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As Filed with the Securities and Exchange Commission on April 23, 1998
File No. 0-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
ANDERSON-TULLY COMPANY
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(Exact Name of Registrant as
Specified in Its Charter)
Mississippi 62-0115690
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1242 North Second Street
P.O. Box 28
Memphis, TN 38101
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(Address of Principal (ZIP Code)
Executive Offices)
Registrant's telephone number, including area code: (901) 576-1400
Securities to be registered pursuant to Section 12(b) of the Act:
Not Applicable Not Applicable
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Title of each class Name of each exchange on which
to be so registered each class is to be registered
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
par value, $2,000.00 per share
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(Title of class)
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Certain statements in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Pro Forma Financial
Statements and elsewhere in this Registration Statement contain or may contain
information that is forward-looking, including, without limitation: statements
regarding the effect of the Merger (as defined herein); the Company's future
financial performance; the attempt of the Company to qualify as a real estate
investment trust (a "REIT") and the effect of government regulations. Actual
results may differ materially from those described in the forward-looking
statements and will be affected by a variety of risks and factors including,
without limitation: national and local economic conditions; the terms of
governmental regulations that affect the Company and its subsidiaries and
interpretations of those regulations; the competitive environment in which the
Company and its subsidiaries operate; and possible environmental regulations.
In addition, the Company's continued qualification as a REIT involves the
application of highly technical and complex provisions of the Internal Revenue
Code. Readers should carefully review this Registration Statement in its
entirety, including but not limited to the Consolidated Financial Statements of
the Company and the Pro Forma Condensed Consolidated Financial Information and
the notes thereto, as well as the risk factors described herein.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Anderson-Tully Company, a Mississippi corporation (the "Company"), was
formed in 1889 and is one of the largest private owners of high quality hardwood
timberlands in North America. The timberlands, which are located along the
Mississippi River primarily in Mississippi, Arkansas, Louisiana and Tennessee,
include approximately 324,000 fee acres of hardwood timberlands (the
"Timberlands"). The Company also owns approximately 8,000 acres of farmland and
has interests in six commercial real estate properties.
The Company is principally engaged in the business of managing its
timberlands and having its standing timber harvested by Anderson-Tully Timber
Company, a Mississippi corporation ("AT Timber"), pursuant to a timber cutting
contract that qualifies for special treatment under Section 631(b) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Company owns 100%
of the non-voting preferred stock in two corporations and has a wholly owned
subsidiary which is the general partner of and a limited partner in a limited
partnership, which controls entities engaged in the harvesting, production and
sale of timber and wood products (including hardwood lumber, rotary veneer, logs
and pulpwood) and the river construction business. The Company will elect to be
taxed as a REIT effective as of January 1, 1998. As a REIT, the Company, except
to the extent described below, will not be subject to Federal corporate income
taxes to the extent that its income is distributed to shareholders of the
Company ("Shareholders"). See "Taxation of the Company."
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CORPORATE STRUCTURE AND CONSOLIDATION METHOD
After giving effect to the 1997 Restructuring Transactions described below,
the Company owns 100% of the non-voting preferred stock representing 82.2% of
the economic interest in AT Timber, which harvests the Company's standing timber
from the Company pursuant to the Timber Harvest Agreement (as described herein)
and resells logs and pulpwood, and 100% of the non-voting preferred stock
representing 95% of the economic interest in Anderson-Tully Lumber Company, a
Mississippi corporation ("AT Lumber"), which manufactures and sells hardwood
lumber. A wholly owned subsidiary of the Company owns a 1% general partnership
interest and a 0.3% limited partnership interest in Anderson-Tully Veneers, L.P.
("Veneers"), which was formed in 1995 to enter the market to produce and sell
hardwood rotary veneer. Veneers owns 100% of the common stock of Anderson-Tully
Management Services LLC ("AT Management"), which provides administrative and
management services to all related entities, and 100% of the common stock of
Patton-Tully Transportation LLC ("PT Transportation"), which is engaged in the
river construction business formerly conducted by PT Transportation prior to the
Restructuring Transactions. AT Management owns (i) 100% of the common stock
representing 17.87% of the economic interest in AT Timber and (ii) 100% of the
common stock representing 5% of the economic interest in AT Lumber. Shareholders
of the Company currently hold, in the aggregate, a 98.7% interest in Veneers as
limited partners. The limited partners of Veneers (the "Limited Partners") have
the exclusive voting authority for the common stock of AT Lumber and AT Timber.
An organizational chart of the significant operating entities is presented on
the following page.
Prior to the 1997 Restructuring Transactions, the Company controlled the
operations of Veneers as managing general partner and guaranteed Veneers'
indebtedness. Accordingly, Veneers' assets, liabilities and results of
operations were included in the consolidated financial statements of the
Company, with appropriate recognition of the Limited Partners' 98.7% minority
interest. After the 1997 Restructuring Transactions, a wholly owned subsidiary
of the Company controls the operations of Veneers as managing general partner,
the Company possesses a substantial majority of the economic interest of AT
Timber and AT Lumber, and the Company guarantees collection of all indebtedness
of Veneers and its subsidiaries. Accordingly, the assets, liabilities and
results of operations for Veneers, AT Timber, AT Lumber, AT Management and PT
Transportation will continue to be included in the consolidated financial
statements of the Company with appropriate recognition of the Limited Partners'
98.7% minority interest.
THE 1997 RESTRUCTURING TRANSACTIONS
In December 1997, the Limited Partners approved certain amendments to
the Limited Partnership Agreement of Veneers (the "Partnership Agreement") and
certain other matters (collectively, the "Restructuring Transactions") in
connection with the restructuring of the Company, Veneers and certain of their
respective subsidiaries and affiliates (the "Restructuring"). The Restructuring
Transactions included the following principal transactions: (i) the contribution
by the Company of a substantial portion of its non-real estate assets to
Veneers, AT Timber and AT Lumber in exchange for limited partner interests in
Veneers ("LP Interests") and all of the shares of non-
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[AN ORGANIZATIONAL CHART OF THE COMPANY AND ITS
SIGNIFICANT OPERATING ENTITIES IS PRESENTED
ON THIS PAGE.]
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voting preferred stock in AT Timber and AT Lumber; (ii) the formation by the
Company of Anderson-Tully GP Company (the "New General Partner") ; (iii) the
contribution by the Company to the New General Partner of the Company's general
partner and limited partner interests in Veneers; (iv) transfer by the Company
to the New General Partner of all of the Company's rights to vote the
partnership percentage interests of Permitted Transferees; (v) the amendment of
the Partnership Agreement to reflect the admission of the New General Partner as
the managing general partner of Veneers; (vi) the contribution by Veneers of
certain timber production and related assets to AT Timber and AT Lumber in
exchange for shares of the common stock in AT Timber and AT Lumber; (vii)
contribution by Veneers of the common stock in AT Timber and AT Lumber in
exchange for 100% of the total number of authorized membership interests in AT
Management and (viii) the assumption by Veneers, AT Lumber and AT Timber of
certain indebtedness incurred by the Company, or the incurrence of certain
indebtedness by Veneers, in either case with collection of such indebtedness
guaranteed in full by the Company. The Restructuring Transactions also
eliminated provisions contained in the Company's Bylaws and in the Partnership
Agreement that shares of Common Stock may only be transferred in tandem with
limited partnership interests in light of the Company's intention to qualify as
a REIT.
The purpose of the Restructuring was to effect the separation of the
Company's timberlands, farmland and commercial real estate holdings from its
other operations, including the harvesting of timber and the production,
marketing and sale of wood products and river construction and transportation
operations. The Restructuring Transactions were primarily designed to permit
the Company to satisfy the REIT qualification tests concerning the nature of a
REIT's income and assets.
The Company anticipates deriving a substantial portion of its income from
the harvesting of standing timber pursuant to timber cutting contracts that
qualify for special treatment under Section 63l(b) of the Code. The Company
currently has its standing timber harvested pursuant to a single timber cutting
contract with AT Timber. See "Timber Harvest Agreement with AT Timber." The
income derived by the Company from the qualifying timber cutting contract
generally will be characterized as long-term capital gains for Federal income
tax purposes. As a REIT, the Company generally will be able to pass through
such long-term capital gains to Shareholders. See "Taxation of the Company -
Income Tests."
THE MERGER AND THE ASSET SALE
On February 9, 1998, the Company entered into an Agreement and Plan of
Merger, dated as of February 9, 1998 (the "Merger Agreement"), with Potlatch
Corporation ("Potlatch"), Timberland Growth Corporation ("Newco"), a company
newly organized by Potlatch, and Beaver Acquisition Corporation, a newly formed
wholly owned subsidiary of Newco ("Newsub"). The Merger Agreement provides for
the merger (the "Merger") of the Company with Newsub. If the Merger is
completed, each outstanding share of Common Stock (excluding shares of the
Common Stock held in the Company's treasury, or held by the Company's
subsidiaries and Shareholders who validly perfect dissenters' rights) will be
canceled and converted into the right to receive an amount of cash per share
determined by a formula set forth in the Merger Agreement.
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Simultaneously with and conditioned upon completion of the Merger,
Potlatch will acquire for cash substantially all of the assets of and will
assume certain liabilities of Veneers relating to its veneer operations, and of
AT Management, including the Common Stock of AT Timber and AT Lumber, pursuant
to an Asset Purchase Agreement, dated as of February 9, 1998 (the "Asset
Purchase Agreement"), among Potlatch, Veneers and AT Management (such
transactions are referred to as the "Asset Sale").
The transactions contemplated by the Merger Agreement have been approved by
the Board of Directors and the Shareholders of the Company and the Asset
Purchase Agreement by the Limited Partners of Veneers, the Board of Directors of
the New General Partner and the Board of Managers of AT Management. Following
approval of the Merger by Shareholders, neither the Company nor any of its
subsidiaries may, directly or indirectly, participate in any discussions with
respect to, or accept any proposal or offer from any person relating to (i) any
acquisition of a substantial amount of assets of the Company or any of its
subsidiaries (other than in the ordinary course of business) or any of the
outstanding capital stock of the Company or (ii) an offer to purchase
outstanding shares of capital stock of the Company or any of its subsidiaries or
(iii) merger, consolidation, business, combination, sale of substantially all of
the assets, recapitalization, liquidation or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
the Merger Agreement.
There can be no assurance that the Merger and the Asset Sale will be
completed. The Merger and the Asset Sale are conditioned upon the completion of
one another. In addition, both the Merger and the Asset Sale are conditioned
upon the completion of an initial public offering by Newco, the expiration or
earlier termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
inapplicability or satisfaction of the requirements of the Mississippi River
Timberlands Act of 1991 (the "Timberlands Act") to the Merger. Notice of early
termination of the applicable waiting period under the HSR Act was received on
April 21, 1998.
INDUSTRY CONDITIONS
TIMBER SUPPLY. Nationwide, timber supplies have tightened relative to
demand over the last decade. Particularly in the western United States, the
supply of timber has been significantly affected by reductions in timber sales
by the United States government, which owns approximately 20% of all domestic
timberland acreage, and by state governments. For example, federal timber under
contract in the United States declined from 21.8 BBF in 1986 to 5.9 BBF in 1997.
These reductions have been caused primarily by increasingly stringent
environmental and endangered species laws and by a change in the emphasis of
domestic governmental policy toward habitat preservation, conservation and
recreation, and away from timber management. Because most timberlands in the
southeastern United States are privately owned, changes in sales of publicly
owned timber affect local timber supplies and prices in the Southeast less
immediately than in the western United States and other regions with large
proportions of public timber ownership.
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More locally, timber supplies can fluctuate depending upon factors such as
changes in weather conditions and harvest strategies of local forest products
industry participants, as well as occasionally high timber salvage efforts due
to unusual pest infestations or fires. Local timber supplies also change in
response to prevailing timber prices. Rising timber prices often lead to
increased harvesting on private timberlands, including lands not previously made
available for commercial timber operations.
DEMAND. The demand for timber and wood products is dependent upon the
markets for lumber, furniture, panel products, paper and other pulp-based
products, which are affected by changes in domestic and international economic
conditions, global population growth and other demographic factors, and the
value of the U.S. dollar in relation to foreign currencies. The end uses for
timber vary widely, depending on species, size and quality. As described below,
hardwoods and softwoods are utilized in different markets, although their usage
overlaps to some extent. For example, most paper products use a blend of
softwood and hardwood fiber. Historically, timber demand has experienced
cyclical fluctuations, although sometimes at different times and rates within
the markets for solid woods and pulpwood. Locally, timber demand also
fluctuates due to the expansion or closure of individual conversion facilities.
Substantially all of the Company's business involves hardwoods, with
softwood timber comprising less than 2% of total timber quantities. Hardwoods
and softwoods are targeted at different customers and experience different
market dynamics. Higher quality hardwoods, such as those managed by the
Company, depend primarily upon the market for furniture, flooring, cabinets and
architectural moldings. Softwoods such as pine are used primarily for
residential construction, industrial uses and pulp. Accordingly, the demand for
softwoods is significantly dependent upon the level of residential construction
and remodeling activity, which is affected by interest rates and other economic
and demographic factors. Reductions in residential construction and remodeling
activities are generally followed by declining softwood lumber prices, which are
usually followed by declining log prices within two or three months. While tied
to housing starts and home remodeling activity to some extent, the end uses for
hardwoods are not as directly dependent on construction activities as softwoods,
and thus are generally less susceptible to seasonal downturns in construction.
SOUTHEASTERN REGION. All of the Company's operations are currently located
in the southeastern United States, which is a major timber producing region.
The Company's holdings are primarily in Mississippi, Arkansas, Louisiana and
Tennessee. Mississippi and Arkansas are heavily wooded states, with a high
percentage of privately owned timberlands. In Mississippi, the forest products
industry owns approximately 18% of all timberlands, other private owners hold
72%, and government agencies own the remaining 10%. In Arkansas, the forest
products industry currently owns approximately 25% of all timberland and other
private owners hold 57%, with the balance owned by government agencies. The
forest products industry in the southeastern United States supports a variety of
hardwood and softwood sawmills, veneer and plywood plants, pulp mills and other
conversion facilities.
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BUSINESS SEGMENTS
The Company, Veneers, AT Timber, AT Lumber and PT Transportation primarily
operate in three industry segments - Timber and Wood Products, River
Construction and Commercial Real Estate. Information relating to the amounts of
revenue, income from operations and identifiable assets for each of the
Company's industry segments for the fiscal years ended July 31, 1995, 1996, 1997
and the five month period ended December 31, 1997 are presented in Note 10 to
the Consolidated Financial Statements set forth beginning at page F-1 of this
Registration Statement.
OPERATIONS - TIMBER AND WOOD PRODUCTS SEGMENT
THE TIMBERLANDS
The Company currently owns and manages approximately 324,000 fee acres (of
which 36,000 acres includes roads, right-of-ways and other non-productive
acreage) of timberland located primarily in Mississippi, Arkansas, Louisiana and
Tennessee containing a total estimated merchantable saw timber volume of
approximately 1.6 BBF, as well as approximately 11.8 million tons of pulpwood.
Approximately 70% of the Timberlands acreage consists of relatively flat
bottomland sites within the Mississippi River basin, and the remainder consists
of upland sites with more diverse terrain. Historically, the Company managed its
timberlands with the principal goal of increasing stocking levels of desired
species. As a result, the Timberlands are densely stocked with an average
volume of approximately 5,500 BF per timbered acre. The Timberlands also
benefit from excellent growing conditions, including rich soils, warm climate,
long growing season and ample moisture. These stocking levels and growing
conditions combine to produce annual growth of approximately 230 BF per acre,
which is more than three times greater than recent averages on all hardwood
timberlands available for commercial harvesting in the Company's operating
region, based on USFS data. The Company believes that these lands produce
premium quality hardwoods. The Company estimates that over 40% of its hardwood
sawtimber is USFS #1 grade, which is more than four times the recent averages on
all hardwood timberlands available for commercial harvesting in the Company's
operating region, based on USFS data. ln addition, approximately two-thirds of
the Company's hardwood sawtimber is in trees with diameter at breast height of
at least 21 inches, compared to recent averages of approximately 22% on all
hardwood timberlands for commercial harvesting in the Company's operating
region, based on USFS data. The superior grade and size of the Company's
hardwood sawtimber results in better yields of wide lumber and lumber with
minimal appearance defects, which is more suitable for high-end uses such as
furniture and commands premium prices.
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TIMBER QUANTITIES
Estimated timber quantities set forth below are based upon estimates derived
from the Company's most recent continuous forest inventory system measurement
concluded as of January 31, 1998. All of the timber quantities shown in this
Registration Statement are approximations developed by Company personnel, from
which actual quantities of timber may differ.
The following table sets forth the Company's estimated merchantable
sawtimber quantities by species within the Timberlands.
MERCHANTABLE SAWTIMBER
QUANTITIES BY SPECIES
<TABLE>
<CAPTION>
Species MMBF Percent
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<S> <C> <C>
Cottonwood 343 21.5%
Oaks 325 20.4%
Hackberry 181 11.3%
Pecan/Hickory 138 8.7%
Gum 134 8.4%
Ash 94 5.9%
Other/(a)/ 380 23.8%
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Total 1,595 100.0%
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(a) Includes sycamore, willow, yellow poplar, cypress, loblolly pine and
others.
The Company's timber quantity also includes 11.8 million tons of hardwood
pulpwoods.
BUSINESS STRATEGY - TIMBER
The Company's primary objective is to maximize long-term cash flow per
share by managing its Timberlands to improve their long-term sustainable yield
while practicing sound environmental stewardship. The Company's strategy is to
manage its Timberlands in a manner designed to optimize the balance among
current cash flow and prudent environmental management in order to achieve
optimal levels of sustainable yield. The Company believes that opportunities
exist to enhance its lands' productivity and yield. The Company intends to
continue to manage the Timberlands to maximize sustainable yield over the long
term, although the Company may choose to have its timber harvested from time to
time at levels above or below its then-current estimate of sustainability for
various reasons, including to improve the productivity of certain timber stands.
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The Company pursues sound environmental stewardship and active involvement
in federal, state and local policymaking to maximize its assets' long-term
value. The Company's uneven-aged timber management practices, by their nature,
are environmentally sensitive and sustain ecological and wildlife diversity.
Harvest operations may require the Company to leave a mix of green and dead
trees at the harvest site, including some large trees, snags and downed logs, to
enrich and protect the soil for successive generations of trees and to provide
habitats for a variety of wildlife species. The Company also uses prudent
logging practices to minimize site damage, and to abide by environmental laws
and sustainable forestry practices when the Company lands are harvested.
TIMBER MANAGEMENT PRACTICES
An individual tree's value changes over time as it progresses through its
life cycle. Beginning as unmerchantable seedlings, trees become increasingly
valuable as they attain merchantable size and quality. They continue to add
volume as they mature, although eventually at declining rates. If not harvested,
trees will ultimately decline in volume and quality due to age and disease.
Although all trees undergo the same basic pattern of growth and decay,
growth rates vary depending on species, location, weather conditions, age and
forestry practice. The average annual growth rates of merchantable timber for
the Company's hardwoods has historically exceeded 4%. The Company believes it
can improve the Timberlands' long-term growth rates by continuing the
accelerated harvesting of large-diameter hardwood timber that the Company began
in 1997. The Company currently believes that the optimal harvest cycle, or
"rotation," for its hardwoods is approximately 40 to 80 years, depending on
species and other factors.
The Company intends to manage its timberlands on an "uneven-aged" basis.
Under the uneven-aged approach, trees of varying sizes are removed selectively
and more frequently than under the "even - aged" approach, often every five to
ten years, thus requiring more intensive harvest planning but reducing
regeneration costs because hardwoods will regenerate naturally. The Company's
foresters select and mark individual trees for harvest under this approach.
Harvest plans are based on projections of weather, timber growth rates,
regulatory constraints and other assumptions, many of which are beyond the
Company's control and there can be no assurance that Company will be able to
have the volumes projected or the specific stands designated in the Company's
harvest plans harvested.
ACCESS AND LIMITATIONS ON ACCESS
Substantially all of the Timberlands are accessible by a system of
established roadways, low-maintenance roads and by the Mississippi River.
Hunting clubs maintain substantially all of the Company's roadways under the
terms of some of the Company's hunting leases. Access to the Timberlands is
affected to some extent by weather conditions and regulatory factors. The
loading of logs from certain bottomlands adjacent to the Mississippi River onto
barges require permits from the United States Department of the Army Corps of
Engineers. Among other things, these permits
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may require compliance with certain water quality and other environmental
standards when loading and unloading logs.
TIMBER HARVEST AGREEMENT WITH AT TIMBER
In the years preceding the Restructuring, substantially all of the
sawtimber harvested from Company lands was consumed in the Company's sawmills
and pulpwood was sold to local area pulp and paper mills. Sales of logs to
outsiders were generally less than 10% of total logs harvested from Company
lands and purchased from the outside. As a result of the Restructuring, the
Company no longer operates sawmills, harvests its own timber or sells pulpwood
to third parties.
On January 1, 1998, the Company entered into a one-year timber harvest
agreement with AT Timber (the "Timber Harvest Agreement"). Pursuant to the
Timber Harvest Agreement, AT Timber has agreed to purchase and harvest in 1998
110 MMBF of standing sawtimber and 660,000 tons of standing pulpwood. AT Timber
intends to sell logs to AT Lumber, Veneers and other third parties including
sawmills, veneer mills and log exporters and to sell pulpwood to area pulp and
paper manufacturers.
The purpose of the Timber Harvest Agreement is to secure a supply of
merchantable standing timber to AT Timber in order for it to meet the needs of
its customers, AT Lumber, Veneers and others and to secure to the Company,
during the term of the Timber Harvest Agreement, treatment pursuant to Section
631(b) of the Code and to harvest the Company's merchantable timber. Federal
income tax treatment of gains derived by the Company from the Timber Harvest
Agreement is governed by Section 631(b) of the Code. The initial term of the
Timber Harvest Agreement commenced on January 1, 1998, and will expire on
December 31, 1998. AT Timber is obligated to pay the Company the "fair market
price" of the standing timber, determined by considering relevant data
including, but not limited to, third party stumpage sales. The Company
anticipates renewing its Timber Harvest Agreement. Volumes to be sold to AT
Timber will be determined by balancing the silvicultural needs of the forest and
the strength of the current timber and wood products markets.
WOOD PRODUCTS
Major wood products historically produced and sold by the Company (prior to
the Restructuring) and Veneers include logs, pulpwood, lumber, veneer and
laminated truck trailer flooring.
LOGS AND PULPWOOD: Substantially all of the sawtimber harvested by AT
Timber is sold as logs to AT Lumber and Veneers and converted into hardwood
lumber and rotary veneer although certain veneer quality and other logs are sold
to third party sawmills, veneer mills and log exporters. In addition, AT Timber
sells pulpwood to pulp and paper mills in the operating area. AT Timber
utilizes outside independent logging contractors to harvest timber. Timber
harvested within approximately 50 to 75 miles of the log yard in Vicksburg is
transported by truck by third parties. Timber harvested outside a 50 to 75 mile
radius from AT Timber's log yard is transported via the
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Mississippi River utilizing AT Timber's towboat and fleet of barges. AT Timber
also uses river transportation to transport pulpwood to customers with
operations near the Mississippi River.
AT Timber competes primarily in the southern United States market with
other pulpwood and log suppliers, including numerous private land and timber
owners, some of whom have significantly greater financial resources than AT
Timber. Competitive factors with respect to logs and pulpwood generally include
price, specie, grade, proximity to customer processing facilities and ability to
meet delivery requirements.
Timber harvest operations are typically impacted during the November to
April time period due to rain and the seasonal rise of the Mississippi River.
However, AT Timber's river transportation capabilities and the Company's diverse
mix of upland and bottomland timberlands enable AT Timber to access certain
lands that are inaccessible to others and continue harvesting operations year
round. AT Timber maintains a log yard with capacity to store over 10 MMBF of
logs (including up to 7.5 MMBF in water storage) which enables it to build up
inventories of logs to ensure availability in the winter and spring when log
supplies in the operating area decrease. AT Timber believes that the large
geographic area in which the Timberlands are located, the ability to access the
Timberlands year round and the ability to transport timber using efficient river
transportation, and the superior quality and diverse specie mix of the timber
enables AT Timber to provide an assured supply of logs and pulpwood year round
and command superior prices.
LUMBER: AT Lumber produces green, kiln dried and air dried hardwood
lumber, which is sold both domestically and internationally to distributors and
manufacturers of end products. Lumber produced and sold is ultimately converted
into, among other things, millwork, moldings, cabinets, furniture, caskets,
flooring, pallets and containers. AT Lumber produces and sells a broad
assortment of lumber to meet customer specifications. Over 20 species are
produced of which eight (cottonwood, red oak, white oak, hackberry, sweet gum,
pecan/hickory, ash and sycamore) comprise over 80% of lumber sales. All of AT
Lumber's logs are currently purchased from AT Timber.
AT Lumber competes with numerous other hardwood lumber manufacturers some
of whom have greater financial resources than the Company. For hardwood lumber,
At Lumber's share of the market is not significant. Competitive factors for
hardwood lumber include grade, quality, ability to assure continuous supply and
pricing. The demand for hardwood lumber is generally dependent on the markets
for furniture, residential construction and home remodeling and repair.
AT Lumber believes that its ability to provide its customers an assured
supply of lumber and the superior quality and diverse specie mix of the
Company's sawtimber, which provides for better yields of wide lumber and lumber
with minimal appearance defects which is more suitable for high end uses, allows
AT Lumber to command superior prices.
VENEERS: In May 1995, the Company formed Veneers to enter the market for
the production and sale of rotary veneer used in three-ply laminated hardwood
flooring. The veneer mill was completed and operations commenced in November
1996. In the first calendar year over 90% of
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Veneer's production was sold to one customer. All of Veneer's logs (primarily
red oak) are currently purchased from AT Timber.
Demand for both solid and laminated hardwood flooring is generally
dependent on the level of residential construction, home remodeling and repair.
Over the last several years laminated wood flooring has achieved better market
acceptance and an increased share of the wood flooring market due to its ease of
installation and generally lower price compared to solid wood flooring.
Veneers competes with numerous other producers of veneer including other
flooring manufacturers none of whom have a long term assured supply of timber.
A wholly owned subsidiary of the Company holds, in the aggregate, a 1.3%
interest in Veneers (comprised of a 1% general partner and a .3% limited
partnership interest), with the remaining interests held by the Limited
Partners.
LAMINATED TRAILER FLOORING: Historically the Company sold laminated
flooring produced in its Memphis facility to truck trailer manufacturers. On
December 31, 1997, the Company sold certain assets related to the laminated
trailer flooring and discontinued that product line.
OPERATIONS - RIVER CONSTRUCTION SEGMENT
PT Transportation, a wholly owned subsidiary of Veneers, is primarily
engaged in the construction of levees, dikes and revetments along the
Mississippi River and its tributary rivers, as well as other private marine
construction, salvage and fleeting that was formerly conducted by a wholly owned
subsidiary of the Company. A majority of its revenues are derived from US Army
Corps of Engineers (the "Corps") contracts awarded by competitive bid. River
construction operations are dependent on the nature and extent of river
construction, work let by the Corps and seasonal factors, including Mississippi
River levels.
In April 1998, PT Transportation contributed certain of its river
construction assets and a wholly owned subsidiary of Veneers assigned a quarry
lease to a Missouri limited liability company in exchange for a 50% interest
therein. APAC-Tennessee, a company engaged in road construction business
contributed cash in exchange for the remaining 50% interest. The new company
will be engaged in the production, transportation and sale of stone from the
quarry suitable for use in road construction. PT Transportation also will
continue to conduct river construction and other operations.
Prior to the 1997 Restructuring Transactions, the river construction
operations were held in a wholly owned subsidiary of the Company. After the
1997 Restructuring Transactions, the Company holds, in the aggregate, an
indirect 1.3% interest in PT Transportation through its partnership interests in
Veneers, with the remaining interest held indirectly by the Limited Partners of
Veneers.
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OPERATIONS - COMMERCIAL REAL ESTATE SEGMENT
The Company has investments in six commercial real estate properties all
located in the Memphis, Tennessee area consisting of four shopping centers and
two commercial warehouses. Three of the four shopping centers are strip centers
with major grocery, drug and discount merchandise retailers as anchor tenants.
The other shopping center is a specialty center with upscale clothing, dining
and other retailers. The Company's commercial real estate is currently fully
leased.
OTHER OPERATIONS
The Company's other operations consist primarily of revenues derived from
leasing timberlands for hunting and leasing 8,000 acres of farm lands for
agricultural use.
The Company believes the ecological and wildlife diversity of the
Timberlands provide high quality recreational experiences. The Company leases
the Timberlands to approximately 275 hunting clubs, generally under one year
leases. Annual revenues from such hunting leases total approximately $1.5
million. Substantially all hunting leases are renewed annually as demand for
land for hunting greatly exceeds its availability. The Company has
approximately 6,000 acres of high quality irrigated farmland of which 60% is
precision leveled and approximately 2,000 acres of other farmland adjacent to
the Timberlands. The Company leases its farmland under one year crop share and
per acre leases, with annual revenues totaling approximately $600,000.
FEDERAL AND STATE REGULATION
BACKGROUND AND APPROACH
The operations of the Company, Veneers, AT Timber, AT Lumber and PT
Transportation are subject to numerous federal, state and local laws and
regulations, including those relating to the environment, endangered species,
the Company's forestry activities, and health and safety. Due to the
significance of regulation to its business, the Company attempts to integrate
wildlife, habitat and watershed management into its resource management
practices. It also takes an active approach to regulatory developments by
participating in standard-setting where possible. For example, the Company
works cooperatively with regulators to address environmental concerns while
preserving the Company's ability to operate its Timberlands efficiently. The
Company also seeks to maintain a favorable public reputation for environmental
stewardship. The Company has pursued a variety of wildlife conservation and
other environmental stewardship programs, such as co-founding a committee of
governmental agencies, environmentalists and industry participants dedicated to
the conservation of black bear habitat.
For many years, the Company has implemented an integrated approach to
timberland stewardship in order to positively affect the policy and regulation
processes. The Company has adopted comprehensive stewardship principles, and
will continue to implement water and wildlife resource programs consisting of
research, education, habitat restoration and monitoring, and active
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participation in the development of environmental partnerships. The Company
believes that these activities enhance its credibility and facilitate
participation in the policymaking and regulatory process.
Despite the Company's active participation in governmental policymaking and
regulatory standard-setting, there can be no assurance that endangered species,
environmental and other laws will not restrict the Company's operations or
impose significant costs, damages, penalties and liabilities on the Company. In
particular, the Company anticipates that endangered species and environmental
laws will generally become increasingly stringent.
ENDANGERED SPECIES LAWS
The Federal Endangered Species Act and similar state laws and regulations
protect species threatened with possible extinction. A number of species
indigenous to the Timberlands have been and in the future may be protected under
these laws and regulations, including the Louisiana black bear and bald eagle.
The presence of protected species on or near the Timberlands may restrict or
prohibit timber harvesting, road building and other silvicultural activities on
portions of the Company's lands that contain the affected species or abut their
habitats. In addition, the Timberlands may be affected by regulatory
requirements relating to habitats for threatened and endangered aquatic species.
Harvesting activities near streams containing threatened or endangered aquatic
species may be limited or prohibited due to the perceived impact on
sedimentation and water quality.
The Company is aware of three bald eagle nests, two of which are active, on
the Timberlands, as well as the presence of Louisiana black bear and certain
other threatened or endangered species on its lands, none of which currently
imposes a significant constraint on the Company's operations.
Consistent with its overall goal of good environmental stewardship, the
Company evaluates each tract of timber designated for harvesting or other
silvicultural operations in order to determine whether to conduct a field
inspection before permitting operations to commence. These inspections are
designed to monitor the status of existing wildlife sites, identify areas
suitable for endangered species and determine if areas previously identified as
containing suitable habitat are, in fact, supporting threatened or endangered
species. The Company investigates reported sightings of threatened or
endangered species and takes reasonable precautions against damage to
environmentally sensitive areas and to comply with applicable environmental
laws.
The Company believes that it is managing the harvesting of its Timberlands
in the areas affected by protected species in substantial compliance with
applicable federal and state regulations, and that the presence of such species
on its lands will not materially adversely affect the Company's ability to
proceed with its current harvest plans. There can be no assurance, however,
that additional species on or around the Timberlands will not receive protected
status under the Endangered Species Act or similar state laws, or that currently
protected species may not be discovered on or around the Timberlands.
Additionally, there can be no assurance that future legislative, administrative
or judicial activities related to protected species will not adversely affect
the Company, its ability to
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continue its operations as currently conducted or its ability to implement its
business strategy. Any such changes could materially and adversely affect the
Company's financial condition and results of operations.
FORESTRY REGULATIONS
The operation of the Timberlands is subject to specialized statutes and
regulations governing forestry operations. These laws address many growing,
harvesting and processing activities on forest lands. For example,
Mississippi's Forest Harvesting Law imposes post-harvest seed tree retention and
re-entry requirements. The Company follows local "best management practices"
developed by state agencies in consultation with industry and environmental
groups, which address matters such as harvesting practices near visually
sensitive areas. Operations in states in which the Timberlands are located are
currently subject to similar voluntary practices.
ENVIRONMENTAL LAWS
Some or all of the operations of the Company, Veneers, AT Timber, AT Lumber
and PT Transportation involve the use and storage of various hazardous materials
such as herbicides, pesticides, fertilizers, gasoline and other chemicals and
result in air emissions or discharges of certain materials into streams and
other bodies of water. Accordingly, all of these operations are subject to
federal, state and local environmental laws and regulations relating to the
protection of the environment. Environmental laws and regulations have changed
substantially and rapidly over the last 20 years, and the Company anticipates
that they will become increasingly stringent. Although each of the Company,
Veneers, AT Timber, AT Lumber and PT Transportation believes that it is in
substantial compliance with these requirements, there can be no assurance that
these increasingly burdensome laws and regulations will not lead to significant
costs, penalties and liabilities, including those related to claims for damages
to property or natural resources, as well as restrictions on timber harvesting,
other silvicultural activities, manufacturing and construction. As of the date
of this Registration Statement, the Company is not aware of any pending
legislative, administrative or judicial action relating to the protection of the
environment that could materially and adversely affect the Company, Veneers, AT
Timber, AT Lumber or PT Transportation.
The Federal Clean Air Act and Federal Clean Water Act, and comparable state
equivalents, may affect the operations of the Company, Veneers, AT Timber, AT
Lumber and PT Transportation through restrictions and controls on site
preparation and harvest activities and regulatory programs designed to reduce
nonpoint source pollution discharged into bodies of water and air emissions and
discharges into bodies of water from manufacturing operations. For example, the
Environmental Protection Agency and its state counterparts have designated
certain bodies of water as "water quality impaired," triggering a requirement to
establish Total Maximum Daily Loads ("TMDLs") for such bodies of water. The
TMDL process could result in additional limitations being placed on the
Company's activities in some or all of the states where the Company, Veneers, AT
Timber, AT Lumber and PT Transportation operate.
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In addition, the operations of the Company, Veneers, AT Timber, AT Lumber
and PT Transportation are affected by federal and state laws designed to protect
wetlands. The Federal Clean Water Act authorizes the regulation of "wetland"
areas. Access to timberlands located within a protected wetlands area may be
limited, and the Company may be required to expend substantial sums for the
protection of such wetland areas.
Some environmental statutes impose strict liability, regardless of the
negligence or fault on the part of the person held liable. Under various laws
and regulations, an owner or operator of real property may become liable for the
costs of removal or remediation of certain hazardous substances released on or
in its property, often without regard to whether the owner or operator knew of,
or was responsible for, the release of such substances. The presence of such
substances, or the failure to remediate such substances properly, may adversely
affect the owner's ability to sell such real estate or to use such real estate
as collateral. Although the Company is not aware of any activities by the
Company or any conditions on its properties that would likely result in the
Company being named a potentially responsible party, there can be no assurance
that the Company, or an owner or operator of any lands adjacent to the
Company's, has not created a material environmental condition on the Company's
lands without the Company's knowledge. In addition, there can be no assurance
that the operations of the Company, Veneers, AT Timber, AT Lumber and PT
Transportation will not result in material liabilities, fines, costs and
restrictions on the Company pursuant to current or future environmental laws and
regulations.
PRODUCT LIABILITY AND REGULATION
All of the states in the United States and several foreign jurisdictions in
which AT Lumber sells its products have, through some combination of legislation
and jurisdictional decision, provided for the liability of the manufacturer and
supplier of defective materials for resulting personal injury and property
damage. The operations of Veneers and AT Lumber entail exposure to product
liability in connection with its sales.
REGULATORY LIMITATIONS ON ACCESS TO TIMBERLANDS
Currently, logs from the Company's timberlands along the Mississippi River
may be loaded onto barges only pursuant to permits issued by the United States
Department of the Army-Corps of Engineers. These permits may impose various
environmental and other restrictions on log loading activities. In addition,
depending upon the location and scope of future acquisitions, the Timberlands
may include sections of land that are intermingled with or adjacent to sections
of land managed by federal and state agencies. Removal of trees from those
portions of the Timberlands may require additional permits and reciprocal
rights-of-way across public lands, the availability of which cannot be assured.
Among other things, federal agencies may be required to consult with each other
and to consider environmental and other factors in granting or renewing such
permits and rights-of-way.
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OTHER REGULATORY MATTERS
The Timberlands operations are subject to various other federal and state
regulations. For example, the Federal Insecticide, Fungicide, and Rodenticide
Act regulates the use of pesticides that may be used in forestry practices. The
operations of the Company, Veneers, AT Timber, AT Lumber and PT Transportation
also are subject to the requirements of the Federal Occupational Safety and
Health Act ("OSHA") and comparable state statutes relating to the health and
safety of their respective employees. The Company believes that it is in
compliance with OSHA regulations, including general industry standards,
permissible exposure levels for toxic chemicals and record-keeping requirements.
LEGAL PROCEEDINGS
Although the Company may, from time to time, be involved in litigation and
claims arising out of its operations in the normal course of business, the
Company is not presently a party to any material legal proceedings.
EMPLOYEES
As of April 20, 1998, the Company's operations had approximately 22
employees and Veneers, AT Lumber, AT Timber and PT Transportation had
approximately 634 employees. The Company believes that it has a good
relationship with its employees.
RISK FACTORS
An investment in the shares of Common Stock involves a high degree of risk.
Prospective purchasers of the Common Stock should carefully consider the
following risk factors, as well as the other information presented in this
Registration Statement. Each of these factors could adversely affect the
Company's results of operations and ability to make anticipated distributions to
stockholders. All statements other than statements of historical fact included
in this Registration Statement, including, without limitation, statements
regarding the Company's business strategy, harvest plans and the other
estimates, plans, intentions and objectives of management of the Company, are
forward-looking statements that involve risks and uncertainties. Important
factors that could cause actual results to differ materially from the Company's
estimates, plans, intentions and objectives are disclosed below and elsewhere in
this Registration Statement.
VOLATILITY OF TIMBER AND WOOD PRODUCT PRICES
The Company's results of operations and cash flow are, and will continue to
be, affected by the volatile nature of timber and wood product prices. The
demand for and supply of standing timber, lumber and pulp products have been and
are expected to be subject to cyclical and other fluctuations, which often
result in significant variations in prices. The demand for softwood sawtimber
and lumber is primarily affected by the level of new residential construction
activity and,
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to a lesser extent, home repair and remodeling activity and other industrial
uses of wood fiber, which are subject to fluctuations due to changes in economic
conditions, interest rates, population growth, weather conditions and other
factors. The demand for hardwood sawtimber, lumber and veneers depends on the
markets for furniture and other products made from hardwoods, as well as the
foregoing factors. The demand for pulpwoods is also cyclical, and tends to
fluctuate based on changes in the demand for paper, tissue and similar products,
as well as conversion capacity in the relevant region. Reductions in residential
construction activity and other events reducing the demand for standing timber
could have a material adverse effect on the Company's results of operations and
cash flow.
The Company's results of operations and cash flow will also be affected by
changes in timber availability at the local and national level. Increases in
timber supply could adversely affect the prices that the Company receives for
standing timber and wood products. The Company's operations are currently
concentrated in the southeastern United States, where most timberlands are
privately owned. Historically, increases in timber prices have often resulted
in substantial increases in harvesting on private timberlands, including lands
not previously made available for commercial timber operations, causing a short-
term increase in supply that has tended to moderate price increases.
In the last decade, environmental concerns and other factors have limited
timber sales by government agencies, which historically have been major
suppliers of timber to the United States forest products industry, particularly
in the West. Any reversal of policy that substantially increases public timber
sales could materially adversely affect the Company's results of operations and
cash flow, as the increased availability of timber in the West and other regions
with significant public timber ownership would depress prices for timber and
converted wood products in other regions, including the Southeast. More locally,
timber supplies can fluctuate depending upon factors such as changes in weather
conditions and harvest strategies of local forest products industry
participants, as well as occasionally high timber salvage efforts due to unusual
pest infestations or fires. Furthermore, increased imports of wood products
could reduce the prices that the Company receives for its standing timber. Over
the longer term, the development and application of silvicultural techniques and
genetic improvements on forest products industry lands have also tended to
expand the overall supply of timber.
Due to the foregoing factors, timber prices have historically been volatile
and frequently experience significant monthly and quarterly fluctuations. The
Company's results of operations and cash flow will be substantially dependent
upon the market price for standing timber in its operating regions and,
accordingly, are expected to fluctuate.
RISK OF UNINSURED LOSSES
The volume and value of standing timber that can be harvested from the
Company's lands, and therefore, its operating results and cash flow, may be
limited by natural disasters such as fire, insect infestation, disease, ice
storms, windstorms, flooding and other weather conditions, and other
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causes. As is typical in the industry, the Company does not maintain insurance
for any loss to its standing timber from natural disasters or other causes.
REGULATION
The operations of the Company, Veneers, AT Timber, AT Lumber and PT
Transportation are subject to numerous federal, state and local laws and
regulations, including those relating to the environment, threatened and
endangered species, the Company's forestry activities, and health and safety. In
particular, the Company anticipates that laws and regulations intended to
protect threatened and endangered species, and other environmental laws and
regulations, will generally become increasingly stringent. A number of species
indigenous to the Timberlands, such as the Louisiana black bear and the bald
eagle, have been and in the future may be protected under the Federal Endangered
Species Act and similar state laws. The presence of protected species on or
near the Timberlands may restrict timber harvesting, road building and other
activities on its lands. The Company's operations will also be subject to
specialized statutes and regulations governing forestry operations, and to other
environmental laws, some of which impose strict liability. The Company's lands,
particularly its bottomlands along the Mississippi River, may become subject to
laws and regulations designed to protect wetlands, which may in the future
restrict harvesting, road building and other activities. There can be no
assurance that current and future laws and regulations will not cause the
Company to incur significant costs, damages, penalties and liabilities, or that
they will not materially and adversely affect harvesting operations on the
Timberlands.
REAL ESTATE INVESTMENT TRUST QUALIFICATION
The Company intends to elect to be taxed as, and to operate so as to
qualify as, a REIT under Sections 856 through 860 of the Code, effective as of
January 1, 1998. Although the Company believes that it will be able to operate
in such a manner, no assurance can be given that the Company will qualify or
remain qualified as a REIT. Qualification as a REIT involves the application of
highly technical and complex provisions of the Code and the tax regulations
promulgated thereunder (the "Treasury Regulations") for which there are only
limited judicial or administrative interpretations. The determination of
various factual matters and circumstances not entirely within the Company's
control may affect its ability to qualify as a REIT. In addition, no assurance
can be given that legislation, new regulations, administrative interpretations
or court decisions will not significantly change the tax laws with respect to
qualification as a REIT or the Federal income tax consequences of such
qualification.
Timber REITs and their activities present issues under Federal income tax
law, including the characterization for purposes of the REIT gross income tests
of income derived from the harvesting of timber pursuant to a contract that
qualifies for special treatment under Section 631(b) of the Code, and the
application of the tax on Built-in Gains (as defined below) to such income. If
the income that the Company derives under the Timber Harvesting Agreement were
to be treated as other than qualifying income for purposes of the REIT gross
income tests, the Company would not qualify as a REIT. See "Certain Federal
Income Tax Considerations."
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Skadden, Arps, Slate, Meagher & Flom LLP has acted as counsel to the
Company in connection with the Company's election to be taxed as a REIT. On
December 31, 1997, Skadden, Arps, Slate, Meagher & Flom LLP issued its opinion
that, commencing with the Company's taxable year ending December 31, 1998, the
Company will be organized in conformity with the requirements for qualification
as a REIT, and the Company's proposed method of operation will enable it to meet
the requirements for qualification and taxation as a REIT provided that (i)
certain elections and other procedural steps are completed in a timely fashion
and (ii) the Company operates in accordance with various assumptions and factual
representations made by the Company concerning their organization, business,
properties and operations. The opinion was expressed based upon facts,
representations and assumptions as of its date, and Skadden, Arps, Slate,
Meagher & Flom LLP has no obligation to advise Shareholders of any subsequent
change in the matters stated, represented or assumed or any subsequent change in
applicable law. No assurance can be given that the Company currently has met or
will meet these requirements in the future, and an opinion of counsel is not
binding on the Internal Revenue Service (the "Service"). To maintain REIT
status, the Company must meet a number of organizational and operational
requirements. As a REIT, the Company generally will not be subject to Federal
income tax on net income that it distributes to its stockholders.
If the Company were to fail to qualify as a REIT in any taxable year, the
Company would not be allowed a deduction for distributions to stockholders in
computing taxable income and would be subject to Federal income tax on its
taxable income at regular corporate rates. Unless entitled to relief under
certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost. As a result, the funds available for distribution to
the Company's stockholders would be materially reduced for each of the years
involved. Although the Company currently intends to operate in a manner
designed to qualify as a REIT, it is possible that future economic, market,
legal, tax or other considerations may cause the Company to fail to qualify as a
REIT or may cause the Board of Directors to revoke the Company's REIT election.
See "Certain Federal Income Tax Considerations."
FACTORS LIMITING CHANGES IN CONTROL
In order for the Company to maintain its qualification as a REIT, not more
than 50% of the value of its outstanding shares may be owned, directly or
constructively, by five or fewer individuals or entities (as set forth in the
Code). This test must be satisfied by the Company for all periods beginning on
June 30, 1999 (i.e., the last half of a REIT's second taxable year). The
Company does not currently meet this requirement. Accordingly, the Company will
be required to take appropriate action, including the issuance of additional
shares or the redemption of certain shares, in order to comply with this
requirement. In addition, the Company intends to propose that the Company's
Articles of Incorporation be amended to prohibit the direct or constructive
ownership of shares representing more than a certain percentage of the combined
total of outstanding shares of the Company by any person (the "Ownership
Limit"). The Ownership Limit is determined after application of certain
constructive ownership and attribution rules under the Code. The constructive
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ownership and attribution rules are complex and may cause shares of the Company
owned directly or constructively by a group of related individuals or entities
to be constructively owned by one individual or entity. Under the amendment,
the Company intends to propose that the Company's Board of Directors may permit
greater ownership of outstanding shares of the Company by a particular
shareholder if it is satisfied, based upon the advice of tax counsel or other
evidence or undertaking acceptable to it, that ownership in excess of the limit
will not jeopardize the Company's status as a REIT. In addition, under the
amendment, transfer of shares to a person who, as a result of the transfer,
violates the Ownership Limit may be void under some circumstances or may be
transferred to a trust, for the benefit of one or more qualified charitable
organizations designated by the Company, with the intended transferee having
only a right to share (to the extent of the transferee's original purchase price
for such shares) in proceeds from the trust's sale of such shares.
SEASONALITY
The Company's operating results and cash flow may fluctuate due to seasonal
factors. Rainfall from November to April typically impacts harvest volumes to
some extent, due in part to the seasonal rise in the Mississippi River. The
Company's revenues and cash flow may be reduced during the foregoing periods.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary discusses the Federal income tax considerations
reasonably anticipated to be material to a Shareholder of the Company in
connection with his or her ownership of shares of Common Stock. The discussion
is for general information only, and is not tax advice. The discussion addresses
only tax consequences to "U.S. persons" and does not address the tax
consequences that may be relevant to a particular Shareholder subject to special
treatment under certain Federal income tax laws, such as dealers in securities,
banks, insurance companies, tax-exempt organizations or non-United States
person. This discussion does not address any consequences arising under the
laws of any state, locality or foreign jurisdiction.
The information in this section is based on current provisions of the Code,
existing, temporary and currently proposed Treasury Regulations thereunder, the
legislative history of the Code, existing administrative interpretations and
practices of the Service, and judicial decisions, all of which are subject to
change either prospectively or retroactively. No assurance can be given that
future legislation, Treasury Regulations, administrative interpretations or
judicial decisions will not significantly change the current law or adversely
affect existing interpretations of current law. Thus, no assurance can be
provided that the statements set forth herein (which do not bind the Service or
the courts) will not be challenged by the Service or will be sustained by a
court if so challenged.
EACH SHAREHOLDER IS ADVISED TO CONSULT WITH HIS OR HER TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE OWNERSHIP AND
DISPOSITION OF SHARES OF COMMON STOCK IN LIGHT OF HIS OR
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HER SPECIFIC TAX AND INVESTMENT SITUATIONS AND THE SPECIFIC FEDERAL, STATE,
LOCAL AND FOREIGN TAX LAWS APPLICABLE TO THE SHARES.
TAXATION OF THE COMPANY
GENERAL
The Company plans to make an election to be taxed as a REIT under Sections
856 through 860 of the Code, beginning with its taxable year commencing January
1, 1998. The Company believes that, effective as of January 1, 1998, it will be
organized and will operate in such a manner as to qualify for taxation as a
REIT. The Company intends to operate in such a manner as to qualify for
taxation as a REIT under Sections 856 through 860 of the Code for each of its
tax years ending subsequent to December 31, 1998. No assurance can be given,
however, that the Company will operate in a manner so as to qualify, or remain
qualified, as a REIT.
The sections of the Code and the corresponding Treasury Regulations
relating to the taxation of REITs and their stockholders are highly technical
and complex. The following sets forth the material aspects of the rules that
govern the Federal income tax treatment of a REIT and its stockholders. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
The Company has submitted a request for rulings from the Service
concerning, among other issues, the following: (i) whether gains derived by the
Company pursuant to the Timber Harvest Agreement will qualify as gains from the
sale or exchange of real property for purposes of the REIT gross income tests
(see discussion under " - Income Tests" below), (ii) whether any such gains will
be subject to the tax on Built-in Gains under Notice 88-19 (see discussion
below), and (iii) whether the Company's timberlands, including the standing
timber thereon, will qualify as "real property" for purposes of the REIT asset
tests (see discussion under "- Assets Tests" below). The Company's
qualification to elect REIT status is not conditioned upon its receipt of a
favorable ruling from the Service with respect to any of the foregoing issues.
Skadden, Arps, Slate, Meagher & Flom LLP has acted as special tax counsel
to the Company in connection with the Company's election to be taxed as a REIT
beginning with its taxable year commencing on January 1, 1998. On December 31,
1997, Skadden, Arps, Slate, Meagher & Flom LLP issued its opinion that
commencing with the Company's tax year beginning on January 1, 1998, the Company
will be organized in conformity with the requirements for qualification as a
REIT, and the Company's proposed method of operation will enable it to meet the
requirements for qualification and taxation as a REIT provided that (i) the
elections and other procedural steps described in this discussion of "Certain
Federal Income Tax Considerations" are completed in a timely fashion and (ii)
the Company operates in accordance with various assumptions and factual
representations made by the Company concerning its organization, business,
properties and operations. The opinion was expressed as of December 31, 1997
and was based upon facts, representations and assumptions as
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of such date, and Skadden, Arps, Slate, Meagher & Flom LLP has no obligation to
advise Shareholders of any change in the matters stated, represented or assumed,
or any change in applicable law subsequent to the date of such opinion.
Moreover, qualification and taxation as a REIT depend upon the Company's ability
to meet on a ongoing basis (through actual annual operating results,
distribution levels and diversity of share ownership) the various qualification
tests imposed under the Code discussed below, the results of which will not be
reviewed by Skadden, Arps, Slate, Meagher & Flom LLP on a continuing basis. No
assurance can be given that the actual results of the Company's operations for
any particular taxable year currently satisfy or will satisfy such requirements
in the future. Further, the anticipated income tax treatment described herein
may be changed, perhaps retroactively, by legislative, administrative or
judicial action at any time. See "--Failure of the Company to Qualify as a
REIT."
If the Company qualifies for taxation as a REIT, it generally will not be
subject to Federal corporate income taxes on that portion of its ordinary income
or capital gain that is currently distributed to Shareholders. The REIT
provisions of the Code generally allow a REIT to deduct dividends paid to its
Shareholders. This deduction for dividends substantially eliminates the "double
taxation" (at the corporate and Shareholder levels) that generally results from
investment in a regular corporation. However, the Company will be subject to
Federal income tax as follows: First, the Company will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. See, however, "Annual Distribution
Requirements" with respect to the Company's ability to elect to treat as having
been distributed to its Shareholders certain of its capital gains upon which the
Company has paid taxes, in which event so much of the taxes as have been paid by
the Company with respect to such income would also be treated as having been
distributed to Shareholders. Second, under certain circumstances, the Company
may be subject to the "alternative minimum tax" on certain of its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is described in Section 1221(1) of
the Code (generally, property held primarily for sale to customers in the
ordinary course of the Company's trade or business) or (ii) other nonqualifying
income from foreclosure property, the Company will be subject to tax at the
highest corporate rate on such income. Fourth, if the Company has net income
from prohibited transactions (which are, in general, certain sales or other
dispositions of property described in Section 1221(1) of the Code), such income
will be subject to a 100% tax. Fifth, if the Company should fail to satisfy the
75% gross income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, the Company will be subject to a 100% tax on an
amount equal to (i) the gross income attributable to the greater of the amount
by which the Company fails the 75% or 95% test multiplied by (ii) a fraction
intended to reflect the Company's profitability. Sixth, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year (other than capital gain income the Company elects to retain and
pay tax on) and (iii) any undistributed taxable income from prior periods (other
than capital gains from such years which the Company elected to retain and pay
tax on), the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, with
respect to any asset (a "Built-in Gain Asset") held by the Company on
January 1, 1998 or acquired by the Company from a corporation
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which is or has been a C corporation (i.e., generally a corporation subject to
full corporate-level tax) in a transaction in which the basis of the Built-in
Gain Asset in the hands of the Company is determined by reference to the basis
of the asset in the hands of the C corporation, if the Company recognizes gain
on the disposition of such asset during the ten-year period (the "Recognition
Period") beginning on the date on which such asset was acquired by the Company,
then pursuant to regulations that have not yet been promulgated, to the extent
of the Built-in Gain (i.e., the excess of (a) the fair market value of such
asset over (b) the Company's adjusted basis in such asset, determined as of the
beginning of the Recognition Period), such gain will be subject to tax at the
highest regular corporate rate.
The results described above with respect to the recognition of Built-in-
Gain assume that the Company will make an election pursuant to Notice 88-19
issued by the Service. The Company expects to file an election under Notice 88-
19 with its first REIT tax return. Shareholders should be aware that there is
currently no controlling authority concerning the applicability of Notice 88-19
to gains derived by the Company from the disposal of standing timber pursuant to
an agreement which qualifies for treatment under Section 631(b) of the Code.
The Service, however, has concluded in a number of private letter rulings that
Notice 88-19 and the tax on Built-in Gains do not apply to such transactions.
The rationale for this conclusion was given in a recent technical advice
memorandum in which the Service reasoned that Congress did not intend the Built-
in Gains tax to apply to gains derived pursuant to transactions that qualify for
treatment under Section 631(b) of the Code because such an application would
contradict the beneficial treatment that Congress intended to bestow upon such
transactions. Although private letter rulings are not binding precedent, they
offer insight into the Service's current position on a particular issue.
