereof to the same dividend and voting rights as the
holder of one share of Company Common Stock. In addition, each Right, under
certain circumstances as described below, will entitle the registered holder
to purchase shares of Company Common Stock, or securities of a company that
acquires the Company. The terms of the Rights are set forth in a Rights
Agreement between the Company and Harris Trust and Savings Bank, as Rights
Agent (the "Rights Agreement").
Prior to the Rights Distribution Date (as defined below), the
Rights will not be exercisable, and will be evidenced by the certificates for,
and will trade with, the Company's Common Stock. As soon as practicable after
the earlier of (i) the tenth day (or such later day as may be designated by a
majority of the Continuing Directors (as defined below)) after the date (the
"Stock Acquisition Date") of the first public announcement that a person
(other than Charles H. Murphy, Jr. and his affiliates and associates) or group
of affiliated or associated persons has acquired beneficial ownership (as
defined in the Rights Agreement) of 15 percent or more of the outstanding
shares of Company Common Stock (any such person, an "Acquiring Person") and
(ii) the tenth business day (or such later day as may be designated by a
majority of the Continuing Directors) after the date of the commencement of a
tender or exchange offer by any person (other than the Company, any of its
subsidiaries or any employee benefit plan of the Company or any of its
subsidiaries) if, upon consummation thereof, such person would be an Acquiring
Person (the earlier of such dates being referred to as the "Rights
Distribution Date"), the Company will issue separate certificates evidencing
the Rights and the Rights will begin to trade separately from the Company
Common Stock. The Rights are not exercisable until the Rights Distribution
Date and will expire at the close of business on December 31, 2006 (the
"Rights Expiration Date"), unless previously redeemed by the Company as
described below.
After the Rights Distribution Date, each holder of a Right
(other than Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by an Acquiring Person (which will
thereafter be void)) will thereafter have the right to receive upon exercise
thereof at the then current Purchase Price, Company Common Stock having a
market value equal to two times the Purchase Price.
If at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or the Company Common Stock
is exchanged for other securities or assets or (ii) 50 percent or more of the
Company's assets or earning power is sold, each holder of a Right will
thereafter have the right to receive, upon exercise thereof at the then
current Purchase Price, common stock of the acquiring company having a market
value equal to two times the Purchase Price.
The Rights may, at the option of the Board of Directors, be
redeemed in whole, but not in part, at a price of $.01 per Right at any time
prior to the earlier of the tenth day after the Stock Acquisition Date (or
such later date as a majority of the Continuing Directors may designate) and
the Rights Expiration Date. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors. Immediately upon the requisite action of
the Board of Directors ordering exchange or redemption of the Rights, the
Rights will terminate, and thereafter the only right of the holders of Rights
will be to receive the redemption price.
"Continuing Director" means any member of the Company Board who
was a member of the Company Board immediately prior to the time an Acquiring
Person becomes such, or any person who is subsequently elected to the Company
Board if such person is recommended or approved by a majority of the
Continuing Directors. "Continuing Director" does not include an Acquiring
Person, or an affiliate or associate of an Acquiring Person, or any
representative of any of the foregoing entities.
The Purchase Price payable, and the number of Units of Series A
Preferred Stock or other securities or property issuable upon exercise of the
Rights, are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A Preferred Stock, (ii) if holders of the
Series A Preferred Stock are granted certain rights or warrants to subscribe
for Series A Preferred Stock or convertible securities at less than the then
current market price of the Series A Preferred Stock or (iii) upon the
distribution to holders of the Series A Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least one percent of the Purchase Price.
No fractional Units are required to be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Series A
Preferred Stock on the last trading date prior to the date of exercise.
Until a Right is exercised, the holder will, as result thereof,
have no rights as a stockholder of the Company, including the right to vote or
to receive dividends.
Stockholders may, depending upon the circumstances, recognize
taxable income in the event that the Rights become exercisable for Series A
Preferred Stock or other consideration as set forth above.
Prior to the Rights Distribution Date, the Rights Agreement
may, if the Company so directs, be amended by the Company and the Rights Agent
in any manner that the Company may deem necessary or desirable without the
approval of any holders of Company Common Stock. After the Rights
Distribution Date, the Rights Agreement may be amended to cure any ambiguity
or may be amended in any respect that does not adversely affect Rights
holders; provided that, after a person becomes an Acquiring Person, any
amendment requires the concurrence of a majority of the Continuing Directors.
The Rights have certain anti-takeover effects which may prevent
stockholders from receiving a premium for their Company Common Stock and may
also have a depressive effect on the market price of the Company Common Stock.
The Rights may cause substantial dilution to a person or group that attempts
to acquire the Company without a condition to such an offer that a substantial
number of the Rights be acquired or the Rights are rendered inapplicable by
Board action or otherwise. The Company's ability to amend the Rights
Agreement may, depending upon the circumstances, increase or decrease the
anti-takeover effects of the Rights. The Rights do not prevent the Company
Board from approving any merger or other business combination (under some
circumstances, with the concurrence of the Continuing Directors) since the
Rights may be redeemed by the Board of Directors as described above. The
presence of the Rights may also discourage attempts to obtain control of
the Company by means of a hostile tender offer, even if such offer would be
beneficial to stockholders generally, and thereby protect the continuity of
management.
Delaware Takeover Statute
The Company is subject to Section 203 of the Delaware General
Corporation Law ("Section 203"). In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder, unless (i) prior to such
date either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85 percent of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding for purposes of
determining the number of shares outstanding, shares owned by (A) persons who
are both directors and officers and (B) employee stock plans in certain
circumstances), or (iii) on or after such date the business combination is
approved by the board and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3 percent of the outstanding voting stock which is not owned by the
interested stockholder. A "business combination" includes a merger,
consolidation, asset sale, or other transaction resulting in a financial
benefit to the interested stockholder. An "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15 percent or more of the corporation's voting stock. The
restrictions imposed by Section 203 will not apply to a corporation if, among
other things, (i) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by Section 203 or
(ii) 12 months have passed after the corporation, by action of its
stockholders holding a majority of the outstanding stock, adopts an amendment
to its certificate of incorporation or bylaws expressly electing not to be
governed by Section 203. The Company has not elected out of Section 203 and,
therefore, the restrictions imposed by Section 203 will apply to the Company.
Liability and Indemnification of Directors and Officers
Certain provisions of the Delaware General Corporation Law and
the Company's Certificate of Incorporation and Bylaws relate to the limitation
of liability and indemnification of directors and officers of the Company.
These various provisions are described below.
The Certificate of Incorporation provides that the Company's
directors are not personally liable to the Company or its stockholders for
monetary damages for breach of their fiduciary duties as a director to the
fullest extent permitted by Delaware law. Under existing Delaware law,
directors would not be personally liable to the Company or its stockholders
for monetary damages for breach of their fiduciary duties as a director,
except for (i) any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) any transaction
from which the director derived improper personal benefit or (iv) the unlawful
payment of dividends or unlawful stock repurchases or redemptions. This
indemnification provision may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter
stockholders or the Company from bringing a lawsuit against directors of the
Company for breach of their fiduciary duties as directors. However, the
provision does not affect the availability of equitable remedies such as an
injunction or rescission.
The Certificate of Incorporation also provides that each person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed civil or criminal action or proceeding by reason of the
fact that such person is or was a director of the Company or is or was serving
at the request of the Company as a director of another corporation,
partnership, joint venture, trust or other enterprise, shall be indemnified
and held harmless by the Corporation to the fullest extent permitted by
Delaware Law. This right to indemnification shall also include the right to
be paid by the Company the expenses incurred in connection with any such
proceeding in advance of its final disposition to the fullest extent
authorized by Delaware Law. This right to indemnification shall be a contract
right. The Company may, by action of the Company Board, provide
indemnification to such of the officers, employees and agents of the Company
to such extent and to such effect as the Company Board determines to be
appropriate and authorized by Delaware law.
The Company intends to purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Company, or is
or was serving at the request of the Company as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Company would have the power or the
obligation to indemnify him or her against such liability under the provisions
of the Company's Certificate of Incorporation.
INDEPENDENT AUDITORS
The Company Board has appointed KPMG Peat Marwick LLP as the
Company's independent accountants to audit the Company's financial statements
for fiscal year 1996. KPMG Peat Marwick LLP has served as Murphy's auditors
throughout the periods covered by the financial statements included in this
Information Statement.
ADDITIONAL INFORMATION
The Company has filed the Form 10 with the Commission under the
Exchange Act with respect to the shares of Company Common Stock being received
by Murphy stockholders in the Distribution. This Information Statement does
not contain all of the information set forth in the Form 10 and the exhibits
and schedules thereto, to which reference is hereby made. For additional
information, reference is made to the Form 10 and the exhibits thereto, which
are on file at the offices of the Commission and may be inspected and copied
as set forth below.
The Form 10 and the exhibits thereto filed by the Company with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
DC 20549, as well as at the Regional Offices of the Commission at Northwest
Atrium Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661, and 7
World Trade Center, 13th floor, New York, New York 10048. Copies of such
information can be obtained by mail from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, DC 20549 at prescribed
rates.
INDEX TO FINANCIAL STATEMENTS
Page
----
Deltic Farm & Timber Co., Inc.
Independent Auditors' Report......................................... F-1
Consolidated Balance Sheets as of September 30, 1996 (unaudited),
December 31, 1995 and December 31, 1994............................ F-2
Consolidated Statements of Income for the Nine Months Ended
September 30, 1996 and 1995 (unaudited)
and the Years Ended December 31, 1995, 1994 and 1993............... F-3
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 (unaudited) and the Years Ended
December 31, 1995, 1994 and 1993..................................... F-4
Consolidated Statements of Stockholder's Equity for the Nine Months
Ended September 30, 1996 (unaudited) and the Years Ended
December 31, 1995, 1994 and 1993................................... F-5
Notes to Consolidated Financial Statements........................... F-6
Deltic Timber Corporation
Independent Auditors' Report........................................ F-16
Balance Sheet as of September 4, 1996............................... F-17
Note to Balance Sheet............................................... F-18
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Deltic Farm & Timber Co., Inc.:
We have audited the accompanying consolidated balance sheets of Deltic Farm &
Timber Co., Inc. (a subsidiary of Murphy Oil Corporation) and Consolidated
Subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholder's equity, and cash flows for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Deltic
Farm & Timber Co., Inc. and Consolidated Subsidiaries as of December 31, 1995
and 1994, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note C to the consolidated financial statements, in 1993 the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, and Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes.
KPMG Peat Marwick LLP
Shreveport, Louisiana
June 27, 1996
DELTIC FARM & TIMBER CO., INC.
Consolidated Balance Sheets
(Thousands of dollars)
<TABLE>
<CAPTION>
December 31,
September 30, -----------------------
1996 1995 1994
-------------- ------- --------
(unaudited)
<S> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents.............................. $5,447 $1,431 $2,344
Trade accounts receivable, less allowance for
doubtful accounts of $136 in 1996, $98 in
1995, and $49 in 1994................................ 4,630 3,564 4,606
Inventories............................................ 5,448 7,538 7,088
Deferred income taxes.................................. 947 527 948
Prepaid expenses and other current assets.............. 2,949 1,562 1,085
-------- -------- --------
Total current assets................................. 19,421 14,622 16,071
Noncurrent receivable from Parent........................ 34,363 29,951 21,271
Property, plant, and equipment - net..................... 27,063 27,012 25,751
Timber and timberlands - net............................. 89,637 91,778 87,958
Real estate held for development and sale................ 18,271 19,356 16,741
Other assets............................................. 5,354 2,528 1,581
-------- -------- --------
Total assets......................................... $194,109 $185,247 $169,373
======== ======== ========
Liabilities and Stockholder's Equity:
Current liabilities:
Current maturities of long-term debt................... $1,698 $1,985 $7
Trade accounts payable................................. 1,614 3,899 2,492
Accrued insurance obligations.......................... 887 705 487
Accrued taxes other than income taxes.................. 804 730 599
Other accrued liabilities.............................. 499 422 282
State income taxes..................................... 275 59 890
-------- -------- --------
Total current liabilities............................ 5,777 7,800 4,757
Long-term debt........................................... 2,685 2,817 163
Accrued postretirement benefits.......................... 3,531 3,352 3,225
Deferred credits and other liabilities................... 1,546 989 955
Stockholder's equity:
Common stock........................................... 321 321 321
Capital in excess of par value......................... 66,108 66,108 66,108
Retained earnings...................................... 114,141 103,860 93,844
-------- -------- --------
Total stockholder's equity........................... 180,570 170,289 160,273
-------- -------- --------
Total liabilities and stockholder's equity........... $194,109 $185,247 $169,373
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
DELTIC FARM & TIMBER CO., INC.
Consolidated Statements of Income
(Thousands of dollars)
<TABLE>
Nine Months Ended
September 30, Years Ended December 31,
--------------------- -------------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales................................... $64,462 $61,996 $80,662 $92,457 $69,448
------- ------- ------- -------- -------
Costs and expenses:
Cost of sales.............................. 44,045 42,475 58,731 56,521 43,925
Depreciation, amortization, and
cost of fee timber harvested............. 3,104 3,010 4,053 3,886 3,488
Selling and general expenses............... 3,583 3,281 4,535 3,675 4,657
------- ------- ------- -------- -------
Total costs and expenses............... 50,732 48,766 67,319 64,082 52,070
------- ------- ------- -------- -------
Operating income....................... 13,730 13,230 13,343 28,375 17,378
Interest income............................. 2,209 1,975 2,668 1,634 1,075
Interest expense............................ (210) (216) (309) (5) (14)
Other income................................ 1,173 127 192 572 100
------- ------- ------- -------- -------
Income before income taxes and
accounting changes......................... 16,902 15,116 15,894 30,576 18,539
Income taxes................................ (6,621) (5,877) (5,878) (12,434) (7,128)
------- ------- ------- -------- -------
Income before accounting changes............ 10,281 9,239 10,016 18,142 11,411
Cumulative effect of accounting changes,
net of income taxes........................ -- -- -- -- (4,076)
------- ------- ------- -------- -------
Net income............................. $10,281 $ 9,239 $10,016 $18,142 $ 7,335
======= ======= ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
DELTIC FARM & TIMBER CO., INC.
Consolidated Statements of Cash Flows
(Thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
---------------------- -------------------------------------
1996 1995 1995 1994 1993
------- -------- ------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Income before cumulative effect of changes
in accounting principles....................... $10,281 $ 9,239 $10,016 $18,142 $11,411
Adjustments to reconcile above income to
net cash provided by operating activities:
Depreciation, amortization and cost of
fee timber harvested........................ 3,104 3,010 4,053 3,886 3,488
Deferred income tax charges
(credits)..................................... (163) (417) (624) (540) (301)
(Gains) losses from disposition of
assets...................................... (832) (6) (4) (659) (117)
Real estate costs recovered upon sale......... 2,427 1,435 1,984 4,719 2,500
(Increases)/decreases in operating
working capital other than cash
and cash equivalents:
Account receivable........................ (1,066) (321) 1,042 385 (298)
Inventories............................... 2,090 157 (450) (2,286) (800)
Deferred income tax assets................ (420) 239 421 1,110 (903)
Prepaid expenses and other
current assets........................... (1,387) (3,261) (477) (527) (3)
Accounts payable ......................... (2,285) 657 1,407 970 (523)
Accrued liabilities....................... 549 (443) (342) 509 694
Other......................................... 1,268 38 (161) (1,815) 1,052
------- ------- ------- ------- -------
Net cash provided by operating
activities................................ 13,566 10,327 16,865 23,894 16,200
Investing activities:
Capital expenditures requiring cash............... (5,886) (5,792) (7,361) (10,176) (10,682)
Proceeds from disposition of property,
plant, and equipment............................ 2,824 106 126 1,129 168
Net additions to noncurrent receivable from
Parent.......................................... (2,756) (5,644) (8,680) (14,697) (5,544)
Other - net....................................... (3,313) (193) (219) (131) (157)
------- ------- ------- ------- -------
Net cash required by investing
activities................................ (9,131) (11,523) (16,134) (23,875) (16,215)
------- ------- ------- ------- -------
Financing activities - cash required for
reductions of long-term debt...................... (419) (77) (1,644) (101) (401)
------- ------- ------- ------- -------
Net decrease in cash and cash equivalents.......... 4,016 (1,273) (913) (82) (416)
Cash and cash equivalents at beginning of period... 1,431 2,344 2,344 2,426 2,842
------- ------- ------- ------- -------
Cash and cash equivalents at end of period......... $ 5,447 $ 1,071 $ 1,431 $ 2,344 $ 2,426
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
DELTIC FARM & TIMBER CO., INC.
Consolidated Statements of Stockholder's Equity
(Thousands of dollars)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Years Ended December 31,
------------- ------------------------------------
1996 1995 1994 1993
------------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C>
Common Stock, No Par*:
Balance at beginning and end of period........ $321 $321 $321 $321
-------- -------- -------- --------
Capital in Excess of Par Value:
Balance at beginning and end of period........ 66,108 66,108 66,108 66,108
-------- -------- -------- --------
Retained Earnings:
Balance at beginning of period................ 103,860 93,844 75,702 68,367
Net income for period......................... 10,281 10,016 18,142 7,335
-------- -------- -------- --------
Balance at end of period...................... 114,141 103,860 93,844 75,702
-------- -------- -------- --------
Total Stockholder's Equity..................... $180,570 $170,289 $160,273 $142,131
======== ======== ======== ==------
</TABLE>
__________
* 5,000 shares authorized, issued, and outstanding at beginning and end of each
period.
See accompanying notes to consolidated financial statements.
Deltic Farm & Timber Co., Inc.
Notes to Consolidated Financial Statements
September 30, 1996 and 1995 and December 31, 1995, 1994, and 1993
A. Description of the Company
Deltic Farm & Timber Co., Inc. ("Deltic" or the "Company") is a wholly
owned subsidiary of Murphy Oil Corporation ("Murphy"). The Company is a
natural resources company that is engaged in timber, lumber manufacturing,
real estate development, land management, and agricultural activities
primarily in Arkansas and Louisiana. At December 31, 1995, the Company
owned 341,000 acres of timberland, two dimension-lumber sawmills, and
36,000 acres of farmland. Deltic also is developing a 4,300-acre planned
community ("Chenal Valley") on Company fee lands in western Little Rock,
Arkansas. Deltic is a 50-percent owner of Del-Tin Fiber L.L.C. ("Del-Tin
Fiber"), a limited liability company that is constructing a medium density
fiberboard plant in Union County, Arkansas. The fiberboard plant is
expected to commence operations in early 1998.
B. Significant Accounting Policies
Principles of Consolidation and Use of Estimates -- The consolidated
financial statements include the accounts of Deltic and all wholly owned
subsidiaries after elimination of significant intercompany transactions
and accounts. The investment in the 50-percent-owned limited liability
company will be accounted for using the equity method.
In the preparation of financial statements of the Company in conformity
with generally accepted accounting principles, management has made a
number of estimates and assumptions related to the reporting of assets
and liabilities and the disclosure of contingent liabilities. Actual
results may differ from the estimates.
Interim Statements -- The historical consolidated balance sheet at
September 30, 1996, and the consolidated statements of income, cash
flows and stockholder's equity for the nine-month periods ended
September 30, 1996 and 1995 are unaudited, and in the opinion of the
Company's management include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the
Company's financial position and results of operations for these interim
periods.
Cash Equivalents -- Cash equivalents consist of cash in banks and U.S.
government securities that have a maturity of three months or less from
the date of purchase.
Revenue Recognition -- Revenue from the sale of lumber, wood by-products,
and agricultural goods is generally recorded as operating revenue at the
time of shipment. Revenue from the sale of timber-cutting rights to
third parties is recorded when legal title passes to the purchaser.
Revenue from intrasegment timber sales is recorded when the timber is
harvested; such intrasegment sales, which are made at market prices, are
eliminated in the consolidated financial statements. Revenue on real
estate sales is generally recorded when the sale is closed and legal
title is transferred.
Inventories -- Inventories of logs, lumber, agricultural products, and
supplies are stated at the lower of cost or market, primarily using the
average cost method. Lumber costs include materials, labor, and
production overhead. Log costs include harvest and transportation costs
as appropriate.
Property, Plant, and Equipment -- Property, plant, and equipment is stated
at cost less accumulated depreciation. Depreciation of buildings,
equipment, and other depreciable assets is primarily determined by
using the straight-line method. Expenditures that substantially
improve and/or increase the useful life of facilities and equipment
are capitalized. Maintenance and repair costs are expensed as
incurred. Gains and losses on disposals or retirements are included
in income as they occur.
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Under
this standard, long-lived assets are evaluated on a specific asset basis
or in groups of similar assets, as applicable. Recognition of an
impairment loss is required when the undiscounted estimated future net
cash flows are less than the carrying value of an evaluated asset. The
adoption of this statement had no effect on the Company's 1995 results
of operations.
Timber and Timberlands -- Timber and timberlands, which includes logging
facilities, is stated at acquisition cost less cost of fee timber
harvested and accumulated amortization of logging facilities. The cost
of fee timber harvested and amortization of logging facilities is based
on the volume of timber harvested in relation to the estimated volume of
timber recoverable. The Company estimates its fee timber inventory
using statistical information and data obtained from physical
measurements and other information gathering techniques. Fee timber
carrying costs are expensed as incurred.
Real Estate Held for Development and Sale -- Real estate held for
development and sale is stated at the lower of cost or net realizable
value, and includes direct costs of land and land development and
indirect costs, including amenities, less amounts charged to cost of
sales. These costs are allocated to individual lots or acreage sold
based on relative sales value. Direct costs are allocated on a tract
basis, while indirect costs are allocated over the entire Chenal Valley
project.
Income Taxes -- The Company is included in the consolidated federal income
tax return of Murphy; however, for financial accounting purposes,
federal income tax has been computed and recorded as if the Company
filed a separate federal income tax return.
The Company uses the asset and liability method of accounting for income
taxes. Under this method, the provision for income taxes includes
amounts currently payable and amounts deferred as tax assets and
liabilities based on differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities
and measured using the enacted tax rates that are assumed will be in
effect when the differences reverse.
Related Party Transactions -- Murphy historically has performed certain
administrative and financial services on behalf of the Company. These
services include among others, cash management and consultation related
to certain personnel, employee benefit, and income tax matters.
C. Accounting Changes
Effective January 1, 1993, the Company elected the immediate recognition
basis for implementing SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. This accounting standard
requires that these costs (supplemental health care and life insurance) be
accrued over the service lives of employees. The cumulative effect upon
adoption was a charge against income of $1,661,000, after an income tax
effect of $856,000. Excluding the cumulative effect, adoption of the
standard did not significantly affect 1993 net income.
Effective January 1, 1993, the Company also adopted SFAS No. 109,
Accounting for Income Taxes, without restating prior years' results. The
cumulative effect of the change on 1993 net income was a charge of
$2,415,000. Excluding the cumulative effect, adoption of the standard did
not significantly affect 1993 net income.
D. Inventories
Inventories consisted of the following at December 31.
1995 1994
------ ------
(thousands of dollars)
Logs........................ $3,799 $3,097
Finished products........... 3,563 3,799
Materials and supplies...... 176 192
------ ------
$7,538 $7,088
====== ======
E. Property, Plant, and Equipment
Property, plant, and equipment consisted of the following at December 31.