Skadden, Arps, Slate, Meagher & Flom LLP has issued its opinion that, although
there is no binding authority directly on point and the matter is not entirely
free from doubt, gain derived by the Company from the disposal of standing
timber pursuant to an agreement that qualifies for treatment under Section
631(b) of the Code during the Recognition Period should not be subject to tax on
Built-in Gains under Notice 88-19.
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, the Company must elect to be so treated and must meet
the requirements, discussed below, relating to the Company's organization,
sources of income, nature of assets and distributions of income.
ORGANIZATIONAL REQUIREMENTS
The Code defines a REIT as a corporation, trust or association (i) which is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest; (iii) which would be taxable as a domestic corporation but
for Sections 856 through 859 of the Code; (iv) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons, and (vi)
during the last half of each taxable year not more than
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50% in value of the outstanding stock of which is owned, directly or indirectly
through the application of certain attribution rules, by five or fewer
individuals (as defined in the Code to include certain entities). In addition,
certain other tests, described below, regarding the nature of its income and
assets must also be satisfied. The Code provides that conditions (i) to (iv)
above, inclusive, must be met during the entire taxable year and that condition
(v) must be met during at least 335 days of a taxable year of twelve months, or
during a proportionate part of a taxable year of less than twelve months.
Conditions (v) and (vi) will not apply until after the first taxable year for
which an election is made to be taxed as a REIT.
Condition (vi) must be satisfied by the Company for all periods beginning
on June 30, 1999 (i.e., the last half of Company's second taxable year as a
REIT). The Company does not currently meet this requirement. Accordingly, the
Company will be required to take appropriate action, including the issuance of
additional shares or the redemption of certain shares, in order to comply with
this requirement. In addition, the Company intends to propose that the
Company's Articles of Incorporation be amended to prohibit the direct or
constructive ownership of shares representing more than a certain percentage of
the combined total of outstanding shares of the Company by any person (the
"Ownership Limit"). The Ownership Limit is determined after application of
certain constructive ownership and attribution rules under the Code. The
constructive ownership and attribution rules are complex and may cause shares of
the Company owned directly or constructively by a group of related individuals
or entities to be constructively owned by an individual or entity. Under the
amendment that the Company intends to propose, the Company's Board of Directors
may permit greater ownership of outstanding shares of the Company by a
particular shareholder if it is satisfied, based upon the advice of tax counsel
or other evidence or undertaking acceptable to it, that ownership in excess of
the limit will not jeopardize the Company's status as a REIT. Under the
amendment, the Company intends to propose transfer of shares to a person who, as
a result of the transfer, violates the Ownership Limit may be void under some
circumstances or may be transferred to a trust, for the benefit of one or more
qualified charitable organizations designated by the Company, with the intended
transferee having only a right to share (to the extent of the transferee's
original purchase price for such shares) in the proceeds from the trust's sale
of such shares.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. The Company has requested from the Service a
change to a calendar taxable year.
In order to qualify as a REIT, the Company cannot have at the end of any
taxable year any undistributed "earnings and profits" that are attributable to a
"C corporation" taxable year. If the Company has any accumulated "earnings
and profits" from a "C" corporation taxable year which is not distributed by the
end of its first tax year, it will fail to qualify as a REIT. The Company
believes that it distributed all of its "C corporation earnings and profits" on
or prior to December 31, 1997. There can be no assurance, however, that the
Service would not contend otherwise on a subsequent audit of the Company.
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In the event that the Company were determined not to qualify as a REIT, the
Company would not be eligible to elect REIT status for up to five years after
the year in which it first failed to qualify as a REIT, unless it qualified for
certain limited relief.
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of
the assets and gross income of the partnership shall retain the same character
in the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and the asset tests.
INCOME TESTS
In order to maintain qualification as a REIT, the Company annually must
satisfy two gross income requirements. First, at least 75% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from investments relating to
real property or mortgages on real property (including "rents from real
property" and "gain from the sale or other disposition of real property" other
than property described in Section 1221(1) of the Code) or from certain types of
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from "prohibited transactions") for each taxable year
must be derived from such real property investments, dividends, interest and
gain from the sale or disposition of stock or securities (or from any
combination of the foregoing).
The Company believes that the income it will receive under the Timber
Harvest Agreement will be characterized for Federal income tax purposes as gain
from the sale or other disposition of real property which is not property
described in Section 1221(1) of the Code. In the opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, income realized by the Company from the disposal of
standing timber held for more than one year pursuant to the Timber Harvest
Agreement: (i) will be characterized as gain from the sale or other disposition
of real property, and (ii) will not constitute income from the sale or other
disposition of property described in Section 1221(1) of the Code, provided that:
(a) the Company complies with the terms and conditions of the Timber Harvest
Agreement and (b) the Company operates in accordance with various assumptions
and factual representations made by the Company. Shareholders should be aware
that there are no controlling Treasury Regulations, published rulings or
judicial decisions involving agreements with terms substantially the same as the
Timber Harvest Agreement that discuss whether income from such an agreement will
be characterized as gain from the sale or other disposition of real property
which is not described in Section 1221(1) of the Code. The opinion of Skadden,
Arps, Slate, Meagher & Flom LLP discussed above is based on all of the facts and
circumstances and upon legislative history, judicial decisions, rulings,
regulations and other regulatory pronouncements involving analogous situations.
In particular, the Service has issued a number of private letter rulings
addressing the identical issue under an analogous provision of the Code. The
Service concluded in such rulings that gains derived from the disposal of
standing timber in a transaction that qualifies for treatment under Section
631(b) of the Code are not gains from the disposition of property
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described in Section 1221(1) of the Code. Although private rulings are not
binding precedent, they offer insight into the Service's current position on a
particular issue. Opinions of counsel are not binding upon the Service or any
court, and there can be no complete assurance that the Service will not
successfully assert a contrary position. If the income realized by the Company
from the disposal of timber held for more than one year pursuant to the Timber
Harvest Agreement is not characterized as gain from the sale or other
disposition of real property, or if such income is considered to be income from
the sale or other disposition of property described in Section 1221(1) of the
Code, then the Company may not be able to satisfy either the 75% or the 95%
gross income tests and, as a result, may lose its REIT status.
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely because it is based on a fixed percentage or percentages
of receipts or sales. Second, rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the REIT, or
an actual or constructive owner of 10% or more of the REIT, actually or
constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify
as "rents from real property," the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an independent contractor from whom the REIT derives no revenue.
The REIT may, however, directly perform certain services that are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered "rendered to the occupant" of the property. To
the extent that services (other than those customarily furnished or rendered in
connection with the rental of real property) are rendered to the tenants of the
property by an independent contractor, the cost of the services must be borne by
the independent contractor. The Company does not and will not (i) charge rent
for any property that is based in whole or in part on the income or profits of
any person (except by reason of being based on a percentage of receipts or
sales, as described above), (ii) rent any property to a Related Party Tenant
(unless the Board determines in its discretion that the rent received from such
Related Party Tenant is not material and will not jeopardize the Company's
status as a REIT), (iii) derive rental income attributable to personal property
(other than personal property leased in connection with the lease of real
property, the amount of which is less than 15% of the total rent received under
the lease), or (iv) perform services considered to be rendered to the occupant
of the property, other than through an independent contractor from whom the
Company derives no revenue.
The Company anticipates that the only rental income it will receive will be
from certain farmlands, commercial properties and from certain hunting leases.
The Company believes that the income from such hunting leases and properties
will constitute "rents from real property" under the rules discussed above.
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If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its Federal income tax
return, and any incorrect information on the schedule was not due to fraud with
intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. As discussed above in "--General," even if these relief provisions
apply, a tax would be imposed with respect to the excess net income.
Any net income realized by the Company from the sale or other disposition
of property described in Section 1221(1) of the Code (including the Company's
share of any such gain realized by Veneers) will be treated as income from a
"prohibited transaction" and will be subject to a 100% penalty tax. Property is
described in Section 1221(1) of the Code if it is held as reserves or primarily
for sale to customers in the ordinary course of a trade or business. Such
prohibited transaction income may also have an adverse effect upon the Company's
ability to satisfy the income tests for qualification as a REIT. Under existing
law, whether property is held as reserves or primarily for sale to customers in
the ordinary course of a trade or business is a question of fact that depends on
all the facts and circumstances with respect to the particular transaction.
As discussed above in "--Income Tests," in the opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, income from the disposal of standing timber pursuant
to the Timber Harvest Agreement will not constitute income from the sale or
other disposition of property described in Section 1221(1) of the Code, provided
that: (a) the Company complies with the terms and conditions of the Timber
Harvest Agreement and (b) the Company operates in accordance with various
assumptions and factual representations made by the Company. Opinions of
counsel are not binding upon the Service or any court, and there can be no
complete assurance that the Service will not successfully assert a contrary
position. If the income realized by the Company from the disposal of timber
pursuant to the Timber Harvest Agreement is considered to be income from the
sale or other disposition of property described in Section 1221(1) of the Code,
then the Company would be subject to the 100% penalty tax on such income and, as
noted above, in such a situation the Company may not be able to satisfy the 75%
or 95% of income tests necessary for it to quality as a REIT.
The Company intends to hold its timberlands and its other properties for
investment with a view to long-term appreciation, to engage in the business of
acquiring, developing, owning and operating its timberlands and its other
properties and to permit harvesting of its timberlands or its other properties
as are consistent with the Company's investment objectives. There can be no
assurance, however, that the Service might not contend that one or more of such
transactions is a prohibited transaction and subject to the 100% penalty tax.
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ASSET TESTS
The Company, at the close of each quarter of its taxable year, must satisfy
three tests relating to the nature of its assets. First, at least 75% of the
value of the Company's total assets must be represented by real estate assets,
including (i) its allocable share of real estate assets held by partnerships in
which the Company owns an interest, (ii) stock of real estate investment trusts,
(iii) stock or debt instruments held for not more than one year purchased with
the proceeds of a stock offering or long-term (at least five years) debt
offering of the Company, and (iv) cash, cash items and government securities.
Second, not more than 25% of the Company's total assets may be represented by
securities other than those in the 75% asset class. Third, other than equity
securities of real estate investment trusts, of the investments included in the
25% asset class, the value of any one issuer's securities owned by the Company
may not exceed 5% of the value of the Company's total assets, and the Company
may not own more than 10% of any one issuer's outstanding voting securities.
The Company believes that, at all times, substantially more than 75% of the
assets owned by the Company, and any "qualified REIT Subsidiary" (as defined
below), will consist of fee ownership of timberland. Accordingly, the Company
believes that it should be able to meet the 75% test described above on a going
forward basis. The Company's indirect interest in certain properties will be
held through a wholly owned corporate subsidiary of the Company, Tenarc
Construction Corporation, which will be operated as a "qualified REIT
subsidiary" within the meaning of the Code. Qualified REIT subsidiaries are not
treated as separate entities from their parent REIT for Federal income tax
purposes. Instead, all assets, liabilities and items of income, deduction and
credit of each qualified REIT subsidiary are treated as assets, liabilities and
items of the Company. A qualified REIT subsidiary of the Company therefore will
not be subject to Federal corporate income taxation, although it may be subject
to state or local taxation.
The Company will directly, and indirectly through Veneers, own interests in
AT Timber and AT Lumber. As set forth above, the ownership of more than 10% of
the voting securities or more than 5% in value of any one issuer by a REIT is
prohibited by the REIT asset tests. The Company believes that its indirect
ownership interests in AT Timber and AT Lumber will qualify under these rules.
Skadden, Arps, Slate, Meagher & Flom LLP, in rendering its opinion on December
31, 1997 as to the qualification of the Company as a REIT, relied upon
representations of the Company as to the value of the Company's direct and
indirect interests in AT Timber and AT Lumber. While the Company has sought
advice of experts in reaching its conclusions, no independent appraisals have
been sought. Accordingly, there can be no assurance that the Service will not
contend that the Company's ownership interest in AT Timber and AT Lumber
disqualifies the Company from treatment as a REIT.
The 5% test described above must generally be met for any quarter in which
the Company acquires securities of the issuer. Although the Company plans to
take steps to ensure that it satisfies the 5% value test for any quarter with
respect to which testing will occur, there can be no assurance
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that such steps will always be successful or will not require a reduction in the
Company's overall interest in AT Timber, AT Lumber, or both.
If the Company should fail to satisfy the asset tests at the end of a
calendar quarter, such a failure would not cause it to lose its REIT status if
(i) it satisfied all of the asset tests at the close of the preceding calendar
quarter and (ii) the discrepancy between the value of the Company's assets and
the asset requirements either did not exist immediately after the acquisition of
any particular asset or was not wholly or partly caused by such an acquisition
(i.e., the discrepancy arose from changes in the market values of its assets).
If the condition described in clause (ii) of the preceding sentence were not
satisfied, the Company could still avoid disqualification by eliminating any
discrepancy within 30 days after the close of the quarter in which it arose.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its Shareholders in an amount
at least equal to (i) the sum of (a) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (b) 95% of the net income (after tax), if any, from
foreclosure property, minus (ii) the sum of certain items of noncash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its tax
return for such year and if paid on or before the first regular dividend payment
date after such declaration. To the extent that the Company does not distribute
(or is not treated as having distributed) all of its net capital gain or
distributes (or is treated as having distributed) at least 95%, but less than
100%, of its "REIT taxable income," as adjusted, it will be subject to tax
thereon at regular ordinary and capital gain corporate tax rates. If the
Company should fail to distribute during each calendar year at least the sum of
(i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital
gain income for such year (other than capital gain income which the Company
elects to retain and pay tax on as provided for below) and (iii) any
undistributed taxable income from prior periods (other than capital gains from
such years which the Company elected to retain and pay tax on), the Company
would be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. Pursuant to recently enacted
legislation, the Company may elect to retain rather than distribute its net
long-term capital gains. The effect of such an election is that (i) the Company
is required to pay the tax on such gains at regular corporate tax rates, (ii)
its Shareholders, while required to include their proportionate share of the
undistributed long-term capital gain in income, will receive a credit or refund
for their share of the tax paid by the Company, and (iii) the basis of a
Shareholder's stock would be increased by the amount of the undistributed long-
term capital gains (minus the amount of capital gains tax paid by the Company)
included in income by such Shareholder. In addition, if the Company disposes of
any Built-In Gain Asset during the applicable Recognition Period, the Company
will be required, pursuant to guidance issued by the Service, to distribute at
least 95% of the Built-In Gain (after tax), if any, recognized on the
disposition of such asset. The Company intends to make timely distributions
sufficient to satisfy these annual distribution requirements.
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It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet these distribution requirements due to
timing or other differences between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company. If
such differences occur, in order to meet the distribution requirements, the
Company may find it necessary to arrange for short or possibly long-term
borrowings, equity issuances or asset sales to pay dividends in the form of
taxable stock dividends (if it is practicable to do so), or elect to retain and
pay tax on a portion of Its net long-term capital gains in the manner provided
for in the preceding paragraph.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to Shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be
able to avoid being taxed on amounts distributed as deficiency dividends;
however, the Company will be required to pay interest based upon the amount of
any deduction taken for deficiency dividends.
ABSENCE OF EARNINGS AND PROFITS
The Code provides that, in the case of a corporation such as the Company
that was formerly a taxable C corporation, it may qualify as a REIT for a
taxable year only if, as of the close of such year, it has no "earnings and
profits" accumulated in any non-REIT year. The Company believes it has satisfied
this requirement.
Any adjustment to the Company's taxable income for taxable years ending on
or before the effective date of its REIT election, including as a result of an
examination of its returns by the Service, could affect the calculation of its
earnings and profits as of the appropriate measurement date. Furthermore, the
determination of earnings and profits requires the resolution of certain
technical tax issues with respect to which there is no authority directly on
point and, consequently, the proper treatment of these issues for earnings and
profits purposes is not free from doubt. There can be no assurance that the
Service will not examine the tax returns of the Company for prior years and
propose adjustments to increase its taxable income. In this regard, the Service
can consider all taxable years of a corporation as open for review for purposes
of determining the amount of such earnings and profits.
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FAILURE OF THE COMPANY TO QUALIFY AS A REIT
If the Company fails to qualify for taxation as a REIT in any taxable year
and if the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to Shareholders in any year in which the
Company fails to qualify as a REIT will not be deductible by the Company nor
will they be required to be made. As a result, the cash available for
distribution by the Company to its Shareholders would be significantly reduced.
In addition, if the Company fails to qualify as a REIT, all distributions to
Shareholders will be taxable as ordinary income, to the extent of the Company's
current and accumulated earnings and profits, and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Company also will be disqualified from taxation as a
REIT for the four taxable years following the year during which such
qualification was lost. It is not possible to state whether in all
circumstances the Company would be entitled to such statutory relief.
TAXATION OF SHAREHOLDERS OF THE COMPANY
DISTRIBUTIONS BY THE COMPANY
As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable Shareholders as ordinary income. Such distributions will not be
eligible for the dividends received deduction in the case of Shareholders that
are corporations. Distributions made by the Company that are properly designated
by the Company as capital gain dividends will be taxable to taxable Shareholders
as long-term capital gains (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which a Shareholder has held his Common Stock. Shareholders that are
corporations may, however, be required to treat up to 20% of certain capital
gain dividends as ordinary income pursuant to Section 291(d) of the Code.
Individuals are generally subject to differing rates of tax on various
transactions giving rise to long-term capital gains or losses. In general, the
long-term capital gains rate is (i) 28% on capital gain from the sale or
exchange of assets held more than one year but not more than 18 months, (ii) 20%
on capital gain from the sale or exchange of assets held for more than 18
months, and (iii) 25% on capital gain from the sale or exchange of certain
depreciable real estate otherwise eligible for the 20% rate, up to the amount of
depreciation deductions previously taken with respect to such real estate.
Subject to certain limitations concerning the classification of the Company's
long-term capital gains, the Company may designate a capital gain dividend as a
28% rate distribution, a 25% rate distribution or a 20% rate distribution.
The Company anticipates that a substantial portion of its income will be
derived from having its timber harvested pursuant to the Timber Harvest
Agreement and that such income will be characterized as long-term capital gains.
Accordingly, the Company anticipates that a substantial portion of any dividend
distribution will be designated as a capital gain dividend. If the Company
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elects to retain capital gains rather than distribute them, a Shareholder will
be deemed to receive a capital gain dividend equal to the amount of such
retained capital gains. Such gains are subject to apportionment among the three
rate groups set forth above. In such a case, a Shareholder will receive certain
tax credits and basis adjustments reflecting the deemed distribution and deemed
payment of taxes by the Shareholder. To the extent that the Company makes
distributions in excess of its current and accumulated earnings and profits,
such distributions will be treated first as a tax-free return of capital to each
Shareholder, reducing the adjusted basis which such Shareholder has in its
Common Stock for tax purposes by the amount of such distribution (but not below
zero), with distributions in excess of a Shareholder's adjusted basis in its
Common Stock taxable as capital gains (provided that the Common Stock has been
held as a capital asset). Dividends declared by the Company in October,
November, or December of any year and payable to a Shareholder of record on a
specified date in any such month shall be treated as both paid by the Company
and received by the Shareholder on December 31 of such year, provided that the
dividend is actually paid by the Company on or before January 31 of the
following calendar year. Shareholders may not include in their own income tax
returns any net operating losses or capital losses of the Company. The Company
will notify each Shareholder after the close of the Company's taxable year as to
the portions of the distributions attributable to that year which constitute
ordinary income, capital gain or a return of capital.
The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the amount required to
be distributed in order to avoid imposition of the 4% excise tax discussed under
"--Taxation of the Company--General" and "--Taxation of the Company--Annual
Distribution Requirements." As a result, Shareholders may be required to treat
as taxable dividends certain distributions that would otherwise result in tax-
free returns of capital. Moreover, any "deficiency dividend" will be treated as
a "dividend" (an ordinary dividend or a capital gain dividend, as the case may
be), regardless of the Company's earnings and profits.
Distributions made by the Company and gain arising from the sale or
exchange by a Shareholder of Common Stock will not be treated as passive
activity income, and, as a result, Shareholders generally will not be able to
apply any "passive losses" against such income or gain. Dividends from the
Company (to the extent they do not constitute a capital gain dividend or a
return of capital) will generally be treated as investment income for purposes
of the investment interest limitation. Net capital gain from the sale or other
disposition of shares of Common Stock and capital gain dividends will generally
not be considered investment income for purposes of the investment interest
limitation.
SALE OF COMMON STOCK
Upon any sale or other disposition of Common Stock, a Shareholder will
recognize gain or loss for Federal income tax purposes in an amount equal to the
difference between (i) the amount of cash and the fair market value of any
property received on such sale or other disposition and (ii) the Shareholder's
adjusted basis in such Common Stock for tax purposes. Such gain or loss will be
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capital gain or loss if the Common Stock has been held by the Shareholder as a
capital asset and will be long-term gain or loss if such Common Stock has been
held for more than one year. In general, any loss recognized by a Shareholder
upon the sale or other disposition of Common Stock that has been held for six
months or less (after applying certain holding period rules) will be treated as
a long-term capital loss to the extent of distributions received by such
Shareholder from the Company which were required to be treated as long-term
capital gains.
AT TIMBER/AT LUMBER
Neither AT Lumber nor AT Timber will qualify as a REIT, and such entities
will be subject to federal, state and local income taxes on their respective
taxable income at normal corporate rates. As described above, the value of the
Company's interests in the securities of AT Timber and AT Lumber cannot exceed
5% of the value of the Company's total assets at the end of any calendar quarter
in which the Company acquires such securities or increases its interest in such
securities (including as a result of the Company increasing its interest in
Veneers). This limitation may restrict the ability of AT Timber and AT Lumber
to increase the size of their respective businesses, or may cause the Company to
sell all or a portion of its stock in AT Timber and AT Lumber, unless the value
of the assets of the Company is increasing at a commensurate rate.
UNCERTAIN IMPACT OF CLINTON BUDGET PROPOSALS
Recent Clinton Administration budget proposals contained a number of
provisions which, if adopted as proposed, could affect REITs in general and the
Company in particular. The proposals included the following four changes to the
rules applicable to REITs. The proposed legislation would, among other things,
(i) restrict the ability of any person (including any corporation) from owning
more than 50% of the vote or value of all classes of equity securities of a
REIT, effective for companies electing REIT status for tax years beginning on or
after the date of "first committee action" on the budget bill, (ii) subject to
limited grandfathering rules, restrict the ability of REIT to own more than 10%
of the vote or value of all equity securities of a corporation (in contrast to
current rules, which provide that a REIT may not own more than 10% of the vote
of all equity securities of a corporation), effective for acquisitions of stock
on or after the date of "first committee action" on the budget bill, and (iii)
require the immediate taxation of all built-in-gains on the conversion of a
subchapter C corporation into a REIT (excluding conversions where the
corporation at issue had a value of $5 million or less), effective for
conversions after January 1, 1999. The proposals, in their current form,
including the proposed effective dates, could have a material adverse impact on
the Company if it were passed in substantially the same form as proposed. The
Company cannot with certainty predict whether the Clinton Administration
proposals will pass, what form any final legislative language will take if so
passed, or the effective date of any such legislation.
34
<PAGE>
OTHER TAXES
The Company, any of its subsidiaries or the Company's Shareholders may be
subject to foreign, state and local tax in various countries, states and
localities, including those countries, states and localities in which it or they
transact business, own property, or reside. The state, local or foreign tax
treatment of the Company and the Shareholders in such jurisdictions may differ
from the Federal income tax treatment described above. Consequently,
prospective Shareholders should consult their tax advisors regarding the effect
of foreign, state and local tax laws upon an investment in the Common Stock.
ITEM 2. FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information as of July 31, 1995, 1996
and 1997, and for the fiscal years then ended, and as of December 31, 1997 and
for the five months then ended, set forth below under the captions "Income
Statement Data" and "Balance Sheet Data" has been derived from audited financial
statements of the Company. The Company's consolidated financial statements for
each of the three years in the period ended July 31, 1997 and for the five
months ended December 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, whose report with respect to such consolidated financial
statements appears elsewhere in this Registration Statement. The Company's
consolidated financial statements for the five months ended December 31, 1996
and for the years ended July 31, 1994 and 1993 have not been audited by
independent auditors. However, in the opinion of the Company's management, the
selected financial data for such periods include all adjustments (which include
only normal recurring adjustments) necessary for a fair presentation of the
data.
The following selected consolidated financial information of the Company
will not be comparable to the results of operations and cash flow the Company
will derive in future periods. FURTHERMORE, THE HISTORICAL CONSOLIDATED RESULTS
OF OPERATIONS DO NOT REFLECT THE CORPORATE ORGANIZATION, ECONOMIC AND INCOME TAX
IMPACTS ON THE COMPANY'S RESULTS OF OPERATIONS THAT WILL RESULT FROM THE
RESTRUCTURING TRANSACTIONS COMPLETED IN DECEMBER 1997 AND THE PLANNED REIT
ELECTION AS DESCRIBED UNDER "THE 1997 RESTRUCTURING TRANSACTIONS." THIS
SELECTED CONSOLIDATED FINANCIAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION.
<TABLE>
<CAPTION>
(in thousands, except per share data)
Five Months
Year Ended July 31, Ended Dec. 31,
------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1996 1997(1)
------------------------------------------------------------------------------
INCOME STATEMENT DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues, net.................. $79,740 $87,066 $ 91,665 $ 88,160 $ 96,908 $ 35,779 $ 52,485
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Total costs and expenses............ 71,766 76,028 78,136 77,035 85,055 33,048 45,495
------- ------- -------- -------- -------- -------- ---------
Income from operations.............. 7,974 11,038 13,529 11,125 11,853 2,731 6,990
Interest expense, net............... 702 863 1,491 2,368 2,911 931 2,339
Income before minority interest..... 9,525 8,157 7,661 6,087 7,470 1,452 64
Net earnings (loss)................. $ 9,525 $ 8,157 $ 7,661 $ 6,087 $ 5,650 $ 962 $ (1,316)
Per share:
Earnings (loss).................. 16,335 14,022 13,174 10,479 9,749 1,660 (2,271)
Cash dividends declared.......... 4,250 5,000 5,250 6,230 6,250 6,250 101,190
BALANCE SHEET DATA
Timber and timberlands, net......... $11,165 $10,912 $ 11,951 $ 11,343 $ 9,968 $ 10,367 $ 9,281
Total assets........................ $74,710 $83,297 $101,640 $121,184 $136,486 $125,012 $132,099
Total debt.......................... $10,057 $14,455 $ 27,906 $ 44,609 $ 51,170 $ 44,358 $104,143
Total stockholders' equity
(deficit)........................... $40,430 $45,647 $ 50,026 $ 52,345 $ 54,373 $ 49,685 $ (5,877)
</TABLE>
_________________________
(1) Results of operations for the five months ended December 31, 1997
include a $5.1 million loss on the sale of assets primarily associated with
the laminated flooring plant.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
Prior to January 1, 1998, the Company was an integrated hardwood forest
products company with approximately 324,000 acres of hardwood timber located
along the Mississippi River primarily in Mississippi, Arkansas, Louisiana and
Tennessee. The Company also operated facilities in Vicksburg, Mississippi that
convert sawtimber into premium hardwood lumber used in furniture, cabinets,
architectural moldings and flooring, and sold pulpwood and other sawtimber to
third parties. The Company and its wholly owned subsidiaries also operated
other businesses not vertically integrated with its hardwood forests, including
PT Transportation, a river construction and transportation business and a
laminated truck flooring facility in Memphis, Tennessee. The laminated truck
flooring facility was sold as of December 31, 1997. In addition, the Company
holds interests in commercial real estate and farmland.
In May 1995, Veneers was formed to construct and operate a state-of-the-art
rotary veneer converting facility which would purchase certain grades of oak
sawtimber from the Company, with the Company holding a 1% interest as managing
general partner and the shareholders of the Company holding the remaining 99% as
Limited Partners. Veneers operations commenced in November 1996. Presently, a
wholly owned subsidiary of the Company is the sole general partner in Veneers
and the Company therefore indirectly controls Veneers' operations. Accordingly,
Veneers' assets, liabilities and results of operations are included in the
consolidated financial statements of the Company with appropriate recognition of
the Limited Partners' approximate 99% minority interest.
36
<PAGE>
Prior to January 1, 1998, the Company completed a series of transactions
designed to separate the Company's timberlands and other real estate holdings
from its converting and other operations in order to enable the Company to
qualify as a REIT effective January 1, 1998. As a result of those transactions,
the Company contributed a substantial portion of its non-real estate assets (i)
to Veneers in exchange for LP Interests and (ii) to AT Timber and AT Lumber in
exchange for all of the shares of non-voting preferred stock in AT Timber and AT
Lumber. Veneers, directly and through its wholly owned subsidiaries, assumed
controlling ownership interests in all non-real estate operations. THE
HISTORICAL RESULTS OF OPERATIONS OF THE COMPANY PRESENTED IN THE CONSOLIDATED
FINANCIAL STATEMENTS INCLUDED IN THIS REGISTRATION STATEMENT DO NOT REFLECT THE
RESTRUCTURING TRANSACTIONS DESCRIBED ABOVE.
BUSINESS AND RESOURCE MANAGEMENT OBJECTIVES
The Company's operating results have fluctuated due to changes in the
Company's business objectives and resource management practices and timber
harvest levels. The Company was formed in 1889 and, throughout most of its
history, its business objective has been to enhance the asset value of its
timber resources by maximizing the growing stock volume of desirable species in
good condition for the production of high quality hardwood sawtimber. Only in
the last ten years have the demand and market prices for hardwood pulpwood
reached levels allowing the harvest of pulpwood to be commercially practicable.
As a result, the Company's historical resource management practice was to remove
trees from stands that were not likely to enhance the value of the stand or had
reached economic maturity in order to improve the quality of the remaining stand
and to promote the natural regeneration of desirable species. From the mid-
1960s through the early 1990s, the average annual harvest was less than 50 MMBF,
or less than 70% of annual growth. Because of this resource management practice,
the Company purchased outside timber and logs in order to meet the species mix
and volume requirements of its timber converting facilities.
In the mid-1990s, the Company achieved its resource management goals for
quality and growing stock volume. Based on timber productivity data accumulated
for approximately 30 years, the Company concluded that it could increase its
timber growth rates by reducing the stocking levels of large-diameter trees
through an increased overall harvest for several years. Accordingly, in January
1997 the Company shifted its business objective from enhancing the asset value
of its timber resources to maximizing the productivity of its timber resources
and cash flow and has begun an increased overall harvest with attention given to
reducing the stocking of large diameter trees. As a result, the Company has
reduced its purchases of timber and logs from third parties.
37
<PAGE>
TIMBERLANDS REVIEW
The Company's harvest and timber acquisition volumes for the periods
presented are as follows:
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
YEARS ENDED JULY 31, DECEMBER 31,
--------------------------- -----------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SAWTIMBER (MBF)
The Company lands...... 54,118 52,068 80,721 29,121 40,439
Purchased timber....... 10,228 10,583 2,852 2,814 1,907
Purchased logs......... 15,321 5,123 6,207 1,312 3,738
------- ------- ------- ------- -------
Total............... 79,667 67,774 89,780 33,247 46,084
PULPWOOD (TONS)
Total...............209,725 277,302 363,540 141,554 274,781
</TABLE>
The increase in harvest volumes for the year ended July 31, 1997 and the
five months ended December 31, 1997 compared to the corresponding periods in the
previous year is due to the implementation of the Company's new resource
management objective. The increase in pulpwood volumes harvested in these
periods also reflects increases in pulpwood demand and is in response to higher
pulpwood prices. Sawtimber volumes harvested for the year ended July 31, 1996
decreased compared to the previous year due to reduced lumber production
resulting from start-up inefficiencies associated with a lumber conversion
facility modernization program begun in 1995 and completed in mid-1996.
FIVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO FIVE MONTHS ENDED DECEMBER 31,
1996 (UNAUDITED)
Net revenues for the five months ended December 31, 1997 were $52.5
million, an increase of 47% from revenues of $35.8 million for the five months
ended December 31,1996. The increase was primarily due to a 51% increase in
timber and wood products revenues, which resulted from increased volumes shipped
in all categories of timber and wood products, including lumber, pulpwood, logs
and laminated truck flooring, as well as increased volumes of veneer shipped
resulting from five months of operations at full capacity in 1997 compared to
only three months of start-up operations in 1996. In addition, river
construction revenues increased to $11.7 million in the five months ended
December 31, 1997 from $7.6 million in the comparable period in the previous
year due to favorable Mississippi River levels extending beyond the normal
season.
Total costs and expenses for the five months ended December 31, 1997 were
$45.5 million, an increase of 38% from the $33.0 million incurred in the five
months ended December 31,1996. Timber and wood products expenses were $29.3
million for the five months ended December 31,
38
<PAGE>
1997, an increase of 28% compared to $22.9 million for the comparable period in
the previous year. The increase is primarily due to increased logging and log
transportation costs resulting from an increased harvest level, increased veneer
manufacturing costs resulting from five months of operations at full capacity
and increased laminated flooring costs resulting from increased production and
sales volume. Lumber manufacturing costs were approximately the same in both
periods despite a 29% increase in lumber volume shipped due to improved
production rates and reduced downtime. River construction expenses were $11.0
million in the five months ended December 31, 1997, an increase of 73% compared
to $6.3 million for the comparable period in the previous year, due to the
increase in river construction revenues described above.
Interest expense for the five months ended December 31,1997 was $2.4
million, an increase of 80% from the interest expense of $1.3 million incurred
in the five months ended December 31, 1996. The increase is due to increased
borrowings of approximately $60.0 million to fund the dividend paid in September
1997 to enable the Company to qualify as a REIT. Loss on sales of assets for
the five months ended December 31, 1997 was $5.2 million compared to a gain of
$0.3 million in the comparable period of the previous year. In late 1997, the
Company decided to dispose of the laminated truck flooring operations since
there were no vertical synergies with its timberlands. On December 31,1997,
assets related to the laminated truck flooring plant were sold for $0.1 million
in cash and a $4.9 million note receivable, which accounts for substantially all
of the loss incurred.
The Company recorded an income tax benefit for the five months ended
December 31,1997 of $0.6 million compared to a $0.5 million expense for the five
months ended December 31, 1996. The effective income tax rate for the five-month
periods in 1997 and 1996 reflect $0.5 million and $0.2 million benefits,
respectively, of the absence of Federal income taxes payable on net earnings
from Veneers.
Income (loss) before minority interest in Veneers for the five months ended
December 31,1997 was ($0.1) million, compared to income of $1.5 million for the
comparable period in 1996. Net income (loss) for the five months ended December
31,1997 was ($1.3) million compared to income of $1.0 million for the comparable
period in the previous year. The decrease in both is due primarily to the loss
on the sale of the laminated truck flooring assets and increased interest
expense offset by the increase in income from operations as described above.
FISCAL YEAR ENDED JULY 31, 1997 COMPARED TO FISCAL YEAR ENDED JULY 31, 1996
Net revenues for the fiscal year ended July 31,1997 were $96.9 million, an
increase of 10% from revenues of $88.2 million for the fiscal year ended July
31,1996. The increase was primarily due to the commencement of the veneer
operations in October 1996, which contributed $8.5 million in revenues in fiscal
1997. Increased volumes shipped and revenues from lumber, pulpwood and logs
were also experienced in fiscal 1997 due to increased lumber production and
increased timber harvest levels but were partially offset by decreases in
laminated trailer flooring sales due to lower volumes of trailers produced and
decreases in river construction revenues due to unfavorable river levels for
extended periods.
39
<PAGE>
Total costs and expenses for the fiscal year ended July 31,1997 were $85.1
million, an increase of 10% from total costs and expenses of $77.0 million for
the fiscal year ended July 31,1996. Timber and wood products expenses were
$60.8 million for fiscal 1997, an increase of 22% compared to $49.7 million for
fiscal 1996. The increase was attributable to the veneer start-up, lumber
operations and timber sales. PT Transportation expenses were $15.1 million in
fiscal 1997, a decrease of 22% compared to $19.2 million in fiscal 1996. The
decrease was attributable to decreased PT Transportation revenues for the same
periods.
Interest expense for the fiscal year ended July 31,1997 was $3.4 million,
an increase of 28% from interest expense of $2.6 million in the year ended July
31,1996. The increase was due to increased borrowings primarily for the
construction of the new veneer mill, lumber manufacturing equipment improvements
and the acquisition of commercial real estate. Gain on sales of assets for
fiscal 1997 was $2.4 million compared to $0.4 million for fiscal 1996 due to
sales in fiscal 1997 of certain farm and commercial properties.
The effective income tax rate for the fiscal year ended July 31,1997 was
34.2% compared to 33.2% for the fiscal year ended July 31,1996. The effective
income tax rate for fiscal 1997 reflects $0.6 million benefit of no Federal
income taxes payable on net earnings from Veneers.
Income before a minority interest in Veneers for 1997 was $7.5 million, an
increase of 23% from $6.1 million in 1996. The increase was due primarily to
the earnings from the veneer operations. Net income for fiscal 1997 was $5.7
million, a decrease of 7% from $6.1 million in 1996.
FISCAL YEAR ENDED JULY 31, 1996 COMPARED TO FISCAL YEAR ENDED JULY 31, 1995
Net revenues for the fiscal year ended July 31,1996 were $88.2 million, a
decrease of 4% from revenues of $91.7 million for the fiscal year ended July
31,1995. The decrease was due primarily to lower lumber sales from decreased
lumber production that occurred because of start-up inefficiencies associated
with the lumber facility modernization program begun in 1995 and completed in
spring 1996.
Total costs and expenses for the fiscal year ended July 31,1996 were $77.0
million, a decrease of 1% from total costs and expenses of $78.1 million for the
fiscal year ended July 31,1995. Timber and wood products expenses were $49.7
million for fiscal 1996, a decrease of 4% compared to $52.0 million for fiscal
1996. The decrease is attributable to the net effect of lower labor costs and
higher depreciation expense due to the lumber facility modernization program.
River construction expenses were $19.2 million in fiscal 1996, an increase of 6%
compared to $18.1 million in fiscal 1995. The increase is due to the 1%
increase in river construction revenues for the same period.
Interest expense for the fiscal year ended July 31,1996 was $2.6 million,
an increase of 65% from interest expense of $1.6 million in the fiscal year
ended July 31, 1995. The increase was due
40
<PAGE>
to increased borrowings primarily for the construction of the new veneer mill,
the lumber facility modernization program and the acquisition of river
construction equipment.
The effective income tax rate for the fiscal year ended July 31, 1996 was
33.2% compared to 34.5% for the fiscal year ended July 31, 1995.
Net income for fiscal 1996 was $6.1 million, a decrease of 21% from $7.7
million in fiscal 1995. The decrease is due primarily to the decrease in timber
and wood products operating income resulting from the start-up inefficiencies
associated with the lumber facility modernization program.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by the Company's operating activities for the five months
ended December 31,1997 and 1996 was $9.2 million and $7.1 million, respectively,
and was $18.4 million, $14.2 million and $9.8 million, respectively, for the
fiscal years ended July 31, 1997, 1996 and 1995. Cash provided by operations has
increased despite decreases in net income in each of the fiscal years presented
because a higher percentage of total expenses are non-cash expenses including
depreciation, depletion and amortization, deferred income taxes and minority
interest in earnings.
The Company's capital expenditures for the five months ended December
31,1997 and 1996 were $2.7 million and $6.3 million, respectively, and were
$31.1 million, $29.8 million and $19.8 million, respectively, for the fiscal
years ended July 31,1997, 1996 and 1995. Capital expenditures were related to
constructing the veneer plant, modernizing the lumber and laminated trailer
flooring facilities, and acquiring river construction equipment and commercial
real estate. Over half of these capital expenditures were funded from cash flow
from operations and the proceeds from the sales of assets and commercial real
estate, with the remainder funded by the issuance of long term debt and
borrowings under line of credit facilities. The reduction in capital
expenditures in the five months ended December 31,1997 is due to the completion
of the projects described above. Capital expenditures necessary to maintain the
Company's current facilities and capacities in future years are currently
expected to be less than $4.0 million per year.
In September 1997, the Company declared a special $100,000 per share
dividend to distribute all of its accumulated earnings and profits to enable the
Company to qualify as a REIT effective January 1,1998. This dividend was
financed by a $50.0 million note payable to Potlatch Corporation plus additional
line of credit borrowings. As of December 31, 1997, the Company had two lines
of credit totaling $16.5 million of which $7.4 million was available for future
borrowing. All outstanding borrowings as of such date are either the direct
obligation of, or are guaranteed by, the Company. Management of the Company
believes that cash flow from operations and access to capital under the
Company's lines of credit would be adequate to fund the Company's REIT
distributions, debt service and capital expenditure needs in the foreseeable
future.
41
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The following Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1997 presents unaudited pro forma operating results
of the Company as if the 1997 Restructuring Transactions (see Note 12 to the
Consolidated Financial Statements) and the sale of the laminated truck flooring
plant (see Note 3 to the Consolidated Financial Statements) had occurred as of
January 1, 1997.
The Company's fiscal year-end has historically been July 31. For purposes
of preparing the Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1997, The Company's historical operating results for
the five months ended December 31, 1996 were subtracted from the Company's
historical operating results for the year ended July 31, 1997, and the Company's
historical operating results for the five months ended December 31, 1997 were
added to the Company's historical operating results for the year ended July 31,
1997.
The Pro Forma Condensed Consolidated Financial Information does not purport
to represent what the Company's financial position or results of operations
actually would have been had these transactions, in fact, occurred on the dates
indicated, or to project the Company's results of operations at any future date
or for any future period.
The Pro Forma Condensed Consolidated Financial Information should be read
in conjunction with the Company's historical consolidated financial statements,
which are included elsewhere herein.
42
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
NET REVENUES $113,614 $(8,246) (a) $105,368
COSTS AND EXPENSES 97,502 (9,095) (a) 88,407
-------- ------- --------
INCOME FROM OPERATIONS 16,112 849 16,961
OTHER INCOME (EXPENSE) (7,374) 2,973 (b) (4,401)
-------- ------- --------
INCOME BEFORE INCOME TAX EXPENSE
AND MINORITY INTEREST 8,738 3,822 12,560
INCOME TAX EXPENSE 2,656 (2,656) (c)
-------- ------- ---------
INCOME BEFORE MINORITY INTEREST 6,082 6,478 12,560
MINORITY INTEREST (2,710) 2,710 (d)
-------- ------- ---------
NET INCOME $ 3,372 $ 9,188 $ 12,560
======== ======= ========
EARNINGS PER SHARE $ 5,818 $ 21,672
======== ========
</TABLE>
________________
(a) To eliminate the sales, costs, and expenses of the laminated truck flooring
plant.
(b) To adjust interest expense to reflect a full year of
interest onborrowings incurred by the Company to fund
the stockholderdividend of $58,645 paid on September
22, 1997. Such dividend was paid in order for the
Company to qualify as a REIT. $(2,600)
To reflect the elimination of the loss on the sale of the
laminatedtruck flooring assets. 5,573
-------
Total $ 2,973
=======
(c) To eliminate income tax expense as a result of REIT status.
(d) To reduce the minority interest in income of limited partnership.
43
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTIES
TIMBERLANDS
The Company's Timberlands are described above under "Business Segments -
Operations - Timber and Wood Products Segment - The Timberlands" in Item 1.
WOOD PRODUCTS MANUFACTURING FACILITIES
AT Lumber operates lumber manufacturing facilities including two sawmills,
a lumber yard, dry kilns and an inspection station and Veneers operates a rotary
veneer mill all in Vicksburg, Mississippi. The veneer mill began operations in
the fall of 1996 and the lumber manufacturing facilities were modernized
beginning in 1995. In December 1997, the Company sold the assets related to the
production of laminated truck flooring. The following table summarizes the
annual production and capacity of the wood products manufacturing facilities as
of December 31, 1997. Amounts presented are MBF of logs consumed.
<TABLE>
<CAPTION>
Production Five Months Ended
Capacity December 31, 1997 Years Ended July 31
---------- ----------------- -------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C> <C> <C>
Lumber Manufacturing 78,000 32,438 75,191 63,203 72,964
Veneer Manufacturing 11,000 3,651 5,835 N/A N/A
</TABLE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At April 20, 1998, there were approximately 166 holders of record of Common
Stock, which is the only class of capital stock of the Company outstanding.
The following table sets forth the beneficial ownership of shares of Common
Stock as of April 20, 1998 by (i) directors of the Company, (ii) the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company (collectively the "Named Executive Officers"), (iii) the
directors and executive officers of the Company as a group and (iv) each person
who is a Shareholder of the Company holding more than a 5% interest in the
Company. Unless otherwise indicated in the footnotes, all of such interests are
owned directly, and the indicated person or entity has sole voting and
disposition power. The number of shares of Common Stock represents (a) the
number of shares of Common Stock the person beneficially owns plus (b) the
number of shares of Common Stock issuable upon exercise of currently outstanding
options.
44
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount & Nature of Percentage
Beneficial Owner (1) Beneficial Ownership of Class
- --------------------- -------------------- -----------
<S> <C> <C>
Directors and Executive Officers
Parnell S. Lewis, Jr. 31.6500(2) 5.5%
Bart C. Tully, Jr. 16.0500(3) 2.8%
Russell E. Bloodworth 25.5500(4) 4.4%
John H. Dicken, Jr. 8.4625(5) 1.5%
Claude Tully Hall 24.9000(6) 4.3%
Linus Parker Hall, Jr. 18.2500(7) 3.1%
Kathleen Bushing Pierce 24.7000(8) 4.3%
E.D. Coombs, Jr. 0.7375 *
Paul M. Jepson, M.D. 23.9499(9) 4.1%
Charles R. Dickinson, Jr. 8.4875(10) 1.5%
All Directors and Executive Officers
as a Group 167.6499 28.9%
5% or greater Shareholders
J.T. Graves Trust 45.3000 7.8%
1 Commerce Square
Memphis, TN 38101
</TABLE>
_________
* Less than 1%
(1) The mailing address for each person listed is that of the Company unless
otherwise indicated.
(2) Includes 4.5 shares held by trusts for the benefit of Mr. Lewis' children.
(3) Includes 4.25 shares held by Mr. Tully's wife and 8.0 shares held by a trust
for the benefit of Mr. Tully's wife.
(4) Includes 8.0 shares held by Mr. Bloodworth's wife and 17.55 shares held by
trusts for the benefit of Mr. Bloodworth's children.
(5) Includes 6.4625 shares held by Mr. Dicken's wife and 2.0 shares held by a
trust for the benefit of Mr. Dicken's children of which Mr. Dicken is
trustee.
(6) Includes 1.2 shares held by Mr. C.T. Hall's wife and 17.0 shares held by
trusts for the benefit of Mr. L.P. Hall during his life, of which Mr. C.T.
Hall is a trustee and in which the children of Mr. L.P. Hall, including Mr.
C.T. Hall, have a remainder interest.
(7) Includes 17.0 shares held by trusts for the benefit of Mr. L.P. Hall during
his life, of which Mr. C.T. Hall is a trustee and in which the children of
Mr. L.P. Hall, including Mr. C.T. Hall, have a remainder interest.
(8) Includes 7.0 shares held by a trust for the benefit of Ms. Pierce and 3.7
shares owned by Ms. Pierce and her brother as tenants in common.
(9) Includes 20.3499 shares held in trust for Dr. Jepson and his wife, 2.1
shares held by a profit sharing plan f/b/o Dr. Jepson and 1.5 shares held by
Dr. Jepson as custodian for his children.
(10) All shares are held by Mr. Dickinson's wife.
45
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and positions of all directors and
executive officers of the Company. All directors hold office until the next
annual meeting of Shareholders and until their successors have been duly elected
and qualified. Officers are appointed annually by the Board of Directors and
serve at the discretion of the Board of Directors. A brief discussion of the
business experience of each director and executive officer during the past five
years is set forth following the table.
<TABLE>
<CAPTION>
Name Age Position Director/Office Since
- ---- --- -------- ---------------------
<S> <C> <C> <C>
Parnell S. Lewis, Jr. 50 Chairman of the Board, Chief Executive 1979
Officer and President
John H. Dicken, Jr. 38 Director 1993
Bart C. Tully, Jr. 79 Director 1936
Russell E. Bloodworth 52 Director 1986
Claude Tully Hall 50 Director 1968
Linus Parker Hall, Jr. 81 Director 1956
Kathleen Bushing Pierce 67 Director 1991
E.D. Coombs, Jr. 52 Director and Treasurer 1977
Paul M. Jepson, M.D. 55 Director 1989
Charles R. Dickinson, Jr. 38 Vice President 1995
John D. Hodges 61 Vice President 1997
Marye Helen Owen 42 General Counsel and Secretary 1996
</TABLE>
No director, officer, affiliate or promoter of the Company has, within the
past five years, filed any bankruptcy petition, nor was a receiver, fiscal agent
or similar officer appointed for the business or property of such person or any
partnership in which he was a general partner or any corporation or business
association of which has was an executive officer within two years before the
time of such filing. No director, officer, affiliate or promoter has been
convicted in or been the subject of any pending criminal proceedings, nor is any
such person the subject of any order, judgment or decree involving the violation
of any state or Federal securities laws or otherwise enjoining or limiting his
activities in any business practice, whether related to securities and
commodities activities or otherwise.
Parnell S. Lewis has been President of the Company since 1993, and has
served as a director of the Company since 1979. Before joining the Company, Mr.
Lewis was a Vice President with National Guard Products from 1982 to 1987. He
was employed by Union Planters National Bank from 1971 to 1987, holding several
positions, including Vice President and Senior Loan Officer.
46
<PAGE>
Mr. Lewis received his B.B.A. from Memphis State University. He is also a
director of Union Planters Corporation. Mr. Lewis is also a director of the New
General Partner and the Company's subsidiaries, including AT Timber and AT
Lumber in addition to serving on the Board of Managers of AT Management. Mr.
Lewis also serves as President and Chief Executive Officer of AT Management.
John H. Dicken, Jr. has served as a director of the Company since 1993.
Mr. Dicken has been the owner of Dicken Commodities since 1993 where he serves
as a commodity trader. Mr. Dicken also serves on the Board of Managers of AT
Management.
Bart C. Tully, Jr. has served as director of the Company since 1936. Mr.
Tully began working for PT Transportation in 1936 and was elected President of
PT Transportation and President of the Company in 1967. Mr. Tully also serves
on the Board of Managers of AT Management.
Russell E. Bloodworth has served as a director of the Company since 1986.
Mr. Bloodworth is employed by various entities such as Boyle Investment Company
where he has served as Executive Vice President since 1984. He is also a
director of Boyle North Company, L.L.C., Financial Federal Savings Bank and the
Crook Trust. Mr. Bloodworth also serves on the Board of Managers of AT
Management.
Claude Tully Hall joined the Company as a full time employee in 1968 as a
forester. He was elected as a director in 1978 and Vice President of the
Company in 1980. His most recent position with the Company was Executive Vice
President-Log and Forest Unit. He is currently the President and a director of
AT Timber and on the Board of Managers of AT Management.
Linus Parker Hall has served as a director of the Company since 1956. Mr.
Hall was first employed with the Company in 1946 and was promoted to Vice
President of Sales from 1956 until his retirement in 1984. Mr. Hall also serves
on the Board of Managers of AT Management.
Kathleen Bushing Pierce has served as a director of the Company since 1991.
Ms. Pierce also serves on the Board of Managers of AT Management.
E. D. Coombs, Jr. has served as a director of the Company since 1977. Mr.
Coombs has held several different positions since being hired by the Company in
1977, including Chief Accountant, Assistant Controller, Controller and,
presently, Treasurer of the Company, the New General Partner, AT Management, AT
Timber and AT Lumber. In addition, Mr. Coombs is an officer and also serves on
the Board of Managers of AT Management and on the Board of Directors of the New
General Partner and several other subsidiaries of the Company, including AT
Timber and AT Lumber.
Paul M. Jepson, M.D., has served as a director of the Company since 1989.
Dr. Jepson has been a self-employed physician since 1975 and served as Chief of
Surgery of the Ukiah Valley Medical Center during 1996 and 1997. Dr. Jepson
also serves on the Board of Managers of AT Management.
47
<PAGE>
Charles R. Dickinson, Jr. has served as Vice President of the Company since
1995. Prior to his employment with the Company, Mr. Dickinson worked for Ernst
& Young, LLP, where he provided accounting, auditing and consulting services to
various clients. Mr. Dickinson is also Vice President of the New General
Partner, AT Management, AT Timber and AT Lumber and on the Board of Directors of
the New General Partner and several other subsidiaries of the Company, including
AT Timber and AT Lumber.
John D. Hodges has served as Vice President of Land Management since
January 1997. Prior to being employed by the Company, Mr. Hodges was a
professor of Lumber Production at Mississippi State University from 1975 to
1996.
Marye Helen Owen has served as General Counsel and Secretary of the Company
since January 1996. Prior to joining the Company, Ms. Owen was a partner in the
Memphis law firm of Black, Bobango & Morgan, a Professional Corporation. Ms.
Owen is a secretary of the New General Partner, AT Management, AT Timber and AT
Lumber and on the Board of Directors of the New General Partner and several
other subsidiaries of the Company, including AT Timber and AT Lumber.
FAMILY RELATIONSHIPS
Parnell S. Lewis, Jr. is related by blood or marriage to Bart C. Tully,
Jr., Russell E. Bloodworth, Charles R. Dickinson, Jr. and John H. Dicken, Jr.
Bart C. Tully, Jr. is the father-in-law of Russell E. Bloodworth and is
related by blood or marriage to Parnell S. Lewis, Jr., Charles R. Dickinson,
Jr., and John H. Dicken, Jr.
Russell E. Bloodworth in the son-in-law of Bart C. Tully, Jr. and is
related by marriage to Parnell S. Lewis, Jr., Charles R. Dickinson, Jr. and John
H. Dicken, Jr.
Linus Parker Hall, Jr. is the father of Claude Tully Hall.
Claude Tully Hall is the son of Linus Parker Hall, Jr.
Charles R. Dickinson, Jr. is related by marriage to Parnell S. Lewis, Jr.,
Bart C. Tully, Jr., Russell E. Bloodworth and John H. Dicken, Jr.
John H. Dicken, Jr. is related by marriage to Parnell S. Lewis, Jr.,
Bart C. Tully, Jr., Russell E. Bloodworth and Charles R. Dickinson, Jr.
48
<PAGE>
COMPENSATION OF DIRECTORS
Beginning January 1, 1997, non-employee directors are paid an annual
retainer at the beginning of each calendar year of $7,500. Members of
committees of the Board of Directors are paid an additional annual retainer of
$5,000 per year. In addition, those directors who do not reside in the Memphis
area and who are not employees of the Company are allowed a per diem of two days
at $500 a day for travel related expenses.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors currently has a Salary and Benefits Committee which
has authority to, among other things, confer and consult regarding salary
arrangements for directors, officers, managers and other employees of the
Company, adopt and amend employment agreements for officers and other employees
of the Company. Members of the Salary and Benefits Committee currently include
three members, Messrs. Bloodworth, Dicken and Jepson, none of whom are employees
of the Company. The Salary and Benefits Committee approved the Change in
Control Agreements and the amendments thereto.
49
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
earned by the Company's Chief Executive Officer and each of the four other most
highly paid executive officers of the Company (the CEO and such officers,
collectively, the "Named Executives") for services rendered to the Company
during its three most recently completed fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Name and Current All Other
Principal Position Year Salary($) Bonus($) Compensation(1)
- ------------------ ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Parnell S. Lewis, Jr. 1997 304,063 125,000 4,750
Chairman of the Board, 1996 300,000 100,000 4,750
Chief Executive Officer 1995 259,162 120,000 4,750
and President of the
Company
E. D. Coombs, Jr. 1997 168,000 75,000 4,750
Treasurer of the Company 1996 168,000 68,500 4,750
1995 163,338 68,000 4,620
Martin S. Lewis 1997 126,870 76,558 4,750
Managing Director, 1996 116,865 50,000 4,750
Veneers 1995 108,125 45,000 4,620
Tony R. Parks 1997 128,760 72,500 3,863
President, 1996 116,150 50,000 3,485
AT Lumber 1995 108,125 45,000 3,243
Claude T. Hall 1997 119,373 72,500 4,750
President, 1996 116,150 49,000 4,750
AT Timber 1995 108,125 45,000 3,641
</TABLE>
_________
(1) Amounts shown represent employer matching contributions under the
Company's Profit Sharing Retirement Plan and Trust.
CHANGE IN CONTROL AND EMPLOYMENT AGREEMENTS
CHANGE IN CONTROL AGREEMENTS
In order to align more closely the interests of the executive officers with
those of Shareholders, to provide economic incentives to executive officers to
maximize the return to Shareholders and to secure the performance of such
officers in connection with preparing for a change in control in
50
<PAGE>
the event of a transaction that would constitute a change in control of the
Company, the Salary and Benefits Committee (which consists solely of nonemployee
directors) of the Board of Directors approved and the Company entered into
Change in Control Agreements with certain of its executive officers. Pursuant to
the Change in Control Agreements, the executive officer agrees to remain
employed by the Company or its successor following a change in control for one
year, if so requested in writing by the Company or its successor and not to
compete or attempt to compete with the Company or Veneers during employment and
for one year thereafter. In consideration for such continued employment, the
Company or its successor agrees to (i) maintain such officer's base salary and
any other compensation agreements and plans at no less than the level prevailing
at the Company prior to the change in control for a period of one year following
the change in control; (ii) require of the officer only duties of commensurate
responsibility to those required immediately prior to the change in control and
(iii) not require any change in the place of such officer's employment more than
25 miles from the place at which the officer was employed immediately prior to
the change in control. Upon the occurrence of a change in control, the officer,
if then employed by the Company or terminated without cause in anticipation of
such change in control, will be entitled to receive in cash a certain percentage
(as set forth in the Change in Control Agreements) of the total consideration
received by Shareholders (the "Total Shareholder Consideration Paid") and
Limited Partners of Veneers. In the event that any payments received by an
officer in connection with a change in control whether under the Change in
Control Agreement or otherwise become subject to the excise tax ("Excise Tax")
assessed under Section 4999 of the Code, the Company will make additional
payments to such officer sufficient to make such individuals whole with respect
to the Excise Tax.
In December 1997, the Company amended the Change in Control Agreements by
adopting two separate agreements: the Supplemental and Clarifying Agreement (the
"Clarifying Agreement"), which applies to those officers who continue to be
employed by the Company following the Restructuring Transactions, and the
Supplemental and Amending Agreement (the "Amending Agreement"), which applies to
former employees of the Company who, after the Restructuring Transactions, will
be employed by AT Timber, AT Lumber and Veneers (defined therein as "New
Employer").
The Clarifying Agreement amends, among other things, the definition of Total
Shareholder Consideration Paid provided in the Change in Control Agreements to
include (i) any consideration paid or received, directly or indirectly, by the
Limited Partners of Veneers and the value of any retained assets of Veneers in
the event the Company or any subsidiary of the Company is a general partner of
Veneers at the time of a change in control; and (ii) any distribution, other
than ordinary dividends, to Shareholders made within 18 months prior to a change
in control, if at the time of the change in control the Company has taken any
action looking toward qualification as a REIT, including without limitation, the
distribution of $100,000 per share paid in September 1997 to Shareholders of the
Company, as voted by the Board of Directors on September 22, 1997.
The Amending Agreement amends, among other things, the section of the Change
in Control Agreements providing for payment in the event of a change in control
by including payments for
51
<PAGE>
officers employed by the New Employer or terminated without cause by the New
Employer in anticipation of a change in control. In addition, the Amending
Agreement also amends the definition of Total Shareholder Consideration Paid
contained therein in the same manner as the Clarifying Agreement.
EMPLOYMENT AGREEMENTS
The Company is also a party to Employment Agreements with certain of its
executive officers. The Employment Agreements do not guarantee employment to
such officers, but do provide for certain benefits payable in the event of
termination that would be payable in addition to the Total Benefits provided
under the Change in Control Agreements. Unless such termination is (i) because
of the officer's death or retirement; (ii) by the Company for cause, such as
willful and continued failure to perform duties; or (iii) by the officer other
than for good reason (as defined in the Employment Agreements), such officer
will receive certain benefits, including full base salary, plus credit for
earned vacation days, continued health benefits and a specific severance pay
provision which provides for a lump sum of cash in an amount equal to the
product of the officer's average annual compensation paid by the Company and
includible in his gross income for Federal income tax purposes during the five
most recent taxable years before the date of his termination multiplied by
three, with special provisions intended to avoid adverse tax consequences.
PENSION PLANS
The following table presents the annual pension benefits estimated to be
payable under the Company's Salaried Employees' Pension Plan (the "Salaried
Pension Plan") at age 65 to a person having the average annual earnings and
years of credited service shown.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Credited Years of Service
Average --------------------------------------------------
Annual Earnings 15 20 25 30 35
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000 $33,900 $35,196 $36,504 $37,800 $39,096
$110,000 $37,872 $39,504 $41,124 $42,756 $44,376
$120,000 $41,856 $43,800 $45,756 $47,700 $49,656
$130,000 $45,828 $48,096 $50,376 $52,656 $54,924
$140,000 $49,800 $52,404 $54,996 $57,600 $60,204
$150,000 $53,772 $56,700 $59,628 $62,556 $65,472
$160,000 $57,756 $60,996 $64,248 $67,500 $70,752
</TABLE>
52
<PAGE>
Maximum compensation taken into account for purposes of calculating
benefits under the pension plan is $160,000. The pension plan covers regular
compensation (excluding bonus) which, in the case of the Named Executives, is
the compensation shown under the heading "Salary" on the Summary Compensation
Table. The benefit amounts are the annual payments that would be made to the
participant at retirement at age 65 based on completion of the scheduled years
of service just prior to retirement. The annual amounts are calculated taking
into consideration integration with Social Security.
Estimated credited years of service for the Named Executives under the
Salaried Pension Plan are as follows: Mr. Lewis, 10; Mr. Coombs, 26; Mr. Lewis,
16; Mr. Parks, 24; and Mr. Hall, 29.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Russell E. Bloodworth, Jr., a director of the Company, is also an Executive
Vice President and director of Boyle Investment Company ("Boyle"). The Company
and Boyle as tenants in common own a warehouse located in Shelby County,
Tennessee. The Company, Boyle and an affiliate of Boyle are also general
partners in BTE Partners, a Tennessee general partnership that owns and operates
a shopping center in Memphis, Tennessee. Boyle is also the manager of both
projects. The Company's share of the operating results of the warehouse for
the calendar year ended December 31, 1997 was net income of $33,782 and from the
shopping center was net loss of $13,655.
ITEM 8. LEGAL PROCEEDINGS
Although the Company may, from time to time, be involved in litigation and
claims arising out of its operations in the normal course of business, the
Company is not presently a party to any material legal proceedings.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Common Stock (the
class of securities registered under this Form 10) or any other securities of
the Company. As of April 20, 1998, there were 579.5441 shares of Common Stock
issued and outstanding. Distributions of $1,250 were made on December 1, 1996,
March 1, 1997, June 1, 1997 and September 1, 1997, and a distribution of $2,500
was made on December 1, 1997. A special distribution of $100,000 per share was
paid to Shareholders in September 1997.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
There have been no sales of Common Stock within the past three years.
53
<PAGE>
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The following summary description of the capital stock of the Company is
qualified in this reference to the form of the Articles of Incorporation and the
Bylaws of the Company, a copy of each of which is filed as an exhibit to the
Registration Statement.
GENERAL
The Articles of Incorporation of the Company provide that the Company may
issue up to 1,200 shares of Common Stock, par value $2,000 per share. As of
April 20, 1998, 579.5441 shares of Common Stock were issued and outstanding.
COMMON STOCK
All shares of Common Stock will be of one class and will have equal voting
and other rights. Shareholders have no preemptive rights to acquire additional
or treasury shares of Common Stock.
Dividends may be declared by the Board of Directors at any regular or
special meeting and may be paid in cash or in property or in shares of the
Common Stock. The Company commenced quarterly distributions on its Common Stock
on December 1, 1996, and intends to continue making quarterly distributions on
the outstanding shares of Common Stock.
Each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of Shareholders, including the election of
directors. Fractional shares issued and outstanding will be entitled to
fractional votes. There is no cumulative voting in the election of directors,
which means that the holders of a plurality of the outstanding Common Stock can
elect all of the directors then standing for election and the holders of the
remaining Common Stock will not be able to elect any directors.
The Mississippi Business Corporations Act (the "MBCA") requires the
affirmative vote of at least two-thirds of all issued and outstanding classes of
stock having voting rights to approve any of the following: (i) the adoption of
a plan of merger with any other corporation, domestic or foreign, other than a
subsidiary corporation; (ii) the sale, lease, exchange, pledge or other
disposition of all or substantially all of the property and assets, with or
without the good will, if not made in the usual and regular course of business;
and (iii) the voluntary dissolution of the Company. The Articles of
Incorporation provide that these provisions and required percentages are adopted
as a part of the charter of the corporation surviving the Merger, and no
amendment to the MBCA allowing a lesser percentage may affect the requirement of
the affirmative vote of at least two-thirds of all issued and outstanding
classes of stock having voting rights.
54
<PAGE>
RESTRICTIONS ON TRANSFER OF COMMON STOCK
The Company is currently classified as a "river timberlands company" under
the Timberlands Act, which is an expression of the public policy of the State of
Mississippi with regard to companies which are incorporated in Mississippi and
own, either directly or through subsidiaries, 80,000 or more acres of land in
the state that is substantially forested and located within fifteen miles of the
thalweg of the Mississippi River. The Timberlands Act is designed to allow a
form of public control over transactions in the voting stock of such
corporations so that parties who seek to obtain a controlling or influential
interest in the voting stock, together with their controlling and affiliated
persons and their backgrounds and plans for the use and management of river
timberlands, will be subject to review in the public interest. For example, the
Timberlands Act provides that no person shall acquire, directly or indirectly,
or enter into any agreement to acquire any of the outstanding voting securities
of a river timberlands company, if (i) such person would then become the owner
of ten percent or more of the voting stock of the company, either individually
or in conjunction with any affiliate or (ii) the voting securities of the
company so proposed to be acquired constitute ten percent or more of the
outstanding voting securities, unless the person has filed with the Secretary of
State of the State of Mississippi (the "Secretary of State") and sent to the
Company notice required under the Timberlands Act and the Secretary of State has
approved the acquisition and such approval is in effect. Public review of
transactions in certain publicly traded securities are exempt from the
Timberlands Act. The Timberlands Act exempts from its provisions companies that
are registered under Section 12(g) of the Exchange Act. By filing this
Registration Statement, the Company intends to cause the Timberlands Act to
become inapplicable to the Merger. Such registration would become effective
immediately prior to the Merger. If the Merger Agreement is terminated, the
Company would withdraw this Registration Statement.
In the event that the Company is unable to register its Common Stock under
the Exchange Act or, despite its reasonable best efforts, is otherwise unable to
cause the Timberlands Act to be inapplicable to the Merger, then Potlatch,
Newco, Newsub and the Company are required to use their commercially reasonable
efforts to make all appropriate filings under the Timberlands Act with respect
to the transactions contemplated by the Merger Agreement, cooperate with each
other in such filings and in the prosecution of an order of approval by the
Secretary of State, and furnish such additional information and take such
additional actions as shall be requested by the Secretary of State. The
applicable fees under the Timberlands Act will be paid by Potlatch.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws require the Company to indemnify its directors and
officers (each an "Indemnitee") to the fullest extent authorized by the MBCA
against all liability and loss and reasonable expense reasonably incurred by
such Indemnitee in connection with any action, suit or proceeding, including
attorneys' fees, judgments, fines, excise taxes with respect to any employee
benefits plan, or amounts paid in settlement. Such indemnification continues
after the Indemnitee ceases to be a director or officer. The right to
indemnification includes the right to be paid by the
55
<PAGE>
Company the expenses incurred in defending any proceeding in advance of its
final disposition upon the delivery of an undertaking by or on behalf of the
Indemnitee to repay all amounts advanced if a final judicial decision is
rendered that such Indemnitee did not meet the standard of conduct permitting
indemnification under the MBCA or the Bylaws. If a claim for indemnification is
not paid in full by the Company within 60 days after it has been received in
writing by the Company, except in the case of a claim for an advancement of
expenses in which case the applicable period is 20 days, the Indemnitee may
bring suit against the Company to recover the amount of the claim. If any
Indemnitee is successful in such suit against the Company, or in a suit brought
by the Company to recover an advancement of expenses, the Indemnitee will be
entitled to be paid the expenses of prosecuting or defending such suit.
The Company maintains insurance, at its expense, to protect against any
liability or loss, regardless of whether any director or officer is entitled to
indemnification under the MBCA or the Bylaws.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained in the Consolidated
Financial Statements of the Company set forth beginning at page F-1 of this
Registration Statement.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
accountants regarding accounting and financial disclosure during the Company's
two most recent fiscal years.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. See Index to Financial Statements beginning at
page F-1 of this Registration Statement.
(b) Exhibits.
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated as of February 9, 1998
among the Registrant, Potlatch Corporation, Timberland Growth
Corporation and Beaver Acquisition Corporation.
3.1 Restated Articles of Incorporation of the Registrant.
3.2 Revised and Restated Bylaws of the Registrant.
56
<PAGE>
10.1 Asset Purchase Agreement, dated as of February 9, 1998, by
and among Potlatch Corporation, Anderson-Tully Veneers, L.P.
and Anderson-Tully Management Services, LLC.
10.2 Sawmills Subsidiary Asset Purchase Agreement, dated as of
February 9, 1998, by and among Potlatch Corporation and
Anderson-Tully Lumber Company.
10.3 Logging Subsidiary Asset Purchase Agreement, dated as of
February 9, 1998, between Potlatch Corporation and Anderson-
Tully Timber Company.
10.4 Timber Harvest Agreement between Anderson-Tully Timber
Company and the Registrant dated January 1, 1998.
10.5 Employment Agreement, dated March 28, 1994 between the
Registrant and Parnell S. Lewis, Jr., Change in Control
Agreement dated December 10, 1996 between the Registrant and
Parnell S. Lewis, Jr. and Supplemental and Clarifying
Agreement, dated December 31, 1997, between the Registrant
and Parnell S. Lewis, Jr.
10.6 Employment Agreement, dated July 10, 1987 between the
Registrant and E. D. Coombs, Jr., Change in Control
Agreement dated December 11, 1996 between the Registrant
and E. D. Coombs, Jr. and Supplemental and Clarifying
Agreement, dated December 31, 1997, between the Registrant
and E. D. Coombs, Jr.
10.7 Change in Control Agreement dated January 11, 1997 between
the Registrant and Tony R. Parks and Supplemental and
Amending Agreement, dated December 31, 1997, between the
Registrant and Tony R. Parks.
10.8 Change in Control Agreement dated May 6, 1997 between the
Registrant and Claude Tully Hall and Supplemental and
Amending Agreement, dated December 31, 1997, between the
Registrant and Claude Tully Hall.
10.9 Change in Control Agreement dated June 10, 1997 between the
Registrant and Martin S. Lewis and Supplemental and Amending
Agreement, dated as of December 31, 1997, between the
Registrant and Martin S. Lewis.
57
<PAGE>
10.10 Change in Control Agreement dated December 11, 1996
between the Registrant and Charles Robert Dickinson, Jr. and
Supplemental and Clarifying Agreement, dated as of December
31, 1997, between the Registrant and Charles Robert
Dickinson Jr.
10.11 Change in Control Agreement dated December 10, 1996
between the Registrant and Marye Helen Owen and Supplemental
and Clarifying Agreement, dated as of December 31, 1997,
between the Registrant and Marye Helen Owen.
10.12 Change in Control Agreement dated December 12, 1996
between the Registrant and Bartlett Tully Lewis and
Supplemental and Amending Agreement, dated as of December
31, 1997, between the Registrant and Bartlett Tully Lewis.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
58
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PAGE
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEETS AS OF JULY 31, 1996 AND 1997 AND DECEMBER 31, 1997 F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR EACH OF THE YEARS
ENDED JULY 31, 1995, 1996, AND 1997 AND THE FIVE-MONTH PERIOD ENDED
DECEMBER 31, 1997 F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR EACH OF THE
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND THE FIVE-MONTH PERIOD
ENDED DECEMBER 31, 1997 F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS
ENDED JULY 31, 1995, 1996, AND 1997 AND THE FIVE-MONTH PERIOD ENDED
DECEMBER 31, 1997 F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors,
Anderson-Tully Company
We have audited the accompanying consolidated balance sheets of Anderson-Tully
Company (the "Company") and its subsidiaries as of July 31, 1996 and 1997 and
December 31, 1997 and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended July 31, 1997 and the five-month period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Anderson-Tully Company and its
subsidiaries at July 31, 1996 and 1997 and December 31, 1997 and the results of
their operations and their cash flows for each of the three years in the period
ended July 31, 1997 and the five-month period ended December 31, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Memphis, Tennessee
February 10, 1998
F-2
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 31,
------------------ DECEMBER 31,
1996 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents................... $ 188 $ 1,749 $ 1,711
Certificates of deposit..................... 100 100 117
Accounts receivable......................... 6,783 9,684 11,049
Notes receivable............................ 4,899
Inventories................................. 6,341 4,783 5,408
Deferred income taxes....................... 1,229 1,076 1,258
Prepaid expenses............................ 885 1,339 1,190
Refundable income taxes..................... 685
-------- -------- --------
Total current assets...................... 16,211 18,731 25,632
TIMBERLAND AND TIMBER--At cost................ 29,942 28,183 27,858
Less accumulated depletion.................. (18,599) (18,215) (18,577)
-------- -------- --------
Timberland and timber--net................ 11,343 9,968 9,281
PLANT PROPERTY--NET........................... 68,693 75,474 64,300
COMMERCIAL REAL ESTATE........................ 22,385 30,007 29,801
OTHER ASSETS.................................. 2,552 2,306 3,085
-------- -------- --------
TOTAL......................................... $121,184 $136,486 $132,099
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
-----------------------------
EQUITY (DEFICIT)
----------------
CURRENT LIABILITIES:
Accounts payable............................ $ 4,346 $ 5,532 $ 7,326
Current portion of long-term debt........... 1,805 4,826 7,356
Accrued expenses:
Wages, insurance, and other................. 3,074 3,105 3,474
Dividends payable........................... 695 723
Taxes other than income..................... 905 1,053 1,585
Income and franchise taxes.................. 239 1,826 2,191
-------- -------- --------
Total accrued expenses.................... 4,913 6,707 7,250
Deferred revenues............................. 917
-------- -------- --------
Total current liabilities................. 11,064 17,065 22,849
DEFERRED INCOME TAXES......................... 13,519 15,955 13,971
LONG-TERM LIABILITIES......................... 1,177 1,171 1,507
LONG-TERM DEBT, Less current portion.......... 42,804 46,344 96,787
MINORITY INTEREST IN EQUITY OF CONSOLIDATED
LIMITED PARTNERSHIP.......................... 275 1,578 2,862
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Capital stock--$2,000 par value; 1,200
shares authorized; 579.54 shares
outstanding................................ 1,159 1,159 1,159
Retained earnings (deficit)................. 51,186 53,214 (7,036)
-------- -------- --------
Total stockholders' equity (deficit)...... 52,345 54,373 (5,877)
-------- -------- --------
TOTAL......................................... $121,184 $136,486 $132,099
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FIVE MONTH
YEARS ENDED JULY 31, PERIOD ENDED
-------------------------------- DECEMBER 31,
1995 1996 1997 1997
<S> <C> <C> <C> <C>
NET REVENUES:
Timber and wood products $63,148 $59,137 $74,262 $ 37,710
River construction 22,797 23,108 16,688 11,691
Commercial real estate 3,299 3,037 2,927 1,392
Other 2,421 2,878 3,031 1,692
------- ------- ------- --------
Total 91,665 88,160 96,908 52,485
COSTS AND EXPENSES:
Timber and wood products 51,976 49,724 60,825 29,341
River construction 18,102 19,221 15,097 11,003
Commercial real estate 1,746 1,788 1,601 667
Selling, administrative, and general 5,575 5,526 6,026 3,059
Other 737 776 1,506 1,425
------- ------- ------- --------
Total 78,136 77,035 85,055 45,495
INCOME FROM OPERATIONS 13,529 11,125 11,853 6,990
OTHER INCOME (EXPENSE):
Interest income 110 266 469 35
Interest expense (1,601) (2,634) (3,380) (2,374)
Gain (loss) on sales of assets (335) 353 2,419 (5,216)
------- ------- ------- --------
Total other expense - net (1,826) (2,015) (492) (7,555)
------- ------- ------- --------
INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT AND
MINORITY INTEREST 11,703 9,110 11,361 (565)
INCOME TAX (EXPENSE) BENEFIT (4,042) (3,023) (3,891) 629
------- ------- ------- --------
INCOME BEFORE MINORITY INTEREST 7,661 6,087 7,470 64
MINORITY INTEREST IN INCOME OF CONSOLIDATED
LIMITED PARTNERSHIP (1,820) (1,380)
------- ------- ------- --------
NET INCOME (LOSS) $ 7,661 $ 6,087 $ 5,650 $(1,316)
======= ======= ======= ========
EARNINGS PER SHARE $13,174 $10,479 $ 9,749 $(2,271)
======= ======= ======= ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 581.54 580.88 579.54 579.54
======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND FIVE-MONTH PERIOD ENDED DECEMBER
31,1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------- RETAINED
NUMBER EARNINGS
OF SHARES AMOUNT (DEFICIT) TOTAL
--------- ------ --------- --------
<S> <C> <C> <C> <C>
BALANCES AT JULY 31, 1994................ 581.54 $1,163 $ 44,484 $ 45,647
Cash dividends declared ($5,250 per
share)................................ (3,053) (3,053)
Dividend of shares of Anderson-Tully
Veneers, L.P.......................... (229) (229)
Net income............................. 7,661 7,661
------ ------ -------- --------
BALANCES AT JULY 31, 1995................ 581.54 1,163 48,863 50,026
Cash dividends declared ($6,230 per
share)................................ (3,618) (3,618)
Repurchase and retirement of common
stock................................. (2.00) (4) (146) (150)
Net income............................. 6,087 6,087
------ ------ -------- --------
BALANCES AT JULY 31, 1996................ 579.54 1,159 51,186 52,345
Cash dividends declared ($6,250 per
share)................................ (3,622) (3,622)
Net income............................. 5,650 5,650
------ ------ -------- --------
BALANCES AT JULY 31, 1997................ 579.54 1,159 53,214 54,373
Cash dividends declared ($101,190 per
share)................................ (58,645) (58,645)
Dividend of assets to Anderson-Tully
Veneers, L,P.......................... (289) (289)
Net loss............................... (1,316) (1,316)
------ ------ -------- --------
BALANCES AT DECEMBER 31, 1997............ 579.54 $1,159 $ (7,036) $ (5,877)
====== ====== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIVE MONTH
YEARS ENDED JULY 31, PERIOD ENDED
---------------------------- DECEMBER 31,
1995 1996 1997 1997
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss).................. $ 7,661 $ 6,087 $ 5,650 $ (1,316)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization..... 4,026 5,107 7,401 3,425
Depletion......................... 1,200 1,915 1,359 1,054
Deferred income taxes............. 72 2,275 2,589 (2,166)
Minority interest in earnings of
consolidated limited partnership. 1,820 1,380
(Gain) loss on sale of assets..... 335 (353) (2,419) 5,216
Changes in assets and liabilities:
Accounts receivable............... (747) 1,980 (2,900) (1,365)
Inventories....................... (2,639) 669 1,559 (624)
Other assets...................... (561) (926) (284) (680)
Accounts payable and accrued
expenses......................... 991 (211) 1,365 2,693
Accrued and refundable income
taxes............................ 1,119 (1,427) 2,272 366
Deferred revenues................. (998) (792) 917
Long-term liabilities............. (697) (149) (6) 336
-------- -------- -------- --------
Net cash provided by operating
activities..................... 9,762 14,175 18,406 9,236
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sales of plant
property.......................... 2,256 1,086 1,130 250
Purchases of plant property........ (17,538) (28,339) (14,148) (2,366)
Proceeds from sales of timber and
timberland........................ 1,077
Purchases of timber and timberland. (2,239) (1,307) (10) (368)
Proceeds from sales of commercial
real estate....................... 9,604
Purchases of commercial real
estate............................ (28) (197) (16,940)
Collections of notes receivable.... 1,750
Proceeds from maturities of short-
term investments.................. 200 200 200 100
Purchases of short-term
investments....................... (200) (200) (200) (117)
-------- -------- -------- --------
Net cash used in investing
activities...................... (17,549) (27,007) (19,287) (2,501)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends paid..................... (3,282) (3,504) (3,594) (59,368)
Distributions to limited partners.. (524) (379)
Purchases of treasury stock........ (150)
Net proceeds from (principal
payments on) lines of credit...... 2,629 2,996 (3,750) 4,222
Proceeds from issuance of long-term
debt.............................. 9,820 14,467 13,636 96,500
Principal payments of long-term
debt.............................. (2,169) (1,154) (3,326) (47,748)
-------- -------- -------- --------
Net cash provided by (used in)
financing activities............ 6,998 12,655 2,442 (6,773)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (789) (177) 1,561 (38)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD.......................... 1,154 365 188 1,749
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF
PERIOD............................. $ 365 $ 188 $ 1,749 $ 1,711
======== ======== ======== ========
SUPPLEMENTAL INFORMATION:
Income taxes paid during the
period............................ $ 2,734 $ 2,173 $ 108 $ 1,174
Interest paid during the period.... 1,379 2,978 3,517 1,713
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company acquired plant property with a total cost of $3,271 in 1995 and
$444 in 1996 by incurring capitalized lease obligations of $1,320 and $444,
respectively, and a note payable of $1,951 in 1995.
During the five-month period ended December 31, 1997, the Company allowed the
payor on its note receivable with a principal balance totalling $7,218 plus
interest to satisfy its obligation by rolling the balance over to a new note
with a principal balance of $7,225.
As of December 31, 1997, the Company sold its inventories and plant property
associated with its Memphis, Tennessee laminated flooring plant for
consideration consisting of $100 cash and notes receivable totalling $4,900.
See notes to consolidated financial statements.
F-6
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995, 1996, AND 1997
AND FIVE-MONTH PERIOD ENDED DECEMBER 31 1997
(IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The consolidated financial statements include the
accounts of Anderson-Tully Company (the "Company"), its wholly-owned
subsidiaries, Patton-Tully Transportation Company, Tenarc Construction Company
("Tenarc"), Biomass Management Corporation ("Biomass"), and Brickeys Stone
Company, and a limited partnership, Anderson-Tully Veneers, L.P. ("AT Veneers"
or the "Partnership") (collectively, the "Companies"). All material
intercompany transactions have been eliminated. (Also see Note 12.)
The Company serves as managing general partner of the Partnership, holding
an approximate one percent interest in such. Remaining partnership capital is
held in the form of limited partnership interests. The Company, as managing
general partner, controls the operations of the Partnership and guarantees the
Partnership's debt; accordingly, the financial statements of the Partnership
are included in the Company's accompanying consolidated financial statements.
Minority interest is recognized for the limited partners' interest in the
financial position and operations of the Partnership.
Cash and Cash Equivalents--Highly liquid debt instruments purchased with
original maturities of three months or less from the date of purchase are
considered to be cash equivalents.
Inventories--Wood products and supplies inventories are stated primarily at
cost (first-in, first-out method). Costs applicable to growing crops are
capitalized. Lumber and log inventories are stated at cost (last-in, first-out
cost method).
Timber and Timberland--Timber and timberland are recorded at cost. The
Company does not capitalize timber carrying costs. Depletion of timber costs
is provided on footages cut at rates based on estimated recoverable timber in
each tract (cost depletion).
Plant Property--Plant property is stated at cost. Depreciation is provided
over estimated useful lives using the straight-line method.
Commercial Real Estate--The Company accounts for its undivided interests in
commercial real estate using the prorata consolidation method. Depreciation of
buildings is provided over their estimated useful lives, generally forty
years. The partnership interest is carried on the equity method.
Income Taxes--Current income taxes reflect taxes provided for and payable on
the earnings of the Company and its subsidiaries. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes of the Company and its subsidiaries.
Federal income taxes are not payable by, or provided for, the Partnership;
partners are taxed individually on their share of partnership earnings.
Change of Year-End--In 1997 the Board of Directors approved a change in the
Company's fiscal year-end from July 31 to December 31. Fiscal years presented
and referred to in these financial statements are on a July 31 fiscal year
basis unless otherwise indicated.
F-7
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
Revenue Recognition--Revenues from product sales (timber and wood products
operations) are recognized upon shipment of product; provision for estimated
sales returns is not deemed necessary based on historical returns rates and
current business conditions.
Revenues from river construction contracts are recognized using the
percentage-of-completion method measured by the percentage of costs incurred
to date to total estimated costs for each contract. Contract costs include all
direct material and labor costs and those indirect costs related to contract
performance. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.
Regarding commercial real estate, shopping center space is generally leased
to retail tenants under short- and intermediate-term leases which are
accounted for as operating leases. The warehouse leases are similar in nature,
except that the tenants are generally manufacturers and/or distributors of
products. Minimum rents are recognized on an accrual basis as earned, the
result of which do not differ materially from the straight-line method.
Percentage rents, common area maintenance ("CAM"), and other recoveries are
recognized on an accrual basis as earned.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments--In accordance with the requirements of
FASB No. 107, "Disclosures About Fair Value of Financial Instruments," the
estimated fair value of the Companies' financial instruments has been
determined by the Company using available market information. However,
considerable judgment is necessarily required in interpreting market data to
develop the estimates of fair value. Accordingly, the fair values are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions may have a
material effect on the estimated fair value amounts. The carrying amounts of
cash, certificates of deposit, accounts receivable, accounts payable, and
long-term debt are considered to be a reasonable estimate of their fair value.
Concentration of Credit Risk--Financial instruments which potentially
subject the Companies to a concentration of credit risk principally consist of
cash, certificates of deposit, trade accounts receivable, and notes
receivable. The Companies maintain their cash balances and certificates of
deposit with large regional or national financial institutions and have not
experienced losses related to these items. The Companies' sales are
principally to U.S. governmental entities (as to river construction) and to
customers in the furniture manufacturing, distribution, and residential
flooring industries in the United States and overseas. No additional credit
risk beyond amounts provided for collection losses is believed inherent in the
Companies' trade accounts receivable balances.
Effect of Recently Issued Accounting Standards--In June 1997, the Financial
Accounting Standards Board issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is required to be
adopted during the Company's first fiscal year beginning after December 15,
1997. At that time, the Company will be required to conform its method of
reporting
F-8
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
industry segment data to new standards and, if necessary, to restate all prior
periods. Under the new requirements, industry segment data will be reported
according to internal reporting segments utilized by management in running the
Company's operations. Statement No. 131 is expected to result in the reporting
of additional segregation of data for the Company's timber and wood products
operations than are currently presented in Note 10.
2. INVENTORIES
Inventories consist of the following at July 31, 1996 and 1997 and December
31, 1997:
<TABLE>
<CAPTION>
JULY 31,
------------- DECEMBER 31,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
Lumber............................................ $3,869 $2,040 $1,663
Wood products..................................... 209 947 774
Logs.............................................. 1,099 606 1,883
Supplies.......................................... 930 857 778
Growing crops..................................... 234 333 310
------ ------ ------
Total........................................... $6,341 $4,783 $5,408
====== ====== ======
</TABLE>
The LIFO reserve related to the lumber and log inventories totalled $5,159,
$4,692, and $3,825 at July 31, 1996 and 1997 and December 31, 1997,
respectively. In the five months ended December 31, 1997, the liquidation of
LIFO inventories decreased cost of sales and, therefore, increased income
before taxes by $377.
3. PLANT PROPERTY
Plant property consists of the following at July 31, 1996 and 1997 and
December 31, 1997:
<TABLE>
<CAPTION>
JULY 31,
---------------- DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Land.......................................... $ 1,203 $ 1,439 $ 1,155
Buildings..................................... 10,441 11,854 10,495
Machinery and equipment....................... 84,766 105,207 85,495
Computer equipment under capital leases....... 1,764 1,764 1,764
Construction in progress...................... 10,395 885 1,784
------- ------- -------
Total....................................... 108,569 121,149 100,693
Less accumulated depreciation................. (39,876) (45,675) (36,393)
------- ------- -------
Plant property--net........................... $68,693 $75,474 $64,300
======= ======= =======
</TABLE>
On December 31, 1997 the Company sold the assets related to its laminated
truck flooring plant for cash of $100 and notes receivable of $4,900. The
notes receivable bear interest at the prime rate and mature June 30, 1998. The
sale resulted in a loss of approximately $5,100.
F-9
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
4.EMPLOYEE BENEFIT PLANS
The Companies have two defined benefit pension plans covering substantially
all hourly and salaried employees. The benefits under the hourly plan are
based on fixed benefit rates and years of service. The benefits under the
salary plan are based on years of service and the employee's highest average
compensation for any five years of service. The Company's funding policy for
each plan is to make at least the minimum contribution required by the
Employee Retirement Income and Security Act of 1974. Contributions provide for
current benefits as well as expected future benefits. The investments of the
plans consist principally of general investment accumulated funds administered
by the trustees.
Net expense for the years ended July 31, 1995, 1996, and 1997 and the five-
month period ended December 31, 1997 included the following:
<TABLE>
<CAPTION>
JULY 31,
------------------ DECEMBER 31,
1995 1996 1997 1997
---- ------ ---- ------------
<S> <C> <C> <C> <C>
Service cost................................ $318 $ 330 $336 $139
Interest cost............................... 814 786 796 330
Actual return on plan assets................ (279) (1,637) (900) (125)
Net amortization and deferral............... (322) 1,061 204 63
---- ------ ---- ----
Net periodic pension cost................. $531 $ 540 $436 $407
==== ====== ==== ====
</TABLE>
Assumptions used in the computations are as follows:
<TABLE>
<CAPTION>
JANUARY 1,
---------------------
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Assumed discount rate.................................... 7.0% 6.5% 6.5%-7.5%
Rates of increase in compensation levels for salaried
employees............................................... 5.0% 5.0% 5.0%
Expected long-term rate of return on assets.............. 7.0% 6.5% 6.5%
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheets as of July 31, 1996 and 1997. A
separate actuarial valuation was not prepared for the December 31, 1997
transition period; however, amounts are not expected to differ significantly
from those shown below.
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested benefits......................................... $10,100 $10,354
Nonvested benefits...................................... 129 114
------- -------
Accumulated benefit obligation........................ $10,229 $10,468
======= =======
Projected benefit obligation.............................. $11,357 $11,755
Plan assets at fair value................................. 10,896 11,214
------- -------
Excess of projected benefit obligation over fair value
of plan assets....................................... (461) (541)
Unrecognized net gain..................................... (579) (365)
Unrecognized prior service cost........................... 59 55
------- -------
Accrued pension cost.................................. $ (981) $ (851)
======= =======
</TABLE>
F-10
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
5. COMMERCIAL REAL ESTATE
Commercial real estate consists of the following at July 31, 1996 and 1997
and December 31, 1997:
<TABLE>
<CAPTION>
JULY 31,
--------------- DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Undeveloped commercial land.................... $ 536
Partnership interest of 24% in a shopping cen-
ter complex................................... 1,837 $ 1,786 $ 1,773
Undivided interests of 25% in two shopping cen-
ters.......................................... 4,986 4,883 4,839
Undivided interests of 100% in shopping cen-
ters.......................................... 13,940 5,484 5,433
Undivided interest of 50% in one warehouse..... 1,086 1,055 1,042
Undivided interest of 100% in one warehouse.... 9,581 9,489
Note receivable, secured by a deed of trust on
a warehouse, interest at prime, maturing
December 31, 1998............................. 7,218 7,225
------- ------- -------
Commercial real estate....................... $22,385 $30,007 $29,801
======= ======= =======
</TABLE>
6. LINE OF CREDIT ARRANGEMENTS
At December 31, 1997, the Companies had two unsecured lines of credit
totalling $16,500 under which borrowings of $9,119 were outstanding, leaving
$7,381 available for unrestricted usage. Each of the lines is a direct
obligation of or unconditionally guaranteed by the Company. Borrowings are at
floating rates of 30- to 90-day LIBOR plus 1.2%--1.5%, totalling 7.17%--7.48%
at December 31, 1997. One of the lines of credit, totalling $7,500, expires
November 30, 1998; the other, totalling $9,000, expires January 1, 1999.
7. LONG-TERM DEBT AND CAPITALIZED LEASES
Long-term debt, all of which is a direct obligation of or unconditionally
guaranteed by the Company, consists of the following at July 31, 1996 and 1997
and December 31, 1997:
<TABLE>
<CAPTION>
JULY 31,
------------- DECEMBER 31,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
Note payable to corporation, 6%, due on demand
beginning June 1, 1999 or, if not demanded
previously, due October 1, 2002, unsecured.... $50,000
Notes payable bank line of credit, due November
30, 1998, with variable interest rates (7.48%
at December 31, 1997). The notes are
unsecured..................................... $1,000 $4,000 2,000
Notes payable bank line of credit, due January
1, 1999, with variable interest rates (7.17%
at December 31, 1997). The notes are
unsecured..................................... 7,646 897 7,119
</TABLE>
F-11
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 31,
---------------- DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Notes payable finance institutions, due in
varying amounts to September 2009, with in-
terest ranging from 7.56% to 9.875%. The
notes are collateralized by a 25% interest
in two shopping centers and a 100% interest
in one shopping center..................... $ 8,713 $ 8,465 $ 8,378
Notes payable bank, due in monthly
installmentsof $86 through June 2002, with
the remaining balance due July 2002, at
floating rates (6.92% at December 31,
1997). The note is collateralized by a 100%
interest in an industrial warehouse........ 9,514 9,387
Note payable finance institution, due in
monthly installments of $22 through Septem-
ber 2000, and the remaining unpaid balance
due October 2000, with an interest rate of
10%. The note is collateralized by a 50%
interest in an industrial warehouse........ 1,198 1,185 1,180
Note payable finance institution, due in
monthly installments of $5 through February
2000, with an interest rate of 7.50%. The
note is collateralized by machinery........ 140 119
Notes payable individuals, due in annual in-
stallments of $316 principal and interest
through September 2004, with an interest
rate of 7.25%.............................. 2,126 1,941 1,745
Notes payable finance institution, due in
varying monthly installments through March
2005 at floating rates (7.17% at December
31, 1997). The notes are collateralized by
machinery and equipment.................... 11,000 10,953 10,934
Notes payable finance institution, due in
monthly installments of $29 through Septem-
ber 2002, with an interest rate of 7.3%.
The note is collataralized by a motor ves-
sel........................................ 1,706 1,423 1,362
Notes payable finance institution, due in
total on September 22, 1997, prime rate,
collateralized by a shopping center........ 1,000
Loan payable, city, due in annual install-
ments of $100 principal plus interest
through December 2010, with interest at
2.00%. The loan is secured by an irrevoca-
ble standby letter of credit issued by a
bank (see Note 11)......................... 1,500 1,400 1,300
Loan payable, state agency, due in
monthlyinstallments of principal and inter-
est approximating $153 through June 2006,
with variable interest rates (7.17% at De-
cember 31, 1997). The loan is unsecured.... 7,359 10,256 9,744
Capitalized lease obligations due in varying
monthly installments through February 2000,
with interest rates of 7.78% to 9.47%...... 1,361 996 875
------- ------- -------
Total....................................... 44,609 51,170 104,143
Less current portion........................ (1,805) (4,826) (7,356)
------- ------- -------
Long-term debt.............................. $42,804 $46,344 $96,787
======= ======= =======
</TABLE>
F-12
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
Principal payments due in each of the next five years ended December 31 and
thereafter are as follows:
<TABLE>
<CAPTION>
CAPITALIZED NOTES AND TOTAL
LEASE OBLIGATIONS LOANS PAYABLE LONG-TERM DEBT
----------------- ------------- --------------
<S> <C> <C> <C>
1998.......................... $387 $ 6,969 $ 7,356
1999.......................... 417 62,092 62,509
2000.......................... 71 5,149 5,220
2001.......................... 5,816 5,816
2002.......................... 11,639 11,639
Thereafter.................... 11,603 11,603
---- -------- --------
Total....................... $875 $103,268 $104,143
==== ======== ========
</TABLE>
For certain of its debt obligations, the Company is subject to covenants
obligating it to maintain specified ratios of cash flows to interest expense
and of total liabilities to adjusted timber value, all terms as defined in the
relevant agreements. The Company was in compliance with these ratios at
December 31, 1997. In addition, during 1998 the Company will become subject to
a fixed charge coverage ratio covenant for its operations from January 1, 1998
forward.
Interest expense related to the notes collateralized by real estate totalled
$854, $873, $970, and $682 for the years ended July 31, 1995, 1996, and 1997
and the five-month period ended December 31, 1997, respectively. Interest
costs totalling $301 and $211 for the years ended July 31, 1996 and 1997,
respectively, were incurred in conjunction with the Partnership's construction
of its plant property and have been capitalized as a part of its cost.
The Company is lessee of certain computer equipment under capital leases
expiring February 20, 2000. The assets and liabilities under capital leases
are recorded at the present value of the minimum lease payments, which
approximates fair value of the assets. The assets are amortized over the lower
of their related lease terms or their estimated productive lives. Amortization
of assets under capital leases is included in depreciation expense in the
accompanying financial statements.
8. INCOME TAXES
The components of income tax expense (benefit), attributable to the Company
and its wholly-owned subsidiaries, consisted of the following for the years
ended July 31, 1995, 1996, and 1997 and the five-month period ended December
31, 1997:
<TABLE>
<CAPTION>
JULY 31,
-------------------- DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Current.................................... $3,970 $ 748 $1,302 $1,537
Deferred................................... 72 2,275 2,589 (2,166)
------ ------ ------ ------
Total income tax expense (benefit)....... $4,042 $3,023 $3,891 $ (629)
====== ====== ====== ======
</TABLE>
F-13
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
A reconciliation of the Company's actual income taxes for the years ended
July 31, 1995, 1996, and 1997 and the five-month period ended December 31,
1997 to that obtained by applying the U.S. federal statutory income tax rate
against income before income taxes and minority interest is as follows:
<TABLE>
<CAPTION>
JULY 31,
---------------------- DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Federal income tax expense (benefit),
at U.S. federal statutory rate........ $4,096 $3,189 $3,976 $(198)
Effect of state income taxes, net of
federal benefit....................... 361 213 372 (76)
Effect of usage of alternative energy
source credits........................ (384) (450)
Effect of consolidated minority inter-
est not subject to federal income tax
(related to the Partnership's income). (627) (485)
Other differences...................... (31) 71 170 130
------ ------ ------ -----
Income tax expense (benefit)......... $4,042 $3,023 $3,891 $(629)
====== ====== ====== =====
</TABLE>
Deferred income taxes result from temporary differences between the carrying
amounts of assets and liabilities for income tax and financial reporting
purposes for the Company and its wholly-owned subsidiaries. The tax effects of
significant items comprising the Company's deferred taxes as of July 31, 1996
and 1997 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
JULY 31,
------------------ DECEMBER 31,
1996 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
Deferred tax assets:
Uniform capitalization of inventory...... $ 424 $ 331 $ 291
Pension plans and deferred compensation.. 685 569 341
Vacation pay............................. 119 128 17
Workers' compensation and hospitalization
insurance reserves...................... 479 524 731
Alternative minimum tax credit and other
carryforwards........................... 343 469
All other................................ 292 138 73
-------- -------- --------
Total deferred tax assets.............. 1,999 2,033 1,922
Deferred tax liabilities--differences
between financial reporting and income
tax bases of:
Plant property........................... (6,851) (8,982) (6,773)
Commercial real estate................... (7,438) (7,930) (7,862)
-------- -------- --------
Total deferred tax liabilities......... (14,289) (16,912) (14,635)
-------- -------- --------
Net deferred tax liability............. $(12,290) $(14,879) $(12,713)
======== ======== ========
</TABLE>
Federal income taxes are not payable by, or provided for, the Partnership.
F-14
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
9. CONTRACTS IN PROGRESS
Amounts with respect to river construction contracts in progress as of July
31, 1996 and 1997 and December 31, 1997, which are included in accounts
receivable in the accompanying financial statements, are as follows:
<TABLE>
<CAPTION>
JULY 31,
------------- DECEMBER 31,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
Costs incurred on contracts in progress and es-
timated earnings on contracts in progress..... $5,919 $4,816 $6,954
Less billings to date on contracts in progress. 5,903 4,905 6,766
------ ------ ------
Net.......................................... $ 16 $ (89) $ 188
====== ====== ======
Costs and estimated earnings in excess of bill-
ings on uncompleted contracts................. $ 35 $ 90 $ 188
Billings in excess of costs and estimated earn-
ings on uncompleted contracts................. 19 179
------ ------ ------
Net.......................................... $ 16 $ (89) $ 188
====== ====== ======
</TABLE>
As of December 31, 1997, the Company had a contractual obligations backlog,
consisting of revenues to be recognized on signed contracts, of approximately
$2,090.
10. INDUSTRY SEGMENT DATA AND MAJOR CUSTOMERS
The Company principally operates in three industries: timber and wood
products operations, river construction contract operations, and commercial
real estate operations. Timber and wood product operations consist of the
management of the Company's forested lands and acquisition of logging rights
to other lands, contracting for the logging thereon, and the sale and/or
processing of the logs into lumber and wood products. River construction
contracts are performed principally for U.S. governmental entities, with
revenues from these entities totalling $16,269, $15,723, $8,017, and $8,954
for the years ended July 31, 1995, 1996, and 1997, and for the five-month
period ended December 31, 1997, respectively. Commercial real estate
operations consist principally of the Company's ownership of varying
percentages of undivided interests in shopping centers or warehouses, or of
partnerships owning these, with revenues being received from occupying
tenants.
F-15
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
Financial information, summarized by industry segment, is as follows:
<TABLE>
<CAPTION>
COMMERCIAL
YEAR ENDED TIMBER AND RIVER REAL
JULY 31, 1995 WOOD PRODUCTS CONSTRUCTION ESTATE OTHER ELIMINATIONS CONSOLIDATED
------------- ------------- ------------ ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues:
Unaffiliated customers:
Domestic............. $50,884 $22,797 $ 3,299 $2,421 $ 79,401
Export............... 12,264 12,264
Intersegment sales..... 1,179 $(1,179)
------- ------- ------- ------ ------- --------
Total................. $63,148 $23,976 $ 3,299 $2,421 $(1,179) $ 91,665
======= ======= ======= ====== ======= ========
Income from operations.. $ 7,184 $ 3,254 $ 1,345 $1,746 $ 13,529
------- ------- ------- ------ --------
Identifiable assets..... $57,566 $13,145 $22,941 $ 820 $ 94,472
------- ------- ------- ------
Corporate assets........ 7,168
--------
Total assets.......... $101,640
========
Depreciation and
amortization expense... $ 2,707 $ 852 $ 394 $ 73 $ 4,026
------- ------- ------- ------ --------
Capital expenditures.... $18,030 $ 1,590 $ 40 $ 145 $ 19,805
------- ------- ------- ------ --------
<CAPTION>
COMMERCIAL
YEAR ENDED TIMBER AND RIVER REAL
JULY 31, 1996 WOOD PRODUCTS CONSTRUCTION ESTATE OTHER ELIMINATIONS CONSOLIDATED
------------- ------------- ------------ ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues:
Unaffiliated customers:
Domestic............. $48,914 $23,108 $ 3,037 $2,878 $ 77,937
Export............... 10,223 10,223
Intersegment sales..... 1,003 $(1,003)
------- ------- ------- ------ ------- --------
Total................. $59,137 $24,111 $ 3,037 $2,878 $(1,003) $ 88,160
======= ======= ======= ====== ======= ========
Income from operations.. $ 5,602 $ 2,399 $ 1,056 $2,068 $ 11,125
------- ------- ------- ------ --------
Identifiable assets..... $73,765 $13,865 $22,636 $1,433 $111,699
------- ------- ------- ------
Corporate assets........ 9,485
--------
Total assets.......... $121,184
========
Depreciation and
amortization expense... $ 3,646 $ 973 $ 402 $ 86 $ 5,107
------- ------- ------- ------ --------
Capital expenditures.... $25,143 $ 3,809 $ 298 $ 593 $ 29,843
------- ------- ------- ------ --------
<CAPTION>
COMMERCIAL
YEAR ENDED TIMBER AND RIVER REAL
JULY 31, 1997 WOOD PRODUCTS CONSTRUCTION ESTATE OTHER ELIMINATIONS CONSOLIDATED
------------- ------------- ------------ ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues:
Unaffiliated customers:
Domestic............. $66,691 $16,688 $ 2,927 $3,031 $ 89,337
Export............... 7,571 7,571
Intersegment sales..... 1,028 $(1,028)
------- ------- ------- ------ ------- --------
Total................. $74,262 $17,716 $ 2,927 $3,031 $(1,028) $ 96,908
======= ======= ======= ====== ======= ========
Income from operations.. $ 8,250 $ 426 $ 1,123 $2,054 $ 11,853
------- ------- ------- ------ ========
Identifiable assets..... $79,006 $15,636 $30,167 $1,769 $126,578
------- ------- ------- ------
Corporate assets........ 9,908
--------
Total assets.......... $136,486
========
Depreciation and
amortization expense... $ 5,757 $ 1,111 $ 432 $ 101 $ 7,401
------- ------- ------- ------ --------
Capital expenditures.... $11,637 $ 2,168 $16,987 $ 306 $ 31,098
------- ------- ------- ------ --------
</TABLE>
F-16
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIVE MONTH
PERIOD ENDED COMMERCIAL
DECEMBER 31, TIMBER AND RIVER REAL
1997 WOOD PRODUCTS CONSTRUCTION ESTATE OTHER ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues:
Unaffiliated customers:
Domestic............. $33,083 $11,691 $ 1,392 $1,692 $ 47,858
Export............... 4,627 4,627
Intersegment sales..... 553 $(553)
------- ------- ------- ------ ----- --------
Total................. $37,710 $12,244 $ 1,392 $1,692 $(553) $ 52,485
======= ======= ======= ====== ===== ========
Income from operations.. $ 6,195 $ (19) $ 645 $ 169 $ 6,990
======= ======= ======= ====== ========
Identifiable assets..... $76,502 $16,950 $29,801 $1,667 $124,920
======= ======= ======= ======
Corporate assets........ 7,179
--------
Total assets.......... $132,099
========
Depreciation and
amortization expense... $ 2,668 $ 532 $ 200 $ 25 $ 3,425
======= ======= ======= ====== ========
Capital expenditures.... $ 2,285 $ 431 $ --- $ 18 $ 2,734
======= ======= ======= ====== ========
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
Operating Leases--The Company leases certain equipment used in its
operations under operating leases. Payments made under these operating leases
totalled $37, $382, $630, and $225 for the years ended July 31, 1995, 1996,
and 1997 and for the five-month period ended December 31, 1997, respectively.
Operating lease payments due in each of the years ended December 31 are as
follows:
<TABLE>
<S> <C>
1998.................................................................. $ 796
1999.................................................................. 608
2000.................................................................. 368
2001.................................................................. 123
------
Total............................................................... $1,895
======
</TABLE>
Guarantee--The Company owns a 24% undivided interest in a partnership which
owns a shopping center complex. The partners guaranteed the construction and
permanent financing of the project. The Company's contingent liability
currently approximates $2,425 and will be reduced to $480 when the operating
property becomes profitable.
Litigation, Claims, and Assessments--The Companies are subject to certain
claims and litigation, including unasserted claims, in the normal course of
business. While it is not possible to predict with certainty the outcome of
these matters, it is management's opinion that the ultimate outcome will not
have a material adverse effect on the financial statements of the Companies.
Irrevocable Standby Letters of Credit--As of December 31, 1997, the
Companies have outstanding irrevocable standby letters of credit issued
related to their loan payable, city (see Note 7), and for insurance purposes,
totalling $1,894.
F-17
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
12. CHANGE IN CORPORATE STRUCTURE
As of the close of business on December 31, 1997, in order for the Company
to have a corporate structure of an allowable nature to qualify as a real
estate investment trust (a "REIT"), significant liquidations, transfers, and
exchanges were effected. The result is that the Company retains ownership of
the timberland and timber, the commercial real estate, and the farmland that
it previously owned. The logging and timber conversion related assets,
previously owned by the Company, are now owned by new companies, of which the
Company owns 100% of their preferred stock, representing 95% of their economic
value, and of which AT Veneers owns 100% of their common stock. The river
construction and management services related assets, previously owned by the
Company or its wholly-owned subsidiaries, are now owned by new companies which
are wholly-owned by AT Veneers. The approximate 1% ownership interest in AT
Veneers, previously owned by the Company, now rests with a new company which
is a wholly-owned subsidiary of the Company. The accompanying December 31,
1997 balance sheet gives effect to these transactions which have occurred
within the Company's consolidated group.
The consolidated group at December 31, 1997 consists of the Company, its
wholly-owned subsidiaries, Tenarc and Anderson-Tully GP Company ("AT GP") and
its 100% preferred stock ownership of Anderson-Tully Timber Company ("AT
Timber") and Anderson-Tully Lumber Company ("AT Lumber"). AT GP owns an
approximate 1% ownership interest in AT Veneers, which in turn directly or
indirectly owns 100% of the common stock of Anderson-Tully Management Services
LLC, AT Timber, AT Lumber, Patton-Tully Transportation LLC, and Brickeys Stone
LLC.
13. SUBSEQUENT EVENTS
On February 9, 1998, the Board of Directors of Anderson-Tully Company voted
to submit to the shareholders for their approval and adoption of a merger
agreement whereby Timberland Growth Corporation would acquire all of the
outstanding common stock of Anderson-Tully Company. Also on that date, the
Board of Directors of AT GP Company voted to submit to the limited partners of
AT Veneers for their approval and adoption of an agreement to sell to Potlatch
Corporation assets relating to the veneer operations, and the Board of
Managers of Anderson-Tully Management Services LLC approved an agreement to
sell to Potlatch Corporation all of its assets including the common stock of
AT Timber and AT Lumber. Patton-Tully Transportation LLC and Brickeys Stone
LLC and certain other assets will be retained by AT Veneers. Under the terms
of these agreements the shareholders and AT Veneers will receive, in the
aggregate, approximately $470 million, subject to certain working capital
adjustments, less outstanding debt at closing and transaction costs.
Shareholder and limited partner approval is required to consummate these
transactions; in addition, certain events must also occur, some of which are
beyond the control of the Company, to effect these transactions. In
anticipation of these transactions legal, accounting, and investment banking
fees totalling $935 as of December 31, 1997 have been deferred and recorded as
other assets in the accompanying financial statements.
The Board voted to empower the officers of the Company to take the actions
necessary to register its stock under Section 12(g) of the Securities Exchange
Act of 1934.
F-18
<PAGE>
ANDERSON-TULLY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 31, 1995, 1996, AND 1997 AND
FIVE-MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
14. COMPARATIVE RESULTS OF OPERATIONS FOR THE FIVE MONTHS ENDED DECEMBER 31,
1996 (UNAUDITED)
The following unaudited results of operations for the five months ended
December 31, 1996 are presented for comparative purposes. It is management's
opinion that this information includes all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the results of
operations for the five months ended December 31, 1996.
<TABLE>
<S> <C>
Net revenues........................................................ $35,779
Costs and expenses.................................................. 33,048
-------
Income from operations.............................................. 2,731
Other expense, net.................................................. (673)
-------
Income before income tax expense and minority interest.............. 2,058
Income tax expense.................................................. (606)
-------
Income before minority interest..................................... 1,452
Minority interest in income of consolidated limited partnership..... (490)
-------
Net income........................................................ $ 962
=======
Earnings per share.................................................. $ 1,660
=======
</TABLE>
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
ANDERSON-TULLY COMPANY
Date: April 23, 1998 By: /s/ Parnell S. Lewis, Jr.