Range of
Useful Lives 1995 1994
------------ ------ -------
(thousands of dollars)
Land and land improvements -- $9,969 $8,626
Buildings and structures.. 10-20 years 2,794 2,373
Machinery and equipment... 3-10 years 42,921 43,096
------- -------
55,684 54,095
Less accumulated depreciation (28,672) (28,344)
------- -------
$27,012 $25,751
======= =======
Commitments for capital expenditures were approximately $6,100,000 for
property, plant, and equipment, and $5,300,000 for real estate held for
development and sale at December 31, 1995.
F. Timber and Timberlands
Timber and timberlands consisted of the following at December 31.
1995 1994
-------- --------
(thousands of dollars)
Timberlands............................... $ 37,565 $ 37,501
Timber and logging facilities............. 80,882 75,956
-------- --------
118,447 113,457
Less accumulated costs of timber
harvested and facilities
amortization............................ (26,669) (25,499)
-------- --------
$ 91,778 $ 87,958
======== ========
Cost of fee timber harvested amounted to $1,073,000 in 1995, $1,310,000 in
1994, and $1,242,000 in 1993. Amortization of logging facilities for the
three years ended December 31, 1995 were: 1995, $97,000; 1994, $108,000;
and 1993, $100,000.
The Company obtains a portion of its timber requirements through cutting
contracts with various private and governmental landowners. These
contracts have terms ranging from a few months to several years. At
December 31, 1995, the Company's total commitment under such contracts
amounted to approximately $4,300,000. Based on lumber prices at December
31, 1995, management estimated the fair value of timber under such
contracts to be approximately $3,100,000. Depending on the market value of
this timber at time of harvest, the Company's sawmills may experience
favorable or unfavorable timber supply costs. In September 1996,
management estimated that the fair value of timber under these contracts
had improved to approximately $4,300,000.
G. Supplemental Cash Flows Disclosures
Interest paid was $273,000, $17,000, and $37,000 in 1995, 1994, and 1993.
Cash paid for state income taxes, net of refunds, was $1,825,000,
$1,797,000, and $926,000 in 1995, 1994, and 1993. Federal income taxes are
included in Murphy's consolidated tax return and are settled through
intercompany accounts.
Noncash investing and financing activities excluded from the Consolidated
Statements of Cash Flows were the assumption of debt in the amount of
$6,276,000 in 1995 and $172,000 in 1994 related to acquisition of land and
timber-cutting rights.
H. Financing Arrangements
At December 31, 1995, Murphy had two committed credit facilities with major
banks totaling $200 million. The Company is named as a potential borrower
under these credit facilities. Depending upon the credit facility,
borrowings bear interest at prime or various cost of funds options.
Facility fees are due at varying rates on the commitments and are paid by
Murphy. The facilities expire at dates ranging from 1996 through 1999. No
amount was outstanding under these facilities at December 31, 1995.
I. Long-Term Debt
Long-term debt consisted of the following at December 31.
1995 1994
------ ------
(thousands of dollars)
Installment timber notes payable, average
interest rate of 5.8%,
due 1996-2000.......................... $4,006 $ 116
Note payable, 8%, due 1999.............. 750 --
Other notes payable, 9%, due 1996-2000.. 46 54
------ -----
4,802 170
Less current maturities................. 1,985 7
------ -----
$2,817 $ 163
====== =====
Amounts becoming due after 1996 are: 1997, $1,698,000; 1998, $133,000;
1999, $868,000; and 2000, $118,000.
J. Income Taxes
The components of income tax expense (benefits) for the three years ended
December 31, 1995 were as follows.
1995 1994 1993
------ ------ ------
(thousands of dollars)
Federal
Current......... $5,086 $10,006 $6,917
Deferred........ (203) 570 (1,084)
------ ------- ------
4,883 10,576 5,833
State - Current... 995 1,858 1,295
------ ------- ------
Total......... $5,878 $12,434 $7,128
====== ======= ======
Following is a reconciliation of the U.S. statutory income tax rate to the
Company's effective rates on income before income taxes.
1995 1994 1993
---- ---- ----
Statutory income tax rate......................... 35% 35% 35%
State income taxes, net of federal income tax
benefit......................................... 4 4 4
Other............................................. (2) 2 (1)
--- --- ---
Effective income tax rate........................ 37% 41% 38%
=== === ===
An analysis of the Company's deferred tax assets and deferred tax
liabilities at December 31, 1995 and 1994 showing the tax effects of
significant temporary differences follows.
1995 1994
------ ------
(thousands of dollars)
Deferred tax assets:
Postretirement and other employee benefits $1,299 $1,203
Real estate held for development
and sale............................. 2,371 2,398
Other deferred tax assets.............. 305 254
------ ------
Total deferred tax assets............ 3,975 3,855
------ ------
Deferred tax liabilities:
Property, plant, and equipment......... (1,973) (1,618)
Timber and timberlands................. (512) (1,005)
Other deferred tax liabilities......... (462) (402)
------ ------
Total deferred tax liabilities....... (2,947) (3,025)
------ ------
Net deferred tax assets.............. $1,028 $ 830
====== ======
Net noncurrent deferred tax assets of $501,000 are included in the
Consolidated Balance Sheet in Other Assets at December 31, 1995, and net
noncurrent deferred tax liabilities of $118,000 are included in Deferred
Credits and Other Liabilities at December 31, 1994.
In management's judgment, the Company's tax assets at December 31, 1995
will more likely than not be realized as reductions of future taxable
income or by utilizing available tax planning strategies. There were no
valuation allowances for deferred tax assets at the end of any of the three
years ended December 31, 1995.
K. Employee and Retiree Benefits
Retirement Plans - Murphy has defined benefit retirement plans that cover
substantially all employees of the Company. Benefits are based on years of
service and final-pay formulas as defined by the plans. All plans are
noncontributory.
Retirement expense (expense reduction) and its components for the three
years ended December 31, 1995, are shown in the following table.
1995 1994 1993
------ ------ ------
(thousands of dollars)
Service cost -- benefits earned during
the year............................ $284 $327 $406
Interest accrued on benefits earned
in prior years...................... 644 618 590
Actual return on plan assets.......... (2,074) (243) (491)
Net amortization and deferral......... 1,134 (705) (430)
------ ----- -----
Net retirement expense (expense
reduction)*........................ $(12) $(3) $75
====== ===== =====
__________
* Major assumptions were discount rates of 7.5% for 1995 and 6.75% for 1994
and 1993; assumed long-term rate of return on plan assets was 8.5% for
1995, 1994 and 1993.
Amounts contributed to funded plans are actuarially determined and are at
least the minimum required by the Employee Retirement Income Security Act
of 1974. The following table sets forth the funded status of the plans
applicable to the Company and the amounts recognized in the Consolidated
Balance Sheets at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
-------- -------
(thousands of dollars)
<S> <C> <C>
Present value of accumulated benefit based on years of service,
applicable pay formulas, and present pay levels
Vested.............................................................. $7,343 $6,525
Nonvested........................................................... 540 336
Accumulated benefit obligation(1)................................ 7,883 6,861
Provision for future pay increases.................................... 1,680 1,708
------ ------
Projected benefit obligation(1).................................. 9,563 8,569
Plan assets -- at market value(2)..................................... 11,617 9,918
------ ------
Plan assets in excess of projected benefit obligation............ 2,054 1,349
Unrecognized net asset from transition to SFAS No. 87(3).............. (1,087) (1,230)
Unrecognized net loss from unfavorable actuarial experience........... 249 1,101
Unrecognized prior service cost....................................... 83 91
------ ------
Prepaid retirement cost(4)....................................... $1,299 $1,311
====== ======
</TABLE>
__________
(1) Major assumptions were discount rates of 7% for 1995 and 7.5% for
1994 and future pay rate increases of 4.6% for 1995 and 5% for 1994.
(2) Primarily includes listed stocks and bonds, government securities,
and U.S. agency bonds.
(3) Being amortized over a period of 15 years.
(4) Included in the Consolidated Balance Sheets under the caption "Other
Assets".
Thrift Plans - Employees of the Company may participate in thrift plans
sponsored by Murphy by allotting up to a specified percentage of their base
pay. The Company matches contributions at a stated percentage of each
employee's allotment based on length of participation in the plans.
Company contributions to these plans were $172,000 in 1995, $151,000 in
1994, and $145,000 in 1993.
Postretirement Benefits - Murphy sponsors plans that provide comprehensive
health care benefits (supplementing Medicare benefits for those eligible)
and life insurance benefits for qualified retired employees. Costs are
accrued for these plans during the service lives of covered employees.
Retirees and the Company contribute to the self-funded cost of health care
benefits. The Company pays premiums for life insurance coverage, arranged
through an insurance company. The health care plan is funded on a
pay-as-you-go basis. The Company has the right to modify the benefits
and/or cost-sharing provisions.
Based on actuarial computations, postretirement expense and its components
for 1995, 1994, and 1993 are shown below.
1995 1994 1993
---- ---- ----
(thousands of dollars)
Service cost...................... $90 $146 $74
Amortization of net actuarial loss 60 38 --
Interest cost..................... 316 301 248
---- ---- ----
Postretirement expense......... $466 $485 $322
==== ==== ====
A summary follows of the postretirement benefit obligations recorded in the
Consolidated Balance Sheets at December 31, 1995 and 1994. Calculation of
the amount of accumulated unfunded postretirement benefit obligations
(APBO) was based on discount rates of 7.0 percent and 7.75 percent in 1995
and 1994.
1995 1994
------ ------
(thousands of dollars)
APBO
Retirees......................... $2,718 $2,171
Fully eligible active
participants................... 581 625
Other active participants........ 1,266 1,694
------ ------
Total unfunded APBO........... 4,565 4,490
Unrecognized net actuarial loss.... (1,213) (1,265)
------ ------
Accrued APBO obligations...... $3,352 $3,225
====== ======
In determining the APBO at December 31, 1995, health care inflation cost
was assumed to increase at an annual rate of 8.5 percent, gradually
decreasing to 4.5 percent in 2002 and thereafter. An increase of one
percent in the assumed health care cost trend would increase both the 1995
postretirement benefit expense and the APBO at December 31, 1995 by 13.9
percent.
L. Related Party Transactions
Under Murphy's consolidated cash management policy, Deltic remits cash
funds generated in excess of its daily requirements to Murphy. Such
remitted funds have given rise to an interest-bearing receivable from
Murphy that is due on demand. The Company classified the receivable as
noncurrent since it does not anticipate receiving payment within the next
year. At December 31, 1995, the receivable earned interest at a rate of
5.61 percent. The receivable from Murphy totaled $29,951,000 at December
31, 1995, and $21,271,000 at December 31, 1994. Deltic's interest income
from this receivable was $1,978,000 in 1995, $1,047,000 in 1994, and
$563,000 in 1993. Murphy charged Deltic $2,015,000 in 1995, $1,935,000 in
1994, and $2,175,000 in 1993 for administrative and financial services it
provided on Deltic's behalf. These amounts were included in Selling and
General Expenses on the Consolidated Statement of Income, except for
$228,000 of costs capitalized in 1995 related to acquisition of mineral
leases. Selling and General Expenses in 1994 included a reduction of
$1,056,000 related to reallocation of certain retirement plan assets among
affiliates of Murphy Oil Corporation.
M. Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of financial instruments held by the Company at December 31, 1995 and 1994.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties. The table excludes trade accounts receivable, trade accounts
payable, and accrued liabilities, all of which had fair values
approximating carrying values.
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
Carrying or Carrying or
Notional Estimated Notional Estimated
Amount Fair Value Amount Fair Value
----------- ---------- ----------- ----------
(thousands of dollars)
<S> <C> <C> <C> <C>
Financial liabilities
Long-term debt, including current
maturities....................... $(4,802) $(4,878) $(170) $(170)
Off-balance-sheet exposures
Letters of credit................... (682) (682) (563) (563)
</TABLE>
Long-term debt, including current maturities - The fair value is estimated
based on current rates offered the Company for debt of the same maturities.
Letters of credit - The fair value is based on the estimated cost to settle
these obligations.
N. Concentration of Credit Risk
The Company's primary credit risk is from trade accounts receivable. These
receivables arise primarily from sales of timber and wood products to a
large number of customers. The credit history and financial condition of
potential customers are reviewed before credit is extended, security may be
obtained then or later, routine follow-up evaluations are made, and an
allowance for doubtful accounts is maintained, generally based upon a risk
evaluation of specific customers. Historically, the Company has
not incurred any significant credit-related losses, and at December 31,
1995, the Company had no significant concentration of credit risk
outside the timber and wood products industry.
O. Del-Tin Fiber
Deltic and Temple-Inland Forest Products Corporation jointly own Del-Tin
Fiber, which has committed to build a medium density fiberboard plant near
El Dorado, Arkansas. The cost of the plant has been estimated at
approximately $100,000,000. Financing arrangements have not been
finalized. Each owner has tentatively committed funding of up to
$10,000,000 for the project, with the remainder to be financed with
borrowings. Each owner is expected to be required to guarantee for an
interim period half of Del-Tin Fiber's borrowings, of which the Company's
share could amount to $40,000,000. Under the operating agreement, Del-Tin
Fiber's employees will operate the plant. Deltic has committed to provide
a portion of the plant's fiber supply at market prices. At December 31,
1995, $114,000 of costs were capitalized in Other Assets in the
Consolidated Balance Sheet related to the Company's investment in Del-Tin
Fiber.
P. Business Segments
Information about the Company's business segments is summarized in the
following tables. Intrasegment transfers are at market prices.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------- ---------------------------------------
(unaudited)
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(thousands of dollars)
<S> <C> <C> <C> <C> <C>
Net sales:
Forest products................... $53,999 $55,584 $68,258 $73,636 $57,138
Real estate....................... 5,095 3,041 4,188 9,635 5,360
Agriculture....................... 5,368 3,371 8,216 9,186 6,950
------- ------- ------- ------- -------
$64,462 $61,996 $80,662 $92,457 $69,448
======= ======= ======= ======= =======
Income before income taxes and
accounting changes:
Forest products................. $13,098 $14,364 $14,748 $24,818 $18,650
Real estate..................... 1,471 753 999 3,637 1,787
Agriculture..................... 1,394 104 373 1,896 (125)
Corporate and other............. (2,233) (1,991) (2,777) (1,976) (2,934)
------- ------- ------- ------- -------
Operating income............. 13,730 13,230 13,343 28,375 17,378
Interest income................. 2,209 1,975 2,668 1,634 1,075
Interest expense................ (210) (216) (309) (5) (14)
Other income.................... 1,173 127 192 572 100
-------- -------- -------- -------- --------
$ 16,902 $ 15,116 $ 15,894 $ 30,576 $ 18,539
======== ======== ======== ======== ========
Identifiable assets at period-end:
Forest products................... $116,640 $121,944 $118,797 $114,725 $110,085
Real estate....................... 22,400 17,847 20,539 17,770 18,414
Agriculture....................... 10,940 13,487 11,613 12,420 12,710
Corporate and other............... 44,129 31,860 34,298 24,458 8,622
-------- -------- -------- -------- --------
$194,109 $185,138 $185,247 $169,373 $149,831
======== ======== ======== ======== ========
Depreciation, amortization, and
cost of fee timber
harvested:
Forest products................. $2,737 $2,478 $3,307 $3,270 $2,872
Real estate..................... 77 27 31 25 24
Agriculture..................... 381 424 561 561 580
Corporate and other............. (91) 81 154 30 12
-------- -------- -------- -------- --------
$ 3,104 $ 3,010 $ 4,053 $ 3,886 $ 3,488
======== ======== ======== ======== ========
Capital expenditures:
Forest products................... $ 1,083 $ 8,103 $ 7,216 $ 6,167 $ 4,573
Real estate....................... 4,212 1,828 4,638 3,849 5,674
Agriculture....................... 156 114 245 266 395
Corporate and other............... 435 1,273 1,538 66 40
-------- -------- -------- -------- --------
$ 5,886 $ 11,318 $ 13,637 $ 10,348 $ 10,682
======== ======== ======== ======== ========
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Deltic Timber Corporation:
We have audited the accompanying balance sheet of Deltic Timber Corporation as
of September 4, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Deltic Timber Corporation at
September 4, 1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Shreveport, Louisiana
September 5, 1996
DELTIC TIMBER CORPORATION
Balance Sheet
as of September 4, 1996
ASSETS
------
Cash.................................................. $ 1
---
Total Assets.................................... $ 1
===
STOCKHOLDER'S EQUITY
--------------------
Common stock, 100 shares authorized,
100 issued at $.01 par value........................ $ 1
---
Total stockholder's equity...................... $ 1
===
See note to balance sheet.
Deltic Timber Corporation
Note to Balance Sheet
DESCRIPTION OF BUSINESS
Deltic Timber Corporation (the "Company"), a Delaware
corporation, is a wholly-owned subsidiary of Murphy Oil Corporation
("Murphy"). Murphy currently intends to make a distribution (the
"Distribution") to its stockholders of all the outstanding shares of the
Company owned by Murphy. Prior to the Distribution, (i) the Company will
become the successor by merger to Deltic Farm & Timber Co., Inc., an Arkansas
corporation (the "Predecessor Company"), (ii) the Company's certificate of
incorporation will be amended to provide for authorized capital stock of
70,000,000 shares, including 50,000,000 shares of common stock, par value $.01
per share ("Common Stock"), and 20,000,000 shares of preferred stock, par
value $.01 per share, and (iii) each share of Common Stock then issued and
outstanding shall be subdivided and converted, without any action on the part
of the holder thereof, into a specified number of fully paid and
non-assessable shares of Common Stock, such that the aggregate number of
shares of Common Stock then issued and outstanding will be sufficient to
permit to the Distribution.
The financial statements of the Predecessor Company are
included in the Registration Statement on Form 10 filed by the Company with
the Securities and Exchange Commission in connection with the Distribution.
The Company is not engaged in any other activity.
EXHIBIT 2.1
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT dated as of [ ], 1996 (the "Agreement")
between Murphy Oil Corporation, a Delaware corporation ("Murphy") and Deltic
Timber Corporation, a Delaware corporation ("Deltic").
W I T N E S S E T H:
WHEREAS, Deltic is a wholly owned Subsidiary of Murphy;
WHEREAS, the Board of Directors of Murphy has determined that it
is in the best interest of Murphy, its stockholders and Deltic that all shares
of Deltic Common Stock owned by Murphy be distributed pro rata to Murphy's
stockholders;
WHEREAS, Murphy and Deltic are concurrently herewith entering into
the Tax Sharing Agreement;
WHEREAS, the parties hereto desire to set forth herein the
principal corporate transactions to be effected in connection with the
Distribution and certain other matters relating to the relationship and the
respective rights and obligations of the parties following the Distribution;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms, as used herein,
have the following meanings:
"Action" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding by or before any court, governmental or
other regulatory or administrative agency or commission or any other tribunal.
"Administrative Services" has the meaning set forth in Schedule
6.01.
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by, or under common control with, such
other Person. For the purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Costs" has the meaning set forth in Section 6.04.
"Deltic Business" means the businesses and operations of the
Deltic Group whether conducted prior to, on or after the Distribution Date.
"Deltic Common Stock" means the common stock, par value $.01 per
share, of Deltic, including any associated preferred stock purchase rights.
"Deltic Group" means Deltic and its Subsidiaries as of (and,
except where the context clearly indicates otherwise, after) the Distribution
Date (including all predecessors to such Persons).
"Deltic Indemnitees" has the meaning set forth in Section 4.02.
"Deltic Liabilities" means all (i) Liabilities of the Deltic Group
under this Agreement, (ii) except as otherwise specifically provided herein or
in the Tax Sharing Agreement, other Liabilities, whether arising before, on or
after the Distribution Date, of or relating to the Deltic Group or arising
from or in connection with the conduct of the Deltic Business or the ownership
or use of assets in connection therewith, including without limitation any
Liabilities arising under or relating to Environmental Laws, and (iii)
Liabilities of the Deltic Group set forth in Schedule 5.01 hereto.
Notwithstanding the foregoing, "Deltic Liabilities" shall exclude: (x) any
Liabilities for Taxes (since such Liabilities shall be governed by the Tax
Sharing Agreement) and (y) any Liabilities specifically retained or assumed by
Murphy pursuant to this Agreement.
"Distribution" means a distribution by Murphy on the Distribution
Date of all Deltic Common Stock owned by it to the holders of Murphy Common
Stock as of the Record Date.
"Distribution Agent" means Harris Trust and Savings Bank.
"Distribution Date" means the business day as of which the
Distribution shall be effected.
"Distribution Documents" means all of the agreements and other
documents entered into in connection with the Distribution as contemplated
hereby, including, without limitation, this Agreement and the Tax Sharing
Agreement.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, permits, licenses and governmental
restrictions, whether now or hereafter in effect, relating to the environment,
the effect of the environment on human health or to emissions, discharges,
releases, manufacturing, storage, processing, distribution, use, treatment,
disposal, transportation or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic, radioactive or hazardous
substances or wastes or the clean-up or other remediation thereof.
"Finally Determined" or "Final Determination" means, with respect
to any Action or other matter, that the outcome or resolution of such Action
or matter has been judicially determined by judgment or order not subject to
further appeal or discretionary review.
"Force Majeure" has the meaning set forth in Section 6.05(b).
"Form 10" means the registration statement on Form 10 filed by
Deltic with the Commission on September 9, 1996 to effect the registration of
Deltic Common Stock pursuant to the 1934 Act in connection with the
Distribution, as such registration statement may be amended from time to time.
"Group" means, as the context requires, the Deltic Group or the
Murphy Group.
"Indemnified Party" has the meaning set forth in Section 4.04.
"Indemnifying Party" has the meaning set forth in Section 4.04.
"Information Statement" means the information statement to be sent
to each holder of Murphy Common Stock in connection with the Distribution.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, any action, order, injunction or consent
decree of any governmental agency or entity, or any award of any arbitrator of
any kind, and those arising under any agreement, commitment or undertaking.
"Losses" means, with respect to any Person, any and all damage,
loss, liability and expense incurred or suffered by such Person (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all Actions or
threatened Actions).
"Murphy Common Stock" means the common stock, par value $1 per
share, of Murphy.
"Murphy Group" means Murphy and its Subsidiaries (other than any
Subsidiary or member of, or other entity in, the Deltic Group).
"Murphy Indemnitees" has the meaning set forth in Section 4.01.
"Murphy Liabilities" means all (i) Liabilities of the Murphy Group
under this Agreement and (ii) except as otherwise specifically provided herein
or in the Tax Sharing Agreement, other Liabilities, whether arising before, on
or after the Distribution Date, of or relating to the Murphy Group or arising
from or in connection with the conduct of the businesses of the Murphy Group
(other than the Deltic Business) or the ownership or use of assets in
connection therewith, including without limitation any Liabilities arising
under or relating to Environmental Laws. Notwithstanding the foregoing,
"Murphy Liabilities" shall exclude: (x) any Liabilities for Taxes (since such
Liabilities shall be governed by the Tax Sharing Agreement) and (y) any
Liabilities specifically retained or assumed by Deltic pursuant to this
Agreement.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Office Facilities" has the meaning set forth in Schedule 6.01.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a governmental or political subdivision or an agency or
instrumentality thereof.
"Record Date" means the date determined by Murphy's Board of
Directors (or determined by a committee of such Board of Directors or by any
person pursuant to authority delegated to such committee or such person) as
the record date for determining the holders of Murphy Common Stock entitled to
receive Deltic Common Stock pursuant to the Distribution.
"Representatives" has the meaning set forth in Section 7.06.
"Restated Deltic Charter" has the meaning set forth in Section
3.02.
"Services" has the meaning set forth in Schedule 6.01.