-------------------------------
Name: Parnell S. Lewis, Jr.
Title: Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated as of February 9, 1998
among the Registrant, Potlatch Corporation, Timberland
Growth Corporation and Beaver Acquisition Corporation.
3.1 Restated Articles of Incorporation of the Registrant.
3.2 Revised and Restated Bylaws of the Registrant.
10.1 Asset Purchase Agreement, dated as of February 9, 1998, by
and among Potlatch Corporation, Anderson-Tully Veneers, L.P.
and Anderson-Tully Management Services, LLC.
10.2 Sawmills Subsidiary Asset Purchase Agreement, dated as of
February 9, 1998, by and among Potlatch Corporation and
Anderson-Tully Lumber Company.
10.3 Logging Subsidiary Asset Purchase Agreement, dated as of
February 9, 1998, between Potlatch Corporation and Anderson-
Tully Timber Company.
10.4 Timber Harvest Agreement between Anderson-Tully Timber
Company and the Registrant dated January 1, 1998.
10.5 Employment Agreement, dated March 28, 1994 between the
Registrant and Parnell S. Lewis, Jr., Change in Control
Agreement dated December 10, 1996 between the Registrant and
Parnell S. Lewis, Jr. and Supplemental and Clarifying
Agreement, dated December 31, 1997, between the Registrant
and Parnell S. Lewis, Jr.
10.6 Employment Agreement, dated July 10, 1987 between the
Registrant and E. D. Coombs, Jr., Change in Control
Agreement dated December 11, 1996 between the Registrant
and E. D. Coombs, Jr. and Supplemental and Clarifying
Agreement, dated December 31, 1997, between the Registrant
and E. D. Coombs, Jr.
10.7 Change in Control Agreement dated January 11, 1997 between
the Registrant and Tony R. Parks and Supplemental and
Amending Agreement, dated December 31, 1997, between the
Registrant and Tony R. Parks.
<PAGE>
10.8 Change in Control Agreement dated May 6, 1997 between the
Registrant and Claude Tully Hall and Supplemental and
Amending Agreement, dated December 31, 1997, between the
Registrant and Claude Tully Hall.
10.9 Change in Control Agreement dated June 10, 1997 between the
Registrant and Martin S. Lewis and Supplemental and Amending
Agreement, dated as of December 31, 1997, between the
Registrant and Martin S. Lewis.
10.10 Change in Control Agreement dated December 11, 1996
between the Registrant and Charles Robert Dickinson, Jr. and
Supplemental and Clarifying Agreement, dated as of December
31, 1997, between the Registrant and Charles Robert
Dickinson Jr.
10.11 Change in Control Agreement dated December 10, 1996
between the Registrant and Marye Helen Owen and Supplemental
and Amending Agreement, dated as of December 31, 1997,
between the Registrant and Marye Helen Owen.
10.12 Change in Control Agreement dated December 12, 1996
between the Registrant and Bartlett Tully Lewis and
Supplemental and Amending Agreement, dated as of December
31, 1997, between the Registrant and Bartlett Tully Lewis.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
9, 1998, by and among ANDERSON-TULLY COMPANY, a Mississippi corporation (the
----------------------
"Company"), POTLATCH CORPORATION, a Delaware corporation ("Parent"), TIMBERLAND
-------------------- ----------
GROWTH CORPORATION, a Delaware corporation ("Newco"), and BEAVER ACQUISITION
- ------------------ ------------------
CORPORATION, a Mississippi corporation and wholly-owned subsidiary of Newco
- -----------
("Newsub"),
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Newco, Newsub and
the Company have approved the merger of Newsub with and into the Company on the
terms and subject to the conditions set forth herein; and
WHEREAS, the transactions contemplated by this Agreement will not be
consummated unless and until, among other things, the Mississippi River
Timberlands Control Act, Miss. Code Ann. (S) 49-20-1 et seq. (1972), is
inapplicable to the transactions contemplated hereby or all required approvals
thereunder have been obtained; and
WHEREAS, in furtherance and not in limitation of the immediately preceding
recital, the Company intends to cause the Timberlands Act to be inapplicable to
the transactions contemplated hereby by registering its Common Stock under
Section 12(g) of the Securities Exchange Act of 1934, as amended, or otherwise,
prior to the effective time of the merger contemplated by this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, Anderson-Tully Veneers, L.P. and Anderson-Tully Management Services LLC
are entering into that certain Asset Purchase Agreement, dated as of the date
hereof (the "Asset Purchase Agreement"), Parent and Anderson-Tully Timber
Company are entering into that certain Logging Subsidiary Asset Purchase
Agreement, dated as of the date hereof (the "Logging Subsidiary Asset Purchase
Agreement"), and Parent and Anderson-Tully Lumber Company are entering into that
certain Sawmills Subsidiary Asset Purchase Agreement (the "Sawmills Subsidiary
Asset Purchase Agreement" and together with the Logging Asset Purchase
Agreement, the "Subsidiaries Asset Purchase Agreements") each of which
contemplates, among other things, the sale of certain assets to Parent by such
other parties immediately prior to (in the case of the assets to be transferred
pursuant to the Asset Purchase Agreement) or immediately after (in the case of
the assets to be transferred pursuant to the Subsidiaries Asset Purchase
Agreements), the closing hereunder; and
WHEREAS, the parties hereto desire to make certain representations,
warranties and covenants in connection with this Agreement:
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
-1-
<PAGE>
ARTICLE I
---------
CERTAIN DEFINITIONS
-------------------
Section 1.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms have the respective meanings set forth below:
"Acquiring Party" has the meaning set forth in Section 7.5(b).
---------------
"Affiliate" means, with respect to any Person, any other Person who
---------
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such Person. The term "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
"controlled" and "controlling" have meanings correlative thereto.
"Agreement" means this Agreement and Plan of Merger.
---------
"Alternative Proposal" has the meaning set forth in Section 5.11(a).
--------------------
"Alternative Timber Transaction" means any transaction or series of related
------------------------------
transactions by Parent or any of its Subsidiaries involving any one or more of
the following: (i) the sale, lease, exchange, transfer or conveyance of
timberlands representing thirty percent (30%) or more of the total timberland
acreage held by Parent in the State of Arkansas on the date hereof (such total
acreage, the "Arkansas Timberlands"), provided that this clause (i) is not
--------
intended to cover a merger or other business combination transaction involving
Parent (including a sale of the Arkansas Timberlands as part of a sale of all or
substantially all of Parent's assets); (ii) the issuance of any investment
security the income from or value of which would depend primarily on the
Arkansas Timberlands, or (iii) the contribution of the Arkansas Timberlands to a
joint venture, trust, limited partnership, real estate investment trust or
similar entity; provided, however, that any transaction described in clauses
-------- -------
(i), (ii) or (iii) above shall not constitute an Alternative Timber Transaction
unless at least one of the parties to such transaction is a Person other than
Parent and its Subsidiaries.
"Antitrust Division" has the meaning set forth in Section 5.6.
------------------
"Articles of Merger" has the meaning set forth in Section 2.3.
------------------
"Asset Purchase Agreement" has the meaning set forth in the recitals to
------------------------
this Agreement.
"Base Per Share Amount" has the meaning set forth in Section 2.8.
---------------------
"Base Merger Price" means $410 million adjusted (without duplication) as
-----------------
follows: (i) minus the aggregate amount of Debt of the Company and its
-----
Subsidiaries as of the Closing Date, (ii) minus the aggregate amount of expenses
-----
incurred or to be incurred by the Company
-2-
<PAGE>
and its Subsidiaries in connection with the transactions contemplated by this
Agreement, including, without limitation, the fees referred to in Section 3.21,
but excluding any such expenses actually paid by the Company prior to the
Closing Date and any reasonable legal fees incurred in connection with the
delivery of the opinions referred to in Section 6.2(e) hereof, (iii) minus the
-----
aggregate amount required to be paid by the Company and its Subsidiaries to
officers, directors or employees of the Company or any of its Subsidiaries which
are triggered by the Company's execution and delivery of this Agreement or by
the consummation of the transactions contemplated hereby, but excluding any such
amounts actually paid by the Company prior to the Closing Date, (iv) plus the
----
amount of the Company's and each Subsidiary's cash and cash equivalents on hand
as of the Closing Date, (v) plus 95% of the Sawmills Amount, (vi) plus 82.2% of
---- ----
the Logging Amount, (vii) plus the amount(s), if any, referred to in clause (a)
----
of the definitions of Company Working Capital Adjustment, Logging Working
Capital Adjustment and Sawmills Working Capital Adjustment or minus the
-----
amount(s), if any, referred to in clause (b) of such definitions. As a means of
clarifying the intentions of the parties hereto with respect to the calculation
of the Base Merger Price, Schedule 2.10(b) is an example of how the Base Merger
----------------
Price would be calculated based on the assumptions set forth therein.
"Biomass" means Biomass Partners, L.P., a Tennessee limited partnership.
-------
"Built-in-Gain Election" has the meaning set forth in Section 3.10.
----------------------
"Business Day" means a day, other than a Saturday or Sunday, on which
------------
commercial banks in Memphis, Tennessee and in San Francisco, California are open
for the general transaction of business.
"Certificates" has the meaning set forth in Section 2.8.
------------
"Claim" has the meaning set forth in Section 5.9(a).
-----
"Closing" has the meaning set forth in Section 2.2.
-------
"Closing Date" has the meaning set forth in Section 2.2.
------------
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
----
and regulations promulgated thereunder.
"Common Stock" means the Common Stock, $2,000 par value per share, of the
------------
Company.
"Company Financial Statements" has the meaning set forth in Section 3.6.
----------------------------
"Company Reorganization" means the transactions contemplated by the
----------------------
Information Statement of the Partnership dated December 16, 1997.
"Company Required Consents" has the meaning set forth in Section 3.4.
-------------------------
"Company Shareholder Approval" has the meaning set forth in Section 3.2.
----------------------------
-3-
<PAGE>
"Company Working Capital Adjustment" means (a) the amount, if any, by which
----------------------------------
the consolidated Working Capital of the Company and its Subsidiaries exceeds
$(321,000), or (b) the amount, if any, by which $(321,000) exceeds the
consolidated Working Capital of the Company and its Subsidiaries.
"Constituent Corporations" means the Company and Newsub.
------------------------
"Contracts" has the meaning set forth in Section 3.15.
---------
"Contribution" means the transaction contemplated to occur immediately
------------
after the Effective Time in which the Company will contribute all of its assets
and liabilities to the REIT Partnership, which shall acquire and assume such
assets and liabilities, all as contemplated by the Registration Statement.
"Debt" means any obligation for borrowed money or representing the purchase
----
price of property deferred and unpaid beyond normal trade terms, or any lease
obligation which under GAAP is to be capitalized, or any guarantee of any such
obligation; provided that the term "Debt" shall not include any guarantee of any
Debt which is assumed by Parent pursuant to the Asset Purchase Agreement, any
guarantee of any Debt referred to in clause (a) of the definitions of Sawmills
Amount or Logging Amount or any guarantee which by its terms terminates at the
Effective Time without liability (contingent or otherwise) to the Company.
"Dissenters' Shares" has the meaning set forth in Section 2.9.
------------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Effective Time" has the meaning set forth in Section 2.3.
--------------
"Environmental Laws" means all federal, state and local laws, ordinances,
------------------
rules and regulations now or hereafter in force, as amended from time to time
through the Closing Date, and all federal and state court decisions, consent
decrees and orders interpreting or enforcing any of the foregoing, in any way
relating to or regulating human health or safety, or industrial hygiene or
environmental conditions, or protection of the environment, or pollution or
contamination of the air, soil, surface water or groundwater, and includes the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. (S) 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
(S) 6901 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq. and the
Endangered Species Act, 16 U.S.C. et seq.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Facilities" shall mean any real property, leaseholds, or other interests
----------
currently or formerly owned or operated by the Company and its Subsidiaries and
any buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company
and its Subsidiaries.
"FTC" has the meaning set forth in Section 5.6.
---
"GAAP" means generally accepted accounting principles as in effect in the
----
United States
-4-
<PAGE>
on the date of this Agreement, applied on a consistent basis.
"Governmental Authority" means any national, federal, state, provincial,
----------------------
county, municipal or local government, foreign or domestic, or the government of
any political subdivision of any of the foregoing, or any entity, authority,
agency, ministry or other similar body exercising executive, legislative,
judicial, regulatory or administrative authority or functions of or pertaining
to government, including any authority or other quasi-governmental entity
established to perform any of such functions.
"Hazardous Substances" means any substance or material that is described as
--------------------
a toxic or hazardous substance, waste or material or a pollutant or contaminant,
or words of similar import, in any of the Environmental Laws, and includes
asbestos, petroleum (including crude oil or any fraction thereof, natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or
any mixture thereof), petroleum products, polychlorinated biphenyls, urea
formaldehyde, radon gas, radioactive matter, medical waste, and chemicals which
may cause cancer or reproductive toxicity.
"Dissenters' Shares" has the meaning set forth in Section 2.9.
------------------
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended.
"Intellectual Property" has the meaning set forth in Section 3.14.
---------------------
"Indemnified Officer/Director" has the meaning set forth in Section 5.9(a).
----------------------------
"IPO" has the meaning set forth in Section 5.8(a).
---
"IPO Criteria" has the meaning set forth in Section 5.8(a).
------------
"Leased Real Property" has the meaning set forth in Section 3.16.
--------------------
"Letter of Transmittal" has the meaning set forth in Section 2.10.
---------------------
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
----
charge of any kind.
"LLC Management Company" means Anderson-Tully Management Services LLC, a
----------------------
Mississippi limited liability company.
"Logging" means Anderson-Tully Timber Company, a Mississippi corporation.
-------
"Logging Amount" means $3,500,000, (a) minus the aggregate amount of Debt
-------------- -----
of Logging as of the Closing Date, (b) plus the amount of Logging's cash on hand
----
as of the Closing Date, and (c) minus the aggregate amount required to be paid
-----
by Logging to its officers, directors or employees which are triggered by this
Agreement, Logging's entering into the Logging Subsidiary Asset Purchase
Agreement or the consummation of the transactions contemplated hereby or
thereby, but excluding any such amounts actually paid by Logging prior to the
Closing
-5-
<PAGE>
Date.
"Logging Subsidiary Asset Purchase Agreement" has the meaning set forth in
-------------------------------------------
the recitals to this Agreement.
"Logging Working Capital Adjustment" means (a) 82.2% of the amount, if any,
----------------------------------
by which the Working Capital of Logging exceeds $5,000 or (b) 82.2% of the
amount, if any, by which $5,000 exceeds the Working Capital of Logging.
"Material Adverse Change" means any change that is materially adverse to
-----------------------
the business, financial condition or results of operations of a specified
Person, including, without limitation, any change which is reasonably likely to
be materially adverse to such business in the future or its future financial
condition or results of operations.
"Material Adverse Effect" means any effect that is materially adverse to
-----------------------
the business, financial condition or results of operations of a specified
Person, including, without limitation, any effect on such Person's future
business or its future financial condition or results of operations which is
reasonably likely to occur.
"Merger" has the meaning set forth in Section 2.1.
------
"Merger Documents" means, collectively, this Agreement, the Articles of
----------------
Merger and all other agreements and documents entered into in connection with
the Merger and the other transactions contemplated hereby.
"Mississippi BCA" has the meaning set forth in Section 2.1.
---------------
"Most Recent Balance Sheet" has the meaning set forth in Section 3.6.
-------------------------
"Multiemployer Plan" has the meaning set forth in section 3(37) of ERISA.
------------------
"Non-Parent Party" has the meaning set forth in Section 7.5(f).
----------------
"Note Purchase Agreement" means the Note Purchase Agreement for 6% Note due
-----------------------
October 1, 2002, dated as of October 1, 1997, between the Company and Parent.
"Offer Price" means (a) the price per share of capital stock to be paid ,
-----------
directly or indirectly, pursuant to any agreement to acquire voting power
referred to in Section 7.5(b)(ii)(A) (if such transaction were consummated on
the date of such agreement) multiplied by the total number of outstanding shares
of capital stock on the date of such agreement, (b) in the case of an agreement
to acquire assets referred to in Section 7.5(b)(ii)(A), the sum of the price to
be paid in such transaction for such assets (if such transaction were
consummated on the date of such agreement) and the fair market value of the
remaining assets of the Company as determined by a nationally recognized
investment banking firm selected by mutual agreement of Parent and the Company,
and (c) in the case of an acquisition of beneficial ownership of capital stock
of the Company referred to in Section 7.5(b)(ii)(B), the highest price per share
of capital stock paid by the acquiring Person or group multiplied by the total
number of outstanding shares of capital stock of the Company on the date of such
acquisition. In determining the Offer Price, the value
-6-
<PAGE>
of any consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by mutual agreement of Parent and
the Company.
"Organizational Documents" has the meaning set forth in Section 3.1.
------------------------
"Owned Real Property" has the meaning set forth in Section 3.16.
-------------------
"Partnership" means Anderson-Tully Veneers, L.P., a Mississippi limited
-----------
partnership.
"Paying Agent" has the meaning set forth in Section 2.10.
------------
"Person" means an individual, partnership, corporation, limited liability
------
company, joint stock company, unincorporated organization or association, trust,
joint venture, association or other organization, whether or not a legal entity,
or a Governmental Authority.
"Plans" has the meaning set forth in Section 3.13.
-----
"Pro Rata Portion" means a fraction, the numerator of which is one (1), and
----------------
the denominator of which is the total number of shares of Common Stock
outstanding immediately prior to the Effective Time (assuming the exercise of
all securities of the Company which are convertible into, or exchangeable for,
shares of Common Stock); but for this purpose any share of Common Stock which is
held in the Company's treasury or by any of its Subsidiaries shall not be deemed
to be outstanding.
"Real Property" has the meaning set forth in Section 3.16.
-------------
"Registration Statement" has the meaning set forth in Section 4.6.
----------------------
"REIT Election" has the meaning set forth in Section 3.10.
-------------
"REIT Partnership" means the Delaware limited partnership in which Newco
----------------
will become the sole general partner at the closing of the IPO, as contemplated
by the Registration Statement.
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment, including continuing migration, of Hazardous Substances into or
through soil, surface water or groundwater.
"Report" has the meaning set forth in Section 5.6.
------
"Sawmills" means Anderson-Tully Lumber Company, a Mississippi corporation.
--------
"Sawmills Amount" means $20,000,000, (a) minus the amount of Debt of
--------------- -----
Sawmills as of the Closing Date, (b) plus the amount of Sawmills' cash on hand
----
as of the Closing Date, and (c) minus the aggregate amount required to be paid
-----
by Sawmills to its officers, directors or employees which are triggered by this
Agreement, Sawmills' entering into the Sawmills Subsidiary Asset Purchase
Agreement, or the consummation of the transactions contemplated hereby or
thereby, but excluding any such amounts actually paid by Sawmills prior to the
-7-
<PAGE>
Closing Date.
"Sawmills Subsidiary Asset Purchase Agreement" has the meaning set forth in
--------------------------------------------
the recitals to this Agreement.
"Sawmills Working Capital Adjustment" means (a) 95% of the amount by which
-----------------------------------
the Working Capital of Sawmills exceeds $3,800,000, or (b) 95% of the amount by
which $3,800,000 exceeds the Working Capital of Sawmills.
"SEC" has the meaning set forth in Section 4.6.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Shareholder" means each holder of shares of Common Stock outstanding
-----------
immediately prior to the Effective Time.
"Shareholders' Meeting" has the meaning set forth in Section 5.3
---------------------
"Short Period" has the meaning set forth in Section 3.10.
------------
"Subsidiaries Asset Purchase Agreements" has the meaning set forth in the
--------------------------------------
recitals to this Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation
or other business entity (except a partnership), a majority of the total voting
power of shares of stock or other interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of such Person or a
combination thereof, or (ii) if a partnership, a majority of the partnership
interests thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more Subsidiaries of such Person or a combination thereof
or such Person shall be allocated a majority of partnership gains or losses or
shall be or control the managing director, managing member, general partner or
other managing Person of such partnership. Notwithstanding the foregoing,
neither Biomass nor the Partnership (nor LLC Management Company, Logging and
Sawmills, which are Subsidiaries of the Partnership) nor any Person listed on
Schedule 3.5(b) shall be deemed to be a Subsidiary of the Company. Unless the
- ---------------
context requires otherwise, each reference to a Subsidiary shall be deemed to be
a reference to a Subsidiary of the Company.
"Surviving Corporation" has the meaning set forth in Section 2.1.
---------------------
"Taxes" has the meaning set forth in Section 3.10.
-----
"Tax Return" has the meaning set forth in Section 3.10.
----------
"Termination Date" has the meaning set forth in Section 7.1(b).
----------------
"Timberlands Act" means the Mississippi River Timberlands Control Act,
---------------
Mississippi
-8-
<PAGE>
Code Ann. (S) 49-20-1 et seq. (1972).
"Topping Amount" means an amount equal to 9.9% of the excess, if any, of
--------------
(a) the Offer Price over (b) the Base Merger Price calculated as of the date
this Agreement is terminated pursuant to Section 7.1(c), Section 7.1(h) or
Section 7.1(i), as the case may be, less the aggregate amount of dividends paid
or with respect to which a record date has been established between such date of
termination and the date of the event giving rise to the payment of a
termination fee under Section 7.5(b).
"Working Capital" means the total current assets (excluding cash and cash
---------------
equivalents) of a specified Person or Persons at the Closing Date minus the
total current liabilities (excluding short-term Debt and the current portion of
long-term Debt) of such Person or Persons at the Closing Date (which difference
may be a negative number), calculated in accordance with GAAP applied in a
manner consistent with the Company Financial Statements.
Section 1.2 Interpretation. Unless otherwise indicated to the contrary
--------------
herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (ii) the word "including" means
"including, but not limited to"; (iii) masculine gender shall also include the
feminine and neuter genders, and vice versa; and (iv) words importing the
singular shall also include the plural, and vice versa.
ARTICLE II
----------
THE MERGER
----------
Section 2.1 The Merger. Upon the terms and subject to the conditions set
----------
forth in this Agreement, at the Effective Time, Newsub shall, pursuant to the
provisions of the Mississippi Business Corporation Act (as amended from time to
time, the "Mississippi BCA"), be merged with and into the Company (the "Merger")
and the separate corporate existence of Newsub shall thereupon cease in
accordance with the provisions of the Mississippi BCA. From and after the
Effective Time, the Company shall be the surviving corporation in the Merger
(the Company, as the surviving corporation in the Merger, being sometimes
hereinafter referred to as the "Surviving Corporation"). The Merger shall have
the effects specified in the Mississippi BCA.
Section 2.2 Closing. The closing of the Merger (the "Closing") shall take
-------
place at the offices of Pillsbury Madison & Sutro LLP, 235 Montgomery Street,
San Francisco, California (a) concurrently with the closing of the IPO and
immediately after the closing under the Asset Purchase Agreement, but in any
event following the satisfaction or waiver of the conditions set forth in
Article VI (other than the conditions that by their nature are to be satisfied
at the Closing, but subject to the satisfaction or waiver of those conditions)
or (b) at such other place and time or on such other date as Parent and the
Company may agree in writing (the "Closing Date").
Section 2.3 Effective Time. As soon as practicable after the Closing, the
--------------
parties hereto shall cause Articles of Merger meeting the requirements of
Section 79-4-11.05 of the Mississippi BCA, to be properly executed and filed in
accordance with the Mississippi BCA. The Merger shall be effective at the time
and on the date when the Articles of Merger are duly filed with the
-9-
<PAGE>
Secretary of State of the State of Mississippi or at such other time as shall be
agreed upon by the parties and set forth in the Articles of Merger (the
"Effective Time").
Section 2.4 Articles of Incorporation. The articles of incorporation of
-------------------------
Newsub in effect immediately prior to the Effective Time shall be the articles
of incorporation of the Company at the Effective Time. The Articles of Merger
shall set forth the amendments to the articles of incorporation of the Surviving
Corporation in order to give effect to the provisions of this Section 2.4.
Section 2.5 Bylaws. The bylaws of Newsub as in effect immediately prior
------
to the Effective Time shall be the bylaws of the Company at and as of the
Effective Time.
Section 2.6 Officers. The officers of Newsub immediately prior to the
--------
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation and will hold office until their successors are duly
elected or appointed and qualify in the manner provided in the articles of
incorporation or bylaws of the Surviving Corporation or as otherwise provided by
law, or until their earlier death, resignation or removal.
Section 2.7 Directors. The directors of Newsub immediately prior to the
---------
Effective Time, from and after the Effective Time, shall be the directors of the
Surviving Corporation and will serve until their successors are duly elected or
appointed and qualify in the manner provided in the articles of incorporation or
bylaws of the Surviving Corporation or as otherwise provided by law, or until
their earlier death, resignation or removal.
Section 2.8 Conversion of Shares.
--------------------
(a) As of the Effective Time, by virtue of the Merger and without any
action on the part of any holder thereof or any party hereto, (i) each share of
Common Stock of the Company issued and outstanding immediately prior to the
Effective Time (other than shares held in the Company's treasury or by any of
its Subsidiaries and other than shares held by Shareholders who validly perfect
dissenters' rights under the Mississippi BCA) shall be canceled and converted
into the right to receive an amount (such amount, the "Base Per Share Amount")
equal to the Base Merger Price multiplied by the Pro Rata Portion, payable in
cash to the holder thereof, without interest thereon, upon surrender of the
certificates formerly representing such share ("Certificates"), all at the time
and otherwise in accordance with Section 2.10, and (ii) each share of Common
Stock held by Shareholders who validly perfect dissenter's rights under the
Mississippi BCA shall be canceled and converted into a right to receive an
amount in accordance with Section 2.9.
(b) Each share of Common Stock held in the treasury of the Company or by
any of its Subsidiaries shall, by virtue of the Merger and without any action on
the part of the holders thereof, be canceled and retired and shall cease to
exist as of the Effective Time and no payment shall be made with respect
thereto.
(c) Each share of capital stock of Newsub issued and outstanding
immediately prior to the Effective Time shall, at the time of the Merger and
without any action on the part of Newsub, be converted into one validly issued,
fully paid and nonassessable share of the common stock of the Surviving
Corporation and the Surviving Corporation shall be a wholly-owned
-10-
<PAGE>
Subsidiary of Newco.
(d) Subject to Section 2.9, from and after the Effective Time, the holders
of Certificates shall cease to have any rights with respect to such
Certificates, except the right to receive the Base Per Share Amount with respect
to each of the shares represented thereby.
Section 2.9 Dissenters' Rights. Shares of Common Stock of the Company
------------------
which have not been voted for approval of this Agreement and with respect to
which dissenters' rights shall have been properly demanded in accordance with
the Mississippi BCA ("Dissenters' Shares") shall not be converted into the right
to receive cash as set forth in Section 2.8(a)(i) on or after the Effective Time
unless and until the shareholder becomes ineligible for such dissenters' rights,
at which time such shares shall cease to be Dissenters' Shares and shall be
converted into and represent the right to receive cash as set forth in Section
2.8(a)(i). From and after the Effective Time, no shareholder who has demanded
dissenters' rights shall have any rights whatsoever other than the right to
payment of the fair value of his shares afforded by the Mississippi BCA, and,
without limiting the generality of the foregoing, no such shareholder shall be
entitled to vote shares of Common Stock for any purpose or to receive payment of
dividends or other distributions with respect to shares of Common Stock (except
dividends and other distributions payable to shareholders of record at a date
which is prior to the Effective Time). The Company shall give Parent (i) prompt
notice (and a copy) of any written notice of intent to demand payment delivered
to Company pursuant to Section 79-4-13.21 of the Mississippi BCA, and prompt
written notice of withdrawal of any such notice or any other instruments in
respect thereof received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with any shareholder who delivers any such notice
of intent to demand payment. The Company will not voluntarily make any payment
with respect to any such demands for payment and will not, except with the prior
written consent of Parent, settle or offer to settle any such demands. Newco
shall be responsible for the handling of all proceedings from and after the
Effective Time, and for the payment of any award or compromise, with respect to
Dissenters' Shares.
Section 2.10 Payment for Common Shares.
-------------------------
(a) Prior to the Closing Date, Parent and the Company shall agree on the
Base Merger Price calculated in accordance with the terms hereof. In this
regard, Parent and the Company shall consult with each other with respect to the
anticipated Closing Date hereunder, which shall be coordinated with the
anticipated closing date of the IPO, assuming the other conditions to Closing
hereunder are satisfied or reasonably capable of being satisfied on such date.
Upon determination of the anticipated Closing Date, the Company shall promptly
prepare and deliver to Parent a schedule substantially in the form attached as
Schedule 2.10(a) showing the estimated Base Merger Price as of the anticipated
- ----------------
Closing Date (including, without limitation, any expected changes in the amount
of Debt or Working Capital that would affect the Base Merger Price). The
Company shall make available to Parent such information as Parent shall
reasonably request to verify the information set forth in such schedule and the
Company shall immediately inform Parent of any changes to the amounts set forth
therein. Prior to Closing, Parent and the Company shall agree on a schedule
setting forth the Base Merger Price, which schedule shall be executed by Parent
and the Company. The foregoing process shall be repeated in the event that the
Closing Date does not occur on the anticipated Closing Date. As a means of
clarifying the intentions of the parties hereto with respect to the calculation
of the Base Merger Price, Schedule
--------
-11-
<PAGE>
2.10(b) is an example of how the Base Merger Price would be calculated based on
- -------
the assumptions set forth therein.
(b) As of or as soon as reasonably practicable after the Effective Time,
Newco shall deposit with the Paying Agent an amount necessary to pay each
Shareholder (other than holders of Dissenters' Shares and except as provided in
section 2.8(b)) an amount equal to the Base Per Share Amount multiplied by the
number of shares of Common Stock held by such Shareholder immediately prior to
the Effective Time.
(c) After the Effective Time, a bank or trust company selected by Newco
and reasonably acceptable to the Company (the "Paying Agent") shall act as
paying agent in effecting the exchange of cash against surrender of Certificates
which, immediately prior to the Effective Time, represented Common Stock of the
Company (other than Dissenters' Shares and except as provided in Section
2.8(b)). As soon as practicable after the Effective Time, the Paying Agent shall
mail a transmittal form (a "Letter of Transmittal") to each holder of
Certificates theretofore representing any such shares advising such holder of
the procedure for surrendering to the Paying Agent any such Certificates for
exchange. Upon the surrender and exchange of such a Certificate, the holder
shall be paid, without interest thereon, the amount of cash to which he is
entitled pursuant to Section 2.8(a)(i), less only any amount required to be
withheld under applicable withholding tax laws and regulations, and such
Certificate shall forthwith be canceled.
(d) If a check for the cash amount to be paid pursuant to Section 2.8
hereof is to be sent to a Person other than a Person in whose name the
Certificates for such shares surrendered for exchange are registered, it shall
be a condition of the exchange that the Person requesting such exchange shall
pay to the Paying Agent any transfer or other taxes required by reason of the
delivery of such check to a Person other than the registered owner of the
Certificates surrendered, or shall establish to the satisfaction of the Paying
Agent that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to a
holder of Certificates theretofore representing such shares for any amount paid
to a public official pursuant to any applicable abandoned property, escheat or
similar law. Until so surrendered and exchanged, each such Certificate shall
represent solely the right to receive the cash into which the shares it
theretofore represented shall have been converted pursuant to Section 2.8,
without interest, and the Surviving Corporation shall not be required until such
surrender to pay the holder thereof the cash to which such holder otherwise
would be entitled.
(e) Any portion of the funds in the hands of the Paying Agent which has not
been so paid pursuant to this Section 2.10 within six months after the Effective
Time shall promptly be paid to Newco, and any Shareholders of the Company who
have not theretofore complied with this Section thereafter shall look only to
Newco for payment of the amount of cash to which they are entitled under this
Agreement.
Section 2.11 Closing of the Company's Transfer Books. At the Effective
---------------------------------------
Time, the stock transfer books of the Company shall be closed and no transfer of
Common Stock (other than common stock into which the capital stock of Newsub may
be converted pursuant to the Merger) shall thereafter be made.
-12-
<PAGE>
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent, Newco and Newsub as follows:
Section 3.1 Organization and Qualification; Subsidiaries. Each of the
--------------------------------------------
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation
specified in Schedule 3.1 and has the corporate power and authority and all
------------
licenses, permits and authorizations necessary to own or lease its property and
assets and to carry on its business as presently conducted, and as presently
proposed to be conducted, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction wherein the nature of
its business or the ownership of its assets makes such qualification necessary,
except where the failure to be so qualified and in good standing would not
prevent, delay or impair the Company's ability to consummate the transactions
contemplated by this Agreement or have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole. The Company has previously provided or
made available to Parent, Newco and Newsub true and complete copies of (a) its
articles of incorporation, (b) its bylaws as currently in effect and (c) the
certificate or articles of incorporation and bylaws, as currently in effect, of
each of its Subsidiaries (the "Organizational Documents").
Section 3.2 Authorization. The Company has the corporate power and
-------------
authority to execute and deliver this Agreement and each other Merger Document
to be executed in connection herewith and, subject only to approval of this
Agreement by the holders of two-thirds of the Common Stock (the "Company
Shareholder Approval") and receipt of the Company Required Consents, to perform
its obligations hereunder and thereunder, all of which have been duly authorized
by all requisite corporate action. This Agreement and each other Merger
Document to be executed in connection herewith have been duly authorized,
executed and delivered by the Company, and constitute valid and binding
agreements of the Company enforceable against the Company in accordance with
their terms, except as such may be subject to or limited by bankruptcy,
insolvency, reorganization or other laws relating to or affecting creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 3.3 Non-contravention. Neither the execution and delivery of this
-----------------
Agreement or any other Merger Document nor the consummation of the Merger and
the other transactions contemplated hereby nor the fulfillment of and the
performance by the Company of its obligations hereunder will (with or without
notice or lapse of time) (a) contravene any provision contained in the
Organizational Documents or any resolution adopted by the board of directors or
shareholders of the Company, (b) conflict with, violate or result in a material
breach of, or constitute a material default under (i) any Contract or (ii) any
judgment, order, decree, statute, law, rule or regulation or other restriction
of any Governmental Authority, in each case to which the Company or any of the
Subsidiaries is a party or by which any of them is bound or to which any of
their respective assets or properties are subject, if any, (c) except with
respect to Liens granted to Parent's financing sources or otherwise created by
Parent or Newco, result in the creation or imposition of any Lien on any of the
assets or properties of the Company or any of its Subsidiaries, which in the
case of any of clauses (a) through (c) above, would prevent, delay or impair the
Company's ability to consummate the transactions contemplated by this Agreement
or
-13-
<PAGE>
have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole.
Section 3.4 No Consents. Except for (a) filing of the Articles of Merger
-----------
in accordance with the Mississippi BCA, (b) filings required by the HSR Act, (c)
any filings which may be required pursuant to Section 5.6(b) and (d) filings and
approvals set forth in Schedule 3.4 (the "Company Required Consents"), no notice
------------
to, filing with, or authorization, registration, consent or approval of any
Governmental Authority or other Person is necessary for the execution, delivery
or performance of this Agreement, the consummation of the transactions
contemplated hereby or thereby by the Company, other than any notice, filing,
authorization, registration, consent or approval which, if not obtained, would
not prevent, delay or impair the Company's ability to consummate the
transactions contemplated by this Agreement or have a Material Adverse Effect on
the Company and its Subsidiaries, taken as a whole.
Section 3.5 Capitalization of the Company and the Subsidiaries.
--------------------------------------------------
(a) The Company's authorized capital stock consists of 1,200 authorized
shares of Common Stock, of which 579.5441 shares are issued and outstanding.
The Company does not have (i) any shares of Common Stock reserved for issuance,
or (ii) any outstanding or authorized option, warrant, right, call or commitment
obligating the Company to issue, deliver, transfer or sell shares of its capital
stock or any outstanding securities or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire
from it, any shares of its capital stock. There are no (i) outstanding
obligations of the Company or any of the Subsidiaries to repurchase, redeem or
otherwise acquire or make any payment in respect of any capital stock of the
Company or any Subsidiary, (ii) authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect to the
Company or any of the Subsidiaries or (iii) voting trusts, proxies or other
agreements, to which the Company is a party, among the Company's shareholders
with respect to the voting or transfer of the Company's capital stock. There
are no preemptive or other subscription rights with respect to any shares of the
Company's capital stock, and all of the issued and outstanding shares of Common
Stock have been duly authorized and are validly issued, fully paid and
nonassessable.
(b) All Subsidiaries of the Company are listed on Schedule 3.1. All of the
------------
issued and outstanding shares of capital stock of each of the Company's
Subsidiaries have been duly authorized and are validly issued, fully paid and
nonassessable, were not issued in violation of preemptive rights or similar
rights and are owned (of record and beneficially) by the Company or by a
Subsidiary, free and clear of all rights of first refusal and other Liens.
Except with respect to the Subsidiaries and except as otherwise disclosed in
Schedule 3.5(b), neither the Company nor any Subsidiary owns any shares of stock
- ---------------
or any equity interest in any Person, and neither the Company nor any of the
Subsidiaries controls any other Person by means of ownership, management
contract or otherwise. Except as set forth in Schedule 3.5(b), no Subsidiary
---------------
has (i) any shares of its capital stock reserved for issuance, or (ii) any
outstanding or authorized option, warrant, right, call or commitment obligating
such Subsidiary to issue, deliver, transfer or sell shares of its capital stock
or any outstanding securities or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire from it, any
shares of its capital stock. Except as set forth in Schedule 3.5(b), there are
---------------
no (i) outstanding obligations of any of the Subsidiaries to repurchase, redeem
or otherwise acquire or make any payment in respect of any capital stock of the
Company or any of its Subsidiaries or (ii) voting trusts, proxies or other
agreements, to which any Subsidiary is a party, among the Company or any
Subsidiary's
-14-
<PAGE>
shareholders with respect to the voting or transfer of the Company or any
Subsidiary's capital stock except as otherwise set forth in this Agreement.
(c) The Company has previously provided to Parent a true and complete list
of the record holders of the Common Stock and the number of shares, including
fractional shares, held by each such holder, which list remains true and
complete as of the date of this Agreement.
Section 3.6 Financial Statements.
--------------------
(a) The Company has made available to Parent, Newco and Newsub (i) the
audited consolidated balance sheets, and the audited consolidated statements of
earnings, shareholders' equity and cash flows of the Company and its
consolidated subsidiaries for the years ended July 31, 1995, July 31, 1996 and
July 31, 1997, and (ii) an unaudited consolidated balance sheet of the Company
and its consolidated subsidiaries as of September 30, 1997 (the "Most Recent
Balance Sheet") and the related unaudited consolidated statements of income,
changes in shareholders' equity and cash flows for the two months then ended,
including the notes thereto, together with the relevant auditors' report with
respect thereto, prepared by the Company's independent certified public
accountants. All of the foregoing financial statements are hereinafter
collectively referred to as the "Company Financial Statements." The Company
Financial Statements have been (and any financial statements provided by the
Company pursuant to Section 5.1(b) hereof will be) prepared from, and are (and
will be) in accordance with, the books and records of the Company and its
consolidated subsidiaries, are (and will be) correct and complete in all
material respects, and fairly present (and will fairly present) the assets and
liabilities of the Company and its consolidated subsidiaries and the
consolidated financial position and consolidated results of operations of the
Company and its consolidated subsidiaries as of the dates and for the periods
indicated, in each case in accordance with GAAP.
(b) Except to the extent reflected or reserved against in the Company
Financial Statements as of and for the fiscal year ended July 31, 1997 (and the
notes thereto), or otherwise disclosed in the Most Recent Balance Sheet, the
Company and its Subsidiaries have no material liabilities or other obligations
(including contingent liabilities and obligations) except (i) liabilities and
obligations incurred in connection with the Company Reorganization or in the
ordinary course of business consistent with past practice since the date of the
Most Recent Balance Sheet, (ii) obligations required to obtain and preserve the
Company's status as a REIT, or (iii) such liabilities or obligations that would
not be required to be reflected or reserved against in the consolidated balance
sheet of the Company and its Subsidiaries prepared in accordance with GAAP.
(c) The Debt of the Company and its Subsidiaries as of the date hereof is
as set forth on Schedule 3.6(c).
---------------
Section 3.7 Books and Records. The books of account, minute books, stock
-----------------
record books and other records of the Company and its Subsidiaries, all of which
have been made available to Parent, are complete and correct and have been
maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute books of the
Company and its Subsidiaries contain accurate and complete records of all
meetings held of, and corporate action taken by, the shareholders, the Boards of
Directors and the committees of Boards of Directors of the Company and its
Subsidiaries, and no meeting of any
-15-
<PAGE>
such shareholders, Board of Directors or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of such books and records will be in the possession of the
Company and its Subsidiaries.
Section 3.8 Governmental Authorizations; Licenses. Except as set forth in
-------------------------------------
Schedule 3.8, the business of each of the Company and its Subsidiaries has been
- ------------
operated in compliance, in all material respects, with all applicable laws,
rules, regulations, codes, ordinances, orders, policies and guidelines of all
Governmental Authorities, except when the failure to comply would not have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Except as set forth in Schedule 3.8, each of the Company and its Subsidiaries
------------
has, and after giving effect to the Merger and the other transactions
contemplated by the Merger Documents, will continue to have, all material
permits, licenses, approvals, certificates and other authorizations and has made
all notifications, registrations, certifications and filings with all
Governmental Authorities, necessary for the operation of its business as
currently conducted, in each case other than those the absence of which would
not have a Material Adverse Effect on the Company. Except as set forth in
Schedule 3.8, there is no action, case, proceeding or investigation pending or,
- ------------
to the Company's knowledge, threatened, and to the knowledge of the Company, no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such action, case or proceeding or
investigation, by any Governmental Authority (a) with respect to any alleged
violation by the Company or any of its Subsidiaries of any statute, law, rule,
regulation, code, ordinance, order, policy or guideline of any Governmental
Authority, or (b) with respect to any alleged failure by the Company or any of
its Subsidiaries to have any permit, license, approval, certification or other
authorization required in connection with the operation of the business of each
of the Company and the Subsidiaries, or (c) which, if determined adversely to
the Company or any such Subsidiary, would reasonably be expected to prevent,
delay or impair the Company's ability to consummate the transactions
contemplated by this Agreement or have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole.
Section 3.9 Litigation. Except as set forth in Schedule 3.8 or Schedule
---------- ------------ --------
3.9, as of the date of this Agreement, there are no claims, actions,
- ---
proceedings, or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any of their
officers or directors (in their capacity as such), and to the knowledge of the
Company, no event has occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such claim, action, proceeding or
investigation, before any court or Governmental Authority which, if determined
adversely to the Company or such Subsidiary, officer or director, would
reasonably be expected to prevent, delay or impair the Company's ability to
consummate the transactions contemplated by this Agreement or have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole.
Section 3.10 Taxes and Tax Payments. Except as set forth on Schedule
---------------------- --------
3.10:
- ----
(a) The Company and each of its Subsidiaries (i) have prepared in good
faith and timely filed (or there has been filed on their behalf) all Tax Returns
required to have been filed by each of them under applicable law (other than Tax
Returns the failure to file of which would not have a Material Adverse Effect on
the Company and its Subsidiaries), and all such Tax Returns were true, correct
and complete in all material respects and (ii) have paid all material Taxes that
are currently due and payable for all periods through and including the Closing
Date
-16-
<PAGE>
except for those contested in good faith or for which adequate reserves have
been established in accordance with GAAP.
(b) There are no ongoing audits or examinations of any Tax Returns of the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has been notified, formally or informally, by any taxing authority
that any such audit or examination, or any other investigation or proceeding
related to Taxes or Tax Matters, is contemplated or pending.
(c) All material Taxes for which the Company or any of its Subsidiaries are
liable for periods through the Closing Date (whether or not the period ends for
tax purposes on the Closing Date) have been or will be paid when due or are
adequately reserved against on the books of the Company. Neither the Company
nor any of its Subsidiaries are parties to any Tax sharing or Tax allocation
agreement. The Company and its Subsidiaries have not agreed to make and are not
required to make any adjustment under Section 481(a) of the Code, by reason of a
change in accounting method or otherwise. The Company intends to make the
election under Section 856(c)(1) of the Code (the "REIT Election") to be treated
as a real estate investment trust pursuant to Sections 856 through 860 of the
Code in connection with its Tax Return filed with respect to the taxable year
beginning January 1, 1998 and ending on the Closing Date (the "Short Period").
As of the Closing Date, and except for the REIT Election, the Company will have
satisfied all of the requirements for taxation as a real estate investment trust
pursuant to Section 856 through 860 of the Code during the Short Period. The
Company is aware of no facts or circumstances which would result in the Company
being unable to make a valid and effective REIT Election. The Company intends
to make the election provided for under Notice 88-19 in connection with its REIT
Election (the "Built-in-Gain Election"). The Company is aware of no facts or
circumstances which would result in the Company being unable to make a valid and
effective Built-in-Gain Election. Schedule 3.10(c) sets forth all material
----------------
elections and consents with respect to any Taxes (or the computation thereof)
affecting the Company or any of its Subsidiaries as of the date hereof.
(d) Neither the Company nor any predecessor corporation, nor any of their
respective Subsidiaries, has executed or filed with the IRS or any other taxing
authority any agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any Taxes.
(e) As used in this Section 3.10, the term (i) "Taxes" includes all taxes
of any nature whatsoever and however denominated, including, without limitation,
income, franchise, sales, gross receipts, occupation, use, severance, real and
personal property, employment, excise, stamp, impost, environmental, transfer
taxes or duties and all other charges, as well as penalties and interest
thereon, imposed by any government or instrumentality, whether federal, state,
local, foreign or other; and (ii) "Tax Return" shall mean a report, return or
other information required to be supplied to any governmental entity with
respect to Taxes including, where permitted or required, combined or
consolidated returns.
Section 3.11 Environmental Matters. Except as permitted by applicable
---------------------
Environmental Laws or disclosed in the Schedule 3.11, to the knowledge of the
-------------
Company: (a) no Hazardous Substances are present in, on or under the Facilities
or any other properties and assets (whether real, personal or mixed) in which
the Company or its Subsidiaries has or had an interest or any nearby real
property which could migrate to the Facilities or other properties and assets,
and
-17-
<PAGE>
there is no present Release or threatened Release of any Hazardous Substances
in, on or under the Facilities or any other properties and assets (whether real,
personal or mixed) in which the Company or its Subsidiaries had or had an
interest, or any nearby real property which could migrate to the Facilities or
other properties and assets, whether by the Company or any of its Subsidiaries
or by any other entity or Person; (b) neither the Company nor any of its
Subsidiaries has ever used or permitted any Person to use the Facilities or any
part thereof or any other properties and assets (whether real, personal or
mixed) in which the Company or its Subsidiaries has or had an interest, for the
production, processing, manufacture, generation, treatment, handling, storage or
disposal of Hazardous Substances, except in compliance with applicable
Environmental Laws; (c) no underground or above-ground storage tanks, barrels,
wells, pits, sumps, lagoons or other containers of any kind are, or to the
knowledge of the Company, have been located in, on, under or about the
Facilities or any other properties and assets (whether real, personal or mixed)
in which the Company or its Subsidiaries has or had an interest; (d) the Company
and its Subsidiaries, the Facilities and every part thereof, and all operations
and activities therein and thereon and the use and occupancy thereof, comply and
have complied with all applicable Environmental Laws (except where any such
violation would not have a Material Adverse Effect on the Company or any of its
Subsidiaries), and neither the Company, nor any of its Subsidiaries, nor any
other Person using or occupying the Facilities or any part thereof is violating
or has violated any Environmental Laws or has any liability under any
Environmental Laws; (e) the Company and its Subsidiaries have all permits,
licenses and approvals required by all applicable Environmental Laws for the use
and occupancy of the Facilities, and all operations and activities of the
Company and its Subsidiaries (except where the failure to have any such permit,
license or approval would not have a Material Adverse Effect upon the Company or
any of its Subsidiaries), and the Company and its Subsidiaries are in full
compliance with all such permits, licenses and approvals; and all such permits,
licenses and approvals were duly issued and are in full force and effect (except
where non-compliance would not have a Material Adverse Effect upon the Company
or any of its Subsidiaries); and (f) no claim, demand, action or proceeding of
any kind relating to any past or present Release or threatened Release of any
Hazardous Substances in, on or under the Facilities or any other properties and
assets (whether real, personal or mixed) in which the Company or its
Subsidiaries has or had an interest or any past or present violation of or any
liability under any Environmental Laws by the Company and its Subsidiaries has
been made or commenced, or is pending, or is being threatened by any person.
Section 3.12 Employee Matters.
----------------
(a) Schedule 3.12 contains a true and complete list of (i) the officers and
-------------
employees currently employed by the Company and its Subsidiaries having an
annual base salary of $100,000 or more, indicating the title of and whether the
employee or officer is covered by an employment, consulting or severance
agreement, and (ii) the directors of each of the Company and the Subsidiaries.
(b) Except as set forth on Schedule 3.12, (i) neither the Company nor any
-------------
Subsidiary has entered into any collective bargaining agreements with respect to
the employees of the Company or its Subsidiaries ("Company Employees"), (ii)
there is no labor strike, labor dispute, work slowdown or work stoppage or
lockout pending or, to the Company's knowledge, threatened against or affecting
the Company or any Subsidiary, (iii) to the Company's knowledge, no union
organization campaign is in progress with respect to any of the Company
-18-
<PAGE>
Employees, and no material question concerning representation exists respecting
such employees, (iv) there is no unfair labor practice charge or complaint
pending or, to the Company's knowledge, threatened against the Company or any
Subsidiary, except for such agreements, activities, charges or complaints which
would not reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole.
Section 3.13 Employee Benefit Plans.
----------------------
(a) Schedule 3.13 sets forth all of the plans and programs (collectively,
-------------
the "Plans") which the Company or any of its Subsidiaries maintain, are party
to, contribute to or are obligated to contribute to, on behalf of the Company's
or any Subsidiary's employees or former employees and their dependents or
survivors (whether or not set forth in a written document), including without
limitation:
(i) Each employee benefit plan, as defined in Section 3(3) of ERISA;
(ii) Each bonus, deferred compensation, incentive, restricted stock,
employee stock purchase, stock option, stock appreciation right, phantom
stock, supplemental pension, executive compensation, fringe benefit,
severance, termination of pay or similar plan, program, policy, perquisite
or arrangement (other than any such item provided solely pursuant to the
terms of a written or oral contract with any individual employee that is
disclosed in Schedule 3.12); and
-------------
(iii) Each material plan, program, agreement, policy, commitment or
other arrangement relating to the provision of any benefit described in
section 3(1) of ERISA to former employees or directors or to their
survivors, other than procedures intended to comply with the Consolidated
Omnibus Budget Reconciliation Act of 1985.
(b) Neither the Company nor any ERISA Affiliate has, since January 1, 1993
terminated, suspended, discontinued contributions to or withdrawn from any
employee pension benefit plan, as defined in section 3(2) of ERISA, including
(without limitation) any multiemployer plan, as defined in section 3(37) of
ERISA. For this purpose, ERISA Affiliate" means each person (as defined in
section 3(9) of ERISA) that, together with the Company, would be treated as a
single employer under section 4001(b) of ERISA or that would be deemed to be a
member of the same "controlled group" within the meaning of section 414(b) or
(c) of the Code.
(c) The Company has provided to Parent complete and current copies of each
of the following:
(i) The text (including amendment) of each of the Plans, to the extent
reduced to writing;
(ii) A summary of each of the Plans, to the extent not previously
reduced to writing;
(iii) With respect to each Plan that is an employee benefit plan (as
defined in section 3(3) of ERISA), the following:
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<PAGE>
(1) The most recent summary plan description, as described in
section 102 of ERISA;
(2) Any summary of material modifications that has been
distributed to participants or filed with the U.S. Department of Labor
but that has not been incorporated in an updated summary plan
description furnished under subparagraph (1) above; and
(3) The annual report, as described in section 103 of ERISA,
and, where applicable, actuarial reports, for the three most recent
plan years for which an annual report or actuarial report has been
prepared; and
(iv) With respect to each Plan that is intended to qualify under
section 401(a) of the Code, the most recent determination letter concerning
the plan's qualification under section 301(a) of the Code, as issued by the
Internal Revenue Service, and any subsequent determination letter
applications.
(d) With respect to each Plan that is an employee benefit plan (as defined
in section 3(3) of ERISA), the requirements of ERISA applicable to such Plan
have been substantially satisfied.
(e) Each Plan that is intended to qualify under section 401(a) of the Code
substantially meets the requirements for qualification under section 401(a) of
the Code and the regulations thereunder, except to the extent that such
requirements may be satisfied by adopting retroactive amendments under section
401(b) of the Code and the regulations thereunder or any other provision of
applicable law. Each such Plan has been administered substantially in accordance
with its terms (or, if applicable, such terms as will be adopted pursuant to a
retroactive amendment under section 401(b) of the Code) and the applicable
provisions of ERISA and the Code and the regulations thereunder or any other
provision of applicable law.
(f) None of the Plans has any accumulated funding deficiency under section
412 of the Code. Neither the Company nor any ERISA Affiliate has any material
termination or withdrawal liability under Title IV of ERISA. For purposes of
determining any accumulated funding deficiency under section 412 of the Code,
the term "ERISA Affiliate" shall include any entity that is deemed to be a
member of the same "controlled group" within the meaning of section 414(m) or
(o) of the Code.
(g) All contributions, premiums or other payments due from the Company or
any Subsidiary to (or under) any Plan have been fully paid or adequately
provided for on the books and financial statements of the Company in accordance
with GAAP applied consistently with the Company Financial Statements.
Section 3.14 Proprietary Rights. Schedule 3.14 (a) identifies each
------------------ -------------
fictitious business name, patent, registered and unregistered trademark, service
mark or copyright registration (the "Intellectual Property") which has been
issued to any of the Company and its Subsidiaries, (b) identifies each pending
patent, trademark, service mark or copyright application or application for
registration made by Company or its Subsidiaries, and (c) identifies each
license
-20-
<PAGE>
which any of the Company and its Subsidiaries has granted to any Person with
respect to its Intellectual Property. To the Company's knowledge, there is not
pending or threatened against the Company or any Subsidiary any claim by any
Person contesting the validity, enforceability, use or ownership of any of its
Intellectual Property. The Company and/or its Subsidiaries is the owner of all
right, title and interest in and to the Intellectual Property, free and clear of
all Liens and other adverse claims, and has the right to use without payment to
any other Person all of the Intellectual Property.
Section 3.15 Contracts.
---------
(a) Schedule 3.15(a) lists all written or oral contracts (except for usual
----------------
and ordinary contracts or purchase orders executed in the normal course of
business and which are not, individually or in the aggregate, material to the
Company), agreements or leases to which, as of the date hereof, the Company or
any Subsidiary is a party or is otherwise bound, of the type described below
(the "Contracts"):
(i) all agreements for the purchase by the Company of machinery,
equipment or other personal property other than those that are for amounts
not to exceed $100,000 and those as to which the Company's remaining
obligation as of the date hereof does not exceed $100,000;
(ii) all leases, pledges, conditional sale or title retention
agreements involving the payment of more than $100,000;
(iii) all agreements between the Company or a Subsidiary of the Company
and any Affiliate of the Company;
(iv) all agreements relating to the consignment or lease of personal
property (whether the Company or a Subsidiary is lessee, sublessee, lessor
or sublessor), other than such agreements that provide for payments of less
than $100,000;
(v) all agreements containing commitments of warranty, suretyship,
guarantee or indemnification (except for guarantees, warranties and
indemnities provided by the Company or any Subsidiary in the ordinary
course of business consistent with past practice and those having a
contract value in the aggregate of less than $100,000);
(vi) all mortgages, indentures, notes, bonds or loan agreements
relating to indebtedness incurred or provided by the Company or any of its
Subsidiaries;
(vii) all licensing agreements or other contracts with respect to
Intellectual Property, including without limitation agreements with current
or former employees, consultants or contractors regarding the appropriation
or the nondisclosure of any Intellectual Property;
(viii) all collective bargaining agreements and other contracts to or
with any labor union or other employee representative of a group of
employees;
(ix) all joint ventures, partnerships and other similar agreements
-21-
<PAGE>
(however named) involving a share of profits, losses, costs or liabilities
by the Company or any of its Subsidiaries with any other Person where the
investment by the Company or any of its Subsidiaries exceeds $100,000;
(x) all agreements containing covenants that in any way purport to
restrict the business activity of the Company or any of its Subsidiaries or
limit the freedom of the Company or any of its Subsidiaries to engage in
any line of business or to compete with any Person;
(xi) all material powers of attorney that are currently effective and
outstanding;
(xii) all agreements entered into other than in the ordinary course of
business consistent with past practice that contain or provide for an
express undertaking by the Company or any of its Subsidiaries to be
responsible for consequential damages and that are not covered by the
Contracts listed in Schedule 3.15(a) with respect to Contracts of the type
----------------
described in clauses (i) through (xi) above or clause (xiii) below;
(xiii) any agreement other than those covered by clauses (i) through
(xii) above which would reasonably be expected to involve payment or
receipt by the Company or any Subsidiary of more than $100,000 in the
aggregate in any calendar year; and
(xiv) all material amendments, supplements and modifications (whether
oral or written) in respect of any of the foregoing.
(b) None of the other parties to any such Contracts has given written
notice to the Company or a Subsidiary that it intends to renegotiate, terminate
or materially alter the provisions of such Contracts either as a result of
transactions contemplated hereby or otherwise, and neither the Company nor any
of the Subsidiaries have given notice to any other party to any such Contract
that it intends to renegotiate, terminate or materially alter the provisions of
any such Contract.
(c) Neither the Company nor any Subsidiary is in material default, nor has
either the Company or any Subsidiary given or received notice of, any default or
claimed, purported or alleged default, under any of the Contracts. Each of the
Company and its Subsidiaries is, and at all times has been, in full compliance
in all material respects with all applicable terms and requirements of each
Contract under which the Company or its Subsidiaries has or had any obligation
or liability or by which the Company and its Subsidiaries or any of the assets
owned or used by the Company or its Subsidiaries is or was bound. To the
knowledge of the Company, each other Person that has or had any obligation or
liability under any Contract under which the Company or its Subsidiaries has or
had any rights is, and at all times since January 1, 1997 has been, in
compliance in all material respects with all applicable terms and requirements
of such Contract. No event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with or result in a
material violation or breach of, or give the Company or its Subsidiaries or
other Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate or modify,
any Contract.
-22-
<PAGE>
(d) Correct and complete copies of all Contracts, including any material
amendments thereto, have been delivered or made available to Parent, Newco and
Newsub.
Section 3.16 Real Property.
-------------
(a) The Company has furnished to Parent and Newco such information, in
writing, concerning the real properties owned by the Company as Parent and Newco
have requested. Such information is true and complete in all material respects.
As to all such real properties purporting to be owned by the Company or a
Subsidiary, consisting of approximately 324,000 acres of timberlands located in
the states of Mississippi, Arkansas, Tennessee, Louisiana, Kentucky, Missouri
and Illinois, approximately 7,500 acres of farmland located in Mississippi and
Arkansas and two commercial real estate properties (the "Commercial Real
Estate"), all as further described in that certain letter agreement dated the
date hereof between Parent and the Company (the "Owned Real Property"), the
Company or a Subsidiary, as the case may be, has good and insurable title to all
the Owned Real Property owned by it. All of the Owned Real Property is owned by
the Company or a Subsidiary, as the case may be, free and clear of all Liens,
except (i) Liens for taxes not yet due and payable, (ii) statutory Liens for
carriers, warehousemen, mechanics, workmen and materialmen for liabilities and
obligations incurred in the ordinary course of business that are not yet
delinquent or are being contested in good faith, (iii) Liens in a cumulative
amount less than $100,000, and (iv) as disclosed in Schedule 3.16(a). All of the
----------------
Owned Real Property is free of defects, irregularities, encumbrances and other
imperfections of title (other than Liens, which are addressed in the preceding
sentence) (collectively, "Other Encumbrances"), except such Other Encumbrances
that do not materially impair (i) the value of the Owned Real Property (taken as
a whole); (ii) the present use of any material portion of the Owned Real
Property, or (iii) the transferability or marketability of any material portion
of the Owned Real Property. No third parties have any rights of first refusal,
rights of first offer or other rights to purchase any of the Owned Real
Property.
(b) Except as set forth in Schedule 3.16(b) and to the Company's knowledge
----------------
with respect to the Commercial Real Estate, there are no (i) presently effective
material leases, lease amendments, lease guaranties, work letter agreements,
improvement agreements, subleases, assignments, licenses, concessions or other
agreements with respect to the leasing, use or occupancy of the Owned Real
Property or any part thereof or (ii) Persons leasing, using or occupying the
Owned Real Property or any part thereof except the Company or its Subsidiaries.
(c) To the knowledge of the Company, Schedule 3.16(c) is an accurate and
----------------
complete list of all tangible and intangible personal property owned by the
Company and its Subsidiaries relating to the ownership, construction,
management, operation, maintenance or repair of the Owned Real Property (other
than the Commercial Real Estate), and all such tangible personal property is
located at such Owned Real Property. The Company or its Subsidiaries has good
title to all such personal property, free and clear of all Liens.
(d) To the knowledge of the Company, Schedule 3.16(d) is an accurate and
----------------
complete list of all presently effective building permits, certificates of
occupancy, and other necessary certificates, permits, licenses and approvals
possessed by the Company relating to the design, construction, ownership,
occupancy, use, management, operation, maintenance or repair of the Owned Real
Property (other than the Commercial Real Estate).
-23-
<PAGE>
(e) To the knowledge of the Company, (i) the Owned Real Property and every
part thereof and (as of the Closing Date) the use and occupancy of the Owned
Real Property are in full compliance with all applicable building, earthquake,
zoning, land use, environmental, antipollution, health, fire, safety, access and
accommodations for the physically handicapped, subdivision, energy and resource
conservation or similar laws, statutes, rules, regulations and ordinances and
all covenants, conditions and restrictions applicable to the Owned Real Property
(except where non-compliance would not have a Material Adverse Effect on the
Company or any of its Subsidiaries), and (ii) the Company has received no
notice, citation or other claim written or, to the knowledge of the Company,
threatened, alleging any violation of any such law, statute, rule, regulation,
ordinance, covenant, condition or restriction.
(f) Schedule 3.16(f) lists all leases of real property pursuant to which
----------------
the Company or any Subsidiary is obligated to make rental payments in excess of
$100,000 per annum under the applicable lease (the "Leased Real Property"),
setting forth the address, landlord and tenant for each parcel of Leased Real
Property. All of the Leased Real Property is held by the Company or a
Subsidiary thereof pursuant to valid and binding leases therefor that are in
full force and effect and enforceable by the Company or Subsidiary thereof that
is party thereto in accordance with their respective terms, except where any
lack of enforceability, individually or in the aggregate, would not have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
The Company has previously provided or made available to Parent and Newco
complete and correct copies of all written leases of Leased Real Property.
Except as set forth in Schedule 3.16(f), neither the Company nor any Subsidiary
----------------
has received any written notice of default or event of default under any lease
of Leased Real Property.
(g) The Owned Real Property and the Leased Real Property constitute all of
the real property owned, leased or otherwise utilized in connection with and
material to the business of the Company and its Subsidiaries (the "Real
Property").
Section 3.17 Equipment. Schedule 3.17 lists all machinery and equipment
--------- -------------
owned by the Company or any Subsidiary and material to the business or
operations thereof. Except as set forth in Schedule 3.17, the machinery and
-------------
equipment material to the business or operations of the Company or the
Subsidiaries are in normal operating condition, ordinary wear and tear and
obsolescence excepted, free from any known defects except such minor defects as
do not substantially interfere with the continued use thereof in the conduct of
normal operations. Except as set forth in Schedule 3.17, the Company and its
-------------
Subsidiaries, together, have good and marketable title to all such personal
property, free and clear of all Liens, except Liens for current taxes,
assessments and other governmental charges not yet due and payable or being
contested in good faith by the Company or a Subsidiary in appropriate
proceedings, Liens of carriers, warehousemen, mechanics, laborers and
materialmen incurred in the ordinary course of business for sums not yet due,
and such Liens, if any, as in the aggregate, are not substantial in character,
extent or amount and do not materially interfere with the use of such property
or otherwise materially impair business operations.
-24-
<PAGE>
Section 3.18 Insurance.
---------
(a) The Company has delivered or made available to Parent:
(i) true and complete copies of all policies of insurance to which
the Company or any of its Subsidiaries is a party or under which the
Company or any of its Subsidiaries, or any director of the Company or any
of its Subsidiaries, is or has been covered at any time within the two
years preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for policies
of insurance;
(iii) any statement by the auditor of the Company or of its
Subsidiaries' financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims;
(iv) true and complete copies of any self-insurance arrangement by or
affecting the Company or any of its Subsidiaries, including descriptions of
any reserves established thereunder;
(v) true and complete copies of any contract or arrangement, other
than a policy of insurance, for the transfer or sharing of any risk by the
Company or any of its Subsidiaries;
(vi) true and complete copies of all contracts of the Company and its
Subsidiaries with any Person with respect to insurance (including leases
and service agreements);
(vii) a summary of the loss experience under each insurance policy;
(viii) a statement describing each claim under an insurance policy for
an amount in excess of $100,000, which sets forth:
(A) the name of the claimant;
(B) description of the policy by insurer, type of insurance, and
period of coverage; and
(C) the amount and a brief description of the claim; and
(ix) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(b) Except as set forth on Schedule 3.18(b):
----------------
(i) All policies to which the Company or any of its Subsidiaries is a
party or that provide coverage to either the Company or any of its
Subsidiaries, or any
-25-
<PAGE>
director or officer of the Company or any of its Subsidiaries:
(A) are valid, outstanding and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for the
assets and the operations of the Company and its Subsidiaries;
(D) will not terminate or be subject to termination as a result
of the Merger; and
(E) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company or any of
its Subsidiaries.
(ii) The Company has not received (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any insurance
policy is no longer in full force or effect or will not be renewed or that
the issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Company and its Subsidiaries have paid all premiums due,
and have otherwise performed all of their respective obligations, under
each policy to which the Company or any of its Subsidiaries is a party or
that provides coverage to the Company or any of its Subsidiaries or a
director or officer thereof.
(iv) The Company and its Subsidiaries have given notice to the
insurer of all claims that may be insured thereby.
Section 3.19 Transactions With Affiliates. Except as set forth on
----------------------------
Schedule 3.19, none of the Company's shareholders, directors, officers or
- -------------
employees nor any Person in which any such shareholder, director, officer or
employee owns five percent or more of the equity interest nor any of their
respective Affiliates is or, since August 1, 1995, was, involved in any business
arrangement or relationship with the Company or the Subsidiaries (whether
written or oral), and none of the Company's shareholders, directors, officers or
employees nor any of their respective Affiliates owns any property or right,
tangible or intangible, which is necessary to the business of the Company or the
Subsidiaries.
Section 3.20 Absence of Certain Changes and Events. Except as set forth
-------------------------------------
in Schedule 3.20 and except for the Company Reorganization and any changes
-------------
required in order for the Company to obtain and preserve its status as a REIT,
since the date of the Most Recent Balance Sheet, the Company and its
Subsidiaries have conducted their businesses in the ordinary course of business
consistent with past practice, and there is not and has not been: (a) any
Material Adverse Change to the Company or its Subsidiaries taken as a whole, (b)
any distribution or dividend made by the Company or its Subsidiaries, except for
distributions or dividends required to be made by the Company to obtain and
preserve its status as a REIT, (c) any material
-26-
<PAGE>
repurchase of equity securities by the Company or any of its Subsidiaries, (d)
any payment or increase by the Company or its Subsidiaries of any salaries or
other compensation to any shareholder, director, officer or (except in the
ordinary course of business consistent with past practice) employee or entry
into any employment, severance, or similar contract with any director, officer
or employee other than in the ordinary course of business consistent with past
practices, (e) any adoption of, increase in the payments to or benefits under,
any profit sharing, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of the
Company or its Subsidiaries other than in the ordinary course of business
consistent with past practices, (f) any condition, event or occurrence which
could reasonably be expected to prevent or materially delay the Company's
consummating the transactions contemplated by this Agreement or (g) any material
change in accounting methods, principles or practice of the Company or its
Subsidiaries.
Section 3.21 Brokers. With the exception of Goldman, Sachs & Co. and SSM
-------
Corporation (whose respective fees and expenses will be paid by Company pursuant
to agreements previously furnished to Parent), no Person is or will be entitled
to a broker's, finder's, investment banker's, financial adviser's or similar fee
from the Company or its Subsidiaries in connection with this Agreement or any of
the transactions contemplated hereby.
Section 3.22 Disclosure. No representation or warranty of the Company in
----------
this Agreement and no statement in the Schedules hereto omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstance in which they were made, not misleading.
Section 3.23 Opinion of Company's Financial Adviser. The Company has
--------------------------------------
received the opinion of Goldman, Sachs & Co., to the effect that the aggregate
consideration received pursuant to the Merger Agreement and the Asset Purchase
Agreeement, considered as a unitary transaction, is fair consideration from a
financial point of view for the Company, its Subsidiaries, the Partnership and
LLC.
Section 3.24 Company Board Recommendation. The board of directors of the
----------------------------
Company has, by unanimous vote of those directors present at a meeting duly
called and held at which a quorum was present, (a) determined that this
Agreement and the transactions contemplated hereby are in the best interests of
the shareholders of the Company, (b) adopted and approved this Agreement and the
transactions contemplated hereby and (c) recommended that the shareholders of
the Company approve this Agreement and the transactions contemplated hereby.
Section 3.25 Company Shareholder Approval. The Company Shareholder
----------------------------
Approval consists of an affirmative vote of holders of two-thirds of the issued
and outstanding Common Stock and is the only vote of holders of any class or
series of the Company's securities necessary to approve the Company's actions
taken or to be taken in connection with this Agreement, the Merger and the other
transactions contemplated hereby.
Section 3.26 Takeover Statutes. The Board of Directors of the Company has
-----------------
taken or will take all appropriate and necessary actions such that the
Mississippi Shareholder Protection Act, Miss. Code Ann. (S) 79-25-3 et seq., and
the Mississippi Control Share Act, Miss. Code Ann. (S) 79-27-3 et seq., will not
have any effect on the Merger or the other transactions contemplated
-27-
<PAGE>
by this Agreement. Except to the extent that the Timberlands Act may be
applicable, no other "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation is, as of the date hereof,
applicable to the Merger or the other transactions contemplated by this
Agreement.
Section 3.27 Information Supplied. The information concerning the Company
--------------------
supplied by the Company to Newco and used in the Registration Statement in the
form attached hereto as Exhibit A does not contain (and any information
---------
hereafter provided by the Company to Newco for inclusion in the Registration
Statement or any amendment to the Registration Statement (or any preliminary
prospectus filed with the SEC pursuant to Rule 424(a) under the Securities Act
with respect to the proposed IPO as of the date of its filing with the SEC) will
not contain) any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and the information concerning the Company supplied by the
Company to Newco and contained in the Registration Statement at the time that it
becomes effective under the Securities Act or in any amendment to such effective
Registration Statement as of its applicable effective date or deemed to be
contained in any such Registration Statement pursuant to Rule 430A or Rule 434
under the Securities Act, will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
Section 3.28 Timber Assets. The Company has furnished to Parent
-------------
information concerning quantities of merchantable wood fiber into which, to the
actual knowledge of the Company, standing timber owned by the Company is capable
of conversion.
Section 3.29 Commercial Real Estate. To the knowledge of the Company, the
----------------------
Company is not subject to or reasonably likely to incur any liability or
obligation by virtue of its partnership interest in BTE Partners, a Tennessee
general partnership, other than those liabilities or obligations which would not
have a Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole.
Section 3.30 Definition of Company Knowledge. As used in this Agreement,
-------------------------------
the phrase "to the knowledge of the Company" (or words of similar import) means
the actual knowledge of the President, the Chief Financial Officer, the General
Counsel and the Vice President of Strategic Planning of the Company.
Section 3.31 Disclaimer of Other Representations and Warranties. Except
--------------------------------------------------
as expressly set forth in this Article III, the Company makes no representation
or warranty, express or implied, at law or in equity, in respect of the Company,
its Subsidiaries, or any of their respective assets, liabilities or operations,
including, without limitation, with respect to merchantability or fitness for
any particular purpose, and any such other representations or warranties are
hereby expressly disclaimed.
-28-
<PAGE>
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
PARENT, NEWCO AND NEWSUB
------------------------
Parent, Newco and Newsub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Newco is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to own or lease its property
and assets and to carry on its business as presently conducted. Newsub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Mississippi and has the corporate power and authority to own or
lease its property and assets and to carry on its business as presently
conducted. Other than Newsub, Newco has no Subsidiaries.
Section 4.2 Authorization. Each of Parent, Newco and Newsub has the
-------------
corporate power and authority to execute and deliver this Agreement and each
other agreement or instrument to be executed in connection herewith and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of each of Parent, Newco or
Newsub and by the sole stockholder or shareholder of each of Newco and Newsub,
and no other corporate proceedings on the part of Parent, Newco or Newsub are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement and each other agreement or instrument to be executed in
connection herewith have been duly authorized, executed and delivered by each of
Parent, Newco and Newsub and constitute a valid and binding agreement of each of
Parent, Newco and Newsub, enforceable against each of Parent, Newco and Newsub
in accordance with its terms, except as such may be subject to or limited by
bankruptcy, insolvency, reorganization or other laws relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 4.3 Noncontravention. The execution, delivery and performance by
----------------
each of Parent, Newco and Newsub of this Agreement and the Articles of Merger
and the consummation of the Merger and each of the other transactions
contemplated hereby will not (a) contravene any provision contained in the
certificate of incorporation or bylaws of Parent, Newco or Newsub, (b) conflict
with, violate or result in a material breach (with or without the lapse of time,
the giving of notice or both) under (i) any material contract, agreement,
commitment, indenture, mortgage, lease, pledge, note, bond, license, permit or
other instrument or obligation or (ii) any judgment, order, decree, statute,
law, rule or regulation or other restriction of any Governmental Authority, in
each case to which Parent, Newco or Newsub is a party or by which it is bound or
to which any of its assets or properties are subject, which in the case of
either clause (a) or (b) above, would have a Material Adverse Effect on Parent,
Newco and Newsub taken as a whole. Newco and Newsub have each previously
delivered to the Company true and complete copies of its certificate of
incorporation (and all amendments thereto) and bylaws (as currently in effect).
Section 4.4 No Consents. Except for (i) filing and recordation of
-----------
appropriate Merger
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<PAGE>
documents as required by the Mississippi BCA, (ii) filings under the HSR Act,
and (iii) filings and approvals that may be required to be made and obtained
under the Timberlands Act (subject to the provisions of Section 5.6(b)), no
notice to, filing with, or authorization, registration, consent or approval of
any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby by Parent, Newco or Newsub.
Section 4.5 Litigation. There are no actions, suits, proceedings, orders
----------
or investigations pending or threatened against or affecting Parent, Newco or
Newsub at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would reasonably be expected
materially adversely to affect Parent's, Newco's or Newsub's performance under
this Agreement or the consummation of the transactions contemplated hereby.
Section 4.6 Registration Statement. As promptly as practicable after the
----------------------
date hereof, Newco shall file with the United States Securities and Exchange
Commission ("SEC") a registration statement on Form S-11 substantially in the
form attached hereto as Exhibit A with such changes as may be deemed necessary
---------
or appropriate by Parent and Newco prior to the time of its initial filing (the
"Registration Statement"). The Registration Statement does not contain (and any
information hereafter included in any amendment to the Registration Statement
(or any preliminary prospectus filed with the SEC pursuant to Rule 424(a) under
the Securities Act with respect to the proposed IPO as of the date of its filing
with the SEC) will not contain) any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading and the Registration Statement at the time it becomes
effective under the Securities Act or any amendment to such effective
Registration Statement as of its applicable effective date or deemed to be
contained in any such Registration Statement pursuant to Rule 430A or Rule 434
under the Securities Act, will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Company acknowledges that
the foregoing representation and warranty assumes the accuracy of, and the
Company's compliance with, the representation and warranty set forth in Section
3.27.
ARTICLE V
---------
CERTAIN COVENANTS AND AGREEMENTS
--------------------------------
Section 5.1 Access and Information.
----------------------
(a) From and after the date hereof, the Company will, and the Company will
cause each of its Subsidiaries to, provide Parent, Newco and Newsub and their
respective agents and representatives with reasonable access during normal
business hours to such of its premises, properties, contracts, commitments,
books, records and other information of the Company and the Subsidiaries, upon
reasonable notice, as Parent, Newco and Newsub and their respective agents and
representatives shall reasonably request from time to time. No investigation
pursuant to this Section 5.1(a) shall be deemed to modify any representation or
warranty made by the Company hereunder. Each of Parent, Newco and Newsub agrees
to conduct and agrees to cause
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<PAGE>
its agents and representatives to conduct, any such inquiries with reasonable
discretion and sensitivity to the Company's relationships with its employees,
customers and suppliers. The foregoing notwithstanding, none of the Parent,
Newco or Newsub or their representatives or agents shall contact any employee,
customer or supplier of the Company or any of the Subsidiaries regarding the
Company or the Subsidiaries without the prior written consent of the Company.
(b) In furtherance and not in limitation of the covenants set forth in
Section 5.1(a), the Company agrees to provide to Parent and Newco: (i) as soon
as practicable after each fiscal quarter (beginning with the fiscal quarter
ended December 31, 1997) and in any event within 45 days thereafter, a
consolidated balance sheet of the Company and its consolidated subsidiaries as
at the end of such quarter and a consolidated statement of income and cash flows
of the Company and its consolidated subsidiaries, prepared in accordance with
GAAP applied in a manner consistent with the Company Financial Statements and
certified by the principal financial or accounting officer of the Company,
together with a comparison of such statements to the Company's operating plan
then in effect and approved by the Company's Board of Directors and (ii) as soon
as practicable after the end of each month (beginning with January 1998) and in
any event within 45 days thereafter, a consolidated balance sheet of the Company
and its consolidated subsidiaries as at the end of such month and a consolidated
statement of income of the Company and its consolidated subsidiaries for such
month, prepared in accordance with GAAP (subject to the absence of notes)
applied in a manner consistent with the Company Financial Statements and
certified by the principal financial or accounting officer of the Company.
(c) The Company, Parent, Newco and Newsub each agrees not to disclose or
permit the disclosure for any purpose other than the transactions contemplated
hereby of any non-public, confidential or proprietary information furnished to
such party by another party hereto in connection with the transactions
contemplated by this Agreement, provided that such disclosure may be made (a) to
any Person who is an officer, director or employee of such party, or to counsel,
accountants and financial advisers to such party solely for their use in
evaluating the transactions contemplated by this Agreement, (b) with the prior
written consent of all parties to this Agreement, (c) pursuant to a subpoena or
order issued by a court, arbitrator or Governmental Authority or (d) if Newco
deems it necessary or appropriate in the Registration Statement or otherwise in
connection with the proposed IPO.
Section 5.2 Conduct of Business by the Company. From the date hereof to
----------------------------------
the Effective Time, the Company will and will cause each of its Subsidiaries to,
except as otherwise expressly provided herein, or consented to in writing by
Parent (which consent shall not be unreasonably withheld or delayed):
(a) conduct its business only in the ordinary and regular course and
consistent with past practice, except as may be required to obtain and preserve
the Company's status as a real estate investment trust ("REIT");
(b) use commercially reasonable efforts to keep in full force and effect
its corporate existence and all material rights, franchises and goodwill
relating to its business;
(c) use commercially reasonable efforts to preserve its present
relationships with
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<PAGE>
customers, suppliers, contractors, distributors, employees and business
associates; provided, however, that nothing in this paragraph (c) shall require
-------- -------
the Company to take any action which would cause the Company to be unable to
qualify as a REIT;
(d) perform in all material respects all of its obligations under all
notes, bonds, mortgages, indentures, licenses, contracts, agreements or other
instruments or obligations to which it is a party or by which it or any of its
properties or assets may be bound and not enter into, assume or amend any of the
foregoing other than in the ordinary course of business;
(e) promptly inform Parent, Newco and Newsub in writing of any material
breach of or change in the representations and warranties contained in Article
III hereof;
(f) not pay or authorize any dividend or other distribution with respect to
its capital stock, other than (i) cash dividends actually paid prior to the
Closing Date, (ii) distributions in respect of any Subsidiary's capital stock
payable entirely to the Company or a wholly-owned subsidiary of the Company and
(iii) the distribution by the Company of its entire interest in Anderson-Tully
GP Company (which distribution and the appointment of a successor general
partner of the Partnership (which successor will be a Person other than the
Company or any of its Subsidiaries) the Company agrees shall have occurred prior
to the Closing Date);
(g) not amend the Organizational Documents except as provided in Schedule
--------
5.2(g);
- ------
(h) not split, combine, subdivide or reclassify its outstanding shares of
capital stock;
(i) not repurchase, redeem or otherwise acquire any shares of its capital
stock;
(j) not terminate, establish, adopt, enter into or amend any Plans except
as required by law or pursuant to the terms of a collective bargaining
agreement;
(k) not increase the salary, wage or other compensation of any directors,
officers or employees, other than in the ordinary course of business in
accordance with past practices;
(l) not issue, sell, pledge or otherwise encumber any shares of its capital
stock or any rights, warrants or options to acquire any such shares;
(m) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any Person or division thereof;
(n) except as permitted by paragraph (v) below, not sell, lease, license,
mortgage or otherwise encumber or subject to any material Lien or otherwise
dispose of any of its properties or assets except in the ordinary course of
business consistent with past practice or in transactions involving
consideration not exceeding $100,000 in any on case or $250,000 in the
aggregate;
(o) not (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any of its debt securities or
warrants or other rights to acquire any such debt securities, guarantee any debt
securities of another Person or agree to maintain the financial condition of any
Person, except for borrowings of up to $50 million under
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<PAGE>
its revolving credit facilities incurred in the ordinary course of business
consistent with past practice or as may be required to make a distribution to
preserve the Company's status as a REIT or (ii) make any loans, advances or
capital contributions to, or investments in, any other Person;
(p) not adopt a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or reorganization;
(q) not change any material accounting method, principle or practice;
(r) not make any material tax election (other than electing to change its
tax year to a calendar year, making the election provided in Notice 88-19, and
making any other election required to obtain or preserve its status as a REIT)
or settle or compromise any material Federal, state, local or foreign income tax
liability, except in the ordinary course of business and consistent with past
practice;
(s) not enter into any contract that is not terminable by it without
penalty upon six months' notice, or that obligates it to make annual
expenditures in excess of $100,000 or terminate or modify in any material
respect any contract to which it is a party or waive, release or assign any
material rights or claims;
(t) except in the ordinary course of business consistent with past
practice, not sell, assign, transfer, license or permit to lapse any material
rights with respect to its Intellectual Property rights;
(u) not enter into, or otherwise engage in, any transaction referred to in
Section 3.19;
(v) not sell or cause to be harvested standing timber at a rate that would
cause its annualized sales for the period January 1, 1998 to the Closing Date to
exceed 110,000 MBF of sawtimber or 780,000 tons of pulpwood (such annualized
amount to be calculated assuming the average sales and harvest rate per day
through the Closing Date continues through December 31, 1998);
(w) continue its various silvicultural practices consistent with its past
practices;
(x) not enter into any contract, or take any action, that would reasonably
be expected to jeopardize the current or future status of the Company as a REIT
(without regard to the transactions contemplated hereby);
(y) maintain in good repair in accordance with its past practice and good
and prudent practice all of the material personal property assets used in its
business (other than those personal property assets associated with the
Commercial Real Estate), and replace, in accordance with past practice and
prudent practice, any of such assets that may be damaged or destroyed;
(z) as soon as reasonably practicable after the date hereof, but in all
events prior to the Closing Date, transfer and assign to Logging all right,
title and interest in U.S. Trademark Reg. No. 620,654; provided, however, that
-------- -------
nothing in this paragraph (z) shall require the Company to make such transfer if
the Board of Directors of the Company reasonably determines that such transfer
would result in the Company's inability to qualify or remain qualified as a
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<PAGE>
REIT;
(aa) not take or omit to be taken any action which would have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole; and
(bb) not commit or agree to take any action inconsistent with the
foregoing;
provided, however, that nothing in this Agreement shall prohibit the Company or
- -------- -------
any of its Subsidiaries from taking any action required to obtain or preserve
the Company's status as a REIT or to consummate or make effective the
transactions contemplated by the Company Reorganization.
Section 5.3 Shareholders' Approval.
----------------------
(a) The Company shall take all action necessary in accordance with
applicable law and its articles of incorporation and bylaws to convene a meeting
of its shareholders within forty-five days after the date hereof or as soon
thereafter as is practicable for the purpose of voting upon this Agreement and
the transactions contemplated hereby (the "Shareholders' Meeting"). The Board
of Directors of the Company (i) has recommended approval of this Agreement and
the transactions contemplated hereby to the shareholders of the Company, (ii)
shall include, and shall not withdraw or modify, such recommendation in the
notice of meeting with respect to the Shareholders' Meeting and in any proxy
statement published in connection with the Shareholders' Meeting unless the
board of directors of the Company reasonably determines after consultation with
outside legal counsel that it is necessary to omit, withdraw or modify any such
recommendation to comply with its fiduciary duties under applicable law, (iii)
shall submit for approval of its shareholders the matters to be voted upon at
the Shareholders' Meeting, (iv) shall use its reasonable best efforts
(including, without limitation, soliciting proxies for such approvals), to the
extent permitted by applicable law, to obtain Company Shareholder Approval, (v)
shall not take any action to nullify its resolution adopting and approving this
Agreement and the transactions contemplated hereby and their submission to the
Company shareholders. In connection with the Shareholders' Meeting, Parent shall
furnish all information concerning Parent, Newco and Newsub as the Company may
reasonably request in connection with any materials to be prepared and
distributed to shareholders of the Company.
(b) The Company agrees that any proxy statement (and any amendment or
supplement thereto) used in connection with the solicitation of proxies for
approval of this Agreement at the Shareholders' Meeting, at the date of mailing
to the shareholders of the Company and at the time of the Shareholders' Meeting,
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 5.4 Commercial Efforts; Further Assurances.
--------------------------------------
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use its commercially 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 and regulations to
consummate and make effective the transactions contemplated by this
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Agreement, including using its commercially reasonable efforts to obtain
consents of all Governmental Authorities and third parties necessary to the
consummation of the transactions contemplated by this Agreement; provided,
--------
however, that neither this Section 5.4(a) nor any other provision of this
- -------
Agreement (including, without limitation, Sections 5.6(a) and (b)) shall
require, or be construed to require, Parent, Newco or the Company to proffer to,
or agree to, any concession to any Governmental Authority that Parent concludes
is reasonably likely materially to reduce the economic or business benefits
Parent expects, as of the date hereof, to realize from the Merger. Subject to
applicable laws relating to the exchange of information, Parent and the Company
shall have the right to review in advance, and to the extent practicable each
will consult the other on, all the information relating to Parent, Newco or the
Company, as the case may be, and any of their respective Subsidiaries, that
appear in any filing made with, or written materials submitted to, any third
party and/or any Governmental Authority in connection with the Merger and the
other transactions contemplated by this Agreement. In exercising the foregoing
right, each of the Company and Parent shall act reasonably and as promptly as
practicable.
(b) In the event any claim, action, suit, investigation or other proceeding
by any Governmental Authority or other Person is commenced which questions the
validity or legality of the Merger or any of the other transactions contemplated
hereby or seeks damages in connection therewith, the parties agree to cooperate
and use commercially reasonable efforts to defend against such claim, action,
suit, investigation or other proceeding and, if an injunction or other order is
issued in any such action, suit or other proceeding, to use commercially
reasonable efforts to have such injunction or other order lifted, and to
cooperate reasonably regarding any other impediment to the consummation of the
transactions contemplated hereby.
(c) (i) Each of the Company and Parent agrees that it shall, as soon as
reasonably practicable after it learns of the existence of any facts or
circumstances causing any of the representations and warranties herein made,
respectively, by the Company or by Parent, Newco or Newsub (including, without
limitation, those contained in Article III or Article IV), to have been
incorrect when made or to have thereafter become incorrect (whether through its
discovery of an inadvertent, good faith error at the time this Agreement was
signed or the happening thereafter of any event or occurrence or otherwise),
deliver to the other written notice of such incorrect representations and
warranties; and (ii) each party shall give prompt written notice to the others
of any failure of the Company, Parent, Newco or Newsub, as the case may be, to
comply with or satisfy any material covenant, condition or agreement to be
complied with or satisfied by it under the Merger Documents.
(d) The Company acknowledges that it is Newco's intention to cause the
Contribution to occur immediately after the Effective Time. The Company and
Newco each agree to use their respective commercially reasonable efforts to
satisfy the conditions set forth in Section 6.2(f).
Section 5.5 Public Announcements. The timing and content of all
--------------------
announcements regarding any aspect of this Agreement or the Merger (including,
without limitation, the disclosure of financial information with respect to the
Company) to the financial community, any Governmental Authority, employees or
the general public shall be mutually agreed upon in advance by the Company and
Parent; provided, that each party hereto may make any such announcement which it
in good faith believes, based on advice of counsel, is necessary or advisable in
connection with any requirement of law or regulation, it being understood and
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<PAGE>
agreed that each party shall promptly provide the other parties hereto with
copies of any such announcement prior thereto; and provided further, that each
party acknowledges the disclosures that are required to be made in the
Registration Statement.
Section 5.6 Hart-Scott-Rodino and Timberlands Act.
-------------------------------------
(a) Each of Parent, Newco, Newsub and Company will use their respective
commercially reasonable efforts to file with the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") promptly following the date hereof the notification and
report form (the "Report") required under the HSR Act, with respect to the
transactions contemplated hereby. Each of Parent, Newco, Newsub and the Company
shall cooperate with each other to the extent necessary to assist each other in
the preparation of its Report, shall request early termination of the waiting
period required by the HSR Act and, if requested, will promptly amend or furnish
additional information thereunder requested by the Antitrust Division and/or the
FTC. The filing fee under the HSR Act shall be paid by Parent. The Company
also agrees to take the actions described in this Section 5.6(a) to the extent
required to permit the Non-Parent Parties to comply with their respective
obligations under Section 5.2(f) of the Asset Purchase Agreement.
(b) As promptly as practicable after the date hereof, the Company shall use
its reasonable best efforts to cause its Common Stock to be registered under
Section 12(g) of the Exchange Act and thereby cause the Timberlands Act to be
inapplicable to the transactions contemplated hereby by virtue of Section 49-20-
9 thereof. In the event that the Company is unable to register its Common Stock
under the Exchange Act or, despite its reasonable best efforts, is otherwise
unable to cause the Timberlands Act to be inapplicable to the transactions
contemplated hereby, then Parent, Newco, Newsub and the Company shall use their
commercially reasonable efforts to make all appropriate filings under the
Timberlands Act with respect to the transactions contemplated hereby, cooperate
with each other in such filings and in the prosecution of an order of approval
by the Mississippi Secretary of State, and furnish such additional information
and take such additional actions as shall be requested by the Mississippi
Secretary of State. The applicable fees under the Timberlands Act shall be paid
by Parent.
Section 5.7 Employee Benefits. As of the Effective Time, Newco shall
-----------------
cause the REIT Partnership to offer employment to those employees of the Company
identified on a schedule to be delivered by Newco to the Company at least thirty
days prior to Closing at the same salaries as those in effect immediately prior
to the Effective Time. At any time after the Effective Time, Newco, in its sole
discretion, may cause the REIT Partnership to extend to the former employees of
the Company and its Subsidiaries who become employees of the REIT Partnership
(each, a "Hired Employee," and collectively, the "Hired Employees"), the
employee benefit plans and programs, including tax-qualified defined benefit and
defined contribution plans, applicable to similarly situated employees of the
REIT Partnership. Until that time, Newco shall cause the REIT Partnership to
maintain employee benefit plans and programs for the former employees of the
Company and its Subsidiaries with terms no less favorable to such employees than
the Plans in place as of the Effective Time for such employees and shall
continue to make all contributions to such plans for such period on a basis
consistent with the Company's past practices. Newco shall cause the Hired
Employees to be given credit for all purposes under all of the REIT
Partnership's pension, welfare and fringe benefit plans, including for purposes
of determining vacation and severance pay, for the period during which such
employee was
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<PAGE>
employed by the Company, its Subsidiaries or any ERISA Affiliate; provided,
--------
however, that in no event will the REIT Partnership be required to credit
- -------
service to a Hired Employee to the extent that such credit would result in a
duplication of benefits. Newco shall cause Hired Employees to be entitled to
participate in the welfare plans maintained by the REIT Partnership effective
upon the Effective Time without any waiting periods, any evidence of
insurability or the application of any preexisting condition restrictions, and
counting claims incurred prior to the Effective Time for purposes of applying
co-payments, deductibles, out-of-pocket maximums and other such matters.
Notwithstanding any other provisions of this Agreement to the contrary, in no
event may any defined benefit plan or other funded employee benefit plan that is
maintained by the Company, its Subsidiaries or any ERISA Affiliate thereof, be
terminated or otherwise amended in any manner that would result in a recognition
of income by Newco attributable to such plan. Effective as of the Effective
Time, Parent shall become the plan sponsor of all of the Plans and the Company
shall take all such actions, including without limitation the adoption of such
amendments to the Plans, as may be necessary to terminate the coverage and cease
benefit accruals effective as of the Effective Time of any individual who is not
a hired Employee or a Hired Employee under the Asset Purchase Agreement, the
Logging Subsidiary Asset Purchase Agreement, or the Sawmills Subsidiary Asset
Purchase Agreement and to provide any required notification to any affected
individual of the cessation of accrual of benefits under the Plan(s) effective
as of the Effective Time. The Company shall use its reasonable best efforts
before and after the Closing Date to cooperate with the REIT Partnership and
Parent to take all such actions and make such governmental filings as may be
necessary or desirable to give effect to the provisions of this Section 5.7 and
to assure an orderly transition to Parent of administrative responsibilities
with respect to the Plans.
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<PAGE>
Section 5.8 Initial Public Offering.
-----------------------
(a) As promptly as practicable after the date hereof, Newco shall use its
reasonable efforts to (i) file the Registration Statement with the SEC, (ii)
cause such Registration Statement (as it may be amended or supplemented in
response to comments received from the SEC staff or as otherwise deemed
necessary or appropriate by Parent and Newco) to be declared effective under the
Securities Act and (iii) effect the proposed underwritten initial public
offering of shares of its Common Stock substantially as contemplated by the
Registration Statement at the time that it becomes effective under the
Securities Act (including for this purpose the information deemed to be
contained in such Registration Statement pursuant to Rule 430A or Rule 434 under
the Securities Act and by any post-effective amendment thereto) and otherwise on
terms and conditions which are materially less favorable to Newco than customary
terms and conditions ("IPO"); provided, however, that Newco's obligation to take
-------- -------
the actions described in clauses (ii) and (iii) above shall be suspended during
any period when (x) in Parent's good faith judgment it is highly likely that any
of the conditions to Closing set forth in Sections 6.1 and 6.2 (other than
Section 6.2(d)) would not be satisfied at the time when, if Newco were to so
proceed, the closing of the proposed IPO would otherwise be expected to occur or
(y) after consultation with the firms designated as the managing underwriters of
the proposed IPO, the Board of Directors of Parent, or a duly constituted
committee thereof, determines in good faith that, based upon then current
conditions in the United States securities markets, factors related to the
proposed business of Newco and the REIT Partnership or other relevant factors,
it is reasonably likely that the proposed IPO will not meet the "IPO Criteria"
(as such term is defined in that certain letter agreement dated the date hereof
between Parent and the Company). Newco shall promptly notify the Company if its
obligations under this Section 5.8(a) shall have been suspended pursuant to the
proviso set forth in the preceding sentence. The Company shall use its
reasonable efforts to assist Newco in complying with its covenants in the first
sentence of this Section 5.8(a), by promptly providing such information
(including, without limitation, financial information) with respect to the
Company reasonably requested by Newco in connection with the Registration
Statement (as it may be amended and supplemented) or the proposed IPO and by
causing its counsel to deliver such opinions, its auditors to deliver such
"comfort" letters and its officers to deliver such certificates, in each case as
are customary in connection with underwritten public offerings such as the
proposed IPO.
(b) Newco agrees to provide to the Company copies of the Registration
Statement (including any amendments thereto) a reasonable time before filing.
Each of the Company and Newco agrees promptly to notify the other if at any time
any event shall have occurred as a result of which the preliminary or final
prospectus contained in the Registration Statement as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 5.9 Indemnification; Officers' and Directors' Insurance.
---------------------------------------------------
(a) From and after the Effective Time, Newco shall, or shall cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former officers and directors of the Company (each an "Indemnified
Officer/Director") against all losses, expenses, claims, damages, liabilities or
amounts that are paid in settlement of, or otherwise in connection with, any
claim, action, suit, proceeding or investigation (a "Claim"), based in whole or
in part
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<PAGE>
on the fact that such person is or was a director or officer of the Company and
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, in connection with the Merger and the other
transactions contemplated by this Agreement), in each case to the full extent
permitted under the Mississippi BCA and the Company's certificate of
incorporation and bylaws (to the extent permitted by applicable law) as in
effect on the date of this Agreement. Newco shall, or shall cause the Surviving
Corporation to, pay any expenses in advance of the final disposition of any such
Claim to each Indemnified Officer/Director to the fullest extent permitted under
the Mississippi BCA upon receipt from the Indemnified Officer/Director to whom
expenses are advanced of any undertaking to repay such advances required under
the Mississippi BCA. Newco shall, or shall cause the Surviving Corporation to,
cooperate in the defense of any such matter.
(b) Newco shall, or shall cause the Surviving Corporation to, keep in
effect provisions in its certificate of incorporation and bylaws providing for
exculpation of director liability and its indemnification of the Indemnified
Officers/Directors to the fullest extent permitted under the Mississippi BCA,
which provisions shall not be amended except as required by applicable law or
except to make changes permitted by law that would enlarge the right of
indemnification of the Indemnified Officers/Directors.
(c) Newco shall at its expense maintain or cause to be maintained in effect
for not less than five (5) years from the Effective Time the policies of
officers' and directors' liability insurance most recently maintained by the
Company (provided that Newco may substitute or cause to be substituted therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time; provided, however, that Newco shall not be obligated to make or cause to
-------- -------
be made annual premium payments for such insurance to the extent premiums exceed
200% of the annual premiums paid by Newco for such insurance during the year
following the IPO. Newco shall pay or cause to be paid all expenses (including
attorney's fees and expenses) that may be incurred by any Indemnified
Officer/Director in enforcing the indemnity and other obligations provided for
in this Section 5.9, provided, however, that Newco shall not be liable for any
-------- -------
settlement effected without its prior consent.
(d) In the event that Newco or any of its successors or assigns
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation thereof, then proper provision shall be made
so that the successors and assigns of Newco or of its successors or assigns, as
the case may be, shall assume its obligations set forth in this Section 5.9.
(e) The provisions of this Section 5.9 shall survive the consummation of
the Merger and expressly are intended to benefit each Indemnified
Officer/Director.
Section 5.10 Approval by Parent and Newco. Each of Parent and Newco, in
----------------------------
its capacity as the sole stockholder of Newsub, shall vote the shares of Newco
and Newsub to approve and adopt the Merger, this Agreement and the transactions
contemplated hereby, and Parent agrees to cause Newco and Newsub to comply with
their respective obligations hereunder during the period prior to the Effective
Time.
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<PAGE>
Section 5.11 No Solicitation.
---------------
(a) The Company agrees that neither it nor any of its Subsidiaries shall,
and the Company shall not permit any of its or any Subsidiary's officers,
directors, agents, representatives or advisers to:
(i) solicit, initiate or knowingly encourage the submission of any
proposal or offer from any Person relating to any (A) acquisition of a
substantial amount of assets of the Company or any of its Subsidiaries
(other than in the ordinary course of business) or any of the
outstanding capital stock of the Company or (B) an offer to purchase
outstanding shares of capital stock of the Company or any of its
Subsidiaries, or (C) merger, consolidation, business combination, sale
of substantially all assets, recapitalization, liquidation or similar
transaction involving the Company or any of its Subsidiaries, other
than the transactions contemplated by this Agreement (each an
"Alternative Proposal"), or
(ii) enter into or participate in any discussions or negotiations regarding
any Alternative Proposal, or furnish to any other Person any non-
public information with respect to its business, properties or assets,
or otherwise cooperate with, or assist or participate in, any attempt
by any other Person to make any Alternative Proposal; provided,
however, that prior to the date of the Shareholders' Meeting the
provisions of this clause (ii) shall not prohibit the Company from
taking any of the actions described in such clause in connection with
an unsolicited bona fide written Alternative Proposal to the Company
or its shareholders, if and only to the extent that (A) the board of
directors of the Company reasonably determines (1) after consultation
with outside legal counsel, that the taking of such action is
necessary for such board of directors to comply with its fiduciary
duties to shareholders under applicable law and (2) after consultation
with its financial adviser, that such Alternative Proposal is
reasonably capable of being completed taking into account all legal,
financial, regulatory and other aspects of the proposal and the Person
making the proposal, and would, if consummated, result in a
transaction which is more favorable, from a financial point of view,
to the Company's shareholders than the transactions contemplated by
this Agreement, and (B) prior to taking such actions, the board of
directors of the Company receives from such Person an executed
confidentiality agreement in customary form. Nothing in this Agreement
shall prevent the Company or its board of directors from making any
public disclosure that, in the opinion of the Company's outside
counsel, is required by applicable law; provided, however, that prior
to making any such public disclosure the Company shall inform Parent
that it intends to make such disclosure, consult the Parent regarding
the necessity for such disclosure and provide to Parent a copy of any
written opinion of outside counsel.
(b) The Company shall notify Parent promptly (and in any event no later
than 24 hours) (i) after any action is taken that would be proscribed by Section
5.11(a)(ii) but for the
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<PAGE>
proviso thereof or (ii) after receipt by the Company of any Alternative
Proposal. Such notification shall include the terms of any Alternative Proposal
and the name of such Person making any such Alternative Proposal. Thereafter,
the Company shall keep Parent informed on a current basis with respect to the
status and terms of any such Alternative Proposal and the status of any
discussions or negotiations with respect thereto.
Section 5.12. Restructuring Agreements. The Company agrees to cooperate
------------------------
with Parent in the preparation and execution of any agreement reasonably
requested by Parent to which the Company or any of its Subsidiaries would be a
party with respect to the operations of the Company after the Effective Time
(including without limitation any agreement providing for the termination or
modification of any existing agreement at the Effective Time); provided however,
that no such agreement shall impose any obligation whatsoever on, or amend any
agreement of, the Company or any of its Subsidiaries prior to the Effective
Time. Any expenses incurred by the Company in connection with this Section 5.12
shall be paid by Parent prior to the Closing and shall not result in any
adjustment to the Base Merger Price.
ARTICLE VI
----------
CLOSING; CONDITIONS TO CLOSING
------------------------------
Section 6.1 Closing; Conditions to the Obligations of All Parties. The
-----------------------------------------------------
Closing of the Merger shall take place simultaneously with the closing of the
IPO and immediately after the closing under the Asset Purchase Agreement, after
satisfaction or waiver of the conditions to Closing set forth in this Agreement.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver at
or prior to the Effective Time of each of the following conditions:
(a) Approval. This Agreement and the transactions contemplated hereby
--------
shall have been approved and adopted by the requisite vote of the shareholders
of the Company.
(b) Change in Law. No statute, rule or regulation shall have been enacted
-------------
or issued by any Governmental Authority that makes the consummation of the
Merger or the transactions contemplated by this Agreement or the Contribution
illegal.
(c) Injunction. At the Effective Time there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any nature
issued and outstanding by a court or Governmental Authority of competent
jurisdiction to the effect that the Merger or the transactions contemplated by
this Agreement or the Contribution may not be consummated and no proceeding or
lawsuit shall have been commenced by any Governmental Authority for the purpose
of obtaining such injunction, writ or preliminary restraining order.
(d) HSR Act. The waiting period (and each extension thereof, if any)
-------
applicable to the Merger under the HSR Act shall have terminated or expired.
(e) Timberlands Act. The Timberlands Act shall be inapplicable to the
---------------
transactions contemplated hereby (by virtue of the registration of the Common
Stock under Section 12(g) of the Exchange Act or otherwise), or a decision
approving Newco's acquisition of Common Stock
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<PAGE>
hereunder by the Secretary of State of Mississippi (or, if applicable, the
reviewing court referred to in Section 49-20-33 of the Timberlands Act) shall
have become final and nonappealable.
Section 6.2 Conditions to the Obligations of Parent, Newco and Newsub.
---------------------------------------------------------
The obligations of Parent, Newco and Newsub to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver
prior to or at the Effective Time of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
------------------------------
made by the Company in this Agreement and the Schedules hereto that are
qualified by materiality shall be true, correct and complete as of the Closing
Date as though such representations and warranties were made as of the Closing
Date (or on the date when made in the case of any representation or warranty
which specifically relates to an earlier date) and all representations and
warranties made by the Company in this Agreement and the Schedules hereto that
are not so qualified shall be true, correct and complete in all material
respects as of the Closing Date as though such representations and warranties
were made as of the Closing Date (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date).
Parent shall have received a certificate, dated the Closing Date, to such
effect, signed on behalf of the Company by its Chief Executive Officer.
(b) Performance by the Company. The Company shall have duly performed or
--------------------------
complied with, in all material respects, all of the covenants and obligations to
be performed or complied with by it under the terms of this Agreement on or
prior to or at the Closing Date. Parent shall have received a certificate,
dated the Closing Date, to such effect, signed on behalf of the Company by its
Chief Executive Officer.
(c) Consents. Newco shall have received evidence reasonably satisfactory
--------
to it that the Company has received the Company Required Consents.
(d) IPO. Newco shall have consummated the IPO (whether or not the IPO
---
satisfied the IPO Criteria).
(e) Legal Opinions. Newco shall have received the opinion of Skadden,
--------------
Arps, Slate, Meagher & Flom LLP, dated the Closing Date, in the form attached
hereto as Exhibit B-1 and from counsel reasonably satisfactory to Newco legal
opinions in form reasonably satisfactory to Newco covering the matters set forth
on Exhibit B-2.
(f) Contribution. Newco shall have obtained the consent or approval of
------------
each Person whose consent or approval shall be required in order to consummate
the Contribution, other than those consents or approvals which, if not obtained,
would not reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations or prospects of Newco or
the REIT Partnership. Newco or the REIT Partnership, as appropriate, shall have
obtained all material permits, licenses, approvals certificates and other
authorizations from, and shall have made all notifications, registrations,
certifications and filings with, Governmental Authorities, necessary for the
REIT Partnership to operate the Company's business after completion of the
Contribution in substantially the same manner as it was conducted by the Company
prior to the Effective Time.
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<PAGE>
Section 6.3 Conditions to the Obligations of the Company. The obligations
--------------------------------------------
of the Company to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction or waiver prior to or at the Effective Time
of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
------------------------------
made by Parent, Newco and Newsub in this Agreement that are qualified by
materiality shall be true, correct and complete as of the Closing Date as though
such representations and warranties were made as of the Closing Date (or on the
date when made in the case of any representation or warranty which specifically
relates to an earlier date) and all representations and warranties made by the
Parent, Newco and Newsub in this Agreement that are not so qualified shall be
true, correct and complete in all material respects as of the Closing Date as
though such representations and warranties were made as of the Closing Date (or
on the date when made in the case of any representation or warranty which
specifically relates to an earlier date). The Company shall have received a
certificate, dated the Closing Date, to such effect, signed on behalf of Parent,
Newco and Newsub by their respective Chief Executive Officers.
(b) Performance by Parent, Newco and Newsub. Parent, Newco and Newsub
---------------------------------------
shall have duly performed or complied with, in all material respects, all of the
covenants and obligations to be performed or complied with by each of them under
the terms of this Agreement prior to the Closing Date. The Company shall have
received a certificate, dated the Closing Date, to such effect, signed on behalf
of Parent, Newco and Newsub by their respective Chief Executive Officers.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 7.1 Termination. This Agreement may be terminated and the Merger
-----------
may be abandoned at any time prior to the Effective Time, whether before or
after the approval thereof by the shareholders of the Company and Newsub:
(a) by written consent of the Company and Parent;
(b) by either the Company or Parent, if the Merger shall not have been
consummated on or before December 31, 1998 (the "Termination Date"); provided,
--------
however, that this Agreement may not be terminated by (i) Parent if Parent fails
- -------
to perform its obligations under this Agreement or the Asset Purchase Agreement
or (ii) the Company if the Company fails to perform its obligations under this
Agreement or a Non-Parent Party fails to perform its obligations under the Asset
Purchase Agreement, and in either such case such failure to perform causes the
Merger not to have been consummated prior to the Termination Date;
(c) by Parent if the approval of the Company's shareholders as required by
Section 6.1(a) shall not have been obtained at the Shareholders' Meeting or if
the Board of Directors of the Company shall have (i) taken any action nullifying
its resolutions adopting and approving this Agreement and directing that it be
submitted for approval of shareholders at the Shareholders' Meeting or (ii)
withdrawn or adversely modified its recommendation of this Agreement and the
transactions contemplated hereby;
-43-
<PAGE>
(d) by the Company if there has been a material breach by Parent, Newco or
Newsub of any representation, warranty or covenant contained in this Agreement
that is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by the Company to the party committing such
breach;
(e) by Parent if there has been a material breach by the Company of any
representation, warranty or covenant contained in this Agreement that is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Parent to the Company;
(f) by Parent if at the time of the Shareholders' Meeting the holders of
more than 10% of the outstanding shares of Common Stock (i) have taken the
actions required in order to assert dissenters' rights under Section 79-4-13.21
of the Mississippi BCA and, (ii) prior to any termination of this Agreement by
Parent, have not become ineligible to assert dissenters' rights pursuant to
Section 79-4-13.23(c) of the Mississippi BCA;
(g) by either Parent or the Company, if any Governmental Authority shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger or the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable;
(h) by either the Company or Parent if the Asset Purchase Agreement shall
have been terminated prior to the closing thereunder; or
(i) by the Company if the approval of the Company's shareholders as
required by Section 6.1(a) shall not have been obtained at the Shareholders'
Meeting.
Section 7.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 7.1 hereof, all rights and obligations of the parties
hereunder shall terminate and no party shall have any liability to the other
party, except for obligations of the parties hereto in Sections 5.1(c), 5.5 and
7.5, which shall survive the termination of this Agreement.
Section 7.3 Amendments. This Agreement may be amended by the parties
----------
hereto, approved by action taken by the respective Boards of Directors of the
Company, Parent, Newco and Newsub at any time before approval hereby by the
shareholders of the Company, but, after such approval, no amendment shall be
made which adversely changes the method of computing the amount to be received
by the Shareholders of the Company or changes the medium of payment therefor or
which in any way materially adversely affects the rights of such Shareholders
without the further approval of the shareholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto, and may not be amended after the Effective Time.
Section 7.4 Waiver. At any time prior to the Effective Time, any term,
------
provision or condition of this Agreement may be waived in writing (or the time
for performance of any of the obligations or other acts of the other parties
hereto may be extended) by the party which is, or the party the shareholders of
which are, entitled to the benefits thereof.
-44-
<PAGE>
Section 7.5 Fees and Expenses.
-----------------
(a) Except as provided in this Section 7.5 and Sections 5.6(a) and (b), all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses (whether or not the Merger is consummated).