"Subsidiary" means, with respect to any Person, any other entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.
"Tax" means Tax as such term is defined in the Tax Sharing
Agreement.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as
of the date hereof between Murphy and Deltic.
"Termination Notice" has the meaning set forth in Section 6.02(b).
"Third-Party Claim" has the meaning set forth in Section 4.05.
"Transition Period" has the meaning set forth in Section 6.02(a).
ARTICLE II
ASSET TRANSFERS
Section 2.01. Transfers of Certain Other Assets. Effective prior
to or as of the Distribution Date or as soon as practicable after the
Distribution Date, subject to receipt of any necessary consents or approvals
of third parties or of governmental or regulatory agencies or authorities and
subject to Section 8.02, (a) Murphy shall, or shall cause the relevant member
of the Murphy Group to, assign, contribute, convey, transfer and deliver to
Deltic or to one or more members of the Deltic Group all of the right, title
and interest of Murphy or such member of the Murphy Group in and to all
assets, if any, held by any member of the Murphy Group that relate solely to
the Deltic Business (and not to the businesses of the Murphy Group) and Deltic
shall assume and take transfer of all liabilities associated with such assets,
and (b) Deltic shall, or shall cause the relevant member of the Deltic Group
to, assign, convey, transfer and deliver to Murphy or to one or more members
of the Murphy Group all of the right, title and interest of Deltic or such
member of the Deltic Group in and to all assets, if any, held by any member of
the Deltic Group that relate solely to the businesses of the Murphy Group (and
not to the Deltic Business) and Murphy shall assume and take transfer of all
liabilities associated with such assets.
Section 2.02. Agreement Relating To Consents Necessary To
Transfer Assets. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall not constitute an agreement to transfer or assign any
asset or any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without the necessary consent of
a third party, would constitute a breach or other contravention thereof or in
any way adversely affect the rights of Deltic or Murphy thereunder. Deltic
and Murphy will, subject to Section 8.02, use their reasonable efforts to
obtain the consent of any third party or any governmental or regulatory agency
or authority, if any, required in connection with the transfer or assignment
pursuant to Section 2.01 of any such asset or any claim or right or any
benefit arising thereunder. If such required consent is not obtained, or if
an attempted assignment thereof would be ineffective or would adversely affect
the rights of the transferor thereunder so that the intended transferee would
not in fact receive all such rights, Deltic and Murphy will cooperate in a
mutually agreeable arrangement under which the intended transferee would
obtain the benefits and assume the obligations thereunder in accordance with
this Agreement, including sub-contracting, sub-licensing or sub-leasing to
such transferee, or under which the transferor would enforce for the benefit
of the transferee, with the transferee assuming the transferor's obligations,
any and all rights of the transferor against a third party thereto.
ARTICLE III
THE DISTRIBUTION
Section 3.01. Cooperation Prior to the Distribution.
(a) Murphy and Deltic shall prepare, and Deltic shall file with
the Commission, the Form 10, which shall include or incorporate by reference
the Information Statement which shall set forth appropriate disclosure
concerning Deltic and the Distribution. Murphy and Deltic shall use
reasonable efforts to cause the Form 10 to become effective under the 1934 Act
as soon as practicable. After the Form 10 has become effective, Murphy shall
mail the Information Statement to the holders of Murphy Common Stock as of the
Record Date.
(b) Murphy and Deltic shall cooperate in preparing, filing with
the Commission and causing to become effective any registration statements or
amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by this
Agreement.
(c) Murphy and Deltic shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement.
(d) Deltic shall prepare, file and pursue an application to
permit listing of the Deltic Common Stock on the New York Stock Exchange.
Section 3.02. Murphy Board Action; Conditions Precedent to the
Distribution. Murphy's Board of Directors shall, in its discretion, establish
(or delegate authority to establish) the Record Date and the Distribution Date
and any appropriate procedures in connection with the Distribution. In no
event shall the Distribution occur unless the following conditions shall have
been satisfied:
(i) the Form 10 shall have become effective under the 1934 Act;
(ii) the Deltic Common Stock to be delivered in the Distribution
shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance;
(iii) the Board of Directors of Murphy shall be satisfied that
(a) both before and after giving effect to the Distribution, Murphy is
not and would not be insolvent, (b) after giving effect to the
Distribution, Murphy would be able to pay its liabilities as they mature
and become absolute, and Murphy would not have unreasonably small
capital with which to engage in its business and (c) the Distribution
will be made out of surplus within the meaning of Section 170 of the
Delaware General Corporation Law.
(iv) Murphy's Board of Directors shall have approved the
Distribution and shall not have abandoned, deferred or modified the
Distribution at any time prior to the Distribution Date;
(v) Deltic's Board of Directors, as named in the Information
Statement, shall have been elected by Murphy, as sole stockholder of
Deltic, and Deltic's certificate of incorporation (the "Restated Deltic
Charter") and bylaws, in substantially the forms filed as exhibits to
the Form 10, shall be in effect;
(vi) the Tax Sharing Agreement shall have been duly executed and
delivered by the parties thereto;
(vii) Murphy shall have received an appropriate private letter
ruling issued by the Internal Revenue Service, or an opinion of counsel
satisfactory to Murphy, as to the tax-free nature of the Distribution;
and
(viii) a credit facility shall have been made available to Deltic
by its lenders on terms and in an amount satisfactory to Murphy and
Deltic.
Section 3.03. The Distribution. Subject to the terms and
conditions set forth in this Agreement, (i) prior to the Distribution Date,
Murphy shall deliver to the Distribution Agent for the benefit of holders of
record of Murphy Common Stock on the Record Date, a stock certificate or
certificates, endorsed by Murphy in blank, representing all of the then
outstanding shares of Deltic Common Stock owned by Murphy, (ii) the
Distribution shall be effective as of the close of business, New York time, on
the Distribution Date and (iii) Murphy shall instruct the Distribution Agent
to distribute, on or as soon as practicable after the Distribution Date, to
each holder of record of Murphy Common Stock as of the Record Date one share
of Deltic Common Stock for each 3.5 shares of Murphy Common Stock so held.
Deltic agrees to provide all certificates for shares of Deltic Common Stock
that Murphy shall require (after giving effect to Section 3.04) in order to
effect the Distribution.
Section 3.04. Subdivision of Deltic Common Stock to Accomplish
the Distribution. Effective upon the filing of the Restated Deltic Charter
with the Secretary of State of the State of Delaware, each share of Deltic
Common Stock then issued and outstanding shall, without any action on the part
of the holder thereof, be subdivided and converted into that number of fully
paid and non-assessable shares of Deltic Common Stock issued and outstanding
equal to the number of shares of Murphy Common Stock outstanding on the Record
Date (excluding shares of restricted stock) times 1/3.5 divided by the number
of shares of Deltic Common Stock outstanding immediately prior to such filing.
Section 3.05. Fractional Shares. No certificates representing
fractional shares of Deltic Common Stock will be distributed in the
Distribution. The Distribution Agent will be directed to determine the number
of whole shares and fractional shares of Deltic Common Stock allocable to each
holder of Murphy Common Stock as of the Record Date. Upon the determination
by the Distribution Agent of such number of fractional shares, as soon as
practicable after the Distribution Date, the Distribution Agent, acting on
behalf of the holders thereof, shall sell such fractional shares for cash on
the open market and shall disburse the appropriate portion of the resulting
cash proceeds to each holder entitled thereto.
ARTICLE IV
INDEMNIFICATION
Section 4.01. Deltic Indemnification of the Murphy Group.
(a) Subject to Section 4.03, on and after the Distribution Date,
Deltic shall indemnify, defend and hold harmless the Murphy Group and the
respective directors, officers, employees and Affiliates of each Person in the
Murphy Group (the "Murphy Indemnitees") from and against any and all Losses
incurred or suffered by any of the Murphy Indemnitees (i) arising out of, or
due to the failure of any Person in the Deltic Group to pay, perform or
otherwise discharge, any of the Deltic Liabilities, or (ii) arising out of or
in connection with the provision by the Murphy Group of the Services to the
Deltic Group under Article VI.
(b) Subject to Section 4.03, Deltic shall indemnify, defend and
hold harmless each of the Murphy Indemnitees and each Person, if any, who
controls any Murphy Indemnitee within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act from and against any and all Losses
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Form 10 or any amendment thereof or the Information Statement
(as amended or supplemented if Deltic shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except
insofar as such Losses are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished to
Deltic in writing by Murphy expressly for use therein.
Section 4.02. Murphy Indemnification of Deltic Group.
(a) Subject to Section 4.03, on and after the Distribution Date,
Murphy shall indemnify, defend and hold harmless the Deltic Group and the
respective directors, officers, employees and Affiliates of each Person in the
Deltic Group (the "Deltic Indemnitees") from and against any and all Losses
incurred or suffered by any of the Deltic Indemnitees and arising out of, or
due to the failure of any Person in the Murphy Group to pay, perform or
otherwise discharge, any of the Murphy Liabilities.
(b) Subject to Section 4.03, Murphy shall indemnify, defend and
hold harmless each of the Deltic Indemnitees and each Person, if any, who
controls any Deltic Indemnitee within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act from and against any and all Losses
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Form 10 or any amendment thereof or the Information Statement
(as amended or supplemented if Deltic shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in each case
to the extent, but only to the extent, that such Losses are caused by any such
untrue statement or omission or alleged untrue statement or omission based
upon information furnished to Deltic in writing by Murphy expressly for use
therein.
Section 4.03. Insurance; Third Party Obligations. Any
indemnification pursuant to Sections 4.01 or 4.02 shall be paid net of the
amount of any insurance or other amounts that would be payable by any third
party to the Indemnified Party (as defined below) in the absence of this
Agreement (irrespective of time of receipt of such insurance or other
amounts). It is expressly agreed that no insurer or any other third party
shall be (i) entitled to a benefit it would not be entitled to receive in the
absence of the foregoing indemnification provisions, (ii) relieved of the
responsibility to pay any claims to which it is obligated or (iii) entitled to
any subrogation rights with respect to any obligation hereunder.
Section 4.04. Notice and Payment of Claims. If any Murphy
Indemnitee or Deltic Indemnitee (the "Indemnified Party") determines that it
is or may be entitled to indemnification by any party (the "Indemnifying
Party") under Article IV (other than in connection with any Action subject to
Section 4.05), the Indemnified Party shall deliver to the Indemnifying Party a
written notice specifying, to the extent reasonably practicable, the basis for
its claim for indemnification and the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified. Within 30 days after
receipt of such notice, the Indemnifying Party shall pay the Indemnified Party
such amount in cash or other immediately available funds unless the
Indemnifying Party objects to the claim for indemnification or the amount
thereof. If the Indemnifying Party does not give the Indemnified Party
written notice objecting to such indemnity claim and setting forth the grounds
therefore within such 30-day period, the Indemnifying Party shall be deemed to
have acknowledged its liability for such claim and the Indemnified Party may
exercise any and all of its rights under applicable law to collect such
amount. In the event of such a timely objection by the Indemnifying Party,
the amount, if any, that is Finally Determined to be required to be paid by
the Indemnifying Party in respect of such indemnity claim shall be paid by
the Indemnifying Party to the Indemnified Party in cash within 15 days
after such indemnity claim has been so Finally Determined.
Section 4.05. Notice and Defense of Third-Party Claims.
Promptly following the earlier of (i) receipt of notice of the commencement by
a third party of any Action against or otherwise involving any Indemnified
Party or (ii) receipt of information from a third party alleging the existence
of a claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall give the Indemnifying Party written
notice thereof. The failure of the Indemnified Party to give notice as
provided in this Section 4.05 shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent that the Indemnifying
Party is prejudiced by such failure to give notice. Within 30 days after
receipt of such notice, the Indemnifying Party may (i) by giving written
notice thereof to the Indemnified Party, acknowledge liability for such
indemnification claim and at its option elect to assume the defense of such
Third-Party Claim at its sole cost and expense or (ii) object to the claim for
indemnification set forth in the notice delivered by the Indemnified Party
pursuant to the first sentence of this Section 4.05; provided that if the
Indemnifying Party does not within such 30-day period give the Indemnified
Party written notice objecting to such indemnification claim and setting forth
the grounds therefor, the Indemnifying Party shall be deemed to have
acknowledged its liability for such indemnification claim. If the
Indemnifying Party has elected to assume the defense of a Third-Party Claim,
(x) the defense shall be conducted by counsel retained by the Indemnifying
Party and reasonably satisfactory to the Indemnified Party, provided that the
Indemnified Party shall have the right to participate in such proceedings and
to be represented by counsel of its own choosing at the Indemnified Party's
sole cost and expense; and (y) the Indemnifying Party may settle or compromise
the Third Party Claim without the prior written consent of the Indemnified
Party so long as such settlement includes an unconditional release of the
Indemnified Party from all claims that are the subject of such Third Party
Claim, provided that the Indemnifying Party may not agree to any such
settlement pursuant to which any remedy or relief, other than monetary damages
for which the Indemnifying Party shall be responsible hereunder, shall be
applied to or against the Indemnified Party, without the prior written consent
of the Indemnified Party, which consent shall not be unreasonably withheld.
If the Indemnifying Party does not assume the defense of a Third-Party Claim
for which it has acknowledged liability for indemnification hereunder, the
Indemnified Party may require the Indemnifying Party to reimburse it on a
current basis for its reasonable expenses of investigation, reasonable
attorney's fees and reasonable out-of-pocket expenses incurred in defending
against such Third-Party Claim and the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party; provided
that the Indemnifying Party shall not be liable for any settlement effected
without its consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall pay to the Indemnified Party in cash the amount, if
any, for which the Indemnified Party is entitled to be indemnified hereunder
within 15 days after such Third Party Claim has been Finally Determined, in
the case of a Third-Party Claim as to which the Indemnifying Party has
acknowledged liability or, in the case of any Third-Party Claim as to which
the Indemnifying Party has not acknowledged liability, within 15 days after
such Indemnifying Party's objection to liability hereunder has been Finally
Determined.
Section 4.06. Contribution. If for any reason the
indemnification provided for in Section 4.01 or 4.02 is unavailable to any
Indemnified Party, or insufficient to hold it harmless, then the Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses in such proportion as is appropriate to reflect all
relevant equitable considerations.
Section 4.07. Non-Exclusivity of Remedies. The remedies provided
for in this Article IV are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any Indemnified Party at law or
in equity.
ARTICLE V
EMPLOYEE MATTERS
Section 5.01. Employee Matters Generally. With respect to
employee matters and employee benefits arrangements, the parties hereto agree
as set forth in Schedule 5.01.
ARTICLE VI
CERTAIN TRANSITIONAL SERVICES
Section 6.01. Provision of Services. On the terms and conditions
set forth in this Agreement, in order to assist in effecting an orderly
transition following the Distribution, the Murphy Group will provide to or
perform for the Deltic Group and the Deltic Group will purchase from the
Murphy Group, for the Transition Period, the Services set forth in Schedule
6.01.
Section 6.02. Duration of Provision and Purchase of Services.
(a) The Services shall be provided by the Murphy Group and
purchased by Deltic for a period (the "Transition Period") commencing on the
Distribution Date and ending on the earlier of (i) six (6) months after the
Distribution Date and (ii) with respect to any Service, thirty (30) days after
delivery of a Termination Notice pursuant to Section 6.02(b).
(b) At any time during the Transition Period, Deltic may, at its
election, terminate the provision of any Service by delivery of a notice to
Murphy (a "Termination Notice"), which termination shall become effective with
respect to such Service thirty (30) days after the date of delivery of a
Termination Notice.
Section 6.03. Nature and Scope of Provision of Services. The
nature, scope and timing of provision of the Services to be provided by the
Murphy Group to the Deltic Group hereunder shall be substantially consistent
with the nature, scope and timing of the Murphy Group's comparable services
provided to the Deltic Group prior to the Distribution; provided that Murphy
shall not be obligated to hire additional or replacement employees, or
increase the compensation of its existing employees, in order to provide
the Services to the Deltic Group.
Section 6.04. Charges and Payment for Services. Deltic shall pay
or reimburse Murphy for all costs attributable to the provision or performance
by the Murphy Group of the Services hereunder as set forth in Schedule 6.01
(the "Costs"). All Costs required to be paid or reimbursed to Murphy
hereunder shall be invoiced monthly by Murphy and (ii) invoiced amounts shall
be due and payable by Deltic in cash within thirty (30) days from date of
receipt of such invoice therefor.
Section 6.05. Exculpation; Force Majeure.
(a) No Murphy Indemnitee shall be liable to any other Person for
any Losses directly or indirectly arising out of, relating to or in connection
with the performance or non-performance of the Services hereunder, except to
the extent such Losses are attributable to the Murphy Group's gross negligence
or willful misconduct.
(b) Without limiting the provisions of Section 6.05(a), the
Murphy Group shall not be liable to the Deltic Group for any delay or default
in performance of the Services where occasioned by any cause of any kind or
extent beyond the Murphy Group's control including, by way of example, but not
limitation, any act of God, any act, regulation or law of any government, war,
civil commotion, destruction of production facilities or materials by fire,
earthquake or storm, labor disturbance, epidemic, equipment breakdown or
failure, failure to obtain any consent or approval of a third party necessary
to provide the Services, or failure of suppliers, public utilities or common
carriers ("Force Majeure"). In claiming relief hereunder Murphy shall
promptly notify Deltic in writing of the Force Majeure causing delay or
default in performance, the probable extent to which it will be unable to
perform, and the actions it intends to take to remove such Force Majeure, to
the extent reasonably possible to do so. The Murphy Group shall take
reasonable action within its control to alleviate the Force Majeure causing
delay or default in performance.
ARTICLE VII
ACCESS TO INFORMATION
Section 7.01. Provision of Corporate Records. Immediately prior
to or as soon as practicable following the Distribution Date, each Group
shall provide to the other Group all documents, contracts, books, records
and data (including but not limited to minute books, stock registers, stock
certificates and documents of title) in its possession relating to such
other Group or such other Group's business and affairs; provided that if
any such documents, contracts, books, records or data relate to both Groups
or the business and operations of both Groups, each such Group shall
provide to the other Group true and complete copies of such documents,
contracts, books, records or data.
Section 7.02. Access to Information. From and after the
Distribution Date, each Group shall afford promptly to the other Group and its
accountants, counsel and other designated representatives reasonable access
during normal business hours to all documents, contracts, books, records,
computer data and other data in such Group's possession relating to such other
Group or the business and affairs of such other Group (other than data and
information subject to an attorney/client or other privilege), insofar as such
access is reasonably required by such other Group, including, without
limitation, for audit, accounting, litigation and disclosure and reporting
purposes.
Section 7.03. Litigation Cooperation. Each Group shall use
reasonable efforts to make available, upon written request, its directors,
officers, employees and representatives as witnesses to the other Group and
its accountants, counsel, and other designated representatives, and shall
otherwise cooperate with the other Group, to the extent reasonably required in
connection with any legal, administrative or other proceedings arising out of
either Group's business and operations prior to the Distribution Date in which
the requesting party may from time to time be involved.
Section 7.04. Reimbursement. Each Group providing information or
witnesses to the other Group, or otherwise incurring any expense in connection
with cooperating, under Sections 7.01, 7.02 or 7.03 shall be entitled to
receive from the recipient thereof, upon the presentation of invoices
therefor, payment for all costs and expenses as may be reasonably incurred in
providing such information, witnesses or cooperation.
Section 7.05. Retention of Records. Except as otherwise required
by law or agreed to in writing, each party shall, and shall cause the members
of its respective Group to, retain all information relating to the other
Group's business and operations in accordance with the past practice of such
party. Notwithstanding the foregoing, any party may destroy or otherwise
dispose of any such information at any time, provided that, prior to such
destruction or disposal, (i) such party shall provide not less than 90 days'
prior written notice to the other party, specifying the information proposed
to be destroyed or disposed of, and (ii) if the recipient of such notice shall
request in writing prior to the scheduled date for such destruction or
disposal that any of the information proposed to be destroyed or disposed of
be delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party.
Section 7.06. Confidentiality. Each party shall hold and shall
cause its directors, officers, employees, agents, consultants and advisors
("Representatives") to hold in strict confidence all information (other than
any such information relating solely to the business or affairs of such party)
concerning the other party unless (i) such party is compelled to disclose such
information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law or (ii) such information can be shown to
have been (A) in the public domain through no fault of such party or (B)
lawfully acquired after the Distribution Date on a non-confidential basis from
other sources. Notwithstanding the foregoing, such party may disclose such
information to its Representatives so long as such Persons are informed by
such party of the confidential nature of such information and are directed by
such party to treat such information confidentially. If such party or any of
its Representatives becomes legally compelled to disclose any documents or
information subject to this Section, such party will promptly notify the other
party so that the other party may seek a protective order or other remedy or
waive such party's compliance with this Section. If no such protective order
or other remedy is obtained or waiver granted, such party will furnish only
that portion of the information which it is advised by counsel is legally
required and will exercise its reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded such information. Such party
agrees to be responsible for any breach of this Section by it and its
Representatives.
Section 7.07. Inapplicability of Article VII to Tax Matters.
Notwithstanding anything to the contrary in Article VII, Article VII shall not
apply with respect to information, records and other matters relating to
Taxes, all of which shall be governed by the Tax Sharing Agreement.
ARTICLE VIII
CERTAIN OTHER AGREEMENTS
Section 8.01. Intercompany Accounts. Except as otherwise
provided in the Tax Sharing Agreement, all intercompany receivable, payable
and loan balances in existence as of the Distribution Date between the Murphy
Group and Deltic Group will be eliminated by payment in full by the party
owing any such obligation.
Section 8.02. Further Assurances and Consents. In addition to
the actions specifically provided for elsewhere in this Agreement, each of the
parties hereto shall use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by
this Agreement, including but not limited to using its reasonable efforts to
obtain any consents and approvals and to make any filings and applications
necessary or desirable in order to consummate the transactions contemplated by
this Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to
any third party from whom such consents or approvals are requested or to take
any action or omit to take any action if the taking of or the omission to take
such action would be unreasonably burdensome to the party, its Group or its
Group's business.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. All notices and other communications to
any party hereunder shall be in writing (including telex, telecopy or similar
writing) and shall be deemed given when received addressed as follows:
If to Murphy, to:
Murphy Oil Corporation
200 Peach Street
El Dorado, Arkansas 71731-7000
Telecopy: (501) 864-6220
Attention: General Counsel
If to Deltic, to:
Deltic Timber Corporation
200 Peach Street
El Dorado, Arkansas 71731-7000
Telecopy: (501) 864-6565
Attention: General Counsel
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall thereafter be made.
Section 9.02. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by Murphy and Deltic, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 9.03. Expenses. Except as specifically provided
otherwise in this Agreement or the Tax Sharing Agreement (including, without
limitation, in Articles IV and VI, Sections 7.04, 7.05, 8.01 and 9.07(c) and
Schedules 5.01 and 6.01 of this Agreement), all costs and expenses incurred in
connection with the preparation, execution and delivery of the Distribution
Documents and the consummation of the Distribution and the other transactions
contemplated hereby (including the fees and expenses of all counsel,
accountants and financial and other advisors of both Groups in connection
therewith, and all expenses in connection with preparation, filing and
printing of the Form 10 and the Information Statement) shall be paid by
Murphy; provided that Deltic shall be responsible for and pay the fees,
expenses and other amounts payable to the lenders under Deltic's credit
facilities and all other fees and expenses incurred in connection therewith
(including the fees and expenses of Deltic's counsel in connection with the
preparation and negotiation of all documentation relating to such credit
facilities).
Section 9.04. Successor and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that neither party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other parties hereto.
Section 9.05. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of Arkansas, without
regard to the conflicts of laws rules of such State.
Section 9.06. Entire Agreement. This Agreement and the other
Distribution Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersedes all prior
agreements, understandings and negotiations, both written and oral, between
the parties with respect to the subject matter hereof and thereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein or in the other Distribution Documents has been made or
relied upon by any party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder. To the extent that the provisions of this
Agreement are inconsistent with the provisions of any other Distribution
Document, the provisions of such other Distribution Document shall prevail.
Section 9.07. Tax Sharing Agreement; Set-Off; Certain Transfer
Taxes.
(a) Except as otherwise provided herein, this Agreement shall not
govern any Tax, and any and all claims, losses, damages, demands, costs,
expenses or liabilities relating to Taxes shall be exclusively governed by the
Tax Sharing Agreement.
(b) If, at the time Deltic is required to make any payment to
Murphy under this Agreement, Murphy owes Deltic any amount under this
Agreement or the Tax Sharing Agreement, then such amounts shall be offset and
the excess shall be paid by the party liable for such excess. Similarly, if
at the time Murphy is required to make any payment to Deltic under this
Agreement, Deltic owes Murphy any amount under this Agreement or the Tax
Sharing Agreement, then such amounts shall be offset and the excess shall be
paid by the party liable for such excess.
(c) All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred
in connection with Section 2.01 of this Agreement shall be borne and paid by
the Person who is receiving the property being transferred. The party that is
required by applicable law to file any Return (as defined in the Tax Sharing
Agreement) or make any payment with respect to any such Tax shall do so, and
the other party shall cooperate with respect thereto as necessary. The
non-paying party shall reimburse the paying party in accordance with this
Section 9.08 within 5 business days after it receives notice of the payment of
such Tax.
Section 9.09. Existing Arrangements. Except as otherwise
contemplated hereby, all prior agreements and arrangements, including those
relating to goods, rights or services provided or licensed, between the Deltic
Group and the Murphy Group shall be terminated effective as of the
Distribution Date, if not theretofore terminated. No such agreements or
arrangements shall be in effect after the Distribution Date unless embodied in
the Distribution Documents.
Section 9.10. Termination Prior to the Distribution. The Murphy
Board of Directors may at any time prior to the Distribution abandon the
Distribution and, by notice to Deltic, terminate this Agreement (whether or
not the Murphy Board of Directors has theretofore approved this Agreement
and/or the Distribution).
Section 9.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
IN WITNESS WHEREOF the parties hereto have caused this
Distribution Agreement to be duly executed by these respective authorized
officers as of the date first above written.
MURPHY OIL CORPORATION
By ____________________________
Name:
Title:
DELTIC TIMBER CORPORATION
By ____________________________
Name:
Title:
Schedule 5.01
EMPLOYEE MATTERS
Section 1. General. Except as otherwise set forth in this
Schedule 5.01, (a) Murphy shall retain any and all liabilities relating to or
arising out of any employee benefit or compensation arrangement (a "Plan") in
respect of any employee or former employee of Murphy and any Affiliate of
Murphy who is not a Transferred Employee (as hereinafter defined), and (b)
Murphy shall have no liability relating to or arising out of any Plan in
respect of Transferred Employees to the extent that any such liability is
incurred or otherwise relates to any period after the Distribution Date.
Section 2. Employees. Except as provided in the following two
sentences, with respect to each individual who is listed on Exhibit A hereto
(collectively, the "Transferred Employees"), Deltic shall cause the
employment of such Transferred Employee to be continued on the Distribution
Date, provided that nothing stated herein shall limit the right of Deltic
or any Subsidiary to terminate the employment of any Transferred Employee
following the Distribution Date or to reduce or otherwise modify the
position, responsibilities, compensation or benefits of any Transferred
Employee at any time. Any individual who is listed on Exhibit A hereto
who is not actively employed, as of the Distribution Date, by reason of
disability, shall not be considered a Transferred Employee as of the
Distribution Date. Upon the return of any such individual to active
employment, Deltic shall cause the employment of such individual to be
continued, consistent with the terms of the first sentence of this Section
2, and such individual shall thereafter be considered a Transferred
Employee. The employee benefit plans and arrangements maintained by Deltic
shall give full service credit for purposes of eligibility and vesting (and
in connection with any such severance or vacation plan or policy, for
purposes of determining the level of benefit) for any service on or prior
to the Distribution Date (or, if later, becoming a Transferred Employee) of
a Transferred Employee with Murphy and its Subsidiaries.
Section 3. Defined Benefit Retirement Plan.
(a) Effective as of the Distribution Date, Murphy shall take all
necessary actions to cause the Retirement Plan of Murphy Oil Corporation (the
"Murphy DB Plan") to be amended (i) to freeze, effective immediately prior to
the Distribution Date, future benefit accruals with respect to Transferred
Employees, and (ii) to provide for the direct trust-to-trust transfer of
assets and the assumption of liabilities as contemplated herein.
(b) Prior to the Distribution Date, Deltic shall establish a
defined benefit pension plan which shall be qualified under Section 401(a) of
the Code (the "Deltic DB Plan") effective as of the Distribution Date covering
Transferred Employees. The Deltic DB Plan shall contain provisions comparable
in all material respects to those of the Murphy DB Plan immediately prior to
the time of adoption of the Deltic DB Plan. As soon as practicable following
the establishment of the Deltic DB Plan, Murphy and Deltic shall file with the
IRS proper notice on IRS Forms 5310 regarding the transfer of assets and
liabilities from the Murphy DB Plan to the Deltic DB Plan.
(c) As soon as practical after the Distribution Date, following
receipt by Deltic and Murphy of favorable determination letters or Deltic's
certification to Murphy, and Murphy's certification to Deltic, in a manner
reasonably acceptable to both Murphy and Deltic, that the Murphy DB Plan and
Deltic DB Plan are qualified under the applicable provisions of the Code, the
assets and liabilities associated with all Transferred Employees shall be
transferred from the Murphy DB Plan to the Deltic DB Plan. The amount of
assets to be transferred shall be equal to that amount which bears the same
ratio to the assets of the Murphy DB Plan, as of the Distribution Date, as the
accrued liability of the Transferred Employees bears to the accrued liability
of all participants in the Murphy DB Plan, as of the Distribution Date. For
purposes of the preceding sentence, the "accrued liability" of any participant
in the Murphy DB Plan shall be calculated under the entry age normal actuarial
method using the same actuarial assumptions employed for purposes of the most
recent annual valuation of the Murphy DB Plan. The assets and liabilities to
be transferred shall be credited with interest on the balance outstanding from
time to time from the Distribution Date to the actual date of transfer, at the
rate of earnings on assets of the Murphy DB Plan during the period from the
Distribution Date to the last day of the month ending prior to the actual date
of transfer. Notwithstanding the above, the transfer of assets and liabilities
from the Murphy DB Plan to the Deltic DB Plan shall satisfy the requirements
of Code Section 414(l). Deltic and Murphy shall each use best efforts to
effect the asset and liability transfers contemplated in this Section 3 as
soon as practicable.
(d) Following the transfers of assets and liabilities as provided
in paragraph (c) above, Deltic shall have no further liability whatsoever
(either under this Agreement or otherwise) with respect to the participants
under the Murphy DB Plan, and Murphy shall have no further liability
whatsoever (either under this Agreement or otherwise) with respect to the
participants under the Deltic DB Plan.
Section 4. Defined Contribution Retirement Plans.
(a) Effective as of the Distribution Date, Murphy shall amend the
Thrift Plan for Employees of Murphy Oil Corporation (the "Murphy DC Plan") (i)
to cause the active participation of the Transferred Employees therein to
cease as of the Distribution Date, and (ii) to provide for the direct
trust-to-trust transfer of plan accounts as contemplated herein.
(b) Prior to the Distribution Date, Murphy or Deltic shall
establish a defined contribution retirement plan which shall be qualified
under Section 401(a) of the Code (the "Deltic DC Plan") effective as of the
Distribution Date covering Transferred Employees. The Deltic DC Plan shall
contain provisions comparable in all material respects to those of the Murphy
DC Plan immediately prior to the time of adoption of the Deltic DC Plan.
(c) No later than the date of the transfer described herein,
Murphy shall make all applicable 401(k), profit sharing, matching
contributions and qualified non-elective contributions payable under the
Murphy DC Plan with respect to Transferred Employees for periods on or prior
to the Distribution Date and shall be entitled to retain any applicable
reserves or accruals relating thereto. As soon as practicable following the
Distribution Date, Murphy shall cause the trustee of the Murphy DC Plan to
transfer the full account balances of Transferred Employees (and beneficiaries
thereof) under the Murphy DC Plan (which account balances will have been
credited with appropriate earnings attributable to the period from the
Distribution Date to the date of transfer described herein), reduced by any
necessary benefit or withdrawal payments to or in respect of Transferred
Employees occurring during the period from the Distribution Date to the date
of transfer described herein, to the appropriate trustee as designated by
Deltic under the trust agreement forming a part of the Deltic DC Plan. Murphy
and Deltic agree to take such actions and enter into such agreements, if any,
that may be necessary to effect the transfer described herein. In
consideration for the transfer of assets described herein, Deltic shall,
effective as of the date of transfer described herein, assume all of the
obligations of Murphy in respect of the account balances accumulated by
Transferred Employees under the Murphy DC Plan (exclusive of any portion of
such account balances which are paid or otherwise withdrawn prior to the date
of transfer described herein) with respect to the account balances transferred
to the Deltic DC Plan. Murphy hereby indemnifies Deltic against and agrees to
hold it harmless from any liabilities or claims (including claims for benefits
or for breach of fiduciary duties, but excluding claims for benefits to the
extent of the assets transferred hereunder) relating to the Murphy DC Plan (or
the qualified status of that Plan) which arose prior to the transfer of assets
described herein or which relate to the operation or administration of that
Plan prior to the transfer of assets. Deltic hereby indemnifies Murphy
against and agrees to hold it harmless from any liabilities or claims relating
to the qualified status of the Deltic DC Plan or the operation or
administration of that Plan following the transfer of assets described herein.
(d) As of the Distribution Date, Deltic shall assume sponsorship
of the Thrift Plan for Employees of Deltic Farm & Timber, Inc. (the "Deltic
Hourly Plan") and, except as provided in the succeeding sentence, Murphy shall
have no further liability with respect to such Plan. Murphy hereby
indemnifies Deltic against and agrees to hold it harmless from any liabilities
or claims (excluding claims for benefits but including claims for breach of
fiduciary duties relating to the Deltic Hourly Plan or the qualified status of
that Plan) which arose prior to the assumption of sponsorship described herein
or which relate to the operation or administration of that Plan prior to such
assumption of sponsorship. Deltic hereby indemnifies Murphy against and
agrees to hold it harmless from any liabilities or claims relating to the
qualified status of the Deltic Hourly Plan or the operation or administration
of that Plan following the assumption of sponsorship described herein.
Section 5. Welfare Plans and Worker Compensation.
(a) As soon as practicable after the Distribution Date, Deltic
shall establish or designate welfare benefit plans, within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended, for the benefit of the Transferred Employees. Murphy shall retain
liability for all incurred but unpaid claims of Transferred Employees and
their beneficiaries as of the Distribution Date (or, if later, the date
such persons become Transferred Employees), under the health and life
insurance benefit plans maintained by Murphy. Deltic shall assume as of
the Distribution Date all the obligations of Murphy and any of its
Affiliates for any obligation to provide coverage and benefits for
Transferred Employees and their qualified beneficiaries under Title X of
the Consolidated Omnibus Budget Reconciliation Act of 1985 and Section
4980B of the Code.
(b) Deltic shall be responsible for all workers compensation
claims, whether arising before or after the Distribution Date, with respect to
any Transferred Employee. In addition, Deltic shall be entitled to retain any
applicable reserves or accruals relating thereto.
Section 6. Bonus and Profit Incentive Plans. Murphy shall bear
the full cost of any bonus or short-term incentive award for calendar 1996 for
any Transferred Employee (the amount of which shall be determined in the
ordinary course, consistent with past practice), and Deltic shall have no
liability therefor. Murphy shall have no liability for, and Deltic shall bear
the cost of, any bonus or short-term incentive awards relating to periods
beginning on or after January 1, 1997.
Section 7. Severance. The continued employment by Deltic and its
Affiliates of Transferred Employees after the Distribution Date shall not be
deemed a severance of employment of such Transferred Employees from Murphy
for purposes of any policy, plan, program or agreement of Murphy or any of its
Subsidiaries that provides for the payment of severance, salary continuation or
similar benefits.
Section 8. Nonqualified Deferred Compensation. Deltic and its
Affiliates shall assume as of the Distribution Date all of the obligations and
liabilities of Murphy and any of its Affiliates for any Transferred Employee
under any nonqualified deferred compensation plan or arrangement maintained by
Murphy.
Section 9. No Third Party Beneficiaries. Neither Transferred
Employees nor any current, former or retired employee of Murphy or its
affiliates shall be entitled to enforce the provisions of this Schedule
against the respective parties as third party beneficiaries thereof.
Exhibit A to Schedule 5.01
Transferred Employees
Schedule 6.01
SERVICES DURING TRANSITION PERIOD
Set forth below are the services (each numbered item, a "Service" and
collectively, the "Services") that the Murphy Group will provide to the Deltic
Group during the Transition Period and the Costs related thereto.
Services Costs (per month)
-------- -----------------
Office Facilities - Rental.
1. Murphy shall provide the Deltic Group with use $ 4,200
of the office facilities at 200 Peach Street,
El Dorado, Arkansas that are occupied and in use
by the Deltic Group as of the Distribution Date (the
"Office Facilities").
Office Facilities - Usage.
2. The Murphy Group shall provide the Deltic Group with $15,750
services substantially similar to those provided to the
Deltic Group prior to the Distribution Date in connection
with the Deltic Group's usage of the Office Facilities in
the ordinary course of business. Such services shall
include, without limitation: (i) janitorial service; (ii)
telephone service; (iii) provision of utilities, including
electricity, gas and water; (iv) provision of office
equipment for use by the Deltic Group, including
photocopying equipment, fax machines and personal
computers; (v) contract mechanical maintenance service;
(vi) contract fire system maintenance; (vii) contract
elevator maintenance; (viii) payment of property taxes
related to the Office Facilities; (ix) provision of insurance
for the Office Facilities; and (x) provision of building
engineers and maintenance supplies related to the Office
Facilities.
Administrative Functions.
The Murphy Group shall provide the Deltic Group with such
administrative services as are reasonably required by the
Deltic Group and are substantially similar to those provided
to the Deltic Group by the Murphy Group prior to the
Distribution Date in the following areas (the "Administrative
Services"):
3. Controllers $ 6,900
4. Environmental Affairs 6,700
5. Human Resources 14,250
6. Information Systems 5,725
7. Insurance 8,000
8. Law 14,400
9. Purchasing 1,500
10. Treasury and Tax(1) 15,200
-------
$72,675
=======
In the event that there
is a significant
increase or decrease in
the level of activity
required by Murphy
personnel in
providing any of the
Administrative
Services, Murphy and
Deltic hereby agree
to renegotiate in
good faith the Costs
associated therewith.
__________
(1) Includes preparation and filing of consolidated Federal Tax Returns for
all Pre-Distribution Periods (in each case, as defined in the Tax
Sharing Agreement) pursuant to Section 2(c) of the Tax Sharing
Agreement.
11. Insurance
The insurance policies listed below (with In the event that Murphy
applicable expiration dates) have been incurs any retroactive
purchased by Murphy and provide coverage premium adjustments or
for various activities and assets of the refunds attributable to
Deltic Group. Murphy has previously claims or coverage
collected from Deltic its pro rata portion applicable to the Deltic
of the initial premiums under such policies. Group, Murphy shall
For each policy, prior to expiration Murphy invoice or credit Deltic
shall assist Deltic in processing claims for such charges, as
and such other matters as may be requested applicable.
by Deltic. Following expiration of each policy,
Murphy shall not be obligated to renew or
replace such policy for the benefit of Deltic
and Deltic may procure any replacement or
other policy as it may desire.
Expiration
Policy Insurance Carrier Date
------ ----------------- ----------
Workers' Reliance National 06/01/97
Compensation Indemnity Company
Automobile Reliance National 06/01/97
Liability Indemnity Company
General Reliance National 06/01/97
Liability Indemnity Company
Excess Lloyds/XL/OCIL/AC 04/30/97
Liability
Business Life Insurance 07/02/97
Travel/ Company of North
Accident America
Directors & National Union Fire 09/30/97
Officers Insurance Company
Liability
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DELTIC TIMBER CORPORATION
* * * * *
Deltic Timber Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:
1. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on September 4,
1996.
2. This Amended and Restated Certificate of Incorporation has
been duly adopted and proposed to the sole stockholder of the Corporation by
the Board of Directors of the Corporation, and has been approved and adopted
by the sole stockholder of the Corporation, in accordance with Sections 242
and 245 of the General Corporation Law of the State of Delaware.
3. Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Amended and Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
Certificate of Incorporation of the Corporation.
4. The text of the Certificate of Incorporation is hereby
restated and further amended to read in its entirety as hereinafter set forth:
FIRST: The name of the Corporation is Deltic Timber Corporation.
SECOND: The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as the same exists or may hereafter
be amended ("Delaware Law").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 70,000,000, consisting of 50,000,000 shares
of Common Stock, par value $.01 per share (the "Common Stock"), and 20,000,000
shares of Preferred Stock, par value $.01 per share (the "Preferred Stock").
The Board of Directors is hereby empowered to authorize by
resolution or resolutions from time to time the issuance of one or more
classes or series of Preferred Stock and to fix the designations, powers,
preferences and relative, participating, optional or other rights, if any, and
the qualifications, limitations or restrictions thereof, if any, with respect
to each such class or series of Preferred Stock and the number of shares
constituting each such class or series, and to increase or decrease the number
of shares of any such class or series to the extent permitted by Delaware Law.
FIFTH: (a) The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors consisting of not
less than six nor more than twelve directors, the exact number of directors to
be determined from time to time solely by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors.
(b) The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may
be possible, of one-third of the total number of directors constituting the
entire Board of Directors. Each director shall serve for a term ending on the
date of the third annual meeting of stockholders next following the annual
meeting at which such director was elected, provided that directors initially
designated as Class I directors shall serve for a term ending on the date of
the 1997 annual meeting, directors initially designated as Class II directors
shall serve for a term ending on the date of the 1998 annual meeting, and
directors initially designated as Class III directors shall serve for a term
ending on the date of the 1999 annual meeting. Notwithstanding the foregoing,
each director shall hold office until such director's successor shall have
been duly elected and qualified or until such director's earlier death,
resignation or removal. In the event of any change in the number of directors,
the Board of Directors shall apportion any newly created directorships among,
or reduce the number of directorships in, such class or classes as shall
equalize, as nearly as possible, the number of directors in each class. In no
event will a decrease in the number of directors shorten the term of any
incumbent director.
(c) There shall be no cumulative voting in the election of
directors. Election of directors need not be by written ballot unless the
bylaws of the Corporation so provide.
(d) Vacancies on the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting
from any increase in the number of directors may be filled solely by a
majority of the directors then in office (although less than a quorum) or by
the sole remaining director. Each director so elected shall hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
(e) No director may be removed from office by the stockholders
except for cause with the affirmative vote of the holders of not less than a
majority of the total voting power of all outstanding securities of the
Corporation then entitled to vote generally in the election of directors,
voting together as a single class.
(f) Notwithstanding the foregoing, whenever the holders of one or
more classes or series of Preferred Stock shall have the right, voting
separately as a class or series, to elect directors, the election, term of
office, filling of vacancies, removal and other features of such directorships
shall be governed by the terms of the resolution or resolutions adopted by the
Board of Directors pursuant to ARTICLE FOURTH applicable thereto, and such
directors so elected shall not be subject to the provisions of this ARTICLE
FIFTH unless otherwise provided therein.
SIXTH: The Board of Directors shall have the power to adopt,
amend or repeal the bylaws of the Corporation.
The stockholders may adopt, amend or repeal the bylaws only with
the affirmative vote of the holders of not less than 80% of the total voting
power of all outstanding securities of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
SEVENTH: Any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote of
stockholders at an annual or special meeting duly noticed and called in
accordance with Delaware Law and may not be taken by written consent of
stockholders without a meeting.
EIGHTH: Special meetings of the stockholders may be called by the
Board of Directors or the Chairman of the Board of Directors of the
Corporation and may not be called by any other person. Notwithstanding the
foregoing, whenever holders of one or more classes or series of Preferred
Stock shall have the right, voting separately as a class or series, to elect
directors, such holders may call, pursuant to the terms of the resolution or
resolutions adopted by the Board of Directors pursuant to ARTICLE FOURTH,
special meetings of holders of such Preferred Stock.
NINTH: (1) A director of the Corporation shall, to the fullest
extent permitted by Delaware Law, not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(2)(a) Each person (and the heirs, executors or administrators of
such person) who was or is a party or is threatened to be made a party to, or
is involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that such person is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless by the Corporation to the fullest
extent permitted by Delaware Law. The right to indemnification conferred in
this ARTICLE NINTH shall also include the right to be paid by the Corporation
the expenses incurred in connection with any such proceeding in advance of its
final disposition to the fullest extent authorized by Delaware Law. The right
to indemnification conferred in this ARTICLE NINTH shall be a contract right.
(b) The Corporation may, by action of its Board of Directors,
provide indemnification to such of the employees and agents of the Corporation
to such extent and to such effect as the Board of Directors shall determine to
be appropriate and authorized by Delaware Law.
(3) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who 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 any expense,
liability or loss incurred by such person in any such capacity or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under Delaware Law.
(4) The rights and authority conferred in this ARTICLE NINTH shall
not be exclusive of any other right which any person may otherwise have or
hereafter acquire.
(5) Neither the amendment nor repeal of this ARTICLE NINTH, nor
the adoption of any provision of this Certificate of Incorporation or the
bylaws of the Corporation, nor, to the fullest extent permitted by Delaware
Law, any modification of law, shall eliminate or reduce the effect of this
ARTICLE NINTH in respect of any acts or omissions occurring prior to such
amendment, repeal, adoption or modification.
TENTH: The Corporation reserves the right to amend this
Certificate of Incorporation in any manner permitted by the Delaware Law and
all rights and powers conferred upon stockholders, directors and officers
herein are granted subject to this reservation. Notwithstanding the
foregoing, the provisions set forth in ARTICLE FIFTH through ARTICLE TENTH,
inclusive, may not be repealed or amended in any respect, and no other
provision may be adopted, amended or repealed which would have the effect of
modifying or permitting the circumvention of the provisions set forth in
ARTICLE FIFTH through ARTICLE TENTH, inclusive, unless such action is approved
by the affirmative vote of the holders of not less than 80% of the total
voting power of all outstanding securities of the Corporation then entitled to
vote generally in the election of directors, voting together as a single class.
IN WITNESS WHEREOF, Deltic Timber Corporation has caused this
Amended and Restated Certificate of Incorporation to be signed by its
President and attested to by its Secretary this ___ day of __________, 1996.