(b) The Company shall pay to Parent a termination fee of $15 million plus
the Topping Amount if (i) this Agreement is terminated pursuant to Section
7.1(c) or Section 7.1(i), or this Agreement is terminated pursuant to Section
7.1(h) following a termination of the Asset Purchase Agreement pursuant to
Section 7.1(f) thereof, and (ii) except as provided in the following sentence,
prior to June 30, 1999 (A) the Company or any of its Subsidiaries enters into
any agreement, (x) pursuant to which any Person (an "Acquiring Party") acquires,
or proposes to acquire, by purchase, merger, consolidation, assignment, lease,
transfer or otherwise, thirty percent or more of the voting power of the
outstanding securities of the Company or any of its Subsidiaries or thirty
percent or more of the fair market value of the total assets of the Company or
any of its Subsidiaries or (y) pursuant to which there is, or there is proposed
to be, consummated a merger, consolidation or similar transaction between the
Company or any of its Subsidiaries and an Acquiring Party in which shareholders
of the Company immediately prior to such merger, consolidation or similar
transaction would not (if such transaction were consummated on the date of such
agreement) own securities representing at least seventy percent of the
outstanding voting power of the surviving entity (or, if applicable, any entity
in control of such surviving entity) of such merger, consolidation of similar
transaction immediately following the consummation thereof or (B) any Person or
"group" acquires "beneficial ownership" of thirty percent or more of the
Company's outstanding capital stock, provided that no Person acting solely as an
underwriter in connection with a firmly committed underwritten public offering
by the Company shall be deemed to have acquired beneficial ownership of the
underwritten securities (the terms "group" and "beneficial ownership" having the
meaning ascribed to them under Rule 13d-5 and Rule 13d-3, respectively, under
the Exchange Act). Clause (ii) of the preceding sentence shall not be deemed to
cover any issuance (or any agreement providing for any issuance) by the Company
to any Person of shares of capital stock of the Company under the following
circumstances: (x) the number of shares to be issued is approximately the
minimum number of shares necessary (assuming such issuance occurred on the date
of any such agreement) to cause the five individuals who, prior to the date of
such issuance (or any such agreement), own (or who are deemed to own pursuant to
the provisions of Sections 542(a)(2) and 544 of the Code, as modified by Section
856(h) of the Code, but without duplication of ownership) the largest number of
shares of capital stock of the Company, to own (or be deemed to own pursuant to
the foregoing provisions of the Code) not more than 49% of the Company's total
number of outstanding shares of capital stock, and (y) prior to the date of the
later of the Shareholders' Meeting or the Limited Partners' Meeting (as such
term is defined in the Asset Purchase Agreement), neither the Person agreeing to
acquire or acquiring such shares from the Company nor any Affiliate of such
Person made an Alternative Proposal to the Company, its board of directors or
any member thereof or publicly announce an Alternative Proposal or an intention
to make an Alternative Proposal. At least ten days prior to entering into an
agreement covered by the preceding sentence, the principal executive officer of
the Company shall deliver a certificate to Parent certifying as to the matters
set forth in clauses (x) and (y) above and the factual basis for the conclusion
that the proposed issuance is covered by clause (x) above.
(c) Parent shall pay to the Company a termination fee of $15 million in the
event that
-45-
<PAGE>
this Agreement is terminated by the Company (i) pursuant to Section 7.1(d) as a
result of willful breach by Parent, Newco or Newsub of any representation,
warranty or covenant contained in this Agreement or (ii) pursuant to Section
7.1(b) and Parent's willful failure to perform its obligations under this
Agreement caused the Merger not to have been consummated prior to the
Termination Date.
(d) The Company shall pay to Parent a termination fee of $15 million in the
event that this Agreement is terminated by Parent (i) pursuant to Section 7.1(e)
as a result of a willful breach by the Company of any representation, warranty
or covenant contained in this Agreement or (ii) pursuant to Section 7.1(b) and
the Company's willful failure to perform its obligations under this Agreement
caused the Merger not to have been consummated prior to the Termination Date.
(e) Parent shall pay to the Company a termination fee of $15 million in the
event that (i) this Agreement is terminated pursuant to Section 7.1(h) and the
termination of the Asset Purchase Agreement resulted from a willful breach by
Parent of any of its representations, warranties or covenants therein or (ii)
this Agreement is terminated by the Company pursuant to Section 7.1(b) and
Parent's willful failure to perform its obligations under the Asset Purchase
Agreement caused the Merger not to have been consummated prior to the
Termination Date.
(f) The Company shall pay to Parent a termination fee of $15 million in the
event that (i) this Agreement is terminated pursuant to Section 7.1(h) and the
termination of the Asset Purchase Agreement resulted from a willful breach by
any party thereto other than Parent (each a "Non-Parent Party") of any of its
representations, warranties and covenants therein or (ii) this Agreement is
terminated by Parent pursuant to Section 7.1(b) and a Non-Parent Party's willful
failure to perform its obligations under the Asset Purchase Agreement caused the
Merger not to have been consummated prior to the Termination Date.
(g) Parent shall pay to the Company a termination fee of $15 million in the
event that this Agreement is terminated by the Company pursuant to Section
7.1(b), all of the conditions to Closing set forth in Sections 6.1 and 6.2
(other than the condition set forth in Section 6.2(d)) were satisfied or were
reasonably capable of being satisfied prior to the Termination Date and prior to
June 30, 1999 Parent enters into any agreement with respect to an Alternative
Timber Transaction.
(h) The termination fees provided for in this Section 7.5 shall be paid by
wire transfer of immediately available funds within two Business Days after the
event giving rise to the obligation to pay such fees. No party shall be
entitled to assert a right to payment under more than one of paragraphs (b)
through (g) of this Section 7.5.
(i) The fees provided for in paragraphs (b), (c), (d), (e), (f) and (g) of
this Section 7.5 are intended to be liquidated damages and, as such, the
exclusive remedies with respect to the matters discussed in such paragraphs, and
no party hereto shall seek any additional damages or remedies at law or in
equity as a result of any such matter.
(j) Any termination fee payable to the Company shall be paid in such
amounts and at such times as payment will not adversely affect the Company's
status as a REIT as determined by
-46-
<PAGE>
the Board of Directors of the Company in good faith. Any amounts payable in
years subsequent to the Termination Date shall accrue interest at the short-term
applicable federal rate as of the Termination Date.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
Section 8.1 Nonsurvival of Representations and Warranties. The
---------------------------------------------
representations, warranties and covenants in this Agreement or in any instrument
delivered pursuant to this Agreement shall terminate as of the Effective Time
and shall not survive the Merger, except that the following provisions of this
Agreement shall survive the Merger: Article II, Sections 5.1(c), 5.5 and 5.9,
Section 7.5 (but only until the party first entitled to receive a termination
fee thereunder shall have received such fee), and this Article VIII.
Section 8.2 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be delivered or sent
personally, by facsimile or by certified, registered or express mail, postage
prepaid, and shall be deemed given when so delivered or sent personally or by
facsimile or, if by mail, two days after the date of mailing, as follows:
If to Parent, Newco or the Newsub:
Potlatch Corporation
601 West Riverside Avenue
Spokane, Washington 99201
Facsimile: (509) 835-1560
Attention: Chief Executive Officer
with a copy to (which shall not constitute notice to Parent, Newco or
Newsub):
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Facsimile: (415) 983-1200
Attention: Blair W. White, Esq.
If to Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Facsimile: (901) 526-8842
Attention: President
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<PAGE>
with a copy to (which shall not constitute notice to the Company):
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Facsimile: (202) 942-5999
Attention: Dennis G. Lyons, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 8.3 Note Purchase Agreement.
-----------------------
(a) Parent and the Company agree that Section 8.2 of the Note Purchase
Agreement is hereby amended by deleting the date "April 1, 1998" as it appears
in the first sentence thereof and substituting instead the date "February 9,
1998."
(b) Parent and the Company agree that this Agreement constitutes a binding
agreement to combine the business of the Company with Parent and certain
affiliates of Parent for purposes of Section 8.7 of the Note Purchase Agreement.
(c) The amendments to the Note Purchase Agreement described in this Section
8.3 shall be effective as of the date of this Agreement. From and after the
date of this Agreement, references in the Note Purchase Agreement to "this
Agreement," "herein" or words of similar import shall mean and be a reference to
the Note Purchase Agreement as amended and supplemented hereby. The amendments
to the Note Purchase Agreement described in this Section 8.3 shall survive any
termination of this Agreement pursuant to Section 7.1.
Section 8.4 Exhibits and Schedules. All exhibits and schedules hereto, or
----------------------
documents expressly incorporated into this Agreement, are hereby incorporated
into this Agreement and are hereby made a part hereof as if set out in full in
this Agreement.
Section 8.5 Expenses. Regardless of whether the transactions provided for
--------
in this Agreement are consummated, except as otherwise provided in Section 7.5
and Sections 5.6(a) and (b), each party hereto shall pay its own expenses
incident to this Agreement and the transactions contemplated hereby. Newco
agrees to pay or cause to be paid any expenses referred to in clauses (ii) and
(iii) of the definition of Base Merger Price which have been incurred or will be
incurred by the Company to the extent that such expenses have not been paid
prior to the Effective Time.
Section 8.6 Time of the Essence. Time is of the essence for each and
-------------------
every provision of this Agreement.
Section 8.7 Governing Law; Consent to Jurisdiction. This Agreement shall
--------------------------------------
be governed by, and construed in accordance with, the internal laws of the State
of Delaware without reference to the choice of law or conflicts of law
principles thereof. Any legal action or proceeding with respect to this
Agreement or any document related hereto may be brought in the courts of the
State of Delaware or the United States of America located in Delaware, and, by
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<PAGE>
execution and delivery of this Agreement, each of Parent, Newco, Newsub and the
Company hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto
hereby irrevocably waive any objection, including, without limitation, any forum
-----
non conveniens, which any of them may now or hereafter have to the bringing of
- --------------
such action or proceeding in such respective jurisdictions.
Section 8.8 Assignment; Successors and Assigns; No Third Party Rights.
---------------------------------------------------------
Except as otherwise provided herein, this Agreement may not be assigned, and any
attempted assignment shall be null and void. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, permitted assigns and legal
representatives. Except as provided in Section 5.9, this Agreement shall be for
the sole benefit of the parties to this Agreement and their respective heirs,
successors, permitted assigns and legal representatives and is not intended, nor
shall be construed, to give any person, other than the parties hereto and their
respective heirs, successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 8.9 Counterparts. This Agreement may be executed in counterparts,
------------
any one of which may be by facsimile followed by the originally executed
document forwarded immediately thereafter to the other parties hereto, each of
which shall be deemed an original agreement, but all of which together shall
constitute one and the same instrument.
Section 8.10 Titles and Headings. The titles, captions and table of
-------------------
contents in this Agreement are for reference purposes only, and shall not in any
way define, limit, extend or describe the scope of this Agreement or otherwise
affect the meaning or interpretation of this Agreement.
Section 8.11 Entire Agreement. This Agreement, including the Schedules
----------------
attached hereto, and the Articles of Merger, constitutes the entire agreement
among the parties with respect to the matters covered hereby and supersedes all
previous written, oral or implied understandings among them with respect to such
matters, except to the extent that other written agreements are expressly
referred to herein.
-49-
<PAGE>
Section 8.12 Severability. Any term or provision of this Agreement which
------------
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ANDERSON-TULLY COMPANY
By /s/ PARNELL S. LEWIS
-----------------------
Name: Parnell S. Lewis
Title: President
POTLATCH CORPORATION
By /s/ JOHN M. RICHARDS
-----------------------
Name: John M. Richards
Title: Chairman and C.E.O.
TIMBERLAND GROWTH CORPORATION
By /s/ JOHN M. RICHARDS
-----------------------
Name: John M. Richards
Title: President
BEAVER ACQUISITION CORPORATION
By /s/ JOHN M. RICHARDS
-----------------------
Name: John M. Richards
Title: President
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<PAGE>
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
ANDERSON-TULLY COMPANY
FIRST: The name of the corporation is ANDERSON-TULLY COMPANY.
SECOND: The period of its duration is 99 years.
THIRD: The specific purpose or purposes for which the corporation is
organized stated in general terms are:
To manufacture, purchase, own and sell lumber, box material, and all kinds
of wood products; to purchase, own, and sell logs, timber and lands within or
without the State of Mississippi.
To purchase, own, develop, operate, sell, deal in, mortgage or otherwise
lien, and to lease, sell, exchange, convey or in any manner whatever dispose of
real property within or without the State of Mississippi including farm lands,
oil, gas and other mineral lands.
<PAGE>
-2-
To manufacture, purchase or otherwise acquire and to hold, own, mortgage or
otherwise lien, pledge, lease, sell, assign, exchange, transfer or in any manner
dispose of, and to invest, deal and trade in and with goods, wares, merchandise
and personal property of any and every class and description, within or without
the State of Mississippi, including boats, barges and other marine equipment.
To acquire the good will, rights and property and to undertake the whole or
any part of the assets and liabilities of any person, firm, association or
corporation; to pay for the same in cash, the stock of this company, bonds or
otherwise, to hold or in any manner to dispose of the whole or any part of the
property so purchased; to conduct in any lawful manner the whole or any part of
any business so acquired and to exercise all the powers necessary or convenient
in and about the conduct and management of such business.
To guarantee, purchase or otherwise acquire, hold, sell, assign, transfer,
mortgage, pledge, or otherwise dispose of shares of the capital stock, bonds or
other evidences of indebtedness created by other corporations and while the
holder of such stock to exercise all the rights and privileges of ownership,
<PAGE>
-3-
including the right to vote thereon, to the same extent as a natural person
might or could do.
To enter into, make and perform contracts of every kind for any lawful
purpose, with any person, firm, association or corporation, town, city, county,
body politic, state, territory, government or colony or dependency thereof.
To borrow money for any of the purposes of the corporation and to draw,
make, accept, endorse, discount, execute, issue, sell, pledge or otherwise
dispose of promissory notes, drafts, bills of exchange, warrants, bonds,
debentures and other negotiable or non-negotiable, transferable or
non-transferable instruments and evidences of indebtedness and to secure the
payment thereof and the interest thereon by mortgage or pledge, conveyance or
assignment in trust of the whole or any part of the property of the corporation
at the time owned or thereafter acquired.
To purchase, hold, sell and transfer the shares of its capital stock,
provided any such purchase does not impair its capital.
<PAGE>
-4-
To have one or more offices and to conduct any or all of its operations and
business and to promote its objects within or without the State of Mississippi,
without restriction as to place or amount.
To do any or all of the things herein set forth as principal, agent,
contractor, trustee or otherwise, alone or in company with others.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is One Thousand Two Hundred (1,200) shares of the par value
of Two Thousand and No/100 Dollars ($2,000.00) each. All shares of stock shall
be of one class, common stock, and shall have equal voting and other rights.
FIFTH: The corporation will not commence business until consideration of
the value of at least $1,000 has been received for the issuance of shares.
SIXTH: Provisions granting to shareholders the preemptive right to acquire
additional or treasury shares of the corporation are: None.
<PAGE>
-5-
SEVENTH: The post office address of its registered office is Long Lake
Road at Old U.S. 61 North, RFD Route 7, vicksburg, Mississippi 39180 and the
name of its registered agent at such address is Sam C. Lusco, Jr.
EIGHTH: The number of directors constituting the initial board of
directors of the corporation, which must be not less than three (3), is seven
(7) and the names and addresses of the persons who are to serve as directors
until the first annual meeting of shareholders or until their successors are
elected and shall qualify are:
Street and Post
Name Office Address
- ---- ---------------
John M. Tully P.O. Box 28
(1242 N. Second)
Memphis, TN
E.D. Coombs, Jr. P.O. Box 28
(1242 N. Second)
Memphis, TN
Parker Hall 4712 Cole Road
Memphis, TN
Claude Tully Hall 4606 Warrington Road
Vicksburg, MS
Farrell W. Bushing 475 S. Perkins
Embassy House
Memphis, TN
<PAGE>
-6-
Henry C. Ward 3839 Pine
Long Beach, CA
John D. Martin, Jr. 705 Union Planters
Bank Building
Memphis, TN
[As set forth in original Articles of Incorporation. Matter is now governed
by By-Laws, which currently provide for nine directors.]
NINTH: The name and post office address of each incorporator is:
Street and Post
Name Office Address
---- ---------------
John M. Tully P.O. Box 28
(1242 N. Second)
Memphis, TN
E.D. Coombs, Jr. P.O. Box 28
(1242 N. Second)
Memphis, TN
John D. Martin, Jr. 705 Union Planters
Bank Building
Memphis, TN
TENTH: Upon the filing with the Secretary of State of Mississippi of
the Articles of Amendment adding the revised Article FOURTH and this Article
TENTH to the Articles of Incorporation, each share of the corporation's stock of
$100.00 par value then outstanding shall be changed into one-twentieth (1/20th)
of a share of stock of $2,000.00 par value per share.
<PAGE>
-7-
Fractional shares will be issued in respect of any final fraction of a share to
which any stockholder of record at the time of the filing of such Articles of
Amendment is entitled in respect of such stockholder's aggregate holdings of
record. Stock certificates previously evidencing shares of stock of $100.00 par
value shall upon the filing of such Articles of Amendment evidence only the
right to receive stock certificates for shares of stock of $2,000.00 par value.
Each stockholder of the corporation shall submit, to the principal office of the
corporation, his or her stock certificate or certificates previously evidencing
shares of stock of $100.00 par value, and shall receive in exchange a stock
certificate for the appropriate number of shares of stock of $2,000.00 par
value. The Board of Directors, by resolution duly adopted, may authorize the
withholding of dividends payable upon the stock of the corporation from any
stockholder who has not submitted for exchange his or her stock certificate as
contemplated by the preceding sentence, but if such withholding is authorized,
upon the subsequent surrender of any such stock certificate for exchange, the
withheld dividend or dividends shall forthwith be paid to the stockholder from
whom such dividend or dividends was withheld, without interest.
<PAGE>
-8-
ELEVENTH: From and after the time Articles of Amendment adding this
Article ELEVENTH are filed with the Secretary of State of Mississippi, no
fractional share or shares of stock in the corporation shall be issued, whether
upon original issue or by way of transfer or exchange or subdivision or
otherwise, no fractional interest in any share of its stock shall be recognized
by the corporation in any way, and no certificate for any fractional share shall
be issued in any case, whether upon original issue or by way of transfer or
exchange or subdivision or otherwise, with only the following exceptions:
1. Fractional shares and certificates evidencing the same may be
issued to any stockholder entitled to the same pursuant to Article TENTH by
reason of his or her being a stockholder of record at the time the Articles of
Amendment amending Article FOURTH and adding Article TENTH are filed with the
Secretary of State of Mississippi, but only in respect of any final fraction of
a share to which his or her aggregate holdings of record (including without
limitation any fractional share outstanding immediately prior to such filing)
entitle him or her.
<PAGE>
-9-
2. Where shares of the corporation's stock are held of record by a
commercial bank or trust company or stockbroker (or its nominee) for the account
of more than one client or customer of such entity as beneficial owners, or for
such entity's own account and for the account of one or more clients or
customers of such entity as beneficial owner, and proof is made, satisfactory in
the absolute discretion of the corporation's Board of Directors or an officer or
officers of the corporation designated by the Board, that such accounts and
beneficial holdings existed as of the close of business on the record date for
determining entitlement to vote at the meeting of stockholders which approved
this Article ELEVENTH, the corporation may, for the purposes of paragraph 1 of
this Article ELEVENTH and for the purposes of Article TENTH, treat the accounts
in existence as of the close of business on such record date of each such client
or customer of such entity (and of the entity itself) as if they were separate
record holders of the corporation's stock. The corporation in any event need
not recognize fractional-share interests in shares of the corporation's stock of
$100.00 par value purportedly held in the accounts of such entity unless the
entity's overall holdings of record include a fractional share of stock of
$100.00 par value, and in such case only that fractional share need be
recognized.
<PAGE>
-10-
3. Fractional shares and certificates evidencing the same may be
issued upon transfer of any of the fractional shares referred to in paragraph 1
of this Article ELEVENTH, but only in the exact fractional amount evidenced by
or included in the certificate surrendered for transfer, or, upon the submission
of two or more certificates for fractional shares for transfer (unless they are
accompanied by a request that they not be combined) or for combination, for the
total fractional-share interest thus combined; but fractional shares thus
combined or combined into whole shares shall not thereafter be subdivided.
Fractional shares issued pursuant to the above exceptions shall have,
pro rata to their respective interests, proportionately equal voting and other
rights to whole shares of stock.
TWELFTH: At the Annual Meeting of Stockholders to be held in 1988,
the total number of directors shall be divided into three (3) groups, with each
group containing one-third (1/3) of the total, as near as may be. The terms of
directors in the first group elected at the 1988 Annual Meeting shall expire at
the first
<PAGE>
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Annual Stockholders' Meeting after their election; the terms of the second group
shall expire at the second Annual Stockholders' Meeting after their election;
and the terms of the third group shall expire at the third Annual Stockholders'
Meeting after their election. At each Annual Stockholders' Meeting held after
the 1988 Annual Stockholders' Meeting, directors shall be chosen for a term of
three (3) years, to succeed those whose terms expire. This Article TWELFTH shall
cease to be effective if the total number of directors constituting the entire
Board of Directors provided in the By-laws shall be less than the minimum number
provided in the laws of Mississippi for a staggered or classified Board of
Directors.
THIRTEENTH: There shall be no cumulative voting in the election of
Directors by the shareholders.
FOURTEENTH: The Mississippi Business Corporation Law now requires the
affirmative
<PAGE>
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vote of at least two-thirds of all issued and outstanding classes of stock
having voting rights to approve any of the following:
a. The adoption of a plan of merger or consolidation with any
other corporation, domestic or foreign, other than a subsidiary
corporation.
b. The sale, lease, exchange, mortgage, pledge or other
disposition of all or substantially all of the property and assets, with or
without the good will, if not made in the usual and regular course of
business.
c. The voluntary dissolution by act of the corporation.
These provisions and these required percentages are adopted as a part of
the charter of the surviving corporation; and no amendment of the Mississippi
Business Corporation Law allowing a lesser percentage shall affect this
requirement of the affirmative vote of at least two-thirds of all issued and
outstanding classes of stock having voting rights.
<PAGE>
EXHIBIT 3.2
ANDERSON-TULLY COMPANY
REVISED AND RESTATED BYLAWS
Bylaws of the Company as Amended Through December 30, 1997
Article I. OFFICES
The registered office of the corporation shall be in Vicksburg, Warren
County, Mississippi.
The corporation may also have an office or offices in the City of
Memphis, State of Tennessee, and at such other places as the Board of Directors
may from time to time designate.
Article II. CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the
corporation, and the words "State of Mississippi."
Article III. MEETINGS OF STOCKHOLDERS
1. Annual Meetings. -- The annual meeting of the shareholders for the
---------------
election of Directors shall be
<PAGE>
held at 10:00 AM CST on the first Tuesday following the second Monday of
November of each year, or at such other time of day or on such other regular
business day within the following sixty days as shall be determined by the Board
of Directors; at this meeting, the shareholders shall elect by ballot, by
plurality vote, a Board of Directors, or, if fewer than all of the Directors are
to be elected at such meeting, such Directors as are to be elected at such
meeting.
2. Special Meetings. -- Special meetings of the stockholders may be
----------------
called at any time by the President and shall be called by the President or
Secretary on the request in writing or by the vote of a majority of the
Directors or on the demand in writing of stockholders of record owning such
number of shares as would entitle them under the laws of Mississippi and the
Articles of Incorporation to call such a meeting.
3. Place. -- All meetings of the stockholders for the election of
-----
Directors shall be held at the office of the corporation in the City of Memphis,
State of Tennessee. All other meetings of the stockholders shall be held at
such place or places, within or without
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<PAGE>
the State of Tennessee, as may from time to time be fixed by the Board of
Directors or as shall be specified and fixed in the respective notices or
waivers of notice thereof.
4. Voting. -- Each stockholder entitled to vote shall, at every meeting
------
of the stockholders, be entitled to one vote in person or by proxy, signed by
him or her, for each share of voting stock held by the stockholder, but no proxy
shall be voted on after eleven months from its date, unless it expressly
provides for a longer period. Such right to vote shall be subject to the power
of the Board of Directors to fix a record date for voting stockholders as
provided in Section 3 of Article VI, and if the Directors shall not have
exercised such power, the record date shall be as provided by law. Fractional
shares issued and outstanding in accordance with the Articles of Incorporation
shall have fractional votes.
5. Notice. -- Written notice of all meetings shall be mailed or
------
otherwise given by the Secretary to each stockholder of record entitled to vote,
at his or
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<PAGE>
her last known post office address, no less than ten days nor more than sixty
days prior to such meeting.
6. Quorum. -- The holders of a majority of the stock outstanding and
------
entitled to vote shall constitute a quorum, but the holders of a smaller amount
may adjourn from time to time without further notice until a quorum is secured.
Article IV. DIRECTORS
1. In General. -- The corporate powers shall be exercised by or under
----------
the authority of, and the business and affairs of the corporation shall be
managed under the direction of, its Board of Directors. Directors need not be
stockholders.
2. Number. -- The Directors shall be nine in number.
------
3. Terms. -- The Directors shall hold office until the next annual
-----
election (but if the Board shall have staggered terms, until the next election
of the
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<PAGE>
class in which they were elected or appointed) and until their successors are
elected and qualified.
4. How Elected. -- The Directors shall be elected by the stockholders,
-----------
except that if there be a vacancy in the Board by reason of death, resignation,
increase in the number of Directors, or otherwise, such vacancy shall be filled
for the unexpired term by the remaining Directors, though less than a quorum,
by majority vote.
5. Powers in General. -- The Board of Directors shall have, in addition
-----------------
to such powers as are hereinafter expressly conferred on it, all such powers as
may be exercised by the corporation, subject to the provisions of the statute,
the Articles of Incorporation and the bylaws.
6. Specific Powers. -- Without limiting the generality of the
---------------
foregoing, the Board of Directors shall have power:
-- To purchase or otherwise acquire property, rights or privileges for
the corporation, which the
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<PAGE>
corporation has power to take, at such prices and on such term as the Board of
Directors may deem proper.
-- To pay for such property, rights or privileges in whole or in part
with money, stock, bonds, debentures or other securities of the corporation, or
by the delivery of other property of the corporation.
-- To create, make and issue mortgages, bonds, deeds of trust, trust
agreements and negotiable or transferable instruments and securities, secured
by mortgages or otherwise, and to do every act and thing necessary to effectuate
the same.
-- To appoint agents, clerks, assistants, factors, employees and
trustees, and to dismiss them at its discretion, to fix their duties and
emoluments and to change them from time to time and to require security as it
may deem proper.
-- To confer on any officer or supervisory employee of the corporation
the power of selecting, discharging or suspending employees other than officers.
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<PAGE>
-- To determine by whom and in what manner the corporation's bills,
notes, receipts, acceptances, endorsements, checks, releases, contracts, or
other documents shall be signed.
7. Annual Meeting of Directors. -- After each annual meeting of
---------------------------
shareholders at which Directors are elected, the Directors shall meet for the
purpose of organization, the election of officers, and the transaction of other
business, at such place and time as shall be fixed by the stockholders at the
annual meeting, and, if a majority of the Directors be present at such place
and time, no prior notice of such meeting shall be required to be given to the
Directors. The place and time of such meeting may also be fixed by written
consent of the Directors.
8. Called Meetings. -- Regular and special meetings of the Directors
---------------
may be called by the President on two days' notice in writing or on one day's
notice by telegraph or facsimile transmission to each Director and shall be
called by the President in like manner on the written request of two Directors.
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<PAGE>
9. Place. -- Regular and special meetings of the Directors may be held
-----
within or without the State of Tennessee at such place as is indicated in the
notice or waiver of notice thereof.
10. Quorum. -- A majority of the number of Directors specified in
------
Section 2 of this Article IV shall constitute a quorum, but a smaller number may
adjourn from time to time, without further notice, until a quorum is secured.
11. Committees. -- The Board may appoint, at any time, from their own
----------
number any committee or committees for any purpose which shall have such title
and exercise such powers of the Board of Directors (except those which under
law may not be exercised by a committee) as shall be specified in the resolution
of appointment. Each such committee shall be composed of two or more members of
the Board.
12. Compensation. -- Directors and members of committees shall receive
------------
such compensation for attendance at each regular or special meeting or otherwise
as the Board may from time to time prescribe.
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<PAGE>
Article V. OFFICERS OF THE CORPORATION
1. In General. -- The officers of the corporation shall be a President,
----------
one or more Vice-Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, and such other officers as may from time to time be chosen by the
Board of Directors. The President shall be chosen from among the Directors.
The other officers need not be Directors.
2. Multiple Offices. -- Any two offices (but not more than two) may be
----------------
held by the same person, except that a person may hold three offices if one is
that of Assistant Secretary or an office not specifically named in Section 1 of
this Article V.
3. Tenure; Removal; Vacancies. -- The officers of the corporation shall
--------------------------
hold office until their successors are chosen and qualify in their stead. Any
officer chosen or appointed by the Board of Directors may be removed either with
or without cause at any time by the affirmative vote of a majority of the number
of Directors specified in Section 2 of Article IV. If the
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<PAGE>
office of any officer or officers becomes vacant for any reason, the vacancy may
be filled by the affirmative vote of a majority of the number of Directors
specified in Section 2 of Article IV.
4. The President. -- The President shall be the chief executive officer
-------------
of the corporation. It shall be the President's duty to preside at all meetings
of the stockholders and Directors; to have general and active management of the
business of the corporation; to see that all orders and resolutions of the Board
of Directors are carried into effect; to execute all contracts, agreements,
deeds, bonds, mortgages and other obligations and instruments, in the name of
the corporation, and to affix the corporate seal thereto when authorized by the
Board.
The President shall have the general supervision and direction of the
other officers of the corporation and shall see that their duties are properly
performed.
The President shall submit a report of the operations of the corporation
for the year to the stockholders at their annual meeting.
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<PAGE>
The President shall be ex officio a member of all committees (other than
those constituted under Section 11 of Article IV unless the President is
expressly named in the resolution of appointment) and shall have the general
duties and powers of supervision and management usually vested in the office of
President of a corporation.
5. The Vice-President or Vice-Presidents. -- The Vice-President or
-------------------------------------
Vice-Presidents, in the order designated by the Board of Directors, shall be
vested with all the powers and required to perform all the duties of the
President in his absence or disability and shall perform such other duties as
may be prescribed by the Board of Directors.
6. President Pro Tem. -- In the absence or disability of the President
-----------------
and the Vice-Presidents, the Board may appoint from their own number a
President Pro Tem.
7. The Secretary. -- The Secretary shall attend all meetings of the
-------------
stockholders, the Board of Directors
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<PAGE>
and of its committees and other standing committees for which the Secretary is
charged with the keeping of minutes. The Secretary shall act as secretary of the
meetings of the stockholders and of the Board of Directors and shall record all
of the proceedings of such meetings in a book kept for that purpose, and shall
record the proceedings of meetings of committees to the extent that the Board of
Directors or such committee shall require that their proceedings shall be
recorded, unless the Board or such committee shall appoint another person to
record such committee proceedings. The Secretary shall give proper notice of
meetings of stockholders and Directors and shall perform such other duties as
shall be assigned to the Secretary by the President or the Board of Directors.
8. The Assistant Secretary or Assistant Secretaries. -- The Assistant
------------------------------------------------
Secretary or Assistant Secretaries, in the order designated by the Board of
Directors, shall be vested with all the powers and required to perform all the
duties of the Secretary in the Secretary's absence or disability, and shall
perform such other duties as may be prescribed by the Board of Directors.
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<PAGE>
9. The Treasurer. -- The Treasurer shall have custody of the funds and
-------------
securities of the corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depository or depositories as may be designated by the
Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board or President, taking proper vouchers for such
disbursements, and shall render to the President and Directors, whenever they
may require it, an account of all such officer's transactions as Treasurer and
of the financial condition of the corporation, and at the annual stockholders'
meeting shall render a report for the preceding year.
The Treasurer shall keep an account of the capital stock of the
corporation registered and transferred in such manner and subject to such
regulations as the Board of Directors may prescribe.
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<PAGE>
The Treasurer shall give the corporation a bond, if required by the Board
of Directors, in such sum and in form and with security satisfactory to the
Board of Directors for the faithful performance of the duties of the office of
Treasurer and the restoration to the corporation, in case of such officer's
death, resignation or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in such officer's possession belonging to
the corporation. The Treasurer shall perform such other duties as the Board of
Directors may from time to time prescribe or require.
10. Delegation in Absence, etc. -- In case of the absence or disability
---------------------------
of any officer of the corporation or for any other reason deemed sufficient by a
majority of the Board, the Board of Directors may delegate such officer's powers
or duties to any other officer or to any Director for the time being.
ARTICLE VI. STOCK AND STOCKHOLDERS
1. Certificates. -- Shares of stock shall be represented by
------------
certificates. Certificates of stock
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<PAGE>
shall be signed by the President or Vice-President and either the Treasurer,
Secretary or Assistant Secretary. If a certificate of stock be lost or
destroyed, another may be issued in its stead upon proof of such loss or
destruction and the giving of a satisfactory bond of indemnity to indemnify the
corporation against any claim, in an amount as determined by the Board of
Directors or officer thereunto authorized by the Board of Directors as
sufficient. A new certificate may be issued without requiring bond when, in the
judgment of the Board of Directors, it is proper to do so.
2. Transfers. -- Subject to satisfaction of all conditions and
---------
restrictions upon transfer of stock, all transfers of stock of the corporation
shall be made upon its books by the holder of the shares in person or by such
holder's lawfully constituted representative, upon surrender of certificates of
stock for cancellation.
3. Record Dates. -- The Board of Directors shall have power to fix a
------------
date as a record date for the determination of the stockholders entitled to
notice of, and to vote, at any meeting of stockholders and any adjournment
thereof (except an adjournment beyond any
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<PAGE>
time permitted by applicable law for use of the original record date for the
adjourned meeting), or entitled to receive payment of any dividend, or to any
allotment of rights, or to exercise rights in respect of any change, conversion
or exchange of capital stock, and in such case such stockholders of record on
such date, and only such stockholders, shall be entitled to such notice of, and
to vote at such meeting and any such adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid. In the
case of a meeting of stockholders, such record date shall not be more than
seventy days prior to the date of such meeting.
4. Record Stockholders as Absolute Owners. -- The corporation shall be
--------------------------------------
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person whether or
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<PAGE>
not it shall have express or other notice thereof, save as expressly provided by
the laws of Mississippi.
5. Dividends. -- Dividends upon the capital stock may be declared by
---------
the Board of Directors at any regular or special meeting and may be paid in
cash or in property or in shares of the capital stock.
6. Information on Share Ownership. -- (a) So long as the corporation
------------------------------
is a "river timberlands company" as that term is defined in the Mississippi
River Timberlands Control Act of 1991 (the "Act"), at any time, and from time to
time, upon the request of any of the officers of the corporation, if such
officers have reason to believe that the ownership, or proposed ownership, of
the corporation's shares of capital stock may be inconsistent with, or in
violation of, any provisions of the Act or the rules and regulations promulgated
thereunder, any existing shareholder or any person presenting for transfer into
his, her or its name any shares of the capital stock of the corporation to any
agent of the corporation for transfer, as from whom the officers of the
corporation believe it appropriate to obtain such information, shall furnish
promptly to
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<PAGE>
the corporation such information and assurances with respect to such shareholder
or such person proposing such a transfer, or any person for whom such
shareholder or such person presenting such shares for transfer may be acting as
nominee or of which such shareholder or person presenting such shares for
transfer (or the person for whom any such shareholder or person may be nominee)
may be an "affiliated person", as defined in the Act, as, in any case, may be
useful in enabling the corporation to determine whether the ownership of such
shares, or the exercise of any rights with respect to such ownership, by such
shareholder or proposed transferee is in compliance with the Act. Without
limiting the generality of the foregoing, such inquiry shall be deemed to be
appropriate in every case where the shareholder or person presenting stock for
transfer is a stockbroker, a commercial bank or trust company, or is a nominee
of a stockbroker or group of stockbrokers or of a commercial bank or trust
company, or is any other entity which has as its business or a part of its
business the holding of stock or other securities in its name for the account of
others.
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<PAGE>
(b) Any such requests for information shall be in writing, with a true
and correct copy of such written request to be furnished to the Mississippi
Secretary of State within two days after it has been issued by the corporation.
(c) If any shareholder or person presenting shares for transfer from whom
information is requested shall fail in a timely fashion to respond to such
request, the corporation may exercise any one or more of the following remedies:
(i) notify the Mississippi Secretary of State of such failure to
respond, and request that the Secretary of State investigate such failure
to respond pursuant to the Secretary of State's powers under the Act;
(ii) refuse to permit the transfer of such stock, or suspend the
rights of stock ownership attributable to the stock in question, such
refusal or transfer or suspension to remain in effect until the requested
information has been received and/or until the corporation has
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<PAGE>
determined that such transfer, or the exercise of such suspended rights,
is permissible under the Act and all applicable rules and regulations
thereunder; and
(iii) exercise any and all appropriate remedies, at law or in equity,
in any court of competent jurisdiction, against any such shareholder or
person presenting shares for transfer who shall fail in a timely fashion
to respond to such request, with a view towards obtaining such
information or preventing or curing any situation which would cause
inconsistency with, or a violation of, any provision of the Act or the
rules and regulations thereunder.
(d) The corporation may cause an appropriate legend to be placed on
certificates for its capital stock referring to the Act and this Section 6 of
this Article VI.
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<PAGE>
(e) As used in this Section 6 of this Article VI, the word "person" shall
have the meaning specified in the Act.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January in each
ARTICLE VIII. CHECKS, DRAFTS, ETC.
All checks, drafts or orders for the payment of money shall be signed
personally or by facsimile by the Treasurer or by such other officer or officers
as the Board of Directors may from time to time designate. No check shall be
signed in blank.
ARTICLE IX. BOOKS AND RECORDS
The books, accounts and records of the corporation except as otherwise
required by the laws of Mississippi, may be kept at Memphis, Tennessee, or at
such place or places as may from time to time be designated by the bylaws or by
resolution of the
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<PAGE>
Directors. No stockholder shall have the right to inspect or copy any book,
account or record of the corporation otherwise than as and to the extent
required by the laws of Mississippi.
ARTICLE X. NOTICES
Notices required to be given under the provisions of these bylaws to any
Director or stockholder shall not be construed to mean personal notice, but may
be given in writing by depositing the same in a post office or letter box in a
prepaid sealed wrapper, addressed to such stockholder or Director at such
address as shall appear on the books of the corporation, and such notice shall
be deemed to be given at the time when the same shall be thus mailed. Notices
given to any Director may be given by facsimile transmission to a number
provided to the corporation by or on behalf of such Director as such Director's
facsimile number, and such notice shall be deemed given when a message
indicating receipt shall have been received back from the facsimile receiving
device by the facsimile transmitting device. Any stockholder or Director may
waive, in writing, any notice required to be given under these bylaws or
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<PAGE>
otherwise, whether before or after the time stated therein.
ARTICLE XI. CONVEYANCES OF REAL PROPERTY
Notwithstanding any other provision of these bylaws, no conveyance or
mortgage of real property owned by the corporation, or of any estate, easement,
right or other interest whatsoever in any such real property, shall be valid
unless executed on behalf of the corporation (a) by the President or by the 1st
Vice-President in his absence; or (b) by such other officer or agent of the
corporation who is thereunto specifically authorized by resolution of the Board
of Directors authorizing such conveyance.
ARTICLE XII. INDEMNIFICATION
1. Right to Indemnification. -- Each person who was or is made a party
------------------------
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or
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<PAGE>
investigative (hereinafter a "proceeding"), by reason of the fact:
(a) that he or she is or was a Director or executive officer of the
corporation, or
(b) that he or she, being at the time a Director or officer of the
corporation, is or was serving at the request of the corporation as a
director, trustee, partner, officer, employee or agent of another
corporation (wherever incorporated) or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee
benefit plan (collectively, "another enterprise"),
whether either in case (a) or case (b) the basis of such proceeding is alleged
action or inaction (x) in an official capacity as a Director or officer of the
corporation, or as a director, trustee, officer, partner, employee or agent of
such other enterprise, or (y) in any other capacity related to the corporation
or such other enterprise while so serving as a Director, trustee, officer,
employee or agent, shall except as
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<PAGE>
otherwise provided in this Article XII be indemnified and held harmless by the
corporation to the fullest extent authorized by the Mississippi Business
Corporation Act, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than permitted prior
thereto), against all liability and loss (including without limitation
attorneys' fees, judgments, fines, excise taxes with respect to an employee
benefit plan ("ERISA excise taxes") or penalties and amounts paid in settlement)
and reasonable expense reasonably incurred or suffered by such person in
connection therewith. The persons indemnified by this Section 1 of this Article
XII are hereinafter referred to as "indemnitees." Such indemnification as to
such alleged action or inaction shall continue as to an indemnitee who has after
such alleged action or inaction ceased to be a Director or officer of the
corporation, or director, officer, employee or agent of such other enterprise;
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Section 3 of this
-------- -------
Article XII with respect to proceedings to
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<PAGE>
enforce rights to indemnification, the corporation shall indemnify any such
indemnitee in connection with a proceeding (or portion thereof) initiated by
such indemnitee only if such proceeding (or portion thereof) was authorized by
the Board of Directors.
2. Certain Incidents of the Right. -- The right to indemnification
------------------------------
conferred in this Article XII (a) shall be a contract right; (b) shall be
binding on the successors of the corporation; (c) shall not be affected
adversely to any indemnitee by any amendment of the bylaws with respect to any
action or inaction occurring prior to such amendment; and (d) shall except as
otherwise provided in this Article XII include to the extent permitted by law
the right to be paid by the corporation the expenses incurred in defending any
such proceeding in advance of its final disposition (hereinafter an "advancement
of expenses"); provided, however, that, if and to the extent the Mississippi
-------- -------
Business Corporation Act requires, an advancement of expenses incurred by an
indemnitee shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall
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<PAGE>
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee did not meet the standard of conduct permitting such indemnitee's
indemnification under the Mississippi Business Corporation Act or otherwise is
not entitled to be indemnified for such expenses under this Article XII,
together with such other affirmations and other papers as may at the time be
required by the Mississippi Business Corporation Act, and provided further that
-------- -------
if the Mississippi Business Corporation Act shall require it, no advancement
shall be made unless a determination that the same is consistent with the
standard of the Mississippi Business Corporation Act for the making of
advancements has been made. Notwithstanding this or any other provision of this
Article XII, should the corporation (acting through action of its Board of
Directors and not through a stockholder suing derivatively in its name) sue or
counterclaim against a Director in respect of action or inaction by such
Director alleged to have been taken or committed at a time that both (a) a
majority of the whole number of Directors authorizing such suit, and (b) such
Director, were Directors of the corporation, then, and in any such
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<PAGE>
case: (i) the Director shall have no right to advancement of expenses with
respect to such suit or counterclaim under this Article XII unless, in addition
to compliance with whatever delivery of undertakings, affirmations or other
documents by the Director are required under the Mississippi Business
Corporation Act, and the making of whatever findings are necessary for
authorization of such advancements under the Mississippi Business Corporation
Act, a majority of the Board of Directors shall authorize the advancement of
such expenses, in their absolute discretion, as being in the best interests of
the corporation; and (ii) the Director shall have no right to indemnification
against liability and loss and expense with respect to such suit or counterclaim
(x) unless such indemnification is mandatory under the Mississippi Business
Corporation Act, or (y) unless a majority of the Board of Directors shall in
their absolute discretion authorize the making of such indemnification and such
indemnification shall be permissible under the Mississippi Business Corporation
Act.
3. Enforcement. -- If a claim under this Article XII is not paid in
-----------
full by the corporation
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<PAGE>
within sixty days after it has been received in writing by the corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty days, the indemnitee may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In any suit (i) brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and in any suit (ii) brought by the corporation to
recover an advancement of expenses pursuant to the terms of an undertaking the
corporation shall be entitled to recover such expenses only upon a final
adjudication that: the indemnitee has not met the applicable standard of conduct
set forth in the Mississippi Business Corporation Act or that the indemnitee is
not entitled to be indemnified as of right pursuant to the provisions of this
Article XII. Neither the failure of the
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<PAGE>
corporation (including the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Mississippi Business Corporation Act, nor an actual determination by the
corporation (including the Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct set forth in the Mississippi Business Corporation
Act or, in the case of such a suit brought by the indemnitee, be a defense to
such suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to have or retain such advancement of expenses, under this
Article XII or otherwise, shall be on the corporation.
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<PAGE>
4. Nonexclusivity. -- The rights to indemnification and to the
--------------
advancement of expenses conferred in this Article XII shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Articles of Incorporation, agreement, vote of stockholders or
disinterested Directors or otherwise.
5. Insurance. -- The corporation may maintain insurance, at its
---------
expense, to protect itself and any Director, trustee, officer, employee or agent
of the corporation or another enterprise (as defined in Section 1 of this
Article XII) against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Mississippi Business Corporation Act.
ARTICLE XIII. AMENDMENT OF BYLAWS
These bylaws may be amended, altered, repealed or added to at any annual,
regular or special meeting of the stockholders or Board of Directors, by
affirmative vote of the holders of a majority of the stock issued
-31-
<PAGE>
and outstanding and entitled to vote or of a majority of the whole authorized
number of Directors as set forth in Section 2 of Article IV hereof, as the case
may be.
ARTICLE XIV. RESOLUTION OF CERTAIN DISPUTES
1. Any Director, individually, or any firm of which any Director may
be a member, or any corporation or association of which any Director may be an
officer or director or in which any Director may be interested as a holder of
any amount of its stock or other ownership interests or otherwise, any
corporation, limited liability company, or other entity, of which there are
stockholders, partners or other owners who are common to the stockholders of the
Corporation, or to the stockholders, partners or other owners of a business
entity directly or indirectly controlled by the Corporation, whether such
identity of stockholders, owners or partners be total or less than total, and
any director, managing partner or any firm of which any such director, managing
partner or similar fiduciary may be a member, or any corporation or association
or other business entity of which any such director, managing partner or similar
fiduciary may be an officer, director
-32-
<PAGE>
or similar fiduciary or in which any such director, managing partner or similar
fiduciary may be interested as holder of any amount of its stock or other
ownership interests or otherwise, in any such case may be a party to or may be
pecuniarily or otherwise interested in, any contract or transaction of the
Corporation (hereinafter, an "Affiliate Contract" or "Affiliate Transaction")
and, in the absence of fraud, no contract or other transaction shall be hereby
affected or invalidated, provided (i) that the fact of the common directorship
or other interest shall be disclosed or shall have been known either (a) to the
Board or a committee thereof and the Board or committee authorizes, approves or
ratifies the Affiliate Contract or Affiliate Transaction by the affirmative vote
of a majority of disinterested Directors, even if the disinterested Directors
constitute less than a quorum, or (b) to the Stockholders entitled to vote, and
the Affiliate Contract or Affiliate Transaction is authorized, approved or
ratified by a majority of the votes cast by the Stockholders entitled to vote
other than the votes of shares owned of record or beneficially owned by the
interested Director or corporation, firm or other entity; or the contract is
unanimously approved by the Stockholders; and (ii) that the Affiliate Contract
or Affiliate Transaction is not unfair to the Corporation,
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<PAGE>
is commercially reasonable and the product of or consistent with arms' length
negotiations, and conforms with normal business practice. Any Director of the
Corporation who is also a director or officer of or interested in such other
corporation or association may be counted in determining the existence of a
quorum at any meeting of the Board which shall authorize any such contract or
transaction, and may vote thereat to authorize any such contract or transaction.
Any such Affiliate Contract, Affiliate Transaction or act of the Corporation or
of the Directors which shall be approved in accordance with this Paragraph shall
be valid and binding as though ratified by every Stockholder of the Corporation
and by every person having any direct or indirect economic interested in the
stock of the Corporation. The burden of proof that an Affiliate Contract or
Affiliate Transaction is not fair to the Corporation, or otherwise does not meet
the standards of this Paragraph, in any such case shall be on the person
challenging the Affiliate Contract or Affiliate Transaction. Nothing in this
Paragraph shall impose any requirement of any form of approval on any contract
or transaction that would not have existed in the absence of this Paragraph, and
nothing in this Paragraph shall make invalid or nonbinding any contract or
transaction
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<PAGE>
that would have been valid and binding in the absence of this Paragraph.
2. In the event of any challenge by or on behalf of the Corporation
to any Affiliate Contract, or to the administration, amendment or
modification of an Affiliate Contract, whether by (i) direct action
by the Corporation or (ii) a derivative or similar action instituted
by a Stockholder of the Corporation or by a stockholder, owner or
partner of an entity directly or indirectly controlling or controlled
by the Corporation in the name or right of the Corporation ((i) and
(ii) collectively, a "Corporate Action"), if such Affiliate Contract
contains a provision requiring that disputes thereunder be subject to
resolution by arbitration, then the Corporate Action shall likewise
be subject to resolution in accordance with the terms of the
arbitration provision in the Affiliate Contract. Notwithstanding the
preceding sentence, in the case of a Corporate Action brought
derivatively or otherwise on behalf of the Corporation (otherwise
than by the Corporation itself),
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<PAGE>
the issue of whether the party prosecuting such Corporate Action
shall have the right to proceed in the name or right of the
Corporation shall be determined by binding arbitration as set forth
herein. The arbitration of the right of such party to proceed shall
be by a tripartite arbitration panel, with one of the members of such
panel to be appointed by the Corporation, the second member of such
panel to be appointed by the party seeking to bring such action, and
the third member of such panel to be appointed by the first two
members so appointed. Any such arbitration shall be conducted in
accordance with the rules for expedited arbitration of commercial
disputes of the American Arbitration Association then in effect and
shall be conducted in the State of Mississippi. If it is determined
that the party prosecuting such Corporate Action shall have the right
to bring the Corporate Action in the name or right of the
Corporation, the Corporate Action shall be resolved by binding
arbitration in accordance with the first sentence of this Paragraph,
except that the party prosecuting such Corporate Action shall
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<PAGE>
have the right to designate the member of the arbitration panel that
otherwise would have been designated by the Corporation and shall
have the right to present evidence and otherwise take part in the
arbitration proceeding, but not to the exclusion of the Corporation.
The results of any arbitration required under this Paragraph shall be
final, binding and conclusive as to all parties with respect to the
matters at issue. Where arbitration is provided for any matter under
this Paragraph, such arbitration shall be the sole and exclusive
method of resolving such matter and no action shall be brought in any
court or tribunal (other than the arbitral tribunal provided for
herein) with respect to such matter, other than to require the making
of such arbitration or to enter judgment on or otherwise enforce an
award entered by, or any other action taken by, the arbitrators in
such arbitration.
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<PAGE>
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of February 9,
1998, by and among POTLATCH CORPORATION, a Delaware corporation ("Purchaser"),
--------------------
ANDERSON-TULLY VENEERS, L.P., a Mississippi limited partnership (the
- ----------------------------
"Partnership"), and ANDERSON-TULLY MANAGEMENT SERVICES LLC, a Mississippi
--------------------------------------
limited liability company ("LLC"),
W I T N E S S E T H:
WHEREAS, Partnership desires to sell and transfer to the Purchaser certain
of the assets and liabilities of the Partnership, and the Purchaser desires to
purchase such assets and assume such liabilities; and
WHEREAS, LLC, a single member limited liability company wholly owned by the
Partnership, desires to sell and transfer to the Purchaser certain of the assets
and liabilities and Purchaser desires to purchase such assets and assume such
liabilities; and
WHEREAS, LLC owns all of the outstanding common stock of Anderson-Tully
Timber Company, a Mississippi corporation ("Logging"), and Anderson-Tully Lumber
Company, a Mississippi corporation ("Sawmills"); and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser, Timberland Growth Corporation, a Delaware
corporation ("Newco"), Beaver Acquisition Corporation, a Mississippi corporation
("Newsub"), and Anderson-Tully Company, a Mississippi corporation (the
"Company"), are entering into that certain Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"), which contemplates, among other
things, Newco's acquisition, after the Closing hereunder, of all of the capital
stock of the Company through the merger of Newsub with and into the Company; and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser, Logging and Sawmills are entering into those
certain Subsidiaries Asset Purchase Agreements, each dated the date hereof (the
"Subsidiaries Asset Purchase Agreements"), which contemplate Purchaser's
acquisition of the assets and assumption of liabilities of Logging and Sawmills
immediately after the Closing under the Merger Agreement; and
WHEREAS, the parties hereto desire to make certain representations,
warranties and covenants in connection with this Agreement:
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
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<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
-------------------
Section 1.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms have the respective meanings set forth below:
"Acquired Assets" means, collectively, the Partnership Acquired Assets and
---------------
the LLC Acquired Assets, all of which are being transferred to Purchaser
pursuant to this Agreement.
"Acquired Real Property" means the Owned Real Property and the Leased Real
----------------------
Property.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
--------------------
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" means with respect to any Person, any other Person who directly
---------
or indirectly, through, one or more intermediaries, controls, is controlled by
or is under common control with, such Person. The term "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
"controlled" and "controlling" have meanings correlative thereto.
"Agreement" means this Asset Purchase Agreement.
---------
"Antitrust Division" has the meaning set forth in Section 5.2.
------------------
"Assumed Contracts" has the meaning set forth in Section 3.15.
-----------------
"Assumed Liabilities" has the meaning set forth in Section 2.4.
-------------------
"Barge" means Patton-Tully Transportation LLC, a Mississippi limited
-----
liability company.
"Bill of Sale" means the Bill of Sale, Assignment and Assumption Agreement,
------------
substantially in the form of Exhibit A hereto.
---------
"Businesses" means the Partnership Business, the LLC Business, the Logging
----------
Business and the Sawmills Business.
"Business Day" means a day, other than a Saturday or Sunday, on which
------------
commercial banks in Memphis, Tennessee and in San Francisco, California are open
for the general transaction of business.
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<PAGE>
"Closing" has the meaning set forth in Section 2.7.
-------
"Closing Date" has the meaning set forth in Section 2.7.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Common Stock" means the Common Stock, $.01 par value, of each of Logging
------------
and Sawmills.
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Company Reorganization" means the transactions contemplated by the
----------------------
Information Statement of the Partnership dated December 16, 1997.
"Debt" means any obligation for borrowed money or representing the purchase
----
price of property deferred and unpaid beyond normal trade terms, or any lease
obligation which under GAAP is to be capitalized, or any guarantee of any such
obligation; provided that the term "Debt" shall not include any guarantee which
by its terms terminates at the Effective Time without liability (contingent or
otherwise) to the Selling Companies.
"Effective Time" means the effective time under the Merger Agreement.
--------------
"Environmental Laws" means all federal, state and local laws, ordinances,
------------------
rules and regulations now or hereafter in force, as amended from time to time
through the Closing Date, and all federal and state court decisions, consent
decrees and orders interpreting or enforcing any of the foregoing, in any way
relating to or regulating human health or safety, or industrial hygiene or
environmental conditions, or protection of the environment, or pollution or
contamination of the air, soil, surface water or groundwater, and includes the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. (S) 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
(S) 6901 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., and the
Endangered Species Act, 16 U.S.C. et. seq.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" has the meaning set forth in Section 3.13(b).
---------------
"Excluded Assets" has the meaning set forth in Section 2.3.
---------------
"Excluded Liabilities" has the meaning set forth in Section 2.5.
--------------------
"Facilities" shall mean any real property, leaseholds, or other interests
----------
currently or formerly owned or operated by the Subject Companies and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Subject
Companies.
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<PAGE>
"Financial Statements" has the meaning set forth in Section 3.6.
--------------------
"FTC" has the meaning set forth in Section 5.2(e).
---
"GAAP" means generally accepted accounting principles as in effect in the
----
United States on the date of this Agreement, applied on a consistent basis.