By:__________________________
Name:
Title: President
ATTEST:__________________
Name:
Title: Secretary
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
DELTIC TIMBER CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, _______________, President, and ____________, Secretary, of
Deltic Timber Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware ("Delaware Law"), in
accordance with the provisions thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation, the Board of
Directors on __________, 1996, adopted the following resolution creating a
series of Preferred Stock in the amount and having the designation, voting
powers, preferences and relative, participating, optional and other special
rights and qualifications, limitations and restrictions thereof as follows:
Section 1. Designation and Number of Shares. The shares of
such series shall be designated as "Series A Participating Cumulative
Preferred Stock" (the "Series A Preferred Stock"), and the number of shares
constituting such series shall be 150,000. Such number of shares of the
Series A Preferred Stock may be increased or decreased by resolution of the
Board of Directors; provided that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares issuable upon exercise or
conversion of outstanding rights, options or other securities issued by the
Corporation.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable on March
1, June 1, September 1 and December 1 of each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of any share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 and (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends or other distributions and
100 times the aggregate per share amount of all non-cash dividends or other
distributions (other than (i) a dividend payable in shares of Common Stock,
par value $.01 per share, of the Corporation (the "Common Stock") or (ii) a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise)), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. If the Corporation shall at any time after
____________, 1996 (the "Rights Declaration Date") pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than
as described in clauses (i) and (ii) of the first sentence of paragraph (A));
provided that if no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date (or, with respect to the
first Quarterly Dividend Payment Date, the period between the first issuance
of any share or fraction of a share of Series A Preferred Stock and such first
Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series
A Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is on or before the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue and be cumulative from the date
of issue of such shares, or unless the date of issue is a date after the
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and on or before such Quarterly
Dividend Payment Date, in which case dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall not be more than 60
days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting
rights required by law, the holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of stockholders of the
Corporation. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of
Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the number of votes
per share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Preferred Stock and the holders of shares of Common
Stock shall vote together as a single class on all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a
period (herein called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series
A Preferred Stock then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders of Preferred Stock
and any other series of Preferred Stock then entitled as a class to elect
directors, voting together as a single class, irrespective of series, shall
have the right to elect two Directors.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless
the holders of 10% in number of shares of Preferred Stock outstanding shall
be present in person or by proxy. The absence of a quorum of holders of
Common Stock shall not affect the exercise by holders of Preferred Stock of
such voting right. At any meeting at which holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting, to elect two
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of Directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Preferred
Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than 10% of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request,
the calling of special meeting of holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by mailing
a copy of such notice to him at his last address as the same appears on the
books of the Corporation. Such meeting shall be called for a time not earlier
than 20 days and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 10% of the total number of
shares of Preferred Stock outstanding, irrespective of series. Notwithstanding
the provisions of this paragraph (C)(iii), no such special meeting shall be
called during the period within 60 days immediately preceding the date fixed
for the next annual meeting of stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References
in this paragraph (C) to Directors elected by the holders of a particular
class of stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of Directors shall be
such number as may be provided for in the certificate of incorporation or
bylaws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the certificate of
incorporation or bylaws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled
by a majority of the remaining Directors.
(D) The Certificate of Incorporation of the Corporation shall
not be amended in any manner (whether by merger or otherwise) so as to
adversely affect the powers, preferences or special rights of the Series A
Preferred Stock without the affirmative vote of the holders of a majority of
the outstanding shares of Series A Preferred Stock, voting separately as a
class.
(E) Except as otherwise provided herein, holders of Series A
Preferred Stock shall have no special voting rights, and their consent shall
not be required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on outstanding shares of Series A
Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series
A Preferred Stock and all such other parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock; provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of stock of the Corporation ranking junior (as to dividends
and upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any
shares of Series A Preferred Stock, or any shares of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Series A
Preferred Stock and all such other parity stock upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for value any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock redeemed, purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock without designation as to
series and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors as permitted by
the Certificate of Incorporation or as otherwise permitted under Delaware Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed per share to holders of
Common Stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such other parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time after the
Rights Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash or any other property, then in any such case the
shares of Series A Preferred Stock shall at the same time be similarly
exchanged for or changed into an amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount
of stock, securities, cash or any other property, as the case may be, into
which or for which each share of Common Stock is changed or exchanged. If the
Corporation shall at any time after the Rights Declaration Date pay any
dividend on Common Stock payable in shares of Common Stock or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The Series A Preferred Stock shall
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank
junior (as to dividends and upon liquidation, dissolution and winding up) to
all other series of the Corporation's preferred stock except any series that
specifically provides that such series shall rank junior to the Series A
Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may
be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate this __ day of ________, 1996.
_____________________________
President
Attest:
______________________
Secretary
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
DELTIC TIMBER CORPORATION
* * * * *
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the
Corporation may require.
Section 3. Books. The books of the Corporation may be kept within
or without of the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of
stockholders shall be held at such place, either within or without the State
of Delaware, on such date and at such time as may be determined from time to
time by the Board of Directors (or the Chairman of the Board in the absence of
a designation by the Board of Directors).
Section 2. Annual Meetings. Annual meetings of stockholders,
commencing with the year 1997, shall be held to elect directors and transact
such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of stockholders may
be called by the Board of Directors or Chairman of the Board of Directors of
the Corporation and may not be called by any other person. Notwithstanding the
foregoing, whenever holders of one or more classes or series of Preferred
Stock shall have the right, voting separately as a class or series, to elect
directors, such holders may call, pursuant to the terms of the resolution or
resolutions adopted by the Board of Directors pursuant to Article Fourth of
the certificate of incorporation, special meetings of holders of such
Preferred Stock.
Section 4. Notice of Meetings and Adjourned Meetings; Waivers of
Notice; Business at Meetings. (a) Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called. Unless otherwise provided by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be amended
("Delaware Law"), such notice shall be given not less than 10 nor more than 60
days before the date of the meeting to each stockholder of record entitled to
vote at such meeting. Unless these bylaws otherwise require, when a meeting
is adjourned to another time or place (whether or not a quorum is present),
notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than 30 days, or after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person
entitled thereto, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
(c) Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 5. Quorum. Unless otherwise provided under the certificate
of incorporation or these bylaws and subject to Delaware Law, the presence, in
person or by proxy, of the holders of a majority of the outstanding capital
stock of the Corporation entitled to vote at a meeting of stockholders shall
constitute a quorum for the transaction of business.
Section 6. Voting. (a) Unless otherwise provided in the
certificate of incorporation and subject to Delaware Law, each stockholder
shall be entitled to one vote for each outstanding share of capital stock of
the Corporation held by such stockholder. Unless otherwise provided in
Delaware Law, the certificate of incorporation or these bylaws, the
affirmative vote of a majority of the shares of capital stock of the
Corporation present, in person or by proxy, at a meeting of stockholders and
entitled to vote on the subject matter shall be the act of the stockholders.
(b) Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to a corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy, but
no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period.
Section 7. No Action by Consent. Any action required or
permitted to be taken at any annual or special meeting of stockholders may be
taken only upon the vote of stockholders at an annual or special meeting duly
noticed and called in accordance with Delaware Law and may not be taken by
written consent of stockholders without a meeting.
Section 8. Organization. At each meeting of stockholders, the
Chairman of the Board, if one shall have been elected, (or in his absence or
if one shall not have been elected, the President) shall act as chairman of
the meeting. The Secretary (or in his absence or inability to act, the person
whom the chairman of the meeting shall appoint secretary of the meeting) shall
act as secretary of the meeting and keep the minutes thereof.
Section 9. Order of Business. The order of business at all
meetings of stockholders shall be as determined by the chairman of the
meeting.
Section 10. Nomination of Directors. Only persons who are
nominated in accordance with the procedures set forth in these bylaws shall be
eligible to serve as directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of stockholders
(a) by or at the direction of the Board of Directors or (b) by any stockholder
of the Corporation who is a stockholder of record at the time of giving of
notice provided for in this Section 10, who shall be entitled to vote for the
election of directors at the meeting and who complies with the notice
procedures set forth in this Section 10. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant
to timely notice in writing to the secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 90 days prior
to the first anniversary of the most recent annual meeting of stockholders.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934 (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such stockholder.
At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the secretary of the
Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be
eligible to serve as a director of the Corporation unless nominated in
accordance with the procedures set forth in this bylaw. The chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that
a nomination was not made in accordance with the procedures prescribed by the
bylaws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 10, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, and the rules
and regulations thereunder with respect to the matters set forth in this
Section.
Section 11. Notice of Business. At any meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (a) by or at the direction of the Board of Directors or (b)
in the case of an annual meeting of stockholders, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of the notice
provided for in this Section 11, who shall be entitled to vote at such meeting
and who complies with the notice procedures set forth in this Section 11. For
business to be properly brought before an annual meeting of stockholders by a
stockholder, the stockholder must have given timely notice thereof in writing
to the secretary of the Corporation. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Corporation not less than 90 days prior to the first anniversary of the
most recent annual meeting of stockholders. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder proposes to bring
before the meeting (a) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (b) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (c) the class and number of shares
of the Corporation which are beneficially owned by the stockholder and (d) any
material interest of the stockholder in such business. Notwithstanding
anything in the bylaws to the contrary, no business shall be conducted at a
stockholder meeting except in accordance with the procedures set forth in this
Section 11, and no business shall be brought by a stockholder before a special
meeting of stockholders. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of the
bylaws, and if he should so determine, he shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing, provisions of this Section 11, a
stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, and the rules and regulations thereunder with
respect to the matters set forth in this Section 11.
ARTICLE III
DIRECTORS
Section 1. General Powers. Except as otherwise provided in
Delaware Law or the certificate of incorporation, the business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors.
Section 2. Number, Classes, Term of Office, etc. The Board of
Directors shall consist of not less than six nor more than twelve directors,
with the exact number of directors to be determined from time to time solely
by resolution adopted by the affirmative vote of a majority of the entire
Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. Except as otherwise provided in
the certificate of incorporation, each director shall serve for a term ending
on the date of the third annual meeting of stockholders next following the
annual meeting at which such director was elected. Notwithstanding the
foregoing, each director shall hold office until such director's successor
shall have been duly elected and qualified or until such director's earlier
death, resignation or removal. Directors need not be stockholders.
Section 3. Quorum and Manner of Acting. Unless the certificate of
incorporation or these bylaws require a greater number, a majority of the
total number of directors shall constitute a quorum for the transaction of
business, and the affirmative vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors. When a meeting is adjourned to another time or place (whether or
not a quorum is present), notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Board of Directors may
transact any business which might have been transacted at the original
meeting. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present at such meeting may adjourn the meeting, from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 4. Time and Place of Meetings. The Board of Directors
shall hold its meetings at such place, either within or without the State of
Delaware, and at such time as may be determined from time to time by the Board
of Directors (or the Chairman in the absence of a determination by the Board
of Directors).
Section 5. Annual Meeting. The Board of Directors shall meet for
the purpose of electing officers and transacting other business, as soon as
practicable after each annual meeting of stockholders, on the same day and at
the same place where such annual meeting shall be held. Notice of such
meeting need not be given. In the event such annual meeting is not so held,
the annual meeting of the Board of Directors may be held at such place either
within or without the State of Delaware, on such date and at such time as shall
be specified in a notice thereof given as hereinafter provided in Section 7 of
this Article III or in a waiver of notice thereof signed by any director who
chooses to waive the requirement of notice.
Section 6. Regular Meetings. After the place and time of regular
meetings of the Board of Directors shall have been determined and notice
thereof shall have been once given to each member of the Board of Directors,
regular meetings may be held without further notice being given.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board and shall be called by
the Chairman of the Board, President or Secretary on the written request of
three directors. Notice of special meetings of the Board of Directors shall
be given to each director at least three days before the date of the meeting
in such manner as is determined by the Board of Directors.
Section 8. Executive Committee. (a) The Board of Directors
shall elect from the directors an executive committee. The Board of Directors
shall fill vacancies in the executive committee by election from the
directors. The executive committee shall fix its own rules of procedure and
shall meet where and as provided by such rules or by resolution of the Board
of Directors, but in every case the presence of at least two members of the
committee shall be necessary to constitute a quorum for the transaction of
business. In every case the affirmative vote of a majority of all of the
members of the committee present at the meeting shall be necessary for the
adoption of any resolution.
(b) The executive committee shall consist of two members in
addition to the Chairman of the Board, who by virtue of his office shall be a
member of the executive committee and chairman thereof. Unless otherwise
ordered by the Board of Directors, each elected member of the executive
committee shall continue to be a member thereof until the expiration of his
term of office as a director. The executive committee, subject to any
limitations prescribed by the Board of Directors, shall have special charge of
all financial accounting, legal and general administrative affairs of the
Corporation. During the intervals between the meetings of the Board of
Directors, the executive committee shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, including the power to authorize the seal of the
Corporation to be affixed to all papers which may require it, except that said
committee shall not have the power or authority of the Board to (i) fill
vacancies in the Board, (ii) amend the certificate of incorporation or bylaws
of the Corporation, (iii) adopt an agreement of merger or consolidation, (iv)
recommend to the stockholders the sale, lease, exchange, mortgage, pledge or
other disposition of all or substantially all of the Corporation's property
and assets, or (v) recommend to the stockholders a voluntary dissolution of
the Corporation or a revocation of a dissolution.
Section 9. Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Chairman of the Board shall be an ex officio member of all
committees, except the audit committee, to which he is not otherwise
appointed, and shall be entitled to vote on all proposals duly presented to
such committees. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. Any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, including the power to authorize the
seal of the Corporation to be affixed to all papers which may require it; but
no such committee shall have the power or authority of the Board to (i) fill
vacancies in the Board, (ii) amend the certificate of incorporation or bylaws
of the Corporation, (iii) adopt an agreement of merger or consolidation, (iv)
recommend to the stockholders the sale, lease, exchange, mortgage, pledge or
other disposition of all or substantially all of the Corporation's property
and assets, or (v) recommend to the stockholders a voluntary dissolution of
the Corporation or a revocation of a dissolution; and unless the resolution of
the Board of Directors or the certificate of incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 10. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 11. Telephonic Meetings. Unless otherwise restricted by
the certificate of incorporation or these bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or such committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 12. Resignation. Any director may resign at any time by
giving written notice to the Board of Directors or to the Secretary of the
Corporation. The resignation of any director shall take effect upon receipt
of notice thereof or at such later time as shall be specified in such notice;
and unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 13. Vacancies. Unless otherwise provided in the
certificate of incorporation, vacancies on the Board of Directors resulting
from death, resignation, removal or otherwise and newly created directorships
resulting from any increase in the number of directors may be filled solely by
a majority of the directors then in office (although less than a quorum) or by
the sole remaining director. Each director so elected shall hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. If there are no directors in
office, then an election of directors may be held in accordance with Delaware
Law. Unless otherwise provided in the certificate of incorporation, when one
or more directors shall resign from the Board, effective at a future date, a
majority of the directors then in office, including those who have so
resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in the
filling of other vacancies.
Section 14. Removal. No director may be removed from office
by the stockholders except for cause with the affirmative vote of the holders
of not less than a majority of the total voting power of all outstanding
securities of the corporation then entitled to vote generally in the election
of directors, voting together as a single class.
Section 15. Compensation. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall
have authority to fix the compensation of directors, including fees and
reimbursement of expenses.
Section 16. Preferred Directors. Notwithstanding anything
else contained herein, whenever the holders of one or more classes or series
of Preferred Stock shall have the right, voting separately as a class or
series, to elect directors, the election, term of office, filling of vacancies,
removal and other features of such directorships shall be governed by the
terms of the resolutions adopted by the Board of Directors pursuant to the
certificate of incorporation applicable thereto, and such directors so elected
shall not be subject to the provisions of Sections 2, 13 and 14 of this
Article III unless otherwise provided therein.
ARTICLE IV
OFFICERS
Section 1. Principal Officers. The principal officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents (which may be designated as Executive or Senior Vice President(s)),
a Treasurer and a Secretary who shall have the duty, among other things, to
record the proceedings of the meetings of stockholders and directors in a book
kept for that purpose. The Corporation may also have such other principal
officers, including one or more Controllers, as the Board may in its
discretion appoint. One person may hold the offices and perform the duties of
any two or more of said offices, except that no one person shall hold the
offices and perform the duties of President and Secretary.
Section 2. Election, Term of Office and Remuneration. The
principal officers of the Corporation shall be elected annually by the Board
of Directors at the annual meeting thereof. Each such officer shall hold
office until his successor is elected and qualified, or until his earlier
death, resignation or removal. The remuneration of all officers of the
Corporation shall be fixed by the Board of Directors. Any vacancy in any
office shall be filled in such manner as the Board of Directors shall
determine.
Section 3. Subordinate Officers. In addition to the principal
officers enumerated in Section 1 of this Article IV, the Corporation may have
one or more Assistant Treasurers, Assistant Secretaries and Assistant
Controllers and such other subordinate officers, agents and employees as the
Board of Directors may deem necessary, each of whom shall hold office for such
period as the Board of Directors may from time to time determine. The Board
of Directors may delegate to any principal officer the power to appoint and to
remove any such subordinate officers, agents or employees.
Section 4. Removal. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at
any time, by resolution adopted by the Board of Directors.
Section 5. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors (or to a principal officer if
the Board of Directors has delegated to such principal officer the power to
appoint and to remove such officer). The resignation of any officer shall
take effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 6. Powers and Duties. The officers of the Corporation
shall have such powers and perform such duties incident to each of their
respective offices and such other duties as may from time to time be conferred
upon or assigned to them by the Board of Directors.
ARTICLE V
GENERAL PROVISIONS
Section 1. Fixing the Record Date. (a) In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which record date shall not be more than 60 nor less than 10 days before
the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect
of any change, conversion or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 2. Dividends. Subject to limitations contained in Delaware
Law and the certificate of incorporation, the Board of Directors may declare
and pay dividends upon the shares of capital stock of the Corporation, which
dividends may be paid in cash, in property or in shares of the capital stock
of the Corporation.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
commence on January 1 and end on December 31 of each year.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the
words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 5. Voting of Stock Owned by the Corporation. The Board of
Directors may authorize any person, on behalf of the Corporation, to attend,
vote at and grant proxies to be used at any meeting of stockholders of any
corporation (except this Corporation) in which the Corporation may hold stock.
Section 6. Amendments. These bylaws or any of them, may be
altered, amended or repealed, or new bylaws may be made, by the Board of
Directors or by the affirmative vote of the holders of not less than 80% of
the total voting power of all outstanding securities of the Corporation then
entitled to vote generally in the election of directors, voting together as a
single class.
EXHIBIT 4.1
RIGHTS AGREEMENT
dated as of
____________, 1996
between
Deltic Timber Corporation
and
Harris Trust and Savings Bank,
as Rights Agent
TABLE OF CONTENTS(1)
__________
(1) The Table of Contents is not a part of this Agreement.
Page
----
Section 1. Definitions..................................... 1
Section 2. Appointment of Rights Agent..................... 5
Section 3. Issue of Right Certificates..................... 6
Section 4. Form of Right Certificates...................... 7
Section 5. Countersignature and Registration............... 8
Section 6. Transfer and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates..................... 8
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights................................ 9
Section 8. Cancellation and Destruction of Right
Certificates.................................. 11
Section 9. Reservation and Availability of Capital Stock... 12
Section 10. Preferred Stock Record Date..................... 13
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights.................... 14
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares..................................... 24
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power....................... 24
Section 14. Fractional Rights and Fractional Shares......... 27
Section 15. Rights of Action................................ 28
Section 16. Agreement of Right Holders...................... 29
Section 17. Right Certificate Holder Not Deemed a
Stockholder................................... 30
Section 18. Concerning the Rights Agent..................... 30
Section 19. Merger or Consolidation or Change of
Name of Rights Agent.......................... 30
Section 20. Duties of Rights Agent.......................... 31
Section 21. Change of Rights Agent.......................... 34
Section 22. Issuance of New Right Certificates.............. 35
Section 23. Redemption...................................... 35
Section 24. Notice of Proposed Actions...................... 36
Section 25. Notices......................................... 37
Section 26. Supplements and Amendments...................... 37
Section 27. Successors...................................... 38
Section 28. Determinations and Actions by the Board
of Directors, etc............................. 38
Section 29. Benefits of this Agreement...................... 39
Section 30. Severability.................................... 39
Section 31. Governing Law................................... 39
Section 32. Counterparts.................................... 40
Section 33. Descriptive Headings............................ 40
Exhibit A - Form of Certificate of Designation of Preferred
Stock
Exhibit B - Form of Right Certificate
RIGHTS AGREEMENT
AGREEMENT dated as of ____________, 1996, between Deltic Timber
Corporation, a Delaware corporation (the "Company"), and Harris Trust and
Savings Bank, as Rights Agent (the "Rights Agent"),
W I T N E S S E T H
WHEREAS, on ___________, 1996 the Board of Directors of the
Company authorized and declared a dividend of one preferred stock purchase
right (a "Right") for each share of Common Stock (as hereinafter defined)
outstanding at the close of business on the next business day following the
filing of the Restated Deltic Charter with the Secretary of State of the State
of Delaware (the "Record Date") and has authorized the issuance, upon the
terms and subject to the conditions hereinafter set forth, of one Right in
respect of each share of Common Stock issued after the Record Date, each Right
representing the right to purchase, upon the terms and subject to the
conditions hereinafter set forth, one one-hundredth of a share of Preferred
Stock (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. The following terms, as used herein,
have the following meanings:
"Acquiring Person" means any Person (other than an Exempt
Holder) who, together with all Affiliates and Associates (other than
an Exempt Holder) of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding, but shall
not include the Company, any of its Subsidiaries, any employee
benefit plan of the Company or any of its Subsidiaries, any Person
organized, appointed or established by the Company or any of its
Subsidiaries for or pursuant to the terms of any such plan, or Murphy
Oil Corporation prior to the consummation of the Spinoff.
Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" solely as a result of an acquisition of shares of Common
Stock by the Company which, by reducing the number of shares of
Common Stock outstanding, increases the proportionate number of
shares of Common Stock beneficially owned by such Person (together
with all Affiliates and Associates of such Person) to 15% or more of
the shares of Common Stock then outstanding.
"Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on the date hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own", any securities:
(a) which such Person or any of its Affiliates or
Associates (other than an Exempt Holder), directly or
indirectly, beneficially owns (as determined pursuant to Rule
13d-3 under the Exchange Act as in effect on the date hereof);
(b) which such Person or any of its Affiliates or
Associates (other than an Exempt Holder), directly or
indirectly, has
(i) the right to acquire (whether such right is
exercisable immediately or only upon the occurrence of
certain events or the passage of time or both) pursuant
to any agreement, arrangement or understanding (whether
or not in writing) or otherwise (other than pursuant to
the Rights); provided that a Person shall not be deemed
the "Beneficial Owner" of or to "beneficially own"
securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of its
Affiliates or Associates until such tendered securities
are accepted for payment or exchange; or
(ii) the right to vote (whether such right is
exercisable immediately or only upon the occurrence of
certain events or the passage of time or both) pursuant
to any agreement, arrangement or understanding (whether
or not in writing) or otherwise; provided that a Person
shall not be deemed the "Beneficial Owner" of or to
"beneficially own" any security under this clause (ii) as
a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or
understanding (A) arises solely from a revocable proxy or
consent given in response to a public proxy or consent
solicitation made pursuant to the applicable rules and
regulations under the Exchange Act and (B) is not also
then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(c) which are beneficially owned, directly or
indirectly, by any other Person (other than an Exempt
Holder), or any Affiliate or Associate (other than an Exempt
Holder) thereof, with which such Person or any of its
Affiliates or Associates (other than an Exempt Holder) has
any agreement, arrangement or understanding (whether or not
in writing) for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in
subparagraph (b)(ii) immediately above) or disposing of any
such securities.