"Governmental Authority" means any national, federal, state, provincial,
----------------------
country, municipal or local government, foreign or domestic, or the government
of any political subdivision of any of the foregoing, or any entity, authority,
agency, ministry or other similar body exercising executive, legislative,
judicial, regulatory or administrative authority or functions of or pertaining
to government, including any authority or other quasi-governmental entity
established to perform any of such functions.
"Hazardous Substances" means any substance or material that is described as
--------------------
a toxic or hazardous substance, waste or material or a pollutant or contaminant,
or words of similar import, in any of the Environmental Laws, and includes
asbestos, petroleum (including crude oil or any fraction thereof, natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or
any mixture thereof), petroleum products, polychlorinated biphenyls, urea
formaldehyde, radon gas, radioactive matter, medical waste, and chemicals which
may cause cancer or reproductive toxicity.
"Hired Employees" has the meaning set forth in Section 5.5.
---------------
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended.
"Intellectual Property" has the meaning set forth in Section 3.14.
---------------------
"Leased Real Property" means, collectively, the Partnership Leased Real
--------------------
Property, the LLC Leased Real Property and all leasehold interests held or owned
by Logging and Sawmills.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
----
charge of any kind.
"Limited Partnership Agreement" means the Limited Partnership Agreement of
-----------------------------
Anderson-Tully Veneers, L.P., dated as of May 1, 1995, as amended.
"Limited Partners' Meeting" has the meaning set forth in Section 5.7(a).
-------------------------
"LLC" has the meaning set forth in the recitals to this Agreement.
---
"LLC Acquired Assets" has the meaning set forth in Section 2.2.
-------------------
"LLC Assets Purchase Price" has the meaning set forth in Section 2.6(b).
-------------------------
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<PAGE>
"LLC Assumed Contracts" has the meaning set forth in Section 2.2(h).
---------------------
"LLC Assumed Debts" means any obligation of LLC at the Closing Date for
-----------------
borrowed money (including interest accrued through and including the Closing
Date but excluding any interest included in the calculation of Working Capital
of LLC) or representing the purchase price of property deferred and unpaid
beyond normal trade terms or any lease obligation which under GAAP is to be
capitalized, or any guarantee of any such obligation.
"LLC Business" means the business of providing certain administrative
------------
services to the Company, the Partnership, Logging and Sawmills, including, but
not limited to, the provision of human resources, accounting, legal and
financial services.
"LLC Executive Employment Contracts" has the meaning set forth in Section
----------------------------------
2.2(k).
"LLC Equipment" has the meaning set forth in Section 2.2(c).
-------------
"LLC Fixtures and Improvements" has the meaning set forth in Section
-----------------------------
2.2(d).
"LLC Intellectual Property" has the meaning set forth in Section 2.2(f).
-------------------------
"LLC Leased Real Property" has the meaning set forth in Section 2.2(b).
------------------------
"LLC Owned Real Property" has the meaning set forth in Section 2.2(a).
-----------------------
"LLC Permits" has the meaning set forth in Section 2.2(g).
-----------
"LLC Real Property" has the meaning set forth in Section 2.2(b).
-----------------
"LLC Working Capital Adjustment" means (a) the amount, if any, by which the
------------------------------
consolidated Working Capital of LLC exceeds $(400,000), or (b) the amount, if
any, by which $(400,000) exceeds the consolidated Working Capital of LLC.
"Logging" has the meaning set forth in the first recital of this Agreement.
-------
"Logging Amount" means $3,500,000, (a) minus the aggregate amount of Debt
-------------- -----
of Logging as of the Closing Date, (b) plus the amount of Logging's cash and
----
cash equivalents on hand as of the Closing Date, and (c) minus the aggregate
-----
amount required to be paid by Logging to its officers, directors or employees
which are triggered by this Agreement, Logging's entering into the Subsidiaries
Asset Purchase Agreements or the consummation of the transactions contemplated
hereby or thereby, but excluding any such amounts actually paid by Logging prior
to the Closing Date.
"Logging Business" means the business operated by Logging prior to the date
----------------
hereof involving harvesting standing timber owned by the Company and
transporting, merchandising, storing and reselling logs and pulpwood.
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<PAGE>
"Logging Working Capital Adjustment" means (a) 17.8% of the amount, if any,
----------------------------------
by which the Working Capital of Logging exceeds $5,000 or (b) 17.8% of the
amount, if any, by which $5,000 exceeds the Working Capital of Logging.
"Material Adverse Change" means any change that is materially adverse to
-----------------------
the business, financial condition or results of operations of the Businesses
taken as a whole, including, without limitation, any change which is reasonably
likely to be materially adverse to the Businesses in the future or future
financial condition or results of operations if the Businesses.
"Material Adverse Effect" means any effect that is materially adverse to
-----------------------
the business, financial condition or results of operations of the Businesses
taken as a whole, including, without limitation, any effect on the Businesses'
future business or future financial condition or results of operations which is
reasonably likely to occur.
"Merger Agreement" has the meaning set forth in the fourth recital to this
----------------
Agreement.
"Most Recent Balance Sheet" has the meaning set forth in Section 3.6.
-------------------------
"Newco" has the meaning set forth in the recitals to this Agreement.
-----
"Newsub" has the meaning set forth in the recitals to this Agreement.
------
"Owned Real Property" means, collectively, the Partnership Owned Real
-------------------
Property, the LLC Owned Real Property all real property owned by Logging and
Sawmills, including all easements, licenses and other interests in real property
appurtenant thereto.
"Other Encumbrances" has the meaning set forth Section 3.16(a).
------------------
"Partnership" has the meaning set forth in the recitals to this Agreement.
-----------
"Partnership Acquired Assets" has the meaning set forth in Section 2.1.
---------------------------
"Partnership Assets Purchase Price" has the meaning set forth in Section
---------------------------------
2.6(a).
"Partnership Assumed Contracts" has the meaning set forth in Section
-----------------------------
2.1(h).
"Partnership Assumed Debts" means any obligation of Partnership at the
-------------------------
Closing Date for borrowed money (including interest accrued through and
including Closing Date but excluding any interest included in the calculation of
Working Capital of the Partnership) or representing the purchase price of
property deferred and unpaid beyond normal trade terms or any lease obligation
which under GAAP is to be capitalized, or any guarantee of any such obligation.
-6-
<PAGE>
"Partnership Business" means the business of constructing and operating the
--------------------
Partnership's wood veneer plant located in Warren County, Mississippi, and the
marketing and sale of wood veneers produced by such plant.
"Partnership Executive Employment Contracts" has the meaning set forth in
------------------------------------------
Section 2.1(k).
"Partnership Equipment" has the meaning set forth in Section 2.1(c).
---------------------
"Partnership Fixtures and Improvements" has the meaning set forth in
-------------------------------------
Section 2.1(d).
"Partnership Intellectual Property" has the meaning set forth in Section
---------------------------------
2.1(f).
"Partnership Leased Real Property" has the meaning set forth in Section
--------------------------------
2.1(b).
"Partnership Owned Real Property" has the meaning set forth in Section
-------------------------------
2.1(a).
"Partnership Permits" has the meaning set forth in Section 2.1(g).
-------------------
"Partnership Real Property" has the meaning set forth in Section 2.1(b).
-------------------------
"Partnership Working Capital Adjustment" means (a) the amount, if any, by
--------------------------------------
which the consolidated Working Capital of the Partnership exceeds $829,000, or
(b) the amount, if any, by which $829,000 exceeds the consolidated Working
Capital of the Partnership; provided, however, that the calculation of
-------- -------
consolidated Working Capital of the Partnership shall exclude Working Capital
attributable to Barge, LLC and Quarry.
"Permitted Liens" has the meaning set forth in Section 3.16(a).
---------------
"Person" means an individual, partnership, corporation, limited liability
------
company, joint stock company, unincorporated organization or association, trust,
joint venture, association or other organization, whether or not a legal entity,
or a Governmental Authority.
"Plans" has the meaning set forth in Section 3.13(a).
-----
"Quarry" means Brickeys Stone LLC, a Mississippi limited liability company.
------
"REIT" means real estate investment trust.
----
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment, including continuing migration, of Hazardous Substances into or
through soil, surface water or groundwater.
"Report" has the meaning set forth in Section 5.2(e).
------
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<PAGE>
"Required Consents" has the meaning set forth in Section 3.4.
-----------------
"Sawmills" has the meaning set forth in the recitals to this Agreement.
--------
"Sawmills Amount" means $20,000,000, (a) minus the amount of Debt of
--------------- -----
Sawmills as of the Closing Date, (b) plus the amount of Sawmills' cash and cash
----
equivalents on hand as of the Closing Date, and (c) minus the aggregate amount
-----
required to be paid by Sawmills to its officers, directors or employees which
are triggered by this Agreement, Sawmills' entering into the Subsidiaries Asset
Purchase Agreements, or the consummation of the transactions contemplated hereby
or thereby, but excluding any such amounts actually paid by Sawmills prior to
the Closing Date.
"Sawmills Business" means the business of operating the sawmill facilities
-----------------
of Sawmills located near Waltersville, Mississippi, including but not limited
to, the operation of planer mills, drying, inspecting and inventory facilities
and sales operations.
"Sawmills Working Capital Adjustment" means (a) 5% of the amount, if any,
-----------------------------------
by which the consolidated Working Capital of Sawmills exceeds $3,800,000, or (b)
5% of the amount, if any, by which $3,800,000 exceeds the consolidated Working
Capital of Sawmills.
"SEC" means the United States Securities and Exchange Commission.
---
"Selling Companies" means the Partnership and LLC.
-----------------
"Subject Companies" means the Partnership, Logging, Sawmills and LLC.
-----------------
"Subsidiaries Asset Purchase Agreements" has the meaning set forth in the
--------------------------------------
fifth recital of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
or other business entity except a partnership, a majority of the total voting
power of shares of stock or other interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, association or other business
entity, a majority of the partnership or other similar interests thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
partnership, association or other business entity if such Person or Persons
shall be allocated a majority ownership interest in a partnership, association
or other business entity gains or losses or shall be or control the managing
director, managing member, general partner or other managing Person of such
partnership, association or other business entity. Unless the context requires
otherwise, each reference to a Subsidiary shall be deemed to be a reference to a
Subsidiary of the LLC.
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<PAGE>
"Taxes" has the meaning set forth in Section 3.10(d).
-----
"Tax Return" has the meaning set forth in Section 3.10(d).
----------
"Title Company" means such title insurance company as shall be agreed by
-------------
the parties to this Agreement prior to the Closing Date.
"Transfers" has the meaning set forth in Section 5.7(a).
---------
"Working Capital" means the total current assets (excluding cash and cash
---------------
equivalents) of a specified Person at the Closing Date minus the total current
liabilities (excluding short-term Debt and the current portion of long-term
Debt) of such Person at the Closing Date (which difference may be a negative
number), calculated in accordance with GAAP applied in a manner consistent with
the Financial Statements.
Section 1.2 Interpretation. Unless otherwise indicated to the contrary
--------------
herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (ii) the word "including" means
"including, but not limited to"; (iii) masculine gender shall also include the
feminine and neuter genders, and vice versa; and (iv) words importing the
singular shall include the plural, and vice versa.
ARTICLE II
SALE OF ASSETS OF THE SELLING COMPANIES
---------------------------------------
Section 2.1 Sale and Purchase of Partnership Assets. Subject to the terms
---------------------------------------
and conditions of this Agreement, and except as provided in Section 2.3, the
Partnership shall sell, transfer, convey, assign and deliver to Purchaser, and
Purchaser shall purchase at Closing hereunder, all of the Partnership's right,
title and interest in and to the assets now owned by the Partnership, or in
which the Partnership has a right, title or interest at any time prior to
Closing (except as otherwise specified in this Section 2.1), and which are used
in, or held in connection with, the Partnership Business, such reference to
assets being deemed to refer to assets as above described, of every nature and
kind, tangible or intangible, wheresoever located and whether or not carried or
reflected on the books of account and financial records of the Partnership (the
"Partnership Acquired Assets"), including, without limitation:
(a) the real property described in Schedule 2.1(a), and all easements,
---------------
licenses, and other interests in real property appurtenant thereto, owned
by the Partnership (the "Partnership Owned Real Property");
(b) all leasehold interests described in Schedule 2.1(b), including
---------------
but not limited to, any agreement pursuant to which the Partnership leases
the lands described in Schedule 2.1(b) on which the veneer mill facility is
---------------
situated (the "Partnership
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<PAGE>
Leased Real Property," and together with the Partnership Owned Real
Property, the "Partnership Real Property");
(c) the equipment, inventory and other personal property (the
"Partnership Equipment"), which are described in Schedule 2.1(c) and used
---------------
in the operation of the Partnership Business; provided, however, that the
-------- -------
lists of inventory and other consumable items will be replaced at the
Closing with lists of inventory current as of the Closing Date;
(d) all buildings, improvements, fixtures, fixed assets and personalty
of a permanent nature affixed or attached to the Partnership Real Property,
including but not limited to, the veneer mill facility, in all cases used
in the operation of the Partnership Business (collectively, the
"Partnership Fixtures and Improvements");
(e) all unexpired warranty rights relating to the Partnership
Equipment and the Partnership Fixtures and Improvements to the extent the
same are transferable;
(f) the Intellectual Property and other proprietary rights related to
the ownership or operation of the Partnership Business described in
Schedule 3.14 (the "Partnership Intellectual Property");
-------------
(g) all unexpired permits, licenses, approvals and registrations
related to the ownership or operation of the Partnership Business, the
Partnership Real Property, the Partnership Equipment, the Partnership
Fixtures and Improvements or the Partnership Intellectual Property (the
"Partnership Permits");
(h) all of the Partnership's rights and obligations under any contract
or agreement that relates to the Partnership Business, including, without
limitation, those agreements described in Schedule 3.15(a) relating to the
----------------
Partnership Business, including all additions or modifications thereto in
the ordinary course of business consistent with prior practice prior to the
Closing (the "Partnership Assumed Contracts");
(i) all of the Partnership's cash, cash equivalents, accounts
receivable and other components of current assets as of the Closing Date;
(j) all of the Partnership's books, records and files (including all
employee records; operating and maintenance manuals; drawings, plans and
specifications; job books; maintenance logs; applications to, reports from
and filings with governmental authorities; and copies of contracts)
relating to the ownership or proper operation of the Partnership Business
or relating to the Partnership Assumed Contracts;
(k) the executive employment contracts with the executives listed in
Schedule 2.1(k) (the "Partnership Executive Employment Contracts");
---------------
-10-
<PAGE>
(l) the insurance contracts listed in Schedule 2.1(l), but only to the
---------------
extent such policies cover the Partnership Acquired Assets or liabilities
which are assumed by Purchaser under this Agreement;
(m) all rights or causes of action the Partnership may have as of the
Closing against any Person for infringing or otherwise unlawfully using any
of the Partnership Intellectual Property or for any breach of the
Partnership Assumed Contracts or the Partnership Executive Employment
Contracts, and any other claims, rights of recovery, causes of action, or
rights of set-off of every kind or character, regardless of when any such
claim, right of recovery, cause of action or right of set-off arose or were
or may be asserted, which rights relate to the Partnership Business and
which the Partnership possesses as of the Closing;
(n) all prepaid expenses with respect to the Partnership Business
other than those prepaid expenses which relate to items the beneficial use
and enjoyment of which will have expired as of the Closing. The purchased
prepaid expenses include, without limitation, those prepaid expense items
listed at Schedule 2.1(n);
---------------
(o) all memberships and similar participations and related stock,
bonds and debentures used or held in connection with the Partnership
Business, and all surety bonds, surety deposits, security deposits, lease
deposits, letters of credit and other such instruments posted by or on
behalf of the Partnership as security for its performance of any contract
or agreement of the Partnership to be transferred to Purchaser pursuant to
this Agreement, including, without limitation, those memberships and
similar participations and related stock, bonds and debentures, deposits
and instruments which are described in Schedule 2.1(o);
---------------
(p) all goodwill, if any, associated with the Partnership Business;
(q) all other assets, whether tangible or intangible, not hereinabove
expressly mentioned which now, or as of the Closing, are used in, or held
in connection with, the Partnership Business; and
(r) the Partnership's limited partnership interest in Biomass
Partners, L.P., a Tennessee limited partnership, and all of the common
stock of Biomass Management Corporation, a Tennessee corporation;
provided, however, that the Partnership Acquired Assets shall not include any of
- -------- -------
the Excluded Assets.
Section 2.2 Sale and Purchase of Certain LLC Assets. Subject to the terms
---------------------------------------
and conditions of this Agreement, and except as provided in Section 2.3, the LLC
shall sell, transfer, convey, assign and deliver to Purchaser, and Purchaser
shall purchase at Closing hereunder, all of the LLC's right, title and interest
in and to the assets now owned by the LLC, or in which the LLC has a right,
title or interest at any time prior to Closing (except as otherwise specified in
this Section 2.2), and which are used in, or held in connection with, the
-11-
<PAGE>
LLC Business, such reference to assets being deemed to refer to assets as above
described, of every nature and kind, tangible or intangible, wheresoever located
and whether or not carried or reflected on the books of account and financial
records of the LLC (the "LLC Acquired Assets"), including, without limitation:
(a) the real property described in Schedule 2.2(a), and all easements,
---------------
licenses, and other interests in real property appurtenant thereto, owned
by the LLC (the "LLC Owned Real Property");
(b) all leasehold interests described in Schedule 2.2(b) (the "LLC
---------------
Leased Real Property," and together with the LLC Owned Real Property, the
"LLC Real Property");
(c) the equipment, inventory and other personal property (the "LLC
Equipment"), which are described in Schedule 2.2(c) and used in the
---------------
operation of the LLC Business; provided, however, that the lists of
-------- -------
inventory and other consumable items will be replaced at the Closing with
lists of inventory current as of the Closing Date;
(d) all buildings, improvements, fixtures, fixed assets and personalty
of a permanent nature affixed or attached to the LLC Real Property,
including but not limited to, the veneer mill facility, in all cases used
in the operation of the LLC Business (collectively, the "LLC Fixtures and
Improvements");
(e) all unexpired warranty rights relating to the LLC Equipment and
the LLC Fixtures and Improvements to the extent the same are transferable;
(f) the Intellectual Property and other proprietary rights related to
the ownership or operation of the LLC Business described in Schedule 3.14
-------------
(the "LLC Intellectual Property");
(g) all unexpired permits, licenses, approvals and registrations
related to the ownership or operation of the LLC Business, the LLC Real
Property, the LLC Equipment, the LLC Fixtures and Improvements or the LLC
Intellectual Property (the "LLC Permits");
(h) all of the LLC's rights and obligations under any contract or
agreement that relates to the LLC Business, including, without limitation,
those agreements described in Schedule 3.15(a) relating to the LLC
----------------
Business, including all additions or modifications thereto in the ordinary
course of business consistent with prior practice prior to the Closing (the
"LLC Assumed Contracts");
(i) all of the LLC's cash, cash equivalents, accounts receivable and
other components of current assets as of the Closing Date;
-12-
<PAGE>
(j) all of the LLC's books, records and files (including all employee
records; operating and maintenance manuals; drawings, plans and
specifications; job books; maintenance logs; applications to, reports from
and filings with governmental authorities; and copies of contracts)
relating to the ownership or proper operation of the LLC Business or
relating to the LLC Assumed Contracts;
(k) the executive employment contracts with the executives listed in
Schedule 2.1(k) (the "LLC Executive Employment Contracts");
---------------
(l) the insurance contracts listed in Schedule 2.1(l);
---------------
(m) all rights or causes of action the LLC may have as of the Closing
against any Person for infringing or otherwise unlawfully using any of the
LLC Intellectual Property or for any breach of the LLC Assumed Contracts or
the LLC Executive Employment Contracts, and any other claims, rights of
recovery, causes of action, or rights of set-off of every kind or
character, regardless of when any such claim, right of recovery, cause of
action or right of set-off arose or were or may be asserted, which rights
relate to the LLC Business and which the LLC possesses as of the Closing;
(n) all prepaid expenses with respect to the LLC Business other than
those prepaid expenses which relate to items the beneficial use and
enjoyment of which will have expired as of the Closing. The purchased
prepaid expenses include, without limitation, those prepaid expense items
listed at Schedule 2.2(n);
---------------
(o) all memberships and similar participations and related stock,
bonds and debentures used or held in connection with the LLC Business, and
all surety bonds, surety deposits, security deposits, lease deposits,
letters of credit and other such instruments posted by or on behalf of the
LLC as security for its performance of any contract or agreement of the LLC
to be transferred to Purchaser pursuant to this Agreement, including,
without limitation, those memberships and similar participations and
related stock, bonds and debentures, deposits and instruments which are
described in Schedule 2.2(o);
---------------
(p) all goodwill, if any, associated with the LLC Business;
(q) all other assets, whether tangible or intangible, not hereinabove
expressly mentioned which now, or as of the Closing, are used in, or held
in connection with, the LLC Business;
(r) all of the Common Stock of Logging; and
(s) all of the Common Stock of Sawmills;
provided, however, that the LLC Acquired Assets shall not include any of the
- -------- -------
Excluded Assets.
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<PAGE>
Section 2.3 Excluded Assets. The following assets are excluded from the
---------------
purchase and sale transaction contemplated by this Agreement (the "Excluded
Assets"):
(a) documents relating to the organization, maintenance or existence of the
Partnership as a limited partnership;
(b) documents relating to the formation, maintenance or existence of LLC as
a limited liability company;
(c) the Partnership's interest in LLC;
(d) the Partnership's interest in Barge;
(e) the Partnership's interest in Quarry;
(f) the general intangibles related to the laminated flooring business of
the Partnership;
(g) the property listed in Schedule 2.3; and
------------
(h) any assets not transferred or conveyed pursuant to Section 2.1 or
Section 2.2.
Section 2.4 Assumed Liabilities. Except as set forth in Section 2.5,
-------------------
Purchaser hereby agrees to assume, satisfy or perform when due all of the
following liabilities and obligations, but no others (the "Assumed
Liabilities"):
(a) all Partnership Assumed Debts and LLC Assumed Debts;
(b) all obligations of the Partnership and LLC under the Assumed Contracts
with respect to the period after the Closing Date;
(c) all current liabilities of the Partnership and LLC as of the Closing
Date, provided that Purchaser shall not assume any current liabilities of the
--------
Selling Companies that are not reflected in the LLC Working Capital Adjustment
or the Partnership Working Capital Adjustment;
(d) all employee benefits liabilities to or in respect of employees of any
of the Selling Companies set forth on Schedule 3.13, including, but not limited
-------------
to:
(i) all liabilities arising under or in respect of any Plan, and all
liabilities or obligations in respect of any withdrawal from or termination
of any Plan;
(ii) all severance pay due to employees of any of such Selling
Companies as a result of the transactions contemplated by this Agreement;
and
-14-
<PAGE>
(iii) all vacation and sick leave time for employees of any of the
Selling Companies accrued and unused as of the Closing Date; and
(iv) any collective bargaining or other such agreements in respect of
any employees of any of such Selling Companies;
(e) all liabilities of the Partnership arising exclusively from the
operation of the Partnership Business prior to January 1, 1998; and
(f) all liabilities covered by insurance policies listed in Schedule
--------
2.1(l).
- ------
The Selling Companies agree to pay, discharge or provide for all
liabilities or obligations of any of them incurred prior to the Closing and not
expressly assumed by Purchaser under this Agreement.
Section 2.5 Excluded Liabilities. Except as provided in Section 2.4,
--------------------
Purchaser will not assume or perform any liabilities or obligations (known or
unknown, absolute, accrued contingent or otherwise) of any of the Selling
Companies (or of any of their predecessors in interest), including without
limitation, any liability for Taxes of any of the Selling Companies imposed on
or calculated by reference to income during any period before or after the
Closing Date (the "Excluded Liabilities").
Section 2.6 Asset Purchase Price.
--------------------
(a) Partnership Assets Purchase Price. At Closing, Purchaser shall pay to
---------------------------------
the Partnership by wire transfer of immediately available funds to an account
designated in writing by the Partnership at least three Business Days prior to
the Closing Date an amount equal to $35,000,000, (i) minus the Partnership
-----
Assumed Debts, (ii) plus the aggregate amount of any cash and cash equivalents
----
transferred by Partnership to Purchaser pursuant to this Agreement, (iii) minus
-----
the payments required to be made to any employees or officers of the Partnership
which are triggered by this Agreement as set forth on Schedule 2.6(a), (iv) plus
--------------- ----
the amount(s), if any, referred to in clause (a) of the definition of
Partnership Working Capital Adjustment or minus the amount(s), if any, referred
-----
to in clause (b) of such definition (the "Partnership Assets Purchase Price");
provided, however, that in the event that the Partnership Assets Purchase Price
- -------- -------
is a negative amount (i.e., is less than zero), Purchaser shall not be required
to make any payment hereunder and at Closing the Partnership shall pay to
Purchaser the amount by which zero exceeds such negative amount by wire transfer
of immediately available funds to an account designated in writing by Purchaser
at least three Business Days prior to the Closing Date.
(b) LLC Assets Purchase Price. At Closing, Purchaser shall pay to LLC by
-------------------------
wire transfer of immediately available funds to an account designated by LLC in
writing at least three Business Days prior to the Closing an amount equal to (i)
5% of the Sawmills Amount, (ii) plus 17.8% of the Logging Amount, (iii) plus
---- ----
$1,500,000, (iv) minus the LLC Assumed Debts, (v) plus the aggregate amount of
----- ----
any cash and cash equivalents transferred by LLC to Purchaser pursuant to this
Agreement, and (vi) minus the payments required to be made to
-----
-15-
<PAGE>
any employees or officers of LLC which are triggered by this Agreement as set
forth on Schedule 2.6(b), (vii) plus the amount(s), if any, referred to in
--------------- ----
clause (a) of the definitions of LLC Working Capital Adjustment, Logging Working
Capital Adjustment and Sawmills Working Capital Adjustment or minus the
-----
amount(s), if any, referred to in clause (b) of such definitions (the "LLC
Assets Purchase Price"); provided, however, that in the event that the LLC
-------- -------
Assets Purchase Price is a negative amount (i.e., is less than zero), Purchaser
shall not be required to make any payment hereunder and at Closing LLC shall pay
to Purchaser the amount by which zero exceeds such negative amount by wire
transfer of immediately available funds to an account designated in writing by
Purchaser at least three Business Days prior to the Closing Date.
(c) Calculation of Partnership and LLC Assets Purchase Price. Purchaser
--------------------------------------------------------
and the Selling Companies shall consult with each other from time to time with
respect to the anticipated Closing Date hereunder. Upon determination of the
anticipated Closing Date, the Selling Companies shall promptly prepare and
deliver to Purchaser a detailed schedule showing the estimated amount payable at
Closing pursuant to Sections 2.6(a) and 2.6(b) as of such date, including any
change in such amounts anticipated to occur prior to the anticipated Closing
Date. The Selling Companies shall make available to Purchaser such information
as Purchaser shall reasonably request to verify the information set forth in
such schedule and shall immediately inform Purchaser of any changes to the
amounts set forth therein. Prior to the Closing, Purchaser and the Selling
Companies shall agree on a schedule setting forth the amounts payable at Closing
pursuant to Sections 2.6(a) and 2.6(b), which schedule shall be executed by
Purchaser and each Selling Company. As a means of clarifying the intentions of
the parties hereto with respect to the calculation of the Partnership Assets
Purchase Price and the LLC Assets Purchase Price, Schedule 2.6(c) is an example
---------------
of how the Partnership Assets Purchase Price and the LLC Assets Purchase Price
would be calculated based on the assumptions set forth therein.
Section 2.7 Closing. The closing for the sale and purchase of the
-------
Acquired Assets (the "Closing") shall take place at the offices of Pillsbury
Madison & Sutro LLP, 235 Montgomery Street, San Francisco, California,
immediately prior to the Effective Time under the Merger Agreement, but in any
event following the satisfaction or waiver of the conditions set forth in
Article VI hereof (other than those conditions that by their nature are to be
satisfied at Closing, but subject to the satisfaction or waiver of those
conditions) or at such other place as the parties may agree in writing (the date
and time of the Closing determined in accordance with this Section 2.7 are
herein referred to as the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE SELLING COMPANIES
---------------------
Each of the Selling Companies, jointly and severally, represents and
warrants to Purchaser as follows:
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<PAGE>
Section 3.1 Organization and Qualification; Subsidiaries. Each of the
--------------------------------------------
Subject Companies is a corporation, limited liability company or limited
partnership, as the case may be, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation
specified in Schedule 3.1 and has the power and authority and all licenses,
------------
permits and authorizations necessary to own or lease its property and assets and
to carry on its business as presently conducted, and as presently proposed to be
conducted, and is duly qualified to do business as a foreign corporation,
limited liability company or partnership and is in good standing in each
jurisdiction wherein the nature of its business or the ownership of its assets
makes such qualification necessary, except where the failure to be so qualified
and in good standing would not prevent, delay or impair the Selling Companies'
ability to consummate the transactions contemplated by this Agreement or have a
Material Adverse Effect. Each of the Selling Companies has previously provided
true and complete copies of each of the Subject Companies' (a) articles of
incorporation, certificate of formation or certificate of limited partnership,
as the case may be, and (b) bylaws, operating agreement or agreement of limited
partnership, if any, as the case may be, as currently in effect (the
"Organizational Documents").
Section 3.2 Authorization.
-------------
(a) Each of the Selling Companies has the power and authority to execute
and deliver this Agreement, subject only to approval of the Transfers by the
Additional Limited Partners and receipt of the Required Consents, to perform its
obligations hereunder and thereunder, all of which have been duly authorized by
all requisite action. This Agreement has been duly authorized, executed and
delivered by the Selling Companies, and is enforceable against each of the
Selling Companies in accordance with its terms, except as such may be subject to
or limited by bankruptcy, insolvency, reorganization or other laws relating to
or affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(b) Each of the Subject Companies, except for the Partnership and LLC, has
the corporate power and authority to execute and deliver the Subsidiaries Asset
Purchase Agreements, subject only to receipt of the required consents disclosed
therein, to perform its obligations hereunder and thereunder, all of which have
been duly authorized by all requisite action. The Subsidiaries Asset Purchase
Agreements have been duly authorized, executed and delivered by the Subject
Companies, except for the Partnership and LLC, and are enforceable against each
of the respective Subject Companies party thereto, except for the Partnership
and LLC, in accordance with its terms, except as such may be subject to or
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Section 3.3 Non-contravention.
-----------------
(a) Neither the execution and delivery of this Agreement nor the
consummation of the other transactions contemplated hereby nor the fulfillment
of and the performance by either of the Selling Companies of its obligations
hereunder will (with or without notice or
-17-
<PAGE>
lapse of time) (i) contravene any provision contained in the Organizational
Documents or any resolution or similar act adopted by the managing general
partner or member of either of the Selling Companies, (ii) conflict with,
violate or result in a material breach of, or constitute a material default
under (1) except as set forth in Schedule 3.3, any Assumed Contract or (2) any
------------
judgment, order, decree, statute, law, rule or regulation or other restriction
of any Governmental Authority, in each case to which either of the Selling
Companies is a party or by which either of them is bound or to which any of
their respective assets or properties are subject, if any, or (iii) except with
respect to Liens granted to Purchaser's financing sources or otherwise created
by Purchaser, result in the creation or imposition of any Lien on any of the
Acquired Assets, which in the case of any of clauses (i) through (iii) above,
would prevent, delay or impair the Selling Companies' ability to consummate the
transactions contemplated by this Agreement or would have a Material Adverse
Effect.
(b) Neither the execution and delivery of the Subsidiaries Asset Purchase
Agreements nor the consummation of the other transactions contemplated thereby
nor the fulfillment of and the performance by any of the Subject Companies,
except for the Partnership and LLC, of its obligations thereunder will (with or
without notice or lapse of time) (i) contravene any provision contained in the
Organizational Documents or any resolution or similar act adopted by the board
of directors or shareholder of the Subject Companies, except for the Partnership
and LLC, (ii) conflict with, violate or result in a material breach of, or
constitute a material default under (1) except as set forth in Schedule 3.3, any
------------
Assumed Contract (as defined in the Subsidiaries Asset Purchase Agreements) or
(2) any judgment, order, decree, statute, law, rule or regulation or other
restriction of any Governmental Authority, in each case to which any of the
Subject Companies, except for the Partnership and LLC, is a party or by which
either of them is bound or to which any of their respective assets or properties
are subject, if any, or (iii) except with respect to Liens granted to
Purchaser's financing sources or otherwise created by Purchaser, result in the
creation or imposition of any Lien on any of the Acquired Assets (as defined in
the Subsidiaries Asset Purchase Agreements), which in the case of any of clauses
(i) through (iii) above, would prevent, delay or impair the ability of the
Subject Companies, except for the Partnership and LLC, to consummate the
transactions contemplated by the Subsidiaries Assets Purchase Agreements or
would have a Material Adverse Effect.
Section 3.4 No Consents. Except for (a) filings required by the HSR Act,
-----------
if any, and (b) filings and approvals set forth in Schedule 3.4 (the "Required
------------
Consents"), no notice to, filing with, or authorization, registration, consent
or approval of any Governmental Authority or other Person is necessary for the
execution, delivery or performance of this Agreement and the Subsidiaries Asset
Purchase Agreements or the consummation of the transactions contemplated hereby
or thereby by any of the Subject Companies, other than any notice, filing,
authorization, registration, consent or approval which, if not obtained, would
not have a Material Adverse Effect.
Section 3.5 LLC Ownership of Logging and Sawmills. The LLC directly owns
-------------------------------------
all of the issued and outstanding shares of Common Stock of each of Logging and
Sawmills and such shares have been duly authorized and legally issued and are
fully paid and nonassessable.
-18-
<PAGE>
Section 3.6 Financial Statements.
--------------------
(a) The Selling Companies have made available to Purchaser (i) the
unaudited consolidated balance sheets, and the unaudited consolidated statements
of earnings and cash flows of the Partnership for the years ended December 31,
1996 and December 31, 1997, and (ii) the unaudited consolidated balance sheets
of the Partnership as at September 30, 1997 (the "Most Recent Balance Sheet")
and the related unaudited consolidated statements of income and cash flows for
the nine months then ended, including the notes thereto. All of the foregoing
financial statements are hereinafter collectively referred to as the "Financial
Statements." Except as set forth in Schedule 3.6(a), the Financial Statements
---------------
have been prepared from, and are in accordance with, the books and records of
the Partnership, are correct and complete in all material respects, and fairly
present the assets and liabilities of the Partnership and the consolidated
financial position and consolidated results of operations of the Partnership as
of the dates and for the periods indicated, in each case in accordance with GAAP
(subject to the absence of notes).
(b) Except to the extent reflected or reserved against in the Financial
Statements as of and for the fiscal year ended December 31, 1997 (and the notes
thereto), or otherwise disclosed in the Most Recent Balance Sheet or Schedule
--------
3.6(b), the Partnership has no material liabilities or other obligations
- ------
(including contingent liabilities and obligations) except (i) liabilities and
obligations incurred in connection with the Company Reorganization or in the
ordinary course of business consistent with past practice since the date of the
Most Recent Balance Sheets or (ii) such liabilities or obligations that would
not be required to be reflected or reserved against in the balance sheet of the
Partnership prepared in accordance with GAAP.
Section 3.7 Books and Records. The books of account, minute books, stock
-----------------
record books and other records of the Subject Companies, all of which have been
made available to Purchaser, are complete and correct and have been maintained
in accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Subject Companies
contain accurate and complete records of all meetings held of, and action taken
by, the shareholders, the managing general partner, the Boards of Directors and
the committees of Boards of Directors of the Subject Companies, and no meeting
of any such shareholders, Board of Directors or committee has been held for
which minutes have not been prepared and are not contained in such minute books.
Section 3.8 Governmental Authorizations; Licenses. Except as set forth in
-------------------------------------
Schedule 3.8, each of the Subject Companies has complied with all applicable
- ------------
laws, rules, regulations, codes, ordinances, orders, policies and guidelines of
all Governmental Authorities with which it is or was required to comply in
connection with its respective ownership of the Acquired Assets and the assets
owned by Logging and Sawmills, except when the failure to comply would not have
a Material Adverse Effect. Except as set forth in Schedule 3.8, each of the
------------
Subject Companies has and, after giving effect to the transactions contemplated
hereby and by the Subsidiaries Assets Purchase Agreements, will transfer to
Purchaser to the extent transferable all material permits, licenses, approvals,
certificates and other authorizations and has made all notifications,
registrations, certifications and filings with all Governmental
-19-
<PAGE>
Authorities, in each case as required in connection with the ownership of the
Acquired Assets and the assets owned by Logging and Sawmills and other than
those the absence of which would not have Material Adverse Effect. Except as
set forth in Schedule 3.8, there is no action, case, proceeding or investigation
------------
pending or, to the knowledge of the Selling Companies, threatened, and to the
knowledge of the Selling Companies, no event has occurred or circumstance exists
that may give rise to or serve as a basis for the commencement of any such
action, case or proceeding or investigation, by any Governmental Authority (a)
with respect to any alleged violation by any of the Subject Companies of any
statute, law, rule, regulation, code, ordinance, order, policy or guideline of
any Governmental Authority, or (b) with respect to any alleged failure by any of
the Subject Companies to have any permit, license, approval, certification or
other authorization required in connection with the operation of the Businesses,
or (c) which, if determined adversely to any of the Subject Companies, would
reasonably be expected to prevent, delay or impair the Selling Companies'
ability to consummate the transactions contemplated by this Agreement or have a
Material Adverse Effect.
Section 3.9 Litigation. Except as set forth in Schedule 3.8 or Schedule
---------- ------------ --------
3.9, as of the date of this Agreement, there are no claims, actions,
- ---
proceedings, or investigations pending or, to the knowledge of the Selling
Companies, threatened against any of the Subject Companies or any of their
officers or directors (in their capacity as such) or any of the Acquired Real
Property, and to the knowledge of the Selling Companies, no event has occurred
or circumstance exists that may give rise to or serve as a basis for the
commencement of any such claim, action, proceeding or investigation, before any
court or Governmental Authority which, if determined adversely to such Subject
Company, officer or director, would reasonably be expected to prevent, delay or
impair the Selling Companies' ability to consummate the transactions
contemplated by this Agreement or result in a Material Adverse Effect.
Section 3.10 Taxes and Tax Payments. Except as set forth on Schedule
---------------------- --------
3.10:
(a) The Subject Companies (i) have prepared in good faith and timely filed
(or there has been filed on their behalf) all Tax Returns required to have been
filed by each of them under applicable law (other than those Tax Returns the
failure to file of which would not have a Material Adverse Effect), and all such
Tax Returns were true, correct and complete in all material respects and (ii)
have paid all material Taxes that are currently due and payable for all periods
through and including the Closing Date except for those contested in good faith
or for which adequate reserves have been established in accordance with GAAP on
the books of such Subject Companies.
(b) There are no ongoing audits or examinations of any Tax Returns of any
of the Subject Companies, and none of the Subject Companies has been notified,
formally or informally, by any taxing authority that any such audit or
examination, or any other investigation or proceeding related to Taxes or Tax
Matters, is contemplated or pending.
(c) All material Taxes for which the Subject Companies are liable for
periods through the Closing Date (whether or not the period ends for tax
purposes on the Closing
-20-
<PAGE>
Date) have been or will be paid when due or are adequately reserved against on
the books of the Subject Companies. None of the Subject Companies is a party to
any Tax sharing or Tax allocation agreement.
(d) As used in this Section 3.10, the term (i) "Taxes" includes all taxes
of any nature whatsoever and however denominated, including, without limitation,
income, franchise, sales, gross receipts, occupation, use, severance, real and
personal property, employment, excise, stamp, impost, environmental, transfer
taxes or duties and all other charges, as well as penalties and interest
thereon, imposed by any government or instrumentality, whether federal, state,
local, foreign or other; and (ii) "Tax Return" shall mean a report, return or
other information required to be supplied to any governmental entity with
respect to Taxes including, where permitted or required, combined or
consolidated returns.
(e) Purchaser and Partnership agree to allocate the Purchase Price for all
Tax and non-Tax purposes, in accordance with the rules under Section 1060 of the
Code and the Treasury Regulations promulgated thereunder, as set forth on
Exhibit B hereto.
- ---------
Section 3.11 Environmental Matters. Except as permitted by applicable
---------------------
Environmental Laws or disclosed in the Schedule 3.11, to the knowledge of the
-------------
Selling Companies: (a) no Hazardous Substances are present in, on or under the
Facilities or any other properties and assets (whether real, personal or mixed)
in which any of the Subject Companies has or had an interest or any nearby real
property which could migrate to the Facilities or other properties and assets in
which any of the Subject Companies has or had an interest, and there is no
present Release or threatened Release of any Hazardous Substances in, on or
under the Facilities or any other properties and assets (whether real, personal
or mixed) in which any of the Subject Companies has or had an interest, or any
nearby real property which could migrate to the Facilities or other properties
and assets in which any of the Subject Companies has or had an interest, whether
by the Subject Companies or by any other entity or Person; (b) none of the
Subject Companies has ever used or permitted any Person to use the Facilities or
any part thereof or any other properties and assets (whether real, personal or
mixed) in which the Subject Companies has or had an interest, for the
production, processing, manufacture, generation, treatment, handling, storage or
disposal of Hazardous Substances, except in compliance with applicable
Environmental Laws; (c) no underground or above-ground storage tanks, barrels,
wells, pits, sumps, lagoons or other containers of any kind are or have been
located in, on, under or about the Facilities or any other properties and assets
(whether real, personal or mixed) in which any of the Subject Companies has or
had an interest; (d) the Subject Companies, the Facilities and every part
thereof, and all operations and activities therein and thereon and the use and
occupancy thereof, comply and have complied with all applicable Environmental
Laws (except where any such violation would not have a Material Adverse Effect),
and none of the Subject Companies nor any other Person using or occupying the
Facilities or any part thereof is violating or has violated any Environmental
Laws or has any liability under any Environmental Laws; (e) the Subject
Companies have all permits, licenses and approvals required by all applicable
Environmental Laws for the use and occupancy of the Facilities, and all
operations and activities of the Subject Companies (except where the failure to
have any such permit, license or approval would not have a Material Adverse
Effect), and the
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Subject Companies are in full compliance with all such permits, licenses and
approvals; and all such permits, licenses and approvals were duly issued and are
in full force and effect (except where non-compliance would not have a Material
Adverse Effect); and (f) no claim, demand, action or proceeding of any kind
relating to any past or present Release or threatened Release of any Hazardous
Substances in, on or under the Facilities or any other properties and assets
(whether real, personal or mixed) in which any of the Subject Companies has or
had an interest or any past or present violation of or any liability under any
Environmental Laws by the Subject Companies has been made or commenced, or is
pending, or is being threatened by any person.
Section 3.12 Employee Matters.
----------------
(a) Schedule 3.12(a) contains a true and complete list of (i) the officers
----------------
and employees currently employed by the Subject Companies having an annual base
salary of $100,000 or more, indicating the title of and whether the employee or
officer is covered by an employment, consulting or severance agreement, and (ii)
the directors of each of the Subject Companies.
(b) Except as set forth on Schedule 3.12(b), (i) no Subject Company has
----------------
entered into any collective bargaining agreements with respect to the employees
of such Subject Company ("Company Employees"), (ii) there is no labor strike,
labor dispute, work slowdown or work stoppage or lockout pending or, to the
knowledge of the Selling Companies, threatened against or affecting any of the
Subject Companies, (iii) to the knowledge of the Selling Companies, no union
organization campaign is in progress with respect to any of the Company
Employees, and no material question concerning representation exists respecting
such employees, (iv) there is no unfair labor practice charge or complaint
pending or, to the knowledge of the Selling Companies, threatened against any of
the Subject Companies, except for such agreements, activities, charges or
complaints which would not reasonably be expected to have a Material Adverse
Effect.
Section 3.13 Employee Benefit Plans.
----------------------
(a) Schedule 3.13 lists all of the plans and programs (collectively, the
-------------
"Plans"), which the Subject Companies maintain, are a party to, contribute to or
are obligated to contribute to, on behalf of the Subject Companies' employees or
former employees and their dependents or survivors (whether or not set forth in
a written document), including without limitation:
(i) Each employee benefit plan, as defined in Section 3(3) of ERISA;
(ii) Each bonus, deferred compensation, incentive, restricted stock,
employee stock purchase, stock option, stock appreciation right, phantom
stock, supplemental pension, executive compensation, fringe benefit,
severance, termination of pay or similar plan, program, policy, perquisite
or arrangement (other than any such item provided solely pursuant to the
terms of a written or
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oral contract with any individual employee that is disclosed in Schedule
--------
3.12); or
----
(iii) Each material plan, program, agreement, policy, commitment or
other arrangement relating to the provision of any benefit described in
section 3(1) of ERISA to former employees or directors or to their
survivors, other than procedures intended to comply with the Consolidated
Omnibus Budget Reconciliation Act of 1985.
(b) None of the Subject Companies nor any ERISA Affiliate has, since
January 1, 1993, terminated, suspended, discontinued contributions to or
withdrawn from any employee pension benefit plan, as defined in section 3(2) of
ERISA that is subject to Title IV of ERISA, including (without limitation) any
multiemployer plan, as defined in section 3(37) of ERISA. For this purpose,
"ERISA Affiliate" means each person (as defined in section 3(9) of ERISA) that,
together with the Company, would be treated as a single employer under section
4001(b) of ERISA or that would be deemed to be a member of the same "controlled
group" within the meaning of section 414(b) or (c) of the Code.
(c) The Subject Companies have provided to Purchaser complete, accurate and
current copies of each of the following:
(i) The text (including amendment) of each of the Plans, to the
extent reduced to writing;
(ii) A summary of each of the Plans, to the extent not previously
reduced to writing;
(iii) With respect to each Plan that is an employee benefit plan (as
defined in section 3(3) of ERISA), the following:
(1) The most recent summary plan description, as described in
section 102 of ERISA;
(2) Any summary of material modifications that has been
distributed to participants or filed with the U.S. Department of Labor
but that has not been incorporated in an updated summary plan
description furnished under Subparagraph (1) above; and
(3) The annual report, as described in section 103 of ERISA,
and, where applicable, actuarial reports, for the three most recent
plan years for which an annual report or actuarial report has been
prepared; and
(iv) With respect to each Plan that is intended to qualify under
section 401(a) of the Code, the most recent determination letter concerning
such Plan's
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qualification under section 401(a) of the Code, as issued by the Internal
Revenue Service, and any subsequent determination letter application.
(d) With respect to each Plan that is an employee benefit plan (as defined
in section 3(3) of ERISA), the requirements of ERISA applicable to such Plan
have been substantially satisfied.
(e) Each Plan that is intended to qualify under section 401(a) of the Code
substantially meets the requirements for qualification under section 401(a) of
the Code and the regulations thereunder, except to the extent that such
requirements may be satisfied by adopting retroactive amendments under section
401(b) of the Code and the regulations thereunder or under any other provision
of applicable law. Each such Plan has been administered substantially in
accordance with its terms (or, if applicable, such terms as will be adopted
pursuant to a retroactive amendment under section 401(b) of the Code) and the
applicable provisions of ERISA and the Code and the regulations thereunder or
any other provision of applicable law.
(f) None of the Plans has any accumulated funding deficiency under section
412 of the Code and none of the Selling Companies nor any Affiliate has incurred
any material termination or withdrawal liability under Title IV of ERISA.
(g) All contributions, premiums or other payments due from any of the
Subject Companies to (or under) any Plan have been fully paid or adequately
provided for on the books and financial statements of such Subject Company in
accordance with GAAP.
Section 3.14 Proprietary Rights. Schedule 3.14 (a) identifies each
------------------ -------------
fictitious business name, patent, registered and unregistered trademark, service
mark or copyright registration (the "Intellectual Property") which has been
issued to or is currently used by any of the Subject Companies, (b) identifies
each pending patent, trademark, service mark or copyright application or
application for registration made by any of the Subject Companies, and (c)
identifies each license which any of the Subject Companies has granted to any
Person with respect to its Intellectual Property. Except as set forth in
Schedule 3.14, to the knowledge of the Selling Companies, there is not pending
- -------------
or threatened against any of the Subject Companies any claim by any Person
contesting the validity, enforceability, use or ownership of any of its
Intellectual Property. Each of the Subject Companies is the owner of all right,
title and interest in and to such Subject Company's Intellectual Property, free
and clear of all Liens and other adverse claims, and has the right to use
without payment to any other Person all of the Intellectual Property.
Section 3.15 Contracts.
---------
(a) Schedule 3.15(a) lists all written or oral contracts (except for usual
----------------
and ordinary contracts or purchase orders executed in the normal course of
business and which are not, individually or in the aggregate, material to the
Subject Companies), agreements or leases, to which, as of the date hereof, any
of the Subject Companies is a party or is otherwise bound, relating to the
ownership of the Acquired Assets or the assets owned by
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Logging and Sawmills or proper operation of the Businesses in the manner in
which such Businesses were operated prior to the date hereof, and of the types
described below (the "Assumed Contracts"):
(i) all agreements for the future purchase by any of the Subject
Companies of machinery, equipment or other personal property other than
those that are for amounts not to exceed $100,000 and those as to which any
of the Subject Companies' remaining obligation as of the date hereof does
not exceed $100,000;
(ii) all leases, pledges, conditional sale or title retention
agreements involving the payment of more than $100,000;
(iii) all agreements between any of the Subject Companies and any
Affiliate of any of the Subject Companies;
(iv) all agreements relating to the consignment or lease of personal
property (whether the Subject Company is lessee, sublessee, lessor or
sublessor) other than such agreements that provide for payments of less
than $100,000;
(v) all agreements containing commitments of warranty, suretyship,
guarantee or indemnification (except for guarantees, warranties and
indemnities provided by a Subject Company in the ordinary course of
business consistent with past practice) and those having a contract value
in the aggregate of less than $100,000;
(vi) all mortgages, indentures, notes, bonds or loan agreements
relating to indebtedness incurred or provided by any of the Subject
Companies;
(vii) all licensing agreements or other contracts with respect to
Intellectual Property, including, without limitation, agreements with
current or former employees, consultants or contractors regarding the
appropriation or the nondisclosure of any Intellectual Property;
(viii) all collective bargaining agreements and other contracts to or
with any labor union or other employee representative of a group of
employees;
(ix) all joint ventures, partnerships and other similar agreements
(however named) involving a share of profits, losses, costs or liabilities
by such Subject Company with any other Person where the investment by such
Subject Company exceeds $100,000;
(x) all agreements containing covenants that in any way purport to
restrict the business activity of any of the Subject Companies or limit the
freedom of any of the Subject Companies to engage in any line of business
or to compete with any Person;
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<PAGE>
(xi) all material powers of attorney that are currently effective and
outstanding;
(xii) all agreements entered into other than in the ordinary course
of business consistent with past practice that contain or provide for an
express undertaking by any of the Subject Companies to be responsible for
consequential damages and that are not covered by the Assumed Contracts
listed in Schedule 3.15(a) with respect to the Assumed Contracts of the
----------------
type described in clauses (i) through (xi) above or clause (xiii) below;
(xiii) any agreement other than those covered by clauses (i) through
(xii) above which would reasonably be expected to involve payment or
receipt by any of the Subject Companies of more than $100,000 in the
aggregate in any calendar year; and
(xiv) all material amendments, supplements and modifications (whether
oral or written) in respect of any of the foregoing.
(b) None of the other parties to any such Assumed Contracts has given
written notice to any of the Subject Companies that it intends to renegotiate,
terminate or materially alter the provisions of such Assumed Contracts either as
a result of transactions contemplated hereby or otherwise, and none of the
Subject Companies has given notice to any other party to any such Assumed
Contract that it intends to renegotiate, terminate or materially alter the
provisions of any such Assumed Contract.
(c) No Subject Company is in material default, nor has any of the Subject
Companies given or received notice of, any default or claimed, purported or
alleged default, under any of the Assumed Contracts. Except as set forth in
Schedule 3.15(c), (i) each of the Subject Companies is, and at all times has
- ----------------
been, in full compliance in all material respects with all applicable terms and
requirements of each Assumed Contract under which such Subject Company has or
had any obligation or liability or by which such Subject Company or any of the
assets owned or used by such Subject Company is or was bound; (ii) to the
knowledge of the Selling Companies, each other Person that has or had any
obligation or liability under any Assumed Contract under which such Subject
Company has or had any rights is, and at all times since January 1, 1997 has
been, in full compliance in all material respects with all applicable terms and
requirements of such Assumed Contract; and (iii) no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with or result in a material violation or breach of, or
give any of the Subject Companies or other Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify, any Assumed Contract.
(d) Each of the Assumed Contracts is valid and binding on the Subject
Company party thereto, in full force and effect in all material respects and,
except for any consents, waivers or approvals or giving any notice listed in
Schedule 3.15(d), is assignable to and
- ----------------
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<PAGE>
assumable by Purchaser, so that immediately after the Closing, Purchaser will be
entitled to the full benefits thereof.
(e) Correct and complete copies of all Assumed Contracts, including any
material amendments thereto, have been delivered or made available to Purchaser.
Section 3.16 Real Property.
-------------
(a) All of the Owned Real Property is owned by the Subject Companies free
and clear of all Liens except (i) Liens for taxes not yet due and payable, (ii)
statutory Liens for carriers, warehousemen, mechanics, workmen and materialmen
for liabilities and obligations incurred in the ordinary course of business that
are not yet delinquent or are being contested in good faith, (iii) such defects,
irregularities, encumbrances and other imperfections of title as normally exist
with respect to property similar in character and that do not and would not,
individually or in the aggregate, have or result in a Material Adverse Effect,
and (iv) as disclosed in Schedule 3.16(a) ("Permitted Liens"). All of the Owned
----------------
Real Property is free of defects, irregularities, encumbrances and other
imperfections of title (other than Liens, which are addressed in the preceding
sentence) (collectively, "Other Encumbrances"), except such Other Encumbrances
that do not materially impair (i) the value of the Owned Real Property (taken as
a whole); (ii) the present use of any material portion of the Owned Real
Property, or (iii) the transferability or marketability of any material portion
of Owned Real Property. No third parties have any rights of first refusal,
rights of first offer or other rights to purchase any of the Owned Real
Property.
(b) Except as set forth in Schedule 3.16(b), there are (i) no presently
----------------
effective material leases, lease amendments, lease guaranties, work letter
agreements, improvement agreements, subleases, assignments, licenses,
concessions or other agreements with respect to the leasing, use or occupancy of
the Owned Real Property or any part thereof or (ii) no Persons leasing, using or
occupying the Owned Real Property or any part thereof except Company and the
Subject Companies.
(c) To the knowledge of the Company, Schedule 3.16(c) is an accurate and
----------------
complete list of all presently effective building permits, certificates of
occupancy, and other necessary certificates, permits, licenses and approvals
issued to the Subject Companies relating to the design, construction, ownership,
operation, occupancy, use, management, operation, maintenance or repair of the
Owned Real Property.
(d) Schedule 3.16(d) lists the LLC Leased Real Property, the Partnership
----------------
Leased Real Property and leases of real property pursuant to which either of
Logging or Sawmills is obligated to make rental payments in excess of $100,000
per annum under the applicable lease (the "Leased Real Property"), setting forth
the landlord and tenant for each parcel of Leased Real Property. All of the
Leased Real Property is held by the Subject Company thereof pursuant to valid
and binding leases therefor that are in full force and effect and enforceable by
the Subject Company thereof that is party thereto in accordance with their
respective terms, except where any lack of enforceability, individually or in
the aggregate, would not have a Material Adverse Effect. The Subject Companies
have previously provided
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<PAGE>
or made available to Purchaser complete and correct copies of all written leases
of Leased Real Property. Except as set forth in Schedule 3.16(d), none of the
----------------
Subject Companies has received any written notice of default or event of default
under any lease of Leased Real Property.