"Business Day" means any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Close of business" on any given date means 5:00 P.M., New York
City time, on such date; provided that if such date is not a Business
Day "close of business" means 5:00 P.M., New York City time, on the
next succeeding Business Day.
"Common Stock" means the Common Stock, par value $.01 per
share, of the Company, except that, when used with reference to any
Person other than the Company, "Common Stock" means the capital stock
of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct
the management, of such Person.
"Continuing Director" means any member of the Board of
Directors of the Company, while such Person is a member of the Board,
who is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative or nominee of an Acquiring
Person or of any such Affiliate or Associate and either (a) was a
member of the Board immediately prior to the time any Person becomes
an Acquiring Person or (b) subsequently becomes a member of the
Board, if such Person's nomination for election or election to the
Board is recommended or approved by a majority of the Continuing
Directors.
"Distribution Date" means the earlier of (a) the close of
business on the tenth day (or such later day as may be designated by
action of a majority of the Continuing Directors) after the Stock
Acquisition Date and (b) the close of business on the tenth Business
Day (or such later day as may be designated by action of a majority
of the Continuing Directors) after the date of the commencement of a
tender or exchange offer by any Person if, upon consummation thereof,
such Person would be an Acquiring Person.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempt Holder" mean Charles H. Murphy, Jr. and his Affiliates
and Associates.
"Expiration Date" means the earlier of (a) the Final Expiration
Date and (b) the time at which all Rights are redeemed as provided in
Section 23.
"Final Expiration Date" means the close of business on December
31, 2006.
"Person" means an individual, corporation, partnership,
association, trust or any other entity or organization.
"Preferred Stock" means the Series A Participating Cumulative
Preferred Stock, par value $.01 per share, of the Company, having the
terms set forth in the form of certificate of designation attached
hereto as Exhibit A.
"Purchase Price" means the price (subject to adjustment as
provided herein) at which a holder of a Right may purchase one
one-hundredth of a share of Preferred Stock (subject to adjustment as
provided herein) upon exercise of a Right, which price shall
initially be $75.00.
"Restated Deltic Charter" shall mean the Amended and Restated
Certificate of Incorporation of the Company, substantially in the
form filed as an exhibit to the Company's Registration Statement on
Form 10 filed with the Securities and Exchange Commission on
September 9, 1996 to effect the registration of the Common Stock
under the Exchange Act, as such registration statement may be amended
from time to time.
"Section 11(a)(ii) Event" means any event described in the
first clause of Section 11(a)(ii).
"Section 13 Event" means any event described in clauses (x),
(y) or (z) of Section 13(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Spinoff" means the distribution by Murphy Oil Corporation to
its stockholders of 100% of the Common Stock of the Company.
"Stock Acquisition Date" means the date of the first public
announcement (including the filing of a report on Schedule 13D under
the Exchange Act (or any comparable or successor report)) by the
Company or an Acquiring Person indicating that an Acquiring Person
has become such.
"Subsidiary" of any Person means any other Person of which
securities or other ownership interests having ordinary voting power,
in the absence of contingencies, to elect a majority of the board of
directors or other Persons performing similar functions are at the
time directly or indirectly owned by such first Person.
"Trading Day" means a day on which the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to trading on
any national securities exchange, a Business Day.
"Triggering Event" means any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or desirable. If the
Company appoints one or more Co-Rights Agents, the respective duties of the
Rights Agent and any Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates. (a) Prior to the
Distribution Date, (i) the Rights will be evidenced by the certificates for
the Common Stock and not by separate Right Certificates (as hereinafter
defined) and the registered holders of the Common Stock shall be deemed to be
the registered holders of the associated Rights, and (ii) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock.
(b) As soon as practicable after the Company has notified the
Rights Agent of the occurrence of the Distribution Date, the Rights Agent will
send, by first-class, insured, postage prepaid mail, to each record holder of
the Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more Right
Certificates evidencing one Right (subject to adjustment as provided herein)
for each share of Common Stock so held. If an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p), the
Company shall, at the time of distribution of the Right Certificates, make the
necessary and appropriate rounding adjustments (in accordance with Section
14(a)) so that Right Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. From and after
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(c) Rights shall be issued in respect of all shares of Common
Stock outstanding as of the Record Date or issued (on original issuance or out
of treasury) after the Record Date but prior to the earlier of the Distribution
Date and the Expiration Date. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to
the Expiration Date, the Company (i) shall, with respect to shares of Common
Stock so issued or sold (x) pursuant to the exercise of stock options or under
any employee plan or arrangement or (y) upon the exercise, conversion or
exchange of other securities issued by the Company prior to the Distribution
Date and (ii) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Right Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided that no such Right Certificate shall be issued if, and to the extent
that, (i) the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company
or the Person to whom such Right Certificate would be issued or (ii)
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
(d) Certificates for the Common Stock issued after the Record
Date but prior to the earlier of the Distribution Date and the Expiration Date
shall have impressed on, printed on, written on or otherwise affixed to them
the following legend:
This certificate also evidences certain Rights as set forth in a
Rights Agreement between Deltic Timber Corporation and Harris Trust
and Savings Bank dated as of ________, 1996 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal executive offices of the
Company. The Company will mail to the holder of this certificate a
copy of the Rights Agreement without charge promptly after receipt
of a written request therefor. Under certain circumstances, as set
forth in the Rights Agreement, such Rights may be evidenced by
separate certificates and no longer be evidenced by this certificate,
may be redeemed or exchanged or may expire. As set forth in the
Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may be null and void.
Section 4. Form of Right Certificates. (a) The certificates
evidencing the Rights (and the forms of assignment, election to purchase and
certificates to be printed on the reverse thereof) (the "Right Certificates")
shall be substantially in the form of Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with
any applicable law, rule or regulation or with any rule or regulation of any
stock exchange on which the Rights may from time to time be listed, or to
conform to usage. The Right Certificates, whenever distributed, shall be
dated as of the Record Date.
(b) Any Right Certificate representing Rights beneficially
owned by any Person referred to in clauses (i), (ii) or (iii) of the first
sentence of Section 7(d) shall (to the extent feasible) contain the following
legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). This Right Certificate and the
Rights represented hereby may be or may become null and void in the
circumstances specified in Section 7(d) of such Agreement.
Section 5. Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Right Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company whose
manual or facsimile signature is affixed to the Right Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Right Certificates may,
nevertheless, be countersigned by the Rights Agent and issued and delivered
with the same force and effect as though the Person who signed such Right
Certificates had not ceased to be such officer of the Company. Any Right
Certificate may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
place for surrender of Right Certificates upon exercise, transfer or exchange,
books for registration and transfer of the Right Certificates. Such books
shall show with respect to each Right Certificate the name and address of the
registered holder thereof, the number of Rights indicated on the certificate
and the certificate number.
Section 6. Transfer and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) At any time
after the Distribution Date and prior to the Expiration Date, any Right
Certificate or Certificates may, upon the terms and subject to the conditions
set forth below in this Section 6(a), be transferred or exchanged for another
Right Certificate or Certificates evidencing a like number of Rights as the
Right Certificate or Certificates surrendered. Any registered holder desiring
to transfer or exchange any Right Certificate or Certificates shall surrender
such Right Certificate or Certificates (with, in the case of a transfer, the
form of assignment and certificate on the reverse side thereof duly executed)
to the Rights Agent at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall
be obligated to take any action whatsoever with respect to the transfer of any
such surrendered Right Certificate or Certificates until the registered holder
of the Rights has complied with the requirements of Section 7(e). Upon
satisfaction of the foregoing requirements, the Rights Agent shall, subject to
Sections 4(b), 7(d) and 14, countersign and deliver to the Person entitled
thereto a Right Certificate or Certificates as so requested. The Company may
require payment by the registered holder of a Right of a sum sufficient to
cover any transfer tax or other governmental charge that may be imposed in
connection with any transfer or exchange of any Right Certificate or
Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the
Company's request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Right Certificate if mutilated, the Company will issue
and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein, including
Sections 7(d) and (e), 9(c), 11(a) and 23) in whole or in part at any time
after the Distribution Date and prior to the Expiration Date upon surrender of
the Right Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the principal office or offices of the Rights Agent designated for such
purpose, together with payment (in lawful money of the United States of
America by certified check or bank draft payable to the order of the Company)
of the aggregate Purchase Price with respect to the Rights then to be
exercised and an amount equal to any applicable transfer tax or other
governmental charge.
(b) Upon satisfaction of the requirements of Section 7(a) and
subject to Section 20(k), the Rights Agent shall thereupon promptly (i)(A)
requisition from any transfer agent of the Preferred Stock (or make available,
if the Rights Agent is the transfer agent therefor) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be purchased
(and the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests) or (B) if the Company shall have elected to deposit
the shares of Preferred Stock issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a share of Preferred Stock
as are to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of
cash, if any, to be paid in lieu of issuance of fractional shares in
accordance with Section 14 and (iii) after receipt of such certificates or
depositary receipts and cash, if any, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate (with such
certificates or receipts registered in such name or names as may be designated
by such holder). If the Company is obligated to deliver Common Stock, other
securities or assets pursuant to this Agreement, the Company will make all
arrangements necessary so that such other securities and assets are available
for delivery by the Rights Agent, if and when appropriate.
(c) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing the number of Rights remaining unexercised shall be
issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Right Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event,
any Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or in any such Associate or Affiliate) or
to any Person with whom the Acquiring Person (or any such Associate or
Affiliate) has any continuing agreement, arrangement or understanding regarding
the transferred Rights or (B) a transfer which the Continuing Directors have
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(d) shall become null
and void without any further action, and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise. The Company shall use all reasonable efforts
to insure that the provisions of this Section 7(d) and Section 4(b) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates and Associates or any
transferee of any of them hereunder.
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder of Rights upon the
occurrence of any purported transfer pursuant to Section 6 or exercise
pursuant to this Section 7 unless such registered holder (i) shall have
completed and signed the certificate contained in the form of assignment or
election to purchase, as the case may be, set forth on the reverse side of the
Right Certificate surrendered for such transfer or exercise, as the case may
be, (ii) shall not have indicated an affirmative response to clause 1 or 2
thereof and (iii) shall have provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for exercise, transfer or exchange shall,
if surrendered to the Company or to any of its agents, be delivered to the
Rights Agent for cancellation or in canceled form, or, if surrendered to the
Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by this Agreement. The
Company shall deliver to the Rights Agent for cancellation, and the Rights
Agent shall cancel, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Right Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a)
The Company covenants and agrees that it will cause to be reserved and kept
available a number of shares of Preferred Stock which are authorized but not
outstanding or otherwise reserved for issuance sufficient to permit the
exercise in full of all outstanding Rights as provided in this Agreement.
(b) So long as the Preferred Stock issuable upon the exercise
of Rights may be listed on any national securities exchange, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all securities reserved for such issuance to be listed on any
such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts (i) to file, as
soon as practicable following the earliest date after the occurrence of a
Section 11(a)(ii) Event as of which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii), or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act with respect to the securities issuable upon exercise of the
Rights, (ii) to cause such registration statement to become effective as soon
as practicable after such filing and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or blue sky laws of the
various states in connection with the exercisability of the Rights. The
Company may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any such provision of this Agreement to the contrary, the
Rights shall not be exercisable for securities in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained,
such exercise therefor shall not be permitted under applicable law or a
registration statement in respect of such securities shall not have been
declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to insure that all one one-hundredths of a
share of Preferred Stock issuable upon exercise of Rights shall, at the time
of delivery of the certificates for such securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and other
governmental charges which may be payable in respect of the issuance or
delivery of the Right Certificates and of any certificates for Preferred Stock
upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax or other governmental charge which may be payable in
respect of any transfer involved in the issuance or delivery of any Right
Certificates or of any certificates for Preferred Stock to a Person other than
the registered holder of the applicable Right Certificate, and prior to any
such transfer, issuance or delivery any such tax or other governmental charge
shall have been paid by the holder of such Right Certificate or it shall have
been established to the Company's satisfaction that no such tax or other
governmental charge is due.
Section 10. Preferred Stock Record Date. Each Person (other
than the Company) in whose name any certificate for Preferred Stock is issued
upon the exercise of Rights shall for all purposes be deemed to have become
the holder of record of such Preferred Stock represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any transfer taxes or other governmental charges) was made; provided that
if the date of such surrender and payment is a date upon which the transfer
books of the Company relating to the Preferred Stock are closed, such Person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
applicable transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. (a)(i) If the Company shall at any time after
the date of this Agreement (A) pay a dividend on the Preferred Stock payable
in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock
into a greater number of shares, (C) combine the outstanding Preferred Stock
into a smaller number of shares or (D) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger involving the
Company), the Purchase Price in effect immediately prior to the record date
for such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
other capital stock issuable on such date shall be proportionately adjusted so
that each holder of a Right shall (except as otherwise provided herein,
including Section 7(d)) thereafter be entitled to receive, upon exercise
thereof at the Purchase Price in effect immediately prior to such date, the
aggregate number and kind of shares of Preferred Stock or other capital stock,
as the case may be, which, if such Right had been exercised immediately prior
to such date and at a time when the applicable transfer books of the Company
were open, such holder would have been entitled to receive upon such exercise
and by virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which requires an adjustment under both this Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) If any Person, alone or together with its Affiliates and
Associates, shall, at any time after the date of this Agreement, become an
Acquiring Person, then proper provision shall promptly be made so that each
holder of a Right shall (except as otherwise provided herein, including
Section 7(d)) thereafter be entitled to receive, upon exercise thereof on or
after the Distribution Date at the Purchase Price in effect immediately prior
to the first occurrence of a Section 11(a)(ii) Event, in lieu of Preferred
Stock, such number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock of the Company (such shares being
referred to herein as the "Adjustment Shares") as shall be equal to the result
obtained by dividing
(x) the product obtained by multiplying the Purchase Price in
effect immediately prior to the first occurrence of a Section
11(a)(ii) Event by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior
to such first occurrence (such product being thereafter referred to
as the "Purchase Price" for each Right and for all purposes of this
Agreement) by
(y) 50% of the current market price (determined pursuant to
Section 11(d)(i)) per share of Common Stock on the date of such first
occurrence.
(iii) If the number of shares of Common Stock which are
authorized by the Company's certificate of incorporation but not outstanding
or reserved for issuance other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights in accordance with
Section 11(a)(ii), the Company shall, with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment of
the Purchase Price then in effect, (A) (to the extent available) Common Stock
and then, (B) (to the extent available) other equity securities of the Company
which a majority of the Continuing Directors has determined to be essentially
equivalent to shares of Common Stock in respect to dividend, liquidation and
voting rights (such securities being referred to herein as "common stock
equivalents") and then, if necessary, (C) other equity or debt securities of
the Company, cash or other assets, a reduction in the Purchase Price or any
combination of the foregoing, having an aggregate value (as determined by the
Continuing Directors based upon the advice of a nationally recognized
investment banking firm selected by the Continuing Directors) equal to the
value of the Adjustment Shares; provided that (x) the Company may, and (y) if
the Company shall not have made adequate provision as required above to
deliver value within 30 days following the later of the first occurrence of a
Section 11(a)(ii) Event and the first date that the right to redeem the Rights
pursuant to Section 23 shall expire, then the Company shall be obligated to,
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, (1) (to the extent available) Common Stock and
then (2) (to the extent available) common stock equivalents and then, if
necessary, (3) other equity or debt securities of the Company, cash or other
assets or any combination of the foregoing, having an aggregate value (as
determined by the Continuing Directors based upon the advice of a nationally
recognized investment banking firm selected by the Continuing Directors) equal
to the excess of the value of the Adjustment Shares over the Purchase Price.
If the Continuing Directors of the Company shall determine in good faith that
it is likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the 30 day period
set forth above (such period, as it may be extended, being referred to herein
as the "Substitution Period") may be extended to the extent necessary, but not
more than 90 days following the first occurrence of a Section 11(a)(ii) Event,
in order that the Company may seek stockholder approval for the authorization
of such additional shares. To the extent that the Company determines that
some action is to be taken pursuant to the first and/or second sentence of
this Section 11(a)(iii), the Company (X) shall provide, subject to Section
7(d), that such action shall apply uniformly to all outstanding Rights and (Y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form and value of any consideration to be
delivered as referred to in such first and/or second sentence. If any such
suspension occurs, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of the Common Stock shall
be the current market price per share of Common Stock (as determined pursuant
to Section 11(d)) on the later of the date of the first occurrence of a
Section 11(a)(ii) Event and the first date that the right to redeem the Rights
pursuant to Section 23 shall expire; any common stock equivalent shall be
deemed to have the same value as the Common Stock on such date; and the value
of other securities or assets shall be determined pursuant to Section
11(d)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within 45
calendar days after such record date) Preferred Stock (or securities having
the same rights, privileges and preferences as the shares of Preferred Stock
("equivalent preferred stock")) or securities convertible into or exercisable
for Preferred Stock (or equivalent preferred stock) at a price per share of
Preferred Stock (or equivalent preferred stock) (in each case, taking account
of any conversion or exercise price) less than the current market price (as
determined pursuant to Section 11(d)) per share of Preferred Stock on such
record date, the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of shares
of Preferred Stock which the aggregate price (taking account of any conversion
or exercise price) of the total number of shares of Preferred Stock (and/or
equivalent preferred stock) so to be offered would purchase at such current
market price and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date plus the number of additional
shares of Preferred Stock (and/or equivalent preferred stock) so to be
offered. In case such subscription price may be paid by delivery of
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a
record date is fixed, and if such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger involving the
Company) of evidences of indebtedness, equity securities other than Preferred
Stock, assets (other than a regular periodic cash dividend out of the earnings
or retained earnings of the Company) or rights, options or warrants (excluding
those referred to in Section 11(b)), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section
11(d)) per share of Preferred Stock on such record date, less the value (as
determined pursuant to Section 11(d)(iii)) of such evidences of indebtedness,
equity securities, assets, rights, options or warrants so to be distributed
with respect to one share of Preferred Stock and the denominator of which
shall be such current market price per share of Preferred Stock. Such
adjustment shall be made successively whenever such a record date is fixed,
and if such distribution is not so made, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(d)(i) For the purpose of any computation hereunder other than
computations made pursuant to Section 11(a)(iii) or 14, the "current market
price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the 30
consecutive Trading Days immediately prior to such date; for purposes of
computations made pursuant to Section 11(a)(iii), the "current market price"
per share of Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the 10 consecutive
Trading Days immediately following such date; and for purposes of computations
made pursuant to Section 14, the "current market price" per share of Common
Stock for any Trading Day shall be deemed to be the closing price per share of
Common Stock for such Trading Day; provided that if the current market price
per share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities exercisable for or convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite 30 Trading Day or 10 Trading Day period, as set forth above, after
the ex-dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in each such
case, the "current market price" shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
or, if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use or, if on any
such date the shares of Common Stock are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock selected by the Board of
Directors of the Company, or, if at the time of such selection there is an
Acquiring Person, by a majority of the Continuing Directors. If on any such
date no market maker is making a market in the Common Stock, the fair value of
such shares on such date as determined in good faith by the Board of Directors
of the Company (or, if at the time of such determination there is an Acquiring
Person, by a majority of the Continuing Directors) shall be used. If the
Common Stock is not publicly held or not so listed or traded, the "current
market price" per share means the fair value per share as determined in good
faith by the Board of Directors of the Company, or, if at the time of such
determination there is an Acquiring Person, by a majority of the Continuing
Directors, or if there are no Continuing Directors, by a nationally recognized
investment banking firm selected by the Board of Directors, which
determination shall be described in a statement filed with the Rights Agent
and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current
market price" per share of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in Section 11(d)(i) (other than
the last sentence thereof). If the current market price per share of
Preferred Stock cannot be determined in such manner, the "current market
price" per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 100 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied by the
current market price per share of Common Stock (as determined pursuant to
Section 11(d)(i) (other than the last sentence thereof)). If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or traded,
the "current market price" per share of the Preferred Stock shall be
determined in the same manner as set forth in the last sentence of Section
11(d)(i). For all purposes of this Agreement, the "current market price" of
one one-hundredth of a share of Preferred Stock shall be equal to the "current
market price" of one share of Preferred Stock divided by 100.
(iii) For the purpose of any computation hereunder, the value of
any securities or assets other than Common Stock or Preferred Stock shall be
the fair value as determined in good faith by the Board of Directors of the
Company, or, if at the time of such determination there is an Acquiring
Person, by a majority of the Continuing Directors then in office, or, if there
are no Continuing Directors, by a nationally recognized investment banking
firm selected by the Board of Directors, which determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in the Purchase Price;
provided that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common
Stock or other share or one-millionth of a share of Preferred Stock, as the
case may be.
(f) If at any time, as a result of an adjustment made pursuant
to Section 11(a)(ii) or Section 13(a), the holder of any Right shall be
entitled to receive upon exercise of such Right any shares of capital stock
other than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred
Stock contained in Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and
(m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made hereunder shall evidence the right to purchase, at the
Purchase Price then in effect, the then applicable number of one
one-hundredths of a share of Preferred Stock and other capital stock of the
Company issuable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one
one-hundredths of a share for which a Right was exercisable immediately prior
to this adjustment by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of
any adjustment in the number of one one-hundredths of a share of Preferred
Stock issuable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the
number of one one-hundredths of a share of Preferred Stock for which such
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have been
issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for
the Right Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Right Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
one-hundredth of a share and the number of shares which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the par value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-hundredths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock or other
capital stock of the Company, if any, issuable upon such exercise over and
above the number of one one-hundredths of a share of Preferred Stock or other
capital stock of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided that the
Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it, in its sole discretion, shall
determine to be advisable in order that any consolidation or subdivision of
the Preferred Stock, issuance wholly for cash of any Preferred Stock at less
than the current market price, issuance wholly for cash of Preferred Stock or
securities which by their terms are convertible into or exercisable for
Preferred Stock, stock dividends or issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to the holders
of its Preferred Stock, shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it will not at any
time after the Distribution Date (i) consolidate, merge or otherwise combine
with or (ii) sell or otherwise transfer (and/or permit any of its Subsidiaries
to sell or otherwise transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries, taken as a whole, to any
other Person or Persons if (x) at the time of or immediately after such
consolidation, merger, combination or sale there are any rights, warrants or
other instruments or securities outstanding or any agreements or arrangements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger, combination or sale, the
stockholders of a Person who constitutes, or would constitute, the "Principal
Party" for the purposes of Section 13 shall have received a distribution of
Rights previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that after the
Distribution Date, it will not, except as permitted by Sections 23 and 26,
take (or permit any Subsidiary to take) any action if at the time such action
is taken it is reasonably foreseeable that such action will substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Notwithstanding anything in this Agreement to the
contrary, if at any time after the date hereof and prior to the Distribution
Date the Company shall (i) pay a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock into a larger number of shares or (iii) combine the outstanding Common
Stock into a smaller number of shares, the number of Rights associated with
each share of Common Stock then outstanding, or issued or delivered thereafter
as contemplated by Section 3(c), shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately prior
to such event by a fraction the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total
number of shares of Common Stock outstanding immediately following the
occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Sections 11 and 13,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in the manner set forth in Section 25. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment
therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. (a) If, following the Stock Acquisition Date,
directly or indirectly,
(x) the Company shall consolidate with, merge into, or
otherwise combine with, any other Person, and the Company shall not
be the continuing or surviving corporation of such consolidation,
merger or combination,
(y) any Person shall merge into, or otherwise combine with,
the Company, and the Company shall be the continuing or surviving
corporation of such merger or combination and, in connection with
such merger or combination, all or part of the outstanding shares of
Common Stock shall be changed into or exchanged for other stock or
securities of the Company or any other Person, cash or any other
property, or
(z) the Company and/or one or more of its Subsidiaries shall
sell or otherwise transfer, in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries, taken as
a whole, to any other Person or Persons,
then, and in each such case, proper provision shall promptly be made so that
(1) each holder of a Right shall thereafter be entitled to
receive, upon exercise thereof at the Purchase Price in effect immediately
prior to the first occurrence of any Triggering Event, such number of duly
authorized, validly issued, fully paid and nonassessable shares of freely
tradeable Common Stock of the Principal Party (as hereinafter defined), not
subject to any rights of call or first refusal, liens, encumbrances or other
claims, as shall be equal to the result obtained by dividing
(A) the product obtained by multiplying the Purchase Price in
effect immediately prior to the first occurrence of any Triggering
Event by the number of one one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
first occurrence (such product being thereafter referred to as the
"Purchase Price" for each Right and for all purposes of this
Agreement) by
(B) 50% of the current market price (determined pursuant to
Section 11(d)(i)) per share of the Common Stock of such Principal
Party on the date of consummation of such consolidation, merger,
combination, sale or transfer;
(2) the Principal Party shall thereafter be liable for, and
shall assume, by virtue of such consolidation, merger, combination, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement;
(3) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; and
(4) such Principal Party shall take such steps (including the
authorization and reservation of a sufficient number of shares of its Common
Stock to permit exercise of all outstanding Rights in accordance with this
Section 13(a)) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the shares of its
Common Stock thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described in Section
13(a)(x) or (y), the Person that is the issuer of any securities into
which shares of Common Stock of the Company are converted in such
merger, consolidation or combination, and if no securities are so
issued, the Person that survives or results from such merger,
consolidation or combination; and
(ii) in the case of any transaction described in Section
13(a)(z), the Person that is the party receiving the greatest portion
of the assets or earning power transferred pursuant to such
transaction or transactions;
provided that in any such case, (A) if the Common Stock of such Person is not
at such time and has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and such Person is a direct
or indirect Subsidiary of another Person the Common Stock of which is and has
been so registered, "Principal Party" shall refer to such other Person; and
(B) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, combination, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which are not
outstanding or otherwise reserved for issuance to permit the exercise in full
of the Rights in accordance with this Section 13 and unless prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Section 13(a) and (b) and providing that, as soon as practicable after the
date of any consolidation, merger, combination, sale or transfer mentioned in
Section 13(a), the Principal Party will
(i) prepare and file a registration statement under the
Securities Act with respect to the securities issuable upon exercise
of the Rights, and will use its best efforts to cause such
registration statement (A) to become effective as soon as practicable
after such filing and (B) to remain effective (with a prospectus at
all times meeting the requirements of the Securities Act) until the
Expiration Date and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers,
consolidations, combinations, sales or other transfers. If any Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii)
Event, the Rights which have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights, except prior to
the Distribution Date as provided in Section 11(p), or to distribute Right
Certificates which evidence fractional Rights. In lieu of any such fractional
Rights, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
price of a whole Right. For purposes of this Section 14(a), the current
market price of a whole Right shall be the closing price of a Right for the
Trading Day immediately prior to the date on which such fractional Rights
would otherwise have been issuable. The closing price of a Right for any
day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if the Rights are not listed
or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any
national securities exchange, the last quoted price, or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on
any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of
Directors of the Company, or, if at the time of such selection there is an
Acquiring Person, by a majority of the Continuing Directors. If on any
such date no such market maker is making a market in the Rights, the
current market price of the Rights on such date shall be as determined in
good faith by the Board of Directors of the Company, or, if at the time of
such determination there is an Acquiring Person, by a majority of the
Continuing Directors.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are multiples of one
one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are multiples of one one-hundredth of a share of
Preferred Stock). In lieu of any such fractional shares of Preferred Stock,
the Company shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market price of one one-hundredth of a share
of Preferred Stock. For purposes of this Section 14(b), the current market
price of one one-hundredth of a share of Preferred Stock shall be one
one-hundredth of the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)) for the Trading Day immediately prior to
the date of such exercise.
(c) Following the occurrence of any Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common
Stock, the Company shall pay to the registered holders of Right Certificates
at the time such Rights are exercised or exchanged as herein provided an
amount in cash equal to the same fraction of the current market price of a
share of Common Stock. For purposes of this Section 14(c), the current market
price of a share of Common Stock shall be the closing price of a share of
Common Stock (as determined pursuant to Section 11(d)(i)) for the Trading Day
immediately prior to the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect
of this Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing Common Stock); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of any certificate
representing Common Stock), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the Distribution Date, of
any certificate representing Common Stock), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting
the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled
to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of, any Person
subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Sections 6 and 7, the Company and the Rights
Agent may deem and treat the Person in whose name a Right Certificate (or,
prior to the Distribution Date, a certificate representing shares of Common
Stock) is registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or writing on the Right
Certificate or the certificate representing shares of Common Stock made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 7(d), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority prohibiting or otherwise
restraining performance of such obligation; provided that the Company must use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the shares of
capital stock which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate,
as such, any of the rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. (a) The Company
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights
Agent, its reasonable expenses and counsel fees and disbursements and other
disbursements incurred in the execution or administration of this Agreement
and the exercise and performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by
the Rights Agent in connection with the administration of this Agreement or
the exercise or performance of its duties hereunder, including the costs and
expenses of defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with the administration of this Agreement or the exercise or
performance of its duties hereunder in reliance upon any Right Certificate or
certificate for Common Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, instruction, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. (a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at
that time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall
not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any "Acquiring
Person" and the determination of "current market price") be proved or
established by the Company prior to taking, suffering or omitting to take any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the Chairman of the Board,
the President or any Vice President and by the Treasurer or any Assistant
Treasurer or the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken, suffered or omitted in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in
the Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(d)) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13 or 23, or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after actual notice
of any such adjustment); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
shares of Common Stock or Preferred Stock to be issued pursuant to this
Agreement or any Right Certificate or as to whether any shares of Common Stock
or Preferred Stock will, when issued, be duly authorized, validly issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, the President or any Vice President or the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken, suffered or omitted to be taken by it in good
faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not the Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any
other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall
not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
or to any holders of Rights resulting from any such act, default, neglect
or misconduct, provided that reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the cases may be, has
either not been completed or indicates an affirmative response to clause 1 or
2 thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and, subsequent to the Distribution Date, to the holders of
the Right Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and, subsequent to the Distribution Date, to the holders of
the Right Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of
a Right Certificate (who shall, with such notice, submit his Right Certificate
for inspection by the Company), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of any
state of the United States, in good standing, having a principal office in the
State of New York (or such other State acceptable to the Company), which is
authorized under such laws to exercise stock transfer or corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent
without further act or deed; but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at the time held by
it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Not later than the effective date
of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common
Stock and the Preferred Stock, and, subsequent to the Distribution Date,
mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares of stock issuable upon exercise of the Rights made in
accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the
Company may, at its option, at any time prior to the earlier of (i) the close
of business on the tenth day after the Stock Acquisition Date (or such later
date as a majority of the Continuing Directors may designate prior to such
time as the Rights are no longer redeemable) and (ii) the Final Expiration
Date, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"); provided that after any Person has
become an Acquiring Person, any redemption of the Rights shall be effective
only if there are Continuing Directors then in office, and such redemption
shall have been approved by a majority of such Continuing Directors.
Notwithstanding anything in this Agreement to the contrary, the Rights shall
not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of
the Company electing to redeem the Rights and without any further action and
without any notice, the right to exercise the Rights will terminate and
thereafter the only right of the holders of Rights shall be to receive the
Redemption Price for each Right so held. The Company shall promptly
thereafter give notice of such redemption to the Rights Agent and the holders
of the Rights in the manner set forth in Section 25; provided that the failure
to give, or any defect in, such notice shall not affect the validity of such
redemption. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption
Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in Section 23, and other
than in connection with the purchase, acquisition or redemption of shares of
Common Stock prior to the Distribution Date.
Section 24. Notice of Proposed Actions. (a) In case the
Company shall propose, at any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of Preferred Stock or to
make any other distribution to the holders of Preferred Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of its Preferred Stock rights or
warrants to subscribe for or to purchase any additional shares of Preferred
Stock or shares of stock of any class or any other securities, rights or
options, or (iii) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision or combination of
outstanding shares of Preferred Stock) or (iv) to effect any consolidation or
merger with any other Person, or to effect and/or to permit one or more of its
Subsidiaries to effect any sale or other transfer, in one transaction or a
series of related transactions, of assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries,
taken as a whole, to any other Person or Persons, or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Right, to the extent feasible
and in accordance with Section 25, a notice of such proposed action, which
shall specify the record date for the purposes of any such dividend,
distribution or offering of rights or warrants, or the date on which any such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation
therein by the holders of Preferred Stock, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least 20 days prior to the record date for determining
holders of the Preferred Stock entitled to participate in such dividend,
distribution or offering, and in the case of any such other action, at least
20 days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Preferred Stock, whichever shall be
the earlier. The failure to give notice required by this Section or any
defect therein shall not affect the legality or validity of the action
taken by the Company or the vote upon any such action.
(b) Notwithstanding anything in this Agreement to the
contrary, prior to the Distribution Date a public filing by the Company with
the Securities and Exchange Commission shall constitute sufficient notice to
the holders of securities of the Company, including the Rights, for purposes
of this Agreement and no other notice need be given to such holders.
(c) If a Triggering Event shall occur, then, in any such case,
(1) the Company shall as soon as practicable thereafter give to each holder of
a Right, in accordance with Section 25, a notice of the occurrence of such
event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) or 13, as the case may be, and (2)
all references in Section 24(a) to Preferred Stock shall be deemed thereafter
to refer to Common Stock or other capital stock, as the case may be.
Section 25. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Right to or on the Company shall be sufficiently given or made if sent by
first-class mail (postage prepaid) to the address of the Company indicated on
the signature page hereof or such other address as the Company shall specify
in writing to the Rights Agent. Subject to the provisions of Section 21, any
notice or demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail (postage prepaid) to
the address of the Rights Agent indicated on the signature page hereof or such
other address as the Rights Agent shall specify in writing to the Company.
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior
to the Distribution Date, to the holder of any certificate representing shares
of Common Stock) shall be sufficiently given or made if sent by first-class
mail (postage prepaid) to the address of such holder shown on the registry
books of the Company.
Section 26. Supplements and Amendments. Prior to the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date, the Company and the Rights Agent shall,
if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Right Certificates in order (a) to cure any
ambiguity, (b) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein or (c) to
change or supplement the provisions hereof in any manner which the Company may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person). Notwithstanding the foregoing, after any
Person has become an Acquiring Person, any supplement or amendment shall be
effective only if there are Continuing Directors then in office, and such
supplement or amendment shall have been approved by a majority of such
Continuing Directors. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment
is in compliance with the terms of this Section, the Rights Agent shall
execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Stock.
Section 27. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) under the
Exchange Act as in effect on the date of this Agreement. The Board of
Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or exchange or not to redeem or
exchange the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board (or, where specifically provided for herein, by the
Continuing Directors) in good faith shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board of Directors of the Company or the
Continuing Directors to any liability to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the certificates representing the shares of Common
Stock) any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the certificates representing the shares of Common
Stock).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated; provided that, notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company (or, after any Person has become an Acquiring Person,
a majority of the Continuing Directors) determines in its good faith judgment
that severing the invalid language from this Agreement would adversely affect
the purpose or effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the close of
business on the tenth day following the date of such determination by the
Board of Directors or Continuing Directors, as the case may be.
Section 31. Governing Law. This Agreement, each Right and
each Right Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State, except that the
rights and obligations of the Rights Agent shall be governed by the law of the
State of New York.
Section 32. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute one and the same instrument.
Section 33. Descriptive Headings. The captions herein are
included for convenience of reference only, do not constitute a part of this
Agreement and shall be ignored in the construction and interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
DELTIC TIMBER CORPORATION
By: __________________________
Name:
Title:
200 Peach Street
P.O. Box 7000
El Dorado, Arkansas 71731-7000
Attention: Secretary
HARRIS TRUST AND SAVINGS BANK
By: _________________________
Name:
Title:
111 West Monroe
P.O. Box 755
Chicago, Illinois 60690-0755
Attention:
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
DELTIC TIMBER CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, _______________, President, and ____________, Secretary, of
Deltic Timber Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware ("Delaware Law"), in
accordance with the provisions thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation, the Board of
Directors on __________, 1996, adopted the following resolution creating a
series of Preferred Stock in the amount and having the designation, voting
powers, preferences and relative, participating, optional and other special
rights and qualifications, limitations and restrictions thereof as follows:
Section 1. Designation and Number of Shares. The shares of
such series shall be designated as "Series A Participating Cumulative
Preferred Stock" (the "Series A Preferred Stock"), and the number of shares
constituting such series shall be 150,000. Such number of shares of the
Series A Preferred Stock may be increased or decreased by resolution of the
Board of Directors; provided that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares issuable upon exercise or
conversion of outstanding rights, options or other securities issued by the
Corporation.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable on March
1, June 1, September 1 and December 1 of each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of any share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 and (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends or other distributions and
100 times the aggregate per share amount of all non-cash dividends or other
distributions (other than (i) a dividend payable in shares of Common Stock,
par value $.01 per share, of the Corporation (the "Common Stock") or (ii) a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise)), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. If the Corporation shall at any time after
____________, 1996 (the "Rights Declaration Date") pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than
as described in clauses (i) and (ii) of the first sentence of paragraph (A));
provided that if no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date (or, with respect to the
first Quarterly Dividend Payment Date, the period between the first issuance
of any share or fraction of a share of Series A Preferred Stock and such first
Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series
A Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is on or before the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue and be cumulative from the date
of issue of such shares, or unless the date of issue is a date after the
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and on or before such Quarterly
Dividend Payment Date, in which case dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall not be more than 60
days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting
rights required by law, the holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of stockholders of the
Corporation. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of
Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the number of votes
per share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Preferred Stock and the holders of shares of Common
Stock shall vote together as a single class on all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a
period (herein called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series
A Preferred Stock then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders of Preferred Stock
and any other series of Preferred Stock then entitled as a class to elect
directors, voting together as a single class, irrespective of series, shall
have the right to elect two Directors.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless
the holders of 10% in number of shares of Preferred Stock outstanding shall
be present in person or by proxy. The absence of a quorum of holders of
Common Stock shall not affect the exercise by holders of Preferred Stock of
such voting right. At any meeting at which holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting, to elect two
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of Directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Preferred
Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than 10% of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request,
the calling of special meeting of holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by mailing
a copy of such notice to him at his last address as the same appears on the
books of the Corporation. Such meeting shall be called for a time not earlier
than 20 days and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 10% of the total number of
shares of Preferred Stock outstanding, irrespective of series.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References
in this paragraph (C) to Directors elected by the holders of a particular
class of stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of Directors shall be
such number as may be provided for in the certificate of incorporation or
bylaws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the certificate of
incorporation or bylaws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled
by a majority of the remaining Directors.
(D) The Certificate of Incorporation of the Corporation shall
not be amended in any manner (whether by merger or otherwise) so as to
adversely affect the powers, preferences or special rights of the Series A
Preferred Stock without the affirmative vote of the holders of a majority of
the outstanding shares of Series A Preferred Stock, voting separately as a
class.
(E) Except as otherwise provided herein, holders of Series A
Preferred Stock shall have no special voting rights, and their consent shall
not be required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on outstanding shares of Series A
Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series
A Preferred Stock and all such other parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock; provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of stock of the Corporation ranking junior (as to dividends
and upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any
shares of Series A Preferred Stock, or any shares of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Series A
Preferred Stock and all such other parity stock upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for value any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock redeemed, purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock without designation as to
series and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors as permitted by
the Certificate of Incorporation or as otherwise permitted under Delaware Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed per share to holders of
Common Stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such other parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time after the
Rights Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash or any other property, then in any such case the
shares of Series A Preferred Stock shall at the same time be similarly
exchanged for or changed into an amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount
of stock, securities, cash or any other property, as the case may be, into
which or for which each share of Common Stock is changed or exchanged. If the
Corporation shall at any time after the Rights Declaration Date pay any
dividend on Common Stock payable in shares of Common Stock or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The Series A Preferred Stock shall
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank
junior (as to dividends and upon liquidation, dissolution and winding up) to
all other series of the Corporation's preferred stock except any series that
specifically provides that such series shall rank junior to the Series A
Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may
be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate this __ day of ________, 1996.
_______________________________
President
Attest:
___________________________
Secretary
Exhibit B
[Form of Right Certificate]
No. R- ____________Rights
NOT EXERCISABLE AFTER THE EARLIER OF _____________, 1996 AND THE DATE ON WHICH
THE RIGHTS EVIDENCED HEREBY ARE REDEEMED OR EXCHANGED BY THE COMPANY AS SET
FORTH IN THE RIGHTS AGREEMENT. AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BE NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BE OR MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(d) OF THE RIGHTS AGREEMENT.](2)
__________
(2) If applicable, insert this portion of the legend and delete the preceding
sentence.
RIGHT CERTIFICATE
DELTIC TIMBER CORPORATION
This Right Certificate certifies that ______________________,
or registered assigns, is the registered holder of the number of Rights set
forth above, each of which entitles the holder (upon the terms and subject to
the conditions set forth in the Rights Agreement dated as of ______________,
1996 (the "Rights Agreement") between Deltic Timber Corporation, a Delaware
corporation (the "Company"), and Harris Trust and Savings Bank, as Rights
Agent (the "Rights Agent")) to purchase from the Company, at any time after
the Distribution Date and prior to the Expiration Date, ___ one-hundredth[s]
of a fully paid, nonassessable share of Series A Participating Cumulative
Preferred Stock (the "Preferred Stock") of the Company at a purchase price of
$75.00 per one one-hundredth of a share (the "Purchase Price"), payable in
lawful money of the United States of America, upon surrender of this Right
Certificate, with the form of election to purchase and related certificate
duly executed, and payment of the Purchase Price at an office of the Rights
Agent designated for such purpose.
Terms used herein and not otherwise defined herein have the
meanings assigned to them in the Rights Agreement.
The number of Rights evidenced by this Right Certificate (and
the number and kind of shares issuable upon exercise of each Right) and the
Purchase Price set forth above are as of ____________, 1996, and may have been
or in the future be adjusted as a result of the occurrence of certain events,
as more fully provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Right Certificate are beneficially owned by (a) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (b) a transferee
of an Acquiring Person (or any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (c) under certain
circumstances specified in the Rights Agreement, a transferee of an Acquiring
Person (or any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such, such Rights shall
become null and void, and no holder hereof shall have any right with respect
to such Rights from and after the occurrence of such Section 11(a)(ii) Event.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Right
Certificates, which limitations of rights include the temporary suspension of
the exercisability of such Rights under the specific circumstances set forth
in the Rights Agreement.
Upon surrender at the principal office or offices of the Rights
Agent designated for such purpose and subject to the terms and conditions set
forth in the Rights Agreement, any Rights Certificate or Certificates may be
transferred or exchanged for another Rights Certificate or Certificates
evidencing a like number of Rights as the Rights Certificate or Certificates
surrendered.
Subject to the provisions of the Rights Agreement, the Board of
Directors of the Company may, at its option,
(a) at any time prior to the earlier of (i) the close of
business on the tenth day after the Stock Acquisition Date (or such
later date as a majority of the Continuing Directors may designate
prior to such time as the Rights are no longer redeemable) and (ii)
the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right; or
(b) at any time after any Person becomes an Acquiring Person
(but before such Person becomes the Beneficial Owner of 50% or more
of the shares of Common Stock then outstanding), exchange all or part
of the then outstanding Rights (other than Rights held by the
Acquiring Person and certain related Persons) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right.
If the Rights shall be exchanged in part, the holder of this Right
Certificate shall be entitled to receive upon surrender hereof
another Right Certificate or Certificates for the number of whole
Rights not exchanged.
No fractional shares of Preferred Stock are required to be
issued upon the exercise of any Right or Rights evidenced hereby (other than
fractions which are multiples of one one-hundredth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Certificates for the number of whole Rights not exercised.
No holder of this Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the shares of
capital stock which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal by its authorized officers.
Dated as of ________________, 19__
DELTIC TIMBER CORPORATION
By________________________________
Title:
[SEAL]
Attest:
___________________________
Secretary
Countersigned:
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
By_________________________
Authorized Signature
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed if the registered holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________________________________________
hereby sells, assigns and transfers unto _____________________________________
______________________________________________________________________________
(Please print name and address of transferee)
______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _____________________, 19__
__________________________________
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate ___are
___are not being assigned by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it ___did ___did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: __________, 19 __ __________________________________
Signature
__________
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
__________
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to exercise
Rights represented by the Right Certificate.)
To: Deltic Timber Corporation
The undersigned hereby irrevocably elects to exercise ___________
Rights represented by this Right Certificate to purchase shares
of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such securities
be issued in the name of and delivered to:
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced
by this Right Certificate, a new Right Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
Dated: ________________, 19__
______________________________
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate ___are
___are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it ___did ___did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: __________, 19 __ __________________________________
Signature
__________
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
__________
EXHIBIT 10.1
TAX SHARING AGREEMENT
This Agreement is entered into as of the [ ] day of [
], 1996 between Murphy Oil Corporation, ("Murphy Oil"), a Delaware
corporation, and Deltic Timber Corporation ("Deltic"), a Delaware corporation,
successor corporation to Deltic Farm & Timber Co., Inc.
W I T N E S S E T H:
WHEREAS, Murphy Oil and Deltic intend to enter into a
Distribution Agreement dated as of [ ], 1996 (the "Distribution
Agreement"), providing for the distribution by Murphy Oil to its stockholders
of all of the common stock of Deltic (the "Distribution");
WHEREAS, Murphy Oil and Deltic desire to set forth their
agreement on the rights and obligations of Murphy Oil, Deltic and their
respective Affiliates with respect to various Tax matters and the handling and
allocation of federal, state, and local Taxes incurred in Taxable periods
beginning prior to the Distribution Date;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Definitions
(a) As used in this Agreement:
"Affiliate" (and the correlative meaning, "Affiliation") of any
person shall mean any individual, corporation, partnership or other entity
directly or indirectly controlling, controlled by or under common control with
such person.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor thereto.
"Consolidated Federal Tax" shall mean the consolidated Federal
Tax liability of the Murphy Oil Consolidated Group for any period as to which
a consolidated Federal Tax Return is filed by Murphy Oil for such group.
"Deltic Federal Tax Liability" shall mean, with respect to any
Tax Sharing Period, the sum of (i) the Deltic Group's share of Consolidated
Federal Tax and (ii) any interest, penalties or other additions to such Taxes
for such period computed in each case as if the Deltic Group were not and
never were part of the Murphy Oil Group, but rather were a separate affiliated
group of corporations filing a consolidated federal tax return.
"Deltic Group" shall mean the corporations that would be
members of the affiliated group of corporations of which Deltic will be the
common parent (within the meaning of Section 1504 of the Code) immediately
after the Distribution Date and any predecessors or successors thereto.
"Deltic Tax Asset Statement" shall be, with respect to any
Deltic Tax Asset, a computation of the Deltic Tax Asset Value prepared by a
nationally recognized public accounting firm selected by Deltic and acceptable
to Murphy Oil.
"Deltic Tax Asset Value" shall be the hypothetical benefit to
Deltic produced by any Tax Asset attributable to the Deltic Group had such Tax
Asset been utilized by the Deltic Group as a separate affiliated group of
corporations filing a consolidated federal tax return for all periods. Such
hypothetical tax savings shall be calculated in good faith and in accordance
with past practices.
"Distribution Date" shall mean the date on which Murphy Oil
distributes to its stockholders all of the common stock of Deltic.
"Federal Tax" shall mean any Tax imposed under Subtitle A of
the Code.
"Final Determination" shall mean (i) a "determination" as
defined in Section 1313(a) of the Code, (ii) the date of acceptance by or on
behalf of the Internal Revenue Service of Form 870-AD (or any successor form
thereto), as a final resolution of tax liability for any taxable period,
except that a Form 870-AD (or successor form thereto) that reserves the right
of the taxpayer to file a claim for refund and/or the right of the Internal
Revenue Service to assert a further deficiency shall not constitute a Final
Determination with respect to the item or items so reserved; or (iii) the
payment or receipt of Tax by Murphy Oil with respect to any item disallowed or
adjusted by the Internal Revenue Service.
"Murphy Oil Consolidated Group" shall mean, with respect to any
Taxable period, the corporations which are members of the affiliated group of
corporations of which Murphy Oil is the common parent within the meaning of
Section 1504 of the Code.
"Murphy Oil Group" shall mean the corporations which are
members of the Murphy Oil Consolidated Group during any Taxable period,
excluding the corporations which are the members of the Deltic Group.
"Other Taxes" are defined in Section 4.
"Post-Distribution Period" shall mean any taxable period (or
portion thereof) beginning after the close of business on the Distribution
Date.
"Pre-Distribution Period" shall mean any Taxable period (or
portion thereof) ending on or before the close of business on the Distribution
Date.
"Pre-Distribution Tax Liability" shall mean the Consolidated
Federal Tax liability of Murphy Oil for any Pre-Distribution Period and for
the portion of any Taxable period including but not ending on the Distribution
Date.
"Prime" shall mean the rate announced from time to time as
"prime" by Morgan Guaranty Trust Company to Murphy Oil as the prime rate.
"Referee" is defined in Section 16.
"Return" shall mean any Tax return, statement, report or form
(including estimated Tax Returns and reports and information Returns and
reports) required to be filed with any Taxing Authority.
"Tax" (and the correlative meaning, "Taxes," "Taxing" and
"Taxable") shall mean (A) any net income, gross income, gross receipts,
alternative or add-on minimum, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, transfer, recording,
severance, stamp, occupation, premium, property, environmental, custom duty,
or other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition to tax or
additional amount imposed by a Taxing Authority; (B) any liability of Murphy
Oil, Deltic or any Affiliate of Murphy Oil or Deltic (or, in each case, any
successor in interest thereto by merger or otherwise), as the case may be, for
the payment of any amounts of the type described in clause (A) for any taxable
period resulting from the application of Treasury Regulation Section 1.1502-6
or, in the case of any similar provision applicable under state law; and (C)
any liability of Murphy Oil, Deltic or any Affiliate of Murphy Oil or Deltic
(or, in each case, any successor in interest thereto by merger or otherwise)
for the payment of any amounts described in clause (A) as a result of any
express or implied obligation to indemnify any other party.
"Tax Asset" shall mean any net operating loss, net capital
loss, investment tax credit, charitable deduction or any other credit or tax
attribute, including additions to basis of property, which could reduce
Federal Taxes including, without limitation, deductions, credits, or
alternative minimum net operating loss carryforwards related to alternative
minimum taxes.
"Tax Sharing Period" shall mean any taxable period (or any
portion thereof) beginning after December 31, 1986 and ending on the
Distribution Date.
"Tax Package" shall mean one or more packages of information
reasonably necessary for the purpose of preparing Federal Tax Returns of the
Murphy Oil Consolidated Group with respect to a Pre-Distribution Period
completed in all material respects in accordance with the standards that
Murphy Oil has heretofore established for its subsidiaries.
"Taxing Authority" shall mean any governmental authority
responsible for the imposition of any Tax.
(b) Any term used in this Agreement which is not defined in
this Agreement shall, to the extent the context requires, have the meaning
assigned to it in the Code or the applicable Treasury regulations thereunder.
2. Federal Taxes--Administrative and Compliance Matters.
(a) Sole Tax Sharing Agreement. The parties acknowledge that
the members of the Deltic Group are includible in the Murphy Oil Consolidated
Group for the Pre-Distribution Period. Any and all existing tax sharing
agreements or arrangements, written or unwritten, between the Murphy Oil Group
and the Deltic Group shall be terminated as of December 31, 1986, and after
such date this Agreement shall constitute the sole tax sharing agreement
between the Murphy Oil Group and each member of the Deltic Group.
(b) Designation of Agent. Deltic and each member of the
Deltic Group hereby irrevocably designate Murphy Oil as its agent for the
purpose of taking any and all actions (including the execution of waivers of
applicable statutes of limitation) necessary or incidental to the filing of any
Federal Tax Return, any amended Federal Tax Return, or any claim for refund
(including those resulting from an item or Tax Asset which may arise in a
Post-Distribution Period), credit or offset of Tax or any other proceedings in
each case relating to any Pre-Distribution Period.
(c) Pre-Distribution Period Returns. Murphy Oil will prepare
and file the consolidated Federal Tax Returns for all Pre-Distribution
Periods. Deltic shall prepare and deliver to Murphy Oil a Tax Package with
respect to the 1996 taxable year on or before April 1, 1997.
3. Allocation of Federal Taxes.
(a) General. For any Tax Sharing Period, Deltic shall pay to
Murphy Oil an amount equal to the Deltic Federal Tax Liability.
(b) Estimated Payments. Murphy Oil shall determine the
amounts of the estimated tax installments of the Deltic Federal Tax Liability
for 1996. Deltic shall, within 5 days of receipt of such determination, pay to
Murphy Oil the amount so determined.
(c) Payment of Taxes for Tax Sharing Periods.
(i) On or before 5 days prior to the due date (including
all applicable and valid extensions) for the Murphy Oil
Consolidated Group's Federal Tax Return, Murphy Oil shall
deliver a statement to Deltic reflecting the Deltic Federal Tax
Liability with respect to the period covered by such Return.
(ii) On or before the date Murphy Oil files its Federal
Tax Return for which payments are to be made under this
Agreement, Deltic shall pay to Murphy Oil, or Murphy Oil shall
pay to Deltic, as appropriate, an amount equal to the
difference, if any, between (x) the Deltic Federal Tax Liability
for such period and (y) the aggregate amount of estimated
installments paid with respect to the Deltic Federal Tax
Liability for such period made pursuant to Section 3(b).
(iii) If a Federal Tax Return reflects a Tax Asset,
attributable to the Deltic Group, that may under applicable law
be used to reduce Consolidated Federal Tax, then within 30 days
of receipt by Murphy Oil of a Deltic Tax Asset Statement,
Murphy Oil shall pay to Deltic the amount owing pursuant to
such Deltic Tax Asset Statement.
(d) Treatment of Adjustments for Tax Sharing Periods. If any
adjustment is made in a Federal Tax Return of the Murphy Oil Consolidated
Group for a Tax Sharing Period, after the filing thereof, in which income or
loss of the Deltic Group is included, then at the time of a Final
Determination of the adjustment, Murphy Oil shall pay Deltic or Deltic shall
pay to Murphy Oil, as the case may be, the difference between all payments
actually made under Section 3 with respect to the taxable year or period
covered by such Tax Return and all payments that would have been made under
Section 3 taking such adjustment into account, together with any penalties and
interest actually paid for each day until the date of Final Determination.
(e) Carrybacks and Certain Other Matters.
(i) Deltic agrees to carry to Pre-Distribution Periods
any Tax Asset as to which such carryback is optional, if
requested to do so by Murphy Oil.
(ii) Murphy Oil agrees to pay Deltic the Deltic Tax
Asset Value for any Deltic Tax Asset arising in a
Post-Distribution period that may under applicable law be used
to reduce the Federal Tax of the Murphy Oil Consolidated Group
for any Pre-Distribution period. Within 30 days of receipt by
Murphy Oil of a Deltic Tax Asset Statement, Murphy Oil's
obligations under this paragraph 3(e)(ii) shall be satisfied by
paying to Deltic the amount owing pursuant to such Deltic Tax
Asset Statement.
(iii) If, subsequent to the payment by Murphy Oil to
Deltic of any amount referred to in Section 3(e)(ii) above,
there shall be a Final Determination which results in a
disallowance or a reduction of the Deltic Tax Asset so carried
back, Deltic shall repay to Murphy Oil within 30 days of such
event the amount which would not have been payable to Deltic
pursuant to Section 3(e)(ii) had the amount of the benefit been
determined in light of such event, plus interest at a rate
equal to Prime computed from the date of payment made pursuant
to Section 3(c)(ii) and penalties, if any, imposed solely in
connection with a disallowance or reduction of the Deltic Tax
Asset.
4. Other Taxes
(a) Liability for all Taxes other than Federal Taxes ("Other
Taxes"), attributable to any member of the Deltic Group, shall be the sole
responsibility of the Deltic Group. The responsibility for filing all Returns
relating to Other Taxes attributable to any member of the Deltic Group for all
Tax periods ending on or before the Distribution Date shall be the sole
responsibility of Murphy Oil. Except as otherwise provided in the Distribution
Agreement, the responsibility for filing all Returns relating to Other Taxes
attributable to any member of the Deltic Group for all Tax periods ending
after the Distribution Date shall be the sole responsibility of Deltic.
Liability for Other Taxes attributable to any member of the Murphy Oil Group
and the responsibility for filing all Returns relating to such Other Taxes
shall be the sole responsibility of the Murphy Oil Group. Each party agrees
to indemnify and hold the other harmless in accordance with the undertakings
contained in this Section 4(a).
(b) The Deltic Group shall be entitled to all refunds and
credits of Other Taxes attributable to any member of the Deltic Group, and the
Murphy Oil Group shall be entitled to all refunds and credits of Other Taxes
attributable to any member of the Murphy Oil Group.
5. Certain Representations and Covenants.
(a) Representations. Deltic and Murphy Oil, as the case may
be, represent that, as of the date hereof and on the Distribution Date, (i)
there is no plan or intention (A) to liquidate Deltic or Murphy Oil or to
merge Deltic or Murphy Oil with any unaffiliated corporation subsequent to the
Distribution or (B) to sell or otherwise dispose of any asset of Deltic or
Murphy Oil subsequent to the Distribution, except, in each case, in the
ordinary course of business; (ii) neither Deltic nor Murphy Oil is aware of
any plan or intention by the current stockholders of Murphy Oil to sell,
exchange, transfer by gift, or otherwise dispose of any of their stock in
Murphy Oil or Deltic subsequent to the Distribution; and (iii) Murphy Oil has
received a representation to that effect from C.H. Murphy, Jr., First United
Bancshares, First National Bank of El Dorado and First National Bank of
Magnolia.
(b) Deltic Covenants. Deltic covenants to Murphy Oil that
(i) during the two-year period following the Distribution Date it will not
liquidate, merge, consolidate, combine or affiliate with any other person,
discontinue or materially change the conduct of a material portion of its
businesses independently and with its own employees, redeem or otherwise
reacquire its stock, or sell, exchange, distribute or otherwise dispose of its
assets other than (A) in the ordinary course of business or (B) in the case of
any disposition by Deltic of its farmland, in the event an attractive
unsolicited offer is received; (ii) following the Distribution, Deltic will,
for a minimum of two years, continue the active conduct of the historic
business conducted by Deltic throughout the five year period prior to the
Distribution; (iii) within one year of the Distribution, Deltic will use its
best efforts to consummate an offering of $30-40 million of common,
convertible preferred or "straight" preferred stock, provided that in no event
will the offering, when added to any other issuances of stock by Deltic that
are contemplated at the time of the Distribution Date, exceed an amount that,
if all such issuances were treated as made immediately prior to the
Distribution, would cause Murphy Oil to own less than 80% of the total combined
voting power of all classes of stock of Deltic entitled to vote or less than
80% of the total number of shares of all other classes of stock of Deltic;
(iv) that it will diligently undertake to effectuate its growth strategies,
including the acquisition of timber properties, in accordance with the plan
presented to the Board of Directors of Murphy on August 7, 1996, and (v) on or
after the Distribution, Deltic will not, nor will it permit any member of the
Deltic Group to, make or change any accounting method, amend or take any Tax
position on any Tax Return, take any other action, omit to take any action or
enter into any transaction that reasonably could be expected to result in any
increased Tax liability or reduction of any Tax Asset of the Murphy Oil
Consolidated Group or any member thereof (immediately after the Distribution)
in respect of any Pre-Distribution Period, without first obtaining the written
consent of an authorized representative of Murphy Oil.
(c) Murphy Oil Covenants. On or after the Distribution,
Murphy Oil will not, nor will it permit any member of the Murphy Oil Group to
make or change any accounting method, amend any Tax Return or take any Tax
position on any Tax Return, take any other action, omit to take any action or
enter into any transaction that reasonably could be expected to result in any
increased Tax liability or reduction of any Tax Asset of the Deltic Group or
any member thereof (immediately after the Distribution) in respect of any
Pre-Distribution Period, without first obtaining the written consent of an
authorized representative of Deltic.
(d) Exceptions. Notwithstanding the foregoing, Deltic may
take actions inconsistent with the covenants contained in Section 5(b)(i) and
5(b)(ii) above, or may, within one year of the Distribution, issue shares in
excess of the amount described in Section 5(b)(iii) above if:
(i) Deltic obtains a ruling from the Internal Revenue Service
to the effect that such actions will not result in the Distribution
being taxable to Murphy Oil or its stockholders; or
(ii) Deltic obtains an unqualified opinion acceptable to Murphy
Oil to the same effect as in Section 5(d)(i) from a nationally
recognized independent tax counsel.
(e) Best Efforts. For purposes of the covenant contained in
Section 5(b)(iii), if Deltic does not make the offering described therein
within one year of the Distribution, Deltic will be considered to have used its
best efforts to do so if Deltic obtains a ruling from the Internal Revenue
Service to the effect that failure to make such offering will not result in
the Distribution being taxable to Murphy Oil or its stockholders.
6. Indemnities.
(a) Deltic Indemnity. Deltic and each member of the Deltic
Group will jointly and severally indemnify Murphy Oil and each member of the
Murphy Oil Group, against and hold them harmless, on an after tax basis, from
(i) any Pre-Distribution Tax Liability assessed after the
Distribution Date pursuant to a Final Determination, to the extent
attributable to an adjustment of any item of income, gain, gross
receipts, loss, credit, deduction or other tax attribute of any
member of the Deltic Group;
(ii) any liability resulting from a breach by Deltic or any
member of the Deltic Group after the Distribution Date of any
representation or covenant made by Deltic herein; and
(iii) all direct and indirect costs and expenses (including,
without limitation, legal fees and expenses and any personnel costs
and expenses) incurred by Murphy Oil with respect to any item or
liability described in Section 6(a)(i) or (ii).
(b) Murphy Oil Indemnity. Murphy Oil and each member of the
Murphy Oil Group will jointly and severally indemnify Deltic and each member
of the Deltic Group against and hold them harmless, on an after tax basis from
(i) any Pre-Distribution Tax Liability, other than any such
liabilities described in Sections 6(a)(i) or (ii) hereof,
(ii) any liability resulting from a breach by Murphy Oil or any
member of the Murphy Oil Group after the Distribution Date of any
representation or covenant made by Murphy Oil herein.
(c) Discharge of Indemnity. Deltic and Murphy Oil shall
discharge their obligations under Sections 6(a) and 6(b) hereof, respectively,
by paying the relevant amount within 15 days of demand therefor. After a Final
Determination of an obligation of Deltic under Section 6(a), Murphy Oil shall
send a statement to Deltic showing the amount due thereunder. Notwithstanding
the foregoing, if either Deltic or Murphy Oil disputes in good faith the fact
or amount of its obligation under Section 6(a) or Section 6(b), then no
payment of the amount in dispute shall be required until any such good faith
dispute is resolved in accordance with Section 16 hereof; provided, however,
that any amount not paid within 30 days of demand therefor shall bear interest
at a rate equal to Prime computed from the date of demand.
(d) Refunds. Any refunds of Tax, net of any tax payable by
reason of the receipt of such refund, received by Murphy Oil relating to a
Pre-Distribution Period, to the extent attributable to any item or adjustment
of any item of income, loss, credit, deduction or other tax attribute of any
member of the Deltic Group shall be paid by Murphy Oil to Deltic within 30
days of receipt of such refund.
(e) Method of Calculation. Except as otherwise provided, the
amount of Deltic's liability under Section 6(a)(i) and Murphy Oil's liability
under Section 6(b)(i) and 6(d) shall be calculated as if the Deltic Group were
not and never were part of the Murphy Oil Group, but rather were a separate
affiliated group of corporations filing a Consolidated Federal Tax Return.
7. Communication and Cooperation.
(a) Consult and Cooperate. Deltic and Murphy Oil shall
consult and cooperate (and shall cause each of their Affiliates to cooperate)
fully at such time and to the extent reasonably requested by the other party
in connection with all matters subject to this Agreement. Such cooperation
shall include, without limitation,
(i) the retention and provision on reasonable request of any
and all information including all books, records, documentation or
other information, any necessary explanations of information, and
access to personnel, until the expiration of the applicable statute
of limitation (giving effect to any extension, waiver, or mitigation
thereof);
(ii) the execution of any document that may be necessary or
helpful in connection of any required Return or in connection with
any audit, proceeding, suit or action; and
(iii) the use of the parties' best efforts to obtain any
documentation from a governmental authority or a third party that may
be necessary or helpful in connection with the foregoing.
(b) Provide Information. Murphy Oil and Deltic shall keep
each other fully informed with respect to any material development relating to
all matters subject to this Agreement.
8. Audits and Contest.
(a) Murphy Oil shall have full control over all matters
relating to any Federal Tax Return filed by the Murphy Oil Consolidated Group
or any Federal Tax audit, dispute or proceeding (whether administrative or
judicial) relating to any Tax matters of the Murphy Oil Consolidated Group.
Murphy Oil shall have absolute discretion with respect to any decisions to be
made, or the nature of any action to be taken, with respect to any matter
described in the preceding sentence.
(b) With respect to Returns relating to Other Taxes
attributable to any member of the Deltic Group, except as otherwise provided
in the Distribution Agreement, Deltic shall have full control over all matters
relating to any state audit, dispute or proceeding (whether administrative or
judicial) in connection therewith. Deltic shall have absolute discretion with
respect to any decisions to be made, or the nature of any action to be taken,
with respect to any matter described in the preceding sentence.
9. Payments.
All payments to be made hereunder shall be made in immediately
available funds. Payments shall be deemed made when received.
10. Notices.
Any notice, demand, claim, or other communication under this
Agreement shall be in writing and shall be deemed to have been given upon the
delivery or mailing thereof, as the case may be, if delivered personally or
sent by certified mail, return receipt requested, postage prepaid, to the
parties at the following addresses (or at such other address as a party may
specify by notice to the other):
If to Murphy Oil, to:
Murphy Oil Corporation
200 Peach Street
P.O. Box 7000
El Dorado, AR 71731-7000
Attn: Income Tax Manager
If to Deltic, to:
Deltic Timber Corporation
200 Peach Street
P.O. Box 7000
El Dorado, AR 71731-7000
Attn: Vice President, Finance and Administration
11. Costs and Expenses.
Except as expressly set forth in this Agreement, each party
shall bear its own costs and expenses incurred pursuant to this Agreement.
For purposes of this Agreement, "out-of-pocket" expenses shall include
reasonable attorney fees, accountant fees and other related professional fees
and disbursements.
12. Effectiveness; Termination and Survival.
This Agreement shall become effective upon the consummation of
the Distribution. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall remain in effect and its provisions shall survive for the
full period of all applicable statutes of limitation (giving effect to any
extension, waiver or mitigation thereof).
13. Section Headings.
The headings contained in this Agreement are inserted for
convenience only and shall not constitute a part hereof or in any way affect
the meaning or interpretation of this Agreement.
14. Entire Agreement; Amendments and Waivers.
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein. No alteration, amendment, modification, or waiver of any of
the terms of this Agreement shall be valid unless made by an instrument signed
by an authorized officer of Murphy Oil and Deltic, or in the case of a waiver,
by the party against whom the waiver is to be effective.
(b) Waiver. No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver hereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege.
15. Governing Law and Interpretation. This Agreement has
been made in and shall be construed and enforced in accordance with the laws
of the State of Arkansas without regard to principles of conflicts of law.
16. Dispute Resolution. If the parties hereto are unable to
agree to resolve any disagreement or dispute relating to this Agreement other
than with respect to Section 5 within 20 days, such disagreement or dispute
shall be resolved by a nationally recognized law firm or accounting firm
expert in tax matters that is mutually acceptable to the parties hereto
("Referee"). A Referee so chosen shall resolve any such disagreement pursuant
to such procedures as it may deem advisable. Any such resolution shall be
binding on the parties hereto without further recourse. The costs of any such
Referee shall be apportioned between Murphy Oil and Deltic as determined by
such Referee in such manner as the Referee deems reasonable, taking into
account the circumstances of the dispute, the conduct of the parties and the
resolution of the dispute.
17. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
18. Assignments; Third Party Beneficiaries.
This Agreement shall be binding upon and shall inure only to the benefit of
the parties hereto and their respective successors and assigns. This
Agreement is not intended to benefit any person other than the parties hereto
and such successors and assigns, and no such other person shall be a third
party beneficiary hereof.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year first written above.
Murphy Oil on its own behalf and on
behalf of the companies
listed on Schedule 1 hereto.
By:__________________________
Title:_______________________
Deltic on its own behalf and on
behalf of the companies
listed on Schedule 2 hereto.
By:__________________________
Title:_______________________
Schedule 1
Arkansas Oil Company
El Dorado Exploration, S.A.
Murphy Denmark Oil Company
Murphy Eastern Oil Company
Murphy Equatorial Guinea Oil company
Murphy France Oil Company
Murphy Ireland Oil Company
Murphy Italy Oil Company
Murphy Loop, Inc.
Murphy Latin America Refining & Marketing, Inc.
Murphy New Zealand Oil Company
Murphy Oil Trading Company (Eastern)
Murphy Pakistan Oil Company
Norske Murphy Oil Company
Spur Oil Corporation
Murphy Gas Gathering, Inc.
New Murphy Oil (U.K.) Corporation
Murphy Exploration & Production Company
Murphy Building Corporation
El Dorado Engineering, Inc.
El Dorado Contractors, Inc.
Ocean International Finance Corporation
Norske Ocean Exploration Company
Ocean Spain Oil Company
Ocean Exploration Company
ODECO Gabon Oil Company
Ocean Gabon Oil Company
Murphy Overseas Ventures, Inc.
ODECO Italy Oil Company
Ocean France Oil Company
Mentor Holding Corporation
Murphy Western Oil Company
Mentor Excess & Surplus Lines Insurance Co.
Mentor Insurance and Reinsurance Corporation
Murphy Spain Oil Company
Murphy Somalia Oil Company
Murphy Yemen Oil Company
Murphy Oil USA, Inc.
Murphy Ventures Corporation
Murphy South Atlantic Oil Company
Schedule 2
Deltic Timber Purchasers, Inc.
Chenal Properties, Inc.