(e) To the knowledge of the Company, except as set forth in Schedule
--------
3.16(e), (i) the Acquired Real Property and every part thereof and (as of the
- -------
Closing Date) the use and occupancy of the Acquired Real Property are in
compliance with all applicable building, earthquake, zoning, land use, health,
fire, safety, occupational safety and health, access and accommodations for the
physically handicapped, subdivision, energy and resource conservation or similar
laws, statutes, rules, regulations and ordinances and all covenants, conditions
and restrictions applicable to the Acquired Real Property, except where the
failure to be in compliance would not have a Material Adverse Effect and (ii)
none of the Subject Companies has received any notice, citation or other claim
alleging any violation of any such law, statute, rule, regulation, ordinance,
covenant, condition or restriction.
(f) The Acquired Real Property constitutes all of the real property owned,
leased or otherwise utilized in connection with and material to the Businesses.
Section 3.17 Equipment. Except as set forth in Schedule 3.17, the
--------- -------------
Partnership Equipment, the LLC Equipment and all equipment, inventory and other
personal property used in the operation of the Logging Business and the Sawmills
Business are in normal operating condition, ordinary wear and tear and
obsolescence excepted, free from any known defects except such defects as do not
substantially interfere with the continued use thereof in the conduct of normal
operations or would not have a Material Adverse Effect, and comply with all
applicable occupational health and safety laws, statutes, rules and regulations,
except where the failure to comply with such laws, statutes, rules or
regulations would not have a Material Adverse Effect. Except as set forth in
Schedule 3.17, the Subject Companies, together, have good and marketable title
- -------------
to all such personal property, free and clear of all Liens, except Liens for
current taxes, assessments and other governmental charges not yet due and
payable or being contested in good faith by the Subject Companies in appropriate
proceedings (and for which appropriate reserves have been established on the
books of such Subject Company), Liens of carriers, warehousemen, mechanics,
laborers and materialmen incurred in the ordinary course of business for sums
not yet due, and such Liens, if any, as in the aggregate, do not materially
interfere with the use of such property or otherwise materially impair business
operations or would not have a Material Adverse Effect.
Section 3.18 Insurance.
---------
(a) The Selling Companies have delivered or made available to Purchaser:
(i) true and complete copies of all policies of insurance to which
any of the Subject Companies is a party or under which any of the Subject
Companies, or any director of any of the Subject Companies, is or has been
covered at any time within the two years preceding the date of this
Agreement;
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(ii) true and complete copies of all pending applications for
policies of insurance;
(iii) any statement by the auditor of the Subject Companies'
financial statements with regard to the adequacy of such entity's coverage
or of the reserves for claims;
(iv) true and complete copies of any self-insurance arrangement by or
affecting any of the Subject Companies, including descriptions of any
reserves established thereunder;
(v) true and complete copies of any contract or arrangement, other
than a policy of insurance, for the transfer or sharing of any risk by any
of the Subject Companies;
(vi) true and complete copies of all contracts of the Subject
Companies with any Person with respect to insurance (including leases and
service agreements);
(vii) a summary of the loss experience under each insurance policy;
(viii) a statement describing each claim under an insurance policy
for an amount in excess of $100,000, which sets forth:
(A) the name of the claimant;
(B) description of the policy by insurer, type of insurance, and
period of coverage; and
(C) the amount and a brief description of the claim; and
(ix) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(b) Except as set forth on Schedule 3.18(b):
----------------
(i) All policies to which any of the Subject Companies is a party or
that provide coverage to any of the Subject Companies, or any director or
officer of any of the Subject Companies:
(A) are valid, outstanding and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
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<PAGE>
(C) taken together, provide adequate insurance coverage for the
assets and the operations of the Subject Companies;
(D) will not terminate or be subject to termination as a result
of the Merger; and
(E) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any of the Subject
Companies.
(ii) The Subject Companies have not received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights, or (B) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform
its obligations thereunder.
(iii) The Subject Companies have paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy
to which any of the Subject Companies is a party or that provides coverage
to any of the Subject Companies or a director or officer thereof.
(iv) The Subject Companies have given notice to the insurer of all
claims that may be insured thereby.
Section 3.19 Transactions With Affiliates. Except as set forth on
----------------------------
Schedule 3.19, none of the Subject Companies' partners, officers or employees
- -------------
nor any Person in which any such member, partner, officer or employee owns five
percent or more of the equity interest nor any of their respective Affiliates is
or, since August 1, 1995, was, involved in any business arrangement or
relationship with any of the Subject Companies (whether written or oral), and
none of the Subject Companies' members, partners, officers or employees nor any
of their respective Affiliates owns any property or right, tangible or
intangible, which is necessary to the Businesses.
Section 3.20 Absence of Certain Changes and Events. Except as set forth
-------------------------------------
in Schedule 3.20 and except for the Company Reorganization and as necessary or
-------------
advisable to obtain or preserve the Company's status as a REIT, since the date
of the Most Recent Balance Sheets, the Subject Companies have conducted their
respective Businesses in the ordinary course of business consistent with past
practice, and there is not and has not been: (a) any Material Adverse Change to
any of the Subject Companies or any material adverse change in the condition of
the Acquired Assets, (b) any distribution or dividend made by any of the Subject
Companies, except for distributions or dividends required to be made by any of
the Subject Companies to obtain and preserve the Company's status as a REIT, (c)
any material repurchase of equity securities by any of the Subject Companies,
(d) any payment or increase by any of the Subject Companies of any salaries or
other compensation to any shareholder, partner, director, officer or (except in
the ordinary course of business consistent
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<PAGE>
with past practice) employee or entry into any employment, severance, or similar
contract with any director, officer or employee (other than in the ordinary
course of business consistent with past practice), (e) any adoption of, increase
in the payments to or benefits under, any profit sharing, deferred compensation,
savings, insurance, pension, retirement or other employee benefit plan for or
with any employees of any of the Subject Companies (other than in the ordinary
course of business consistent with past practice), (f) any condition, event or
occurrence which could reasonably be expected to prevent or materially delay
either of the Subject Companies consummating the transactions contemplated by
this Agreement or the Subsidiaries Asset Purchase Agreements or (g) any material
change in accounting methods, principles or practice of any of the Subject
Companies.
Section 3.21 Acquired Assets Are All Assets Used by the Selling Companies.
------------------------------------------------------------
Except for those assets excluded pursuant to Section 2.3, the Acquired Assets
and the assets to be owned by Logging and Sawmills are all of the real and
personal property (or interests therein), machinery, tools, equipment,
inventory, intellectual property rights and other property or interest, of any
type or nature, in which the Subject Companies, or any of their Affiliates has
any right, title or interest and which has been used in the operation of the
Businesses prior to the date hereof or is necessary to permit Purchaser to
operate the Businesses in the manner in which they are operated by the Subject
Companies prior to the Closing Date.
Section 3.22 Disclosure. No representation or warranty of the Selling
----------
Companies in this Agreement and no statement in the Schedules hereto omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstance in which they were made, not misleading.
Section 3.23 Definition of Selling Company Knowledge. As used in this
---------------------------------------
Agreement, the phrase "to the knowledge of the Selling Companies" (or words of
similar import) means the actual knowledge of the President, the Treasurer, the
Secretary, the Vice President of LLC and the President of Sawmills.
Section 3.24 As Is. THE PURCHASER, ON THE ONE HAND, AND THE SELLING
-----
COMPANIES, ON THE OTHER, HEREBY AGREE THAT, EXCEPT TO THE EXTENT SET FORTH
HEREIN, IN THE SCHEDULES HERETO OR IN ANY INSTRUMENT DELIVERED IN CONNECTION
HEREWITH, (A) THE ACQUIRED ASSETS ARE BEING SOLD ON AN "AS IS, WHERE IS" BASIS
AND (B) NONE OF THE SELLING COMPANIES MAKES ANY WARRANTIES, EXPRESS OR IMPLIED,
OF MERCHANTABILITY, FITNESS OR OTHERWISE WITH RESPECT TO THE ACQUIRED ASSETS OR
OTHER PROPERTY.
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ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
PURCHASER
---------
Purchaser represents and warrants to the Selling Companies as follows:
Section 4.1 Organization. Purchaser is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to own or lease its property and
assets and to carry on its business as presently conducted.
Section 4.2 Authorization. Purchaser has the corporate power and
-------------
authority to execute and deliver this Agreement and each other agreement or
instrument to be executed in connection herewith and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Purchaser, and no other corporate proceedings on
the part of Purchaser are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement and each other agreement or
instrument to be executed in connection herewith have been duly authorized,
executed and delivered by Purchaser and constitute a valid and binding agreement
of Purchaser, enforceable against Purchaser in accordance with its terms, except
as such may be subject to or limited by bankruptcy, insolvency, reorganization
or other laws relating to or affecting creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.3 Non-contravention. The execution, delivery and performance by
-----------------
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby will not (a) contravene any provision contained in the
certificate of incorporation or bylaws of Purchaser, (b) conflict with, violate
or result in a material breach (with or without the lapse of time, the giving of
notice or both) under (i) any material contract, agreement, commitment,
indenture, mortgage, lease, pledge, note, bond, license, permit or other
instrument or obligation or (ii) any judgment, order, decree, statute, law, rule
or regulation or other restriction of any Governmental Authority, in each case
to which Purchaser is a party or by which it is bound or to which any of its
assets or properties are subject.
Section 4.4 No Consents. Except for filings under the HSR Act, if any, no
-----------
notice to, filing with, or authorization, registration, consent or approval of
any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby by Purchaser.
Section 4.5 Litigation. There are no actions, suits, proceedings, orders
----------
or investigations pending or threatened against or affecting Purchaser at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which would reasonably be
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<PAGE>
expected materially adversely to affect Purchaser's performance under this
Agreement or the consummation of the transactions contemplated hereby.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
--------------------------------
Section 5.1 Access and Information.
----------------------
(a) From and after the date hereof, each of the Selling Companies agrees to
provide, and to cause the other Subject Companies to provide, to Purchaser and
its agents and representatives with reasonable access during normal business
hours to the premises, properties, contracts, commitments, books, records and
other information of each of the Subject Companies, upon reasonable notice, as
the Purchaser and its agents and representatives shall reasonably request from
time to time. The Purchaser agrees to conduct and agrees to cause its agents
and representatives to conduct, any such inquiries with reasonable discretion
and sensitivity to the relationships of each of the Subject Companies with their
respective employees, customers and suppliers. The foregoing notwithstanding,
prior to the Closing neither the Purchaser nor any of its representatives or
agents shall contact any employee, customer or supplier of any of the Subject
Companies without the prior written consent of the Selling Companies.
(b) Each of Purchaser and the Selling Companies agrees not to disclose or
permit the disclosure for any purpose other than the transactions contemplated
hereby of any non-public, confidential or proprietary information furnished to
such party by another party hereto in connection with the transactions
contemplated by this Agreement, provided that such disclosure may be made (i) to
any Person who is an officer, director or employee of such party, or to counsel,
accountants and financial advisors to such party solely for their use in
evaluating the transactions contemplated by this Agreement, (ii) with the prior
written consent of all parties to this Agreement, (iii) pursuant to a subpoena
or order issued by a court, arbitrator or Governmental Authority, (iv) if the
Selling Companies deem it necessary or appropriate in the registration statement
on Form 10 that the Company files with the SEC or (v) if Purchaser deems it
necessary or appropriate in the registration statement on Form S-11 that Newco
files with the SEC.
Section 5.2 Conduct of Business by the Selling Companies. From the date
--------------------------------------------
hereof to the Closing Date, each of the Selling Companies will, and will cause
Logging and Sawmills to, except as otherwise expressly provided herein or
consented to in writing by the Purchaser (which consent shall not be
unreasonably withheld or delayed):
(a) conduct its Business only in the ordinary and regular course and
consistent with past practice, except as may be required to obtain and preserve
the status of the Company as a REIT;
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(b) use commercially reasonable efforts to keep in full force and effect
its limited partnership, limited liability company or corporate existence and
all material rights, franchises and goodwill relating to its Business;
(c) use commercially reasonable efforts to preserve its present
relationships with customers, suppliers, contractors distributors, employees and
business associates; provided, however, that nothing in this paragraph (c) shall
-------- -------
require any Subject Company to take any action that would cause the Company to
be unable to qualify as a REIT;
(d) perform in all material respects all of its obligations under all
notes, bonds, mortgages, indentures, licenses, leases, contracts, agreements or
other instruments or obligations to which it is a party or by which it or any of
its respective properties or assets may be bound and not enter into, assume or
amend any of the foregoing other than in the ordinary course of business;
(e) take all commercially reasonable efforts to cause to be filed with the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the Federal Trade Commission (the "FTC") promptly following the date hereof the
notification and report form (the "Report") required under the HSR Act, if any,
with respect to the transactions contemplated hereby and to cooperate with
Purchaser to the extent necessary in the preparation of its Report, and to
request early termination of the waiting period required by the HSR Act and, if
requested, promptly to amend or furnish additional information thereunder
requested by the Antitrust Division and/or the FTC.
(f) promptly inform the Purchaser in writing of any material breach of or
change in the representations and warranties contained in Article III hereof;
(g) not acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any Person or division thereof;
(h) not sell, lease, license, mortgage or otherwise encumber or subject to
any material Lien or otherwise dispose of any of its properties or assets except
in the ordinary course of business consistent with past practice or in
transactions involving consideration not exceeding $50,000 in any one case or
$100,000 in the aggregate;
(i) not (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any of its debt securities or
warrants or other rights to acquire any such debt securities, guarantee any debt
securities of another Person or agree to maintain the financial condition of any
Person or incur any liability which would be required to be recorded as a long-
term obligation on a balance sheet of such Subject Company prepared as of the
Closing Date, except for borrowings of up to $35,000,000 by LLC and $5,000,000
by each of the other Subject Companies under its revolving credit facilities
incurred in the ordinary course of business consistent with past practice, or
(ii) make any loans, advances or capital contributions to, or investments in,
any other Person;
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(j) not terminate, establish, adopt, enter into, make any new grants or
awards under, amend or otherwise modify any Plans except as required by law or
pursuant to the terms of a collective bargaining agreement;
(k) not increase the salary, wage or base compensation of any directors,
officers or employees other than in the ordinary course of business consistent
with past practice;
(l) not enter into any contract or other binding agreement that is not
terminable by it without penalty upon six months' notice, or that obligates it
to make annual expenditures in excess of $10,000 or terminate or modify in any
material respect any material contract to which it is a party or waive, release
or assign any material rights or claims;
(m) not enter into any contract, or take any action, that would reasonably
be expected to jeopardize the current or future status of the Company as a REIT
(without regard to the transactions contemplated by the Merger Agreement);
(n) except in the ordinary course of business consistent with past
practice, not sell, assign, transfer, license or permit to lapse any material
rights with respect to its Intellectual Property;
(o) maintain in good repair in accordance with past practice and good and
prudent practice all of the material personal property assets used in its
Business, and replace, in accordance with past practice and prudent practice,
any of such assets that may be damaged or destroyed;
(p) maintain supplies of inventories used in its Business in the ordinary
course of business and in accordance with past practice;
(q) refrain from collecting any of the accounts receivable falling within
the scope of the Acquired Assets except in accordance with its past practice;
(r) not perform or take any other action or incur or permit to exist any
other acts, transactions, events or occurrences of the type which would
materially adversely affect the Acquired Assets to be transferred to Purchaser
by it or have a Material Adverse Effect; and
(s) not commit or agree to take any actions prohibited by the foregoing;
provided, however, that nothing in this Agreement shall prohibit the Subject
- -------- -------
Companies from taking any action required to obtain or preserve the Company's
status as a REIT or to consummate or make effective the transactions
contemplated by the Company Reorganization.
Section 5.3 Commercial Efforts; Further Assurances.
--------------------------------------
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use its commercially reasonable efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable
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laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. Purchaser and each of the Selling Companies
will use, and the Selling Companies shall cause the other Subject Companies to
use, their respective commercially reasonable efforts to obtain all consents and
other approvals of all Governmental Authorities and third parties necessary to
the consummation of the transactions contemplated by this Agreement and the
Subsidiaries Asset Purchase Agreements.
(b) In the event any claim, action, suit, investigation or other proceeding
by any Governmental Authority or other Person is commenced that questions the
validity or legality of any of the transactions contemplated hereby or seeks
damages in connection therewith, the parties agree to cooperate and use
commercially reasonable efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order is issued
in any such action, suit or other proceeding, to use commercially reasonable
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the
transactions contemplated hereby.
(c) (i) Each party agrees that it shall, as soon as reasonably practicable
after it learns of the existence of any facts or circumstances causing any of
the representations and warranties herein made, respectively, by the Selling
Companies or the Purchaser (including, without limitation, those contained in
Article III or Article IV), to have been incorrect when made or to have
thereafter become incorrect (whether through its discovery of an inadvertent,
good faith error at the time this Agreement was signed or the happening
thereafter of any event or occurrence), deliver to the others written notice of
such incorrect representations and warranties; and (ii) each party shall give
prompt written notice to the others of any failure of the Selling Companies or
the Purchaser, as the case may be, to comply with or satisfy any material
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement.
Section 5.4 Public Announcements. The timing and content of all
--------------------
announcements regarding any aspect of this Agreement to the financial community,
any governmental Authority, employees or the general public shall be mutually
agreed upon in advance by the parties hereto; provided, that each party hereto
--------
may make any such announcement that it in good faith believes, based on advice
of counsel, is necessary or advisable in connection with any requirement of law
or regulation, it being understood and agreed that each party shall promptly
provide the other parties hereto with copies of any such announcement prior
thereto.
Section 5.5 Employee Benefits. Purchaser shall offer employment to all
-----------------
employees of the Selling Companies at the same salaries or wages as in effect
immediately prior to the Closing Date other than those identified on a schedule
to be delivered by Purchaser to the Selling Companies at least thirty days prior
to Closing. At any time after the Closing Date, Purchaser, in its sole
discretion, may extend to the employees of the Selling Companies who become
employees of Purchaser (each, a "Hired Employee," and collectively, the "Hired
Employees"), the employee benefit plans and programs, including tax-qualified
defined benefit and defined contribution plans, applicable to similarly situated
employees of Purchaser and its Subsidiaries. Until that time, Purchaser shall
maintain employee benefit plans and programs for the Hired Employees of the
Selling Companies with terms no less favorable to such
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employees than the Plans in place as of the Closing Date for such employees and
shall continue to make all contributions to such plans for such period on a
basis consistent with the Selling Companies' past practices. The Hired
Employees shall be given credit for all purposes under all of Purchaser's
pension, welfare and fringe benefit plans, including for purposes of determining
vacation and severance pay, for the period during which such employee was
employed by any of the Selling Companies or any ERISA Affiliate; provided,
--------
however, that in no event will Purchaser be required to credit service to a
- -------
Hired Employee to the extent that such credit would result in a duplication of
benefits. Hired Employees shall be entitled to participate in the welfare plans
maintained by Purchaser for the Hired Employees effective upon the Closing Date
without any waiting periods, any evidence of insurability or the application of
any preexisting condition restrictions, and counting claims incurred prior to
the Closing Date for purposes of applying co-payments, deductibles, out-of-
pocket maximums and other such matters. Effective upon the Closing Date,
Purchaser shall become the plan sponsor of all of the Plans.
Section 5.6 Indemnification.
---------------
(a) The Purchaser agrees to indemnify the Selling Companies from and
against the entirety of any Adverse Consequences the Selling Companies shall
suffer caused by any liability or obligation of the Selling Companies which is
an Assumed Liability.
(b) The Selling Companies jointly and severally, agree to indemnify the
Purchaser from and against any Adverse Consequences the Purchaser shall suffer
caused by any liability or obligation of the Selling Companies which is not an
Assumed Liability (including any liability of the Selling Companies which is not
an Assumed Liability but which becomes a liability of the Purchaser under any
bulk transfer law of any jurisdiction, under any common law doctrine or
statutory provision of de facto merger or successor or transferee liability, or
otherwise by operation of law).
(c) The provisions of this Section 5.6 shall survive the Closing.
Section 5.7 Limited Partners' Consent.
-------------------------
(a) The Partnership shall take all action necessary in accordance with
applicable law and the Limited Partnership Agreement to convene a meeting of the
Additional Limited Partners (as defined in the Limited Partnership Agreement)
(the "Limited Partners' Meeting") within 45 days after the date hereof or as
soon thereafter as is practicable for the purpose of voting upon the transfer
(the "Transfers") of the Common Stock of Logging and Sawmills contemplated by
this Agreement as required by Section 6.12(c) of the Limited Partnership
Agreement. The Partnership shall submit for approval of the Additional Limited
Partners the matters to be voted upon at the Limited Partners' Meeting and shall
use its reasonable best efforts (including, without limitation, by soliciting
proxies for such approval), to the extent permitted by applicable law, to obtain
the vote necessary to approve the Transfers under the Limited Partnership
Agreement.
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(b) The Partnership agrees that any proxy statement (and any amendment or
supplement thereto) used in connection with the solicitation of proxies for
approval of the Transfers at the Limited Partners' Meeting, at the date of
mailing to the Additional Limited Partners and at the time of the Limited
Partners Meeting, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE VI
CLOSING; CONDITIONS TO CLOSING
------------------------------
Section 6.1 Conditions to the Obligations of All Parties. The Closing of
--------------------------------------------
the transaction contemplated hereby shall take place immediately prior to the
Effective Time under the Merger Agreement. The respective obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver at or prior to the Closing of each of the
following conditions:
(a) Change in Law. No statute, rule or regulation shall have been enacted
-------------
or issued by any Governmental Authority that makes the consummation of the
transactions contemplated by this Agreement or the Subsidiaries Asset Purchase
Agreements illegal.
(b) Injunction. On the Closing Date, there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any nature
issued and outstanding by a court or Governmental Authority of competent
jurisdiction to the effect that the transactions contemplated by this Agreement
or the Subsidiaries Asset Purchase Agreements may not be consummated as herein
or therein provided, and no proceeding or lawsuit shall have been commenced by
any Governmental Authority for the purpose of obtaining any such injunction,
writ or preliminary restraining order.
(c) Filings and Consents. All material consents, authorizations, orders or
--------------------
approvals of, and filings or registrations with, any Governmental Authority that
are required in connection with the execution and delivery of this Agreement or
the Subsidiaries Asset Purchase Agreements and the other documents to be
executed in connection herewith and therewith and the consummation of the
transactions contemplated hereby and thereby shall have been obtained or made
and shall be in full force and effect.
(d) Limited Partner Approval of Sale of Common Stock. The sale and
------------------------------------------------
transfer of the Common Stock of Logging and Sawmills shall have been approved by
the requisite vote of the Additional Limited Partners (as defined in the Limited
Partnership Agreement) in accordance with Section 6.12(c) of the Limited
Partnership Agreement.
(e) HSR Act Waiting Period. Any applicable waiting periods (and any
----------------------
extension thereof) related to the HSR Act with respect to the transactions
contemplated by this
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Agreement or by the Subsidiaries Asset Purchase Agreements shall have expired or
otherwise have been terminated.
Section 6.2 Conditions to the Obligations of the Purchaser. The
----------------------------------------------
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
------------------------------
made by the Selling Companies in this Agreement and the Schedules hereto that
are qualified by materiality shall be true, correct and complete as of the
Closing Date as though such representations and warranties were made as of the
Closing Date (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date) and all representations
and warranties made by the Selling Companies in this Agreement and the Schedules
hereto that are not so qualified shall be true, correct and complete in all
material respects as of the Closing Date as though such representations and
warranties were made as of the Closing Date (or on the date when made in the
case of any representation or warranty which specifically relates to an earlier
date). Purchaser shall have received certificates, dated the Closing Date, to
such effect, signed on behalf of the Selling Companies by their respective duly
authorized officers.
(b) Performance by the Selling Companies. The Selling Companies shall have
------------------------------------
duly performed or complied with, in all material respects, all of the covenants,
obligations and conditions to be performed or complied with by it under the
terms of this Agreement prior to or at the Closing.
(c) Consents. Purchaser shall have received evidence reasonably
--------
satisfactory to it that the Subject Companies have received the Required
Consents.
(d) Instruments of Transfer. The Selling Companies shall have delivered to
-----------------------
Purchaser on the Closing Date the Bill of Sale, any deeds and any other similar
instruments of conveyance and transfer with respect to the Acquired Assets as
may be reasonably requested by Purchaser and any payments required to be made
pursuant to the provisos in Sections 2.6(a) and (b).
(e) Legal Opinions. Purchaser shall have received from counsel reasonably
--------------
satisfactory to Purchaser legal opinions in form reasonably satisfactory to
Purchaser covering the matters set forth on Exhibit C.
---------
(f) Title Insurance. The Title Company shall be unconditionally and
---------------
irrevocably committed to issue to Purchaser one or more American Land Title
Association Owner's Policies Form B-1970 (Amended 10/17/70) of title insurance,
with liability equal to the value (as reasonably determined by Purchaser and the
respective Selling Company) of the Owned Real Property covered by such policy,
containing all endorsements reasonably requested by Purchaser, and insuring
Purchaser that fee simple absolute title to the Owned Real Property is vested in
Purchaser and that a valid leasehold estate is vested in Purchaser with respect
to the Leased Real Property, subject only to the Permitted Liens. If more than
one policy is issued,
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Purchaser also shall require that all policies contain tie-in endorsements, with
a combined policy limit equal to the value of all of the Owned Real Property.
Section 6.3 Conditions to the Obligations of the Selling Companies. The
------------------------------------------------------
obligations of the Selling Companies to consummate the transactions contemplated
by this Agreement shall be subject to satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
------------------------------
made by the Purchaser in this Agreement and the Schedules hereto shall be true,
correct and complete on the date hereof and as of the Closing Date as though
such representations and warranties were made as of the Closing Date (or on the
date when made in the case of any representation or warranty which specifically
relates to an earlier date), and the Purchaser shall have duly performed or
complied with, in all material respects, all of the covenants, obligations and
conditions to be performed or complied with by it under the terms of this
Agreement prior to or at the Closing. The Selling Companies shall have received
a certificate, dated the Closing Date, to such effect, signed on behalf of the
Purchaser by its Chief Executive Officer.
(b) Payment; Instruments of Assumption. Purchaser shall have made the
----------------------------------
payments required to be made at Closing pursuant to Section 2.6 hereof and shall
have executed the Bill of Sale.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to Closing:
(a) by written consent of all of the parties hereto;
(b) by the Selling Companies if there has been a material breach by
Purchaser of any representation, warranty or covenant contained in this
Agreement that is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by the Selling Companies to Purchaser
committing such breach;
(c) by Purchaser if there has been a material breach by either of the
Selling Companies of any representation, warranty or covenant contained in this
Agreement that is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by Purchaser to the party committing such
breach;
(d) by any of the parties hereto, if any Governmental Authority shall have
issued an order, degree or ruling or taken any other action restraining,
enjoining or otherwise
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prohibited the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable;
(e) by the Selling Companies or Purchaser, if the Merger Agreement shall
have been terminated prior to closing thereunder; or
(f) by the Selling Companies or Purchaser, if the approval required by
Section 6.1(d) shall not have been obtained at the Limited Partners' Meeting.
Section 7.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 7.1 hereof, all rights and obligations of the parties
hereunder shall terminate and no party shall have any liability to the other
party, except for obligations of the parties hereto in Sections 5.1(b) and 5.4,
which shall survive the termination of this Agreement, and except that nothing
herein will relieve any party from liability for any willful breach of any
representation, warranty, agreement or covenant contained herein prior to such
termination.
Section 7.3 Amendments. This Agreement may not be amended except by an
----------
instrument in writing signed on behalf of each of the parties hereto.
Section 7.4 Termination Fee. No party to this Agreement shall be liable
---------------
for money damages for breach of this Agreement except to the extent that such
party is entitled to a Termination Fee (as defined in the Merger Agreement)
pursuant to Section 7.5 of the Merger Agreement.
Section 7.5 Waiver. At any time prior to the Closing, any term, provision
------
or condition of this Agreement may be waived in writing (or the time for
performance of any of the obligations or other acts of the other parties hereto
may be extended) by the party that is entitled to the benefits thereof.
ARTICLE VIII
BULK SALES COMPLIANCE
---------------------
Section 8.1 Bulk Sales Compliance. Purchaser hereby waives compliance by
---------------------
each of the Selling Companies with the provisions of the Bulk transfer
provisions of Mississippi law, and the Selling Companies warrant and agree to
pay and discharge when due all claims of creditors which could be asserted
against Purchaser by reason of such noncompliance to the extent that such
liabilities are not specifically assumed by Purchaser under this Agreement. The
Selling Companies, jointly and severally, shall indemnify and agree to hold
Purchaser harmless from, against and in respect of (and shall on demand
reimburse Purchaser for) any loss, liability, cost or expense, including,
without limitation, attorneys' fees, suffered or incurred by Purchaser by reason
of the failure of the Selling Companies to pay or discharge such claims arising
out of compliance with said Bulk transfer provisions. The Selling Companies
shall furnish to Purchaser prior to Closing such evidence as Purchaser may
reasonably request to confirm their compliance with the provisions of this
Article.
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ARTICLE IX
MISCELLANEOUS
-------------
Section 9.1 Survival of Representations and Warranties. The
------------------------------------------
representations, warranties and covenants of Purchaser to the Selling Companies
and of the Selling Companies to Purchaser in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Closing;
provided that the representations, warranties and covenants of such parties set
forth in Sections 5.1(b), 5.4, 5.6 and 8.1 shall survive the Closing.
Section 9.2 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be delivered or sent
personally, by facsimile or by certified, registered or express air mail,
postage prepaid, and shall be deemed given when so delivered or sent personally
or by facsimile or, if by mail, two days after the date of mailing, as follows:
If to the Purchaser:
Potlatch Corporation
601 West Riverside Avenue
Spokane, Washington 99201
Facsimile: (509) 835-1560
Attention: Chief Executive Officer
with a copy to (which shall not constitute
notice to the Purchaser):
Pillsbury Madison & Sutro LLP
235 Montgomery Street
P.O. Box 7880
San Francisco, California 94120-7880
Facsimile: (415) 983-1200
Attention: Blair W. White, Esq.
If to either of the Selling Companies:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Facsimile: (901) 526-8842
Attention: President
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with a copy to (which shall not constitute
notice to the Selling Companies):
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Facsimile: (202) 942-5999
Attention: Dennis G. Lyons, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 9.3 Exhibits and Schedules. All exhibits and schedules hereto, or
----------------------
documents expressly incorporated into this Agreement, are hereby incorporated
into this Agreement and are hereby made a part hereof as if set out in full in
this Agreement.
Section 9.4 Expenses.
--------
(a) Regardless of whether the transactions provided for in this Agreement
are consummated and except as provided in this Section 9.4 and Section 5.6, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses (whether or not the transactions hereby are consummated).
(b) Purchaser shall pay all filing fees, if any, under the HSR Act.
(c) Purchaser shall pay all sales and use taxes, if any, imposed on the
transfer of the Acquired Assets pursuant to this Agreement, whether such taxes
are assessed initially against Purchaser or the Selling Companies.
Section 9.5 Time of the Essence; Computation of Time. Time is of the
----------------------------------------
essence for each and every provision of this Agreement.
Section 9.6 Governing Law; Consent to Jurisdiction. This Agreement shall
--------------------------------------
be governed by, and construed in accordance with, the internal laws of the State
of Delaware, without reference to the choice of law or conflicts of law
principles thereof. Any legal action or proceeding with respect to this
Agreement or any document related hereto may be brought in the courts of the
State of Delaware or the United States of America, and, by execution and
delivery of this Agreement, Purchaser and each of the Selling Companies hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto
hereby irrevocably waive any objection, including, without limitation, any forum
non conveniens, which any of them may now or hereafter have to the bringing of
such action or proceeding in such jurisdictions.
Section 9.7 Assignment; Successors and Assigns; No Third Party Rights.
---------------------------------------------------------
Except as otherwise provided herein, this Agreement may not be assigned, and any
attempted
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<PAGE>
assignment shall be null and void, except that Purchaser may assign, in its sole
discretion, any or all of its rights, interests or obligations hereunder to any
direct or indirect wholly owned subsidiary of Purchaser. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors, permitted assigns and
legal representatives. This Agreement shall be for the sole benefit of the
parties to this Agreement and their respective heirs, successors, permitted
assigns and legal representatives and is not intended, nor shall be construed,
to give any Person, other than the parties hereto and their respective heirs,
successors, assigns and legal representatives, any legal or equitable right,
remedy or claim hereunder.
Section 9.8 Counterparts. This Agreement may be executed in counterparts,
------------
any one of which may be by facsimile followed by the originally executed
document forwarded immediately thereafter to the other parties hereto, each of
which shall be deemed an original agreement, but all of which together shall
constitute once and the same instrument.
Section 9.9 Titles and Headings. The titles, captions and table of
-------------------
contents in this Agreement are for reference purposes only, and shall not in any
way define, limit, extend or describe the scope of this Agreement or otherwise
affect the meaning or interpretation of this Agreement.
Section 9.10 Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules attached hereto constitute the entire agreement among the parties with
respect to the matters covered hereby and supersede all previous written, oral
or implied understandings among them with respect to such matters, except to the
extent that other written agreements are expressly referred to herein.
Section 9.11 Severability. Any term or provision of this Agreement that
------------
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this
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Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
POTLATCH CORPORATION
By /s/ John M. Richards
_____________________________
Name: John M. Richards
Title: Chairman and Chief Executive Officer
ANDERSON-TULLY VENEERS, L.P.
By ANDERSON-TULLY GP COMPANY, its
Managing General Partner
By /s/ Parnell S. Lewis
_____________________________
Name: Parnell S. Lewis
Title: President
ANDERSON-TULLY MANAGEMENT
SERVICES LLC
By ANDERSON-TULLY VENEERS, L.P., its
sole MEMBER
By ANDERSON-TULLY GP COMPANY,
its Managing General Partner
By /s/ Parnell S. Lewis
_____________________________
Name: Parnell S. Lewis
Title: President
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EXHIBIT 10.2
SAWMILLS SUBSIDIARY ASSET PURCHASE AGREEMENT
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THIS SAWMILLS SUBSIDIARY ASSET PURCHASE AGREEMENT (this "Agreement"), dated
as of February 9, 1998, by and among POTLATCH CORPORATION, a Delaware
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corporation (the "Purchaser"), and ANDERSON-TULLY LUMBER COMPANY, a Mississippi
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corporation ("Sawmills"),
W I T N E S S E T H:
WHEREAS, Purchaser desires to purchase and Sawmills desires to sell all of
the assets of Sawmills on the terms and conditions set forth below; and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser, Timberland Growth Corporation, a Delaware
corporation ("TGC"), Beaver Acquisition Corporation, a Mississippi corporation
("Newsub"), and Anderson-Tully Company, a Mississippi corporation (the
"Company"), are entering into that certain Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"), which contemplates, among other
things, TGC's acquisition, immediately prior to the Closing hereunder, of all of
the capital stock of the Company, through the merger of Newsub with and into the
Company (the "Merger"); and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser, Anderson-Tully Veneers, L.P., a Mississippi
limited partnership (the "Partnership"), and Anderson-Tully Management Services
LLC, a Mississippi limited liability company ("LLC"), are entering into that
certain Asset Purchase Agreement, dated as of the date hereof (the "Asset
Purchase Agreement"), which contemplates, among other things, Purchaser's
acquisition, immediately prior to the closing under the Merger Agreement, of
certain assets of Partnership and LLC, including all of the common stock of
Sawmills; and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser and Anderson-Tully Timber Company, a Mississippi
corporation ("Logging"), are entering into that certain Logging Subsidiary Asset
Purchase Agreement, dated as of the date hereof (the "Logging Asset Purchase
Agreement"), which contemplates, among other things, Purchaser's acquisition,
contemporaneously with the Closing hereunder, of all of the assets of Logging;
and
WHEREAS, the parties hereto desire to make certain representations,
warranties and covenants in connection with this Agreement:
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
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Section 1.1 Certain Definitions. As used in this Agreement, the following
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terms have the respective meanings set forth below:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
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investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"Agreement" means this Sawmills Subsidiary Asset Purchase Agreement.
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"Asset Purchase Agreement" has the meaning set forth in the fourth recital
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of this Agreement.
"Assets Purchase Price" has the meaning set forth in Section 2.4(a).
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"Assumed Debts" means any Debts of Sawmills at the Closing Date.
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"Assumed Liabilities" has the meaning set forth in Section 2.2.
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"Bill of Sale" means the Bill of Sale, Assignment and Assumption Agreement
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substantially in the form of Exhibit A hereto.
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"Business Day" means a day, other than a Saturday or Sunday, on which
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commercial banks in Memphis, Tennessee and in San Francisco, California are open
for the general transaction of business.
"Closing" has the meaning set forth in Section 2.5.
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"Closing Date" has the meaning set forth in Section 2.5.
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"Company" has the meaning set forth in the recitals to this Agreement.
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"Debt" means any obligation for borrowed money or representing the purchase
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price of property deferred and unpaid beyond normal trade terms, or any lease
obligation which under GAAP is to be capitalized, or any guarantee of any such
obligation.
"Effective Time" means the effective time under the Merger Agreement.
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"Excluded Liabilities" has the meaning set forth in Section 2.3.
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"GAAP" means generally accepted accounting principles as in effect in the
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United States on the date of this Agreement, applied on a consistent basis.
"Governmental Authority" means any national, federal, state, provincial,
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country, municipal or local government, foreign or domestic, or the government
of any political subdivision of any of the foregoing, or any entity, authority,
agency, ministry or other similar body exercising executive, legislative,
judicial, regulatory or administrative authority or functions of or pertaining
to government, including any authority or other quasi-governmental entity
established to perform any of such functions.
"Hired Employees" has the meaning set forth in Section 5.2.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
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as amended.
"Logging" has the meaning set forth in the recitals to this Agreement.
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"Logging Asset Purchase Agreement" has the meaning set forth in the
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recitals to this Agreement.
"Material Adverse Effect" means any effect that is materially adverse to
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the business, financial condition or results of operations of the Businesses (as
defined in the Asset Purchase Agreement) taken as a whole, including, without
limitation, any effect on the Businesses' future business or future financial
condition or results of operations which is reasonably likely to occur.
"Merger" has the meaning set forth in the recitals to this Agreement.
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"Merger Agreement" has the meaning set forth in the recitals to this
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Agreement.
"Person" means an individual, partnership, corporation, limited liability
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company, joint stock company, unincorporated organization or association, trust,
joint venture, association or other organization, whether or not a legal entity,
or a Governmental Authority.
"Sawmills" has the meaning set forth in the first paragraph of this
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Agreement.
"Sawmills Acquired Assets" has the meaning set forth in Section 2.1.
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"Sawmills Amount" means $20,000,000, (a) minus the aggregate amount of Debt
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of Sawmills as of the Closing Date, (b) plus the amount of Sawmills' cash and
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cash equivalents on hand as of the Closing Date, and (c) minus the aggregate
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amount required to be paid by Sawmills to its officers, directors or employees
which are triggered by this Agreement or by the Merger Agreement or the
consummation of the transactions contemplated hereby or thereby, but excluding
any such amounts actually paid by Sawmills prior to the Closing Date.
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"Sawmills Business" means the business of operating the sawmill facilities
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of Sawmills located near Waltersville, Mississippi, including but not limited
to, the operation of planer mills, drying, inspecting and inventory facilities
and sales operations.
"Working Capital" means the total current assets (excluding cash and cash
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equivalents) of Sawmills at the Closing Date minus the total current liabilities
(excluding short-term Debt and the current portion of long-term Debt) of
Sawmills at the Closing Date (which difference may be a negative number),
calculated in accordance with GAAP.
"Working Capital Adjustment" means (a) the amount, if any, by which the
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Working Capital of Sawmills exceeds $3,800,000 or (b) the amount, if any, by
which $3,800,000 exceeds the Working Capital of Sawmills.
Section 1.2 Interpretation. Unless otherwise indicated to the contrary
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herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (ii) the word "including" means
"including, but not limited to"; (iii) masculine gender shall also include the
feminine and neuter genders, and vice versa; and (iv) words importing the
singular shall include the plural, and vice versa.
ARTICLE II
SALE OF ASSETS OF SAWMILLS
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Section 2.1 Sale and Purchase of Sawmills Assets. Subject to the terms
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and conditions of this Agreement, Sawmills shall sell, transfer, convey, assign
and deliver to Purchaser, and Purchaser shall purchase at Closing hereunder, all
of Sawmills's right, title and interest in and to the assets now owned by
Sawmills, or in which Sawmills has a right, title or interest at any time prior
to Closing such reference to assets being deemed to refer to assets as above
described, of every nature and kind, tangible or intangible, wheresoever located
and whether or not carried or reflected on the books of account and financial
records of Sawmills (the "Sawmills Acquired Assets"), including, but not limited
to, the assets listed on Schedule 2.1.
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Section 2.2 Assumed Liabilities. Except as set forth in Section 2.3,
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Purchaser hereby agrees to assume, satisfy or perform when due all of the
liabilities and obligations (known or unknown, absolute, accrued, contingent or
otherwise) of Sawmills as of the Closing Date arising from the operation of the
Sawmills Business prior to the Closing Date, including, without limitation,
obligations of Sawmills with respect to Debts and current liabilities of
Sawmills as of the Closing Date (the "Assumed Liabilities").
Section 2.3 Excluded Liabilities. Purchaser shall not assume any
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liability for Taxes of Sawmills imposed on or calculated by reference to income
during any period before or after the Closing Date (the "Excluded Liabilities").
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Section 2.4 Assets Purchase Price.
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(a) Sawmills Assets Purchase Price. At Closing, Purchaser shall pay to
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Sawmills (the "Assets Purchase Price"):
(i) in cash to Sawmills by wire transfer of immediately available
funds to an account designated in writing by Sawmills at least three
Business Days prior to the Closing Date, an amount equal to either (A) the
Sawmills Amount or (B) such other amount less than the Sawmills Amount as
Purchaser and Sawmills shall agree prior to the Closing Date; and
(ii) a Promissory Note on such commercially reasonable terms and
conditions as the parties shall agree prior to the Closing Date, for an
amount equal to the difference, if any, between the Sawmills Amount and
that portion of the Assets Purchase Price paid in cash pursuant to clause
(i) above.
(b) Calculation of Assets Purchase Price. Purchaser and Sawmills shall
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consult with each other from time to time with respect to the anticipated
Closing Date hereunder. Upon determination of the anticipated Closing Date,
Sawmills shall promptly prepare and deliver to Purchaser a detailed schedule
showing the estimated amount payable at Closing pursuant to Section 2.4(a) as of
such date, including any change in such amounts anticipated to occur prior to
the anticipated Closing Date. Sawmills shall make available to Purchaser such
information as Purchaser shall reasonably request to verify the information set
forth in such schedule and shall immediately inform Purchaser of any changes to
the amounts set forth therein. Prior to the Closing, Purchaser and Sawmills
shall agree on a schedule setting forth the amounts payable at Closing pursuant
to Section 2.4(a), which schedule shall be executed by Purchaser and Sawmills.
As a means of clarifying the intentions of the parties hereto with respect to
the calculation of the Assets Purchase Price, Schedule 2.4(b) is an example of
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how the Assets Purchase Price would be calculated based on the assumptions set
forth therein.
Section 2.5 Closing. The Closing for the sale and purchase of the
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Sawmills Acquired Assets (the "Closing") shall take place at the offices of
Pillsbury Madison & Sutro LLP, 235 Montgomery Street, San Francisco, California,
on the first Business Day after the Effective Time under the Merger Agreement or
such earlier time as the parties may agree, but in any event following the
satisfaction or waiver of the conditions set forth in Article VI hereof (other
than those conditions that by their nature are to be satisfied at Closing, but
subject to the satisfaction or waiver of those conditions) or at such other
place as the parties may agree in writing (the date and time of the Closing
determined in accordance with this Section 2.5 are herein referred to as the
"Closing Date").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SAWMILLS
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Sawmills represents and warrants to Purchaser as follows:
Section 3.1 Organization and Qualification. Sawmills is a corporation
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duly organized, validly existing and in good standing under the laws of
Mississippi and has the corporate power and authority and all licenses, permits
and authorizations necessary to own or lease its property and assets and to
carry on its business as presently conducted, and as presently proposed to be
conducted, and is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction wherein the nature of its business or the
ownership of its assets makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have a Material
Adverse Effect. Sawmills has previously provided or made available to Purchaser
true and complete copies of (i) its articles of incorporation and (ii) its
bylaws as currently in effect (the "Organizational Documents").
Section 3.2 Authorization. Sawmills has the corporate power and authority
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to execute and deliver this Agreement, to perform its obligations hereunder and
thereunder, all of which have been duly authorized by all requisite action.
This Agreement has been duly authorized, executed and delivered by Sawmills, and
is enforceable against Sawmills in accordance with its terms, except as such may
be subject to or limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 3.3 Non-contravention. Neither the execution and delivery of this
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Agreement nor the consummation of the other transactions contemplated hereby nor
the fulfillment of and the performance by Sawmills of its obligations hereunder
will (with or without notice or lapse of time) contravene any provision
contained in the Organizational Documents or any resolution or similar corporate
act adopted by the board of directors or shareholders of Sawmills.
Section 3.4 As Is. THE PURCHASER AND SAWMILLS HEREBY AGREE THAT, EXCEPT
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TO THE EXTENT SET FORTH HEREIN, IN THE SCHEDULES HERETO OR IN ANY INSTRUMENT
DELIVERED IN CONNECTION HEREWITH, (A) THE SAWMILLS ACQUIRED ASSETS ARE BEING
SOLD ON AN "AS IS, WHERE IS" BASIS AND (B) SAWMILLS MAKES NO WARRANTIES, EXPRESS
OR IMPLIED, OF MERCHANTABILITY, FITNESS OR OTHERWISE WITH RESPECT TO THE
SAWMILLS ACQUIRED ASSETS OR OTHER PROPERTY.
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF
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PURCHASER
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Purchaser represents and warrants to Sawmills as follows:
Section 4.1 Organization. Purchaser is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to own or lease its property and
assets and to carry on its business as presently conducted.
Section 4.2 Authorization. Purchaser has the corporate power and
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authority to execute and deliver this Agreement and each other agreement or
instrument to be executed in connection herewith and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the board of directors of Purchaser, and no other corporate proceedings on
the part of Purchaser are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement and each other agreement or
instrument to be executed in connection herewith have been duly authorized,
executed and delivered by Purchaser and constitute a valid and binding agreement
of Purchaser, enforceable against Purchaser in accordance with its terms, except
as such may be subject to or limited by bankruptcy, insolvency, reorganization
or other laws relating to or affecting creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.3 Noncontravention. The execution, delivery and performance by
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Purchaser of this Agreement and the consummation of the transactions
contemplated hereby will not (a) contravene any provision contained in the
articles of incorporation or bylaws of Purchaser, (b) conflict with, violate or
result in a material breach (with or without the lapse of time, the giving of
notice or both) under (i) any material contract, agreement, commitment,
indenture, mortgage, lease, pledge, note, bond, license, permit or other
instrument or obligation or (ii) any judgment, order, decree, statute, law, rule
or regulation or other restriction of any Governmental Authority, in each case
to which Purchaser is a party or by which it is bound or to which any of its
assets or properties are subject.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
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Section 5.1 Commercial Efforts; Further Assurances. (a) Subject to the
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terms and conditions herein provided, each of the parties hereto shall use its
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Purchaser
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and Sawmills will use their respective commercially reasonable efforts to obtain
all consents and other approvals of all Governmental Authorities and third
parties necessary to the consummation of the transactions contemplated by this
Agreement and the Asset Purchase Agreement.
(b) In the event any claim, action, suit, investigation or other proceeding
by any Governmental Authority or other Person is commenced that questions the
validity or legality of any of the transactions contemplated hereby or seeks
damages in connection therewith, the parties agree to cooperate and use
commercially reasonable efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order is issued
in any such action, suit or other proceeding, to use commercially reasonable
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the
transactions contemplated hereby.
(c) (i) Each party agrees that it shall, as soon as reasonably practicable
after it learns of the existence of any facts or circumstances causing any of
the representations and warranties herein made, respectively, by Sawmills or
Purchaser (including, without limitation, those contained in Article III or
Article IV), to have been incorrect when made or to have thereafter become
incorrect (whether through its discovery of an inadvertent, good faith error at
the time this Agreement was signed or the happening thereafter of any event or
occurrence), deliver to the others written notice of such incorrect
representations and warranties; and (ii) each party shall give prompt written
notice to the other of any failure of Sawmills or Purchaser, as the case may be,
to comply with or satisfy any material covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
Section 5.2 Employee Benefits. Purchaser shall offer employment to all
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employees of Sawmills at the same salaries or wages as in effect immediately
prior to the Closing Date other than those identified in a notice to be
delivered by Purchaser to Sawmills at least 30 days prior to the Closing Date.
At any time after the Closing Date, Purchaser, in its sole discretion, may
extend to the employees of Sawmills who become employees of Purchaser (each, a
"Hired Employee," and collectively, the "Hired Employees"), the employee benefit
plans and programs, including tax-qualified defined benefit and defined
contribution plans, applicable to similarly situated employees of Purchaser and
its Subsidiaries. Until that time, Purchaser shall maintain employee benefit
plans and programs for the Hired Employees of Sawmills with terms no less
favorable to such employees than the Plans in place as of the Closing Date for
such employees and shall continue to make all contributions to such plans for
such period on a basis consistent with Sawmills's past practices. The Hired
Employees shall be given credit for all purposes under all of Purchaser's
pension, welfare and fringe benefit plans, including for purposes of determining
vacation and severance pay, for the period during which such employee was
employed by Sawmills or any ERISA Affiliate (as that term is defined in the
Asset Purchase Agreement); provided, however, that in no event will Purchaser be
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required to credit service to a Hired Employee to the extent that such credit
would result in a duplication of benefits. Hired Employees shall be entitled to
participate in the welfare plans maintained by Purchaser for the Hired Employees
effective upon the Closing Date without any waiting periods, any evidence of
insurability or the application of any preexisting condition restrictions, and
counting claims incurred prior to the Closing Date
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for purposes of applying co-payments, deductibles, out-of-pocket maximums and
other such matters. Effective upon the Closing Date, Purchaser shall become the
plan sponsor of all of the Plans.
Section 5.3 Indemnification.
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(a) Purchaser agrees to indemnify Sawmills from and against the entirety of
any Adverse Consequences Sawmills shall suffer caused by any liability or
obligation of Sawmills which is an Assumed Liability.
(b) Sawmills agrees to indemnify the Purchaser from and against any Adverse
Consequences the Purchaser shall suffer caused by any liability or obligation of
Sawmills which is not an Assumed Liability (including any liability of Sawmills
which is not an Assumed Liability but which becomes a liability of the Purchaser
under any bulk transfer law of any jurisdiction, under any common law doctrine
or statutory provision of de facto merger or successor or transferee liability,
or otherwise by operation of law).
ARTICLE VI
CONDITIONS TO CLOSING
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Section 6.1 Conditions to the Obligations of All Parties. The Closing of
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the transaction contemplated hereby shall take place immediately after the
closing under the Merger Agreement. The respective obligations of each party
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or waiver at or prior to the Closing of each of the
following conditions:
(a) Change in Law. No statute, rule or regulation shall have been enacted
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or issued by any Governmental Authority that makes the consummation of the
transactions contemplated by this Agreement illegal.
(b) Injunction. On the Closing Date, there shall be no effective
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injunction, writ or preliminary restraining order or any order of any nature
issued and outstanding by a court or Governmental Authority of competent
jurisdiction to the effect that the transactions contemplated by this Agreement
may not be consummated as herein provided, and no proceeding or lawsuit shall
have been commenced by any Governmental Authority for the purpose of obtaining
any such injunction, writ or preliminary restraining order.
(c) Filings and Consents. All material consents, authorizations, orders or
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approvals of, and filings or registrations with, any Governmental Authority that
are required in connection with the execution and delivery of this Agreement and
the other documents to be executed in connection herewith and the consummation
of the transactions contemplated hereby and thereby shall have been obtained or
made and shall be in full force and effect.
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(d) HSR Act. Any applicable waiting periods (and any extension thereof)
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related to the HSR Act with respect to the transactions contemplated by this
Agreement shall have expired or otherwise have been terminated.
Section 6.2 Conditions to the Obligations of the Purchaser. The
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obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
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made by Sawmills in this Agreement and the Schedules hereto shall be true,
correct and complete on the date hereof and as of the Closing Date as though
such representations and warranties were made as of the Closing Date (or on the
date when made in the case of any representation or warranty that specifically
relates to an earlier date), except, in any such case, for such changes that
have occurred as contemplated by the transactions provided for herein or in the
Merger Agreement.
(b) Performance by Sawmills. Sawmills shall have duly performed or
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complied with, in all material respects, all of the covenants, obligations and
conditions to be performed or complied with by it under the terms of this
Agreement prior to or at the Closing.
(c) Instruments of Transfer. Sawmills shall have delivered to Purchaser on
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the Closing Date the Bill of Sale, any deeds and any other similar instruments
of conveyance and transfer with respect to the Sawmills Acquired Assets as may
be reasonably requested by Purchaser.
Section 6.3 Conditions to the Obligations of Sawmills. The obligations of
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Sawmills to consummate the transactions contemplated by this Agreement shall be
subject to satisfaction or waiver at or prior to the Closing of each of the
following conditions:
(a) Representations and Warranties. All representations and warranties
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made by the Purchaser in this Agreement and the Schedules hereto shall be true,
correct and complete on the date hereof and as of the Closing Date as though
such representations and warranties were made as of the Closing Date (or on the
date when made in the case of any representation or warranty which specifically
relates to an earlier date), and the Purchaser shall have duly performed or
complied with, in all material respects, all of the covenants, obligations and
conditions to be performed or complied with by it under the terms of this
Agreement prior to or at the Closing.
(b) Payment; Instruments of Assumption. Purchaser shall have made the
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payments required to be made pursuant to Section 2.4 hereof and shall have
executed the Bill of Sale.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
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Section 7.1 Termination. This Agreement may be terminated at any time
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prior to Closing:
(a) by written consent of all of the parties hereto;
(b) by Sawmills, if there has been a material breach by Purchaser of any
representation, warranty or covenant contained in this Agreement that is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Sawmills to Purchaser;
(c) by Purchaser, if there has been a material breach by Sawmills of any
representation, warranty or covenant contained in this Agreement that is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Purchaser to Sawmills;
(d) by Purchaser or Sawmills, if any Governmental Authority shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable;
(e) by Purchaser or Sawmills, if the Merger Agreement shall have been
terminated prior to closing thereunder;
(f) by Purchaser or Sawmills, if the Asset Purchase Agreement shall have
been terminated prior to closing thereunder; or
(g) by Purchaser or Sawmills, if the Logging Asset Purchase Agreement shall
have been terminated prior to closing thereunder.
Section 7.2 Effect of Termination. If this Agreement is terminated
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pursuant to Section 7.1 hereof, all rights and obligations of the parties
hereunder shall terminate and no party shall have any liability to the other
party, except that nothing herein will relieve any party from liability for any
willful breach of any representation, warranty, agreement or covenant contained
herein prior to such termination.
Section 7.3 Amendments. This Agreement may not be amended except by an
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instrument in writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Closing, any term, provision
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or condition of this Agreement may be waived in writing (or the time for
performance of any of the obligations or other acts of the other parties hereto
may be extended) by the party that is entitled to the benefits thereof.
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ARTICLE VIII
BULK SALES COMPLIANCE
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Section 8.1 Bulk Sales Compliance. Purchaser hereby waives compliance by
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Sawmills with the provisions of the bulk transfer provisions of Mississippi law,
and Sawmills warrants and agrees to pay and discharge when due all claims of
creditors which could be asserted against Purchaser by reason of such
noncompliance to the extent that such liabilities are not specifically assumed
by Purchaser under this Agreement. Sawmills shall indemnify and agree to hold
Purchaser harmless from, against and in respect of (and shall on demand
reimburse Purchaser for) any loss, liability, cost or expense, including,
without limitation, attorneys' fees, suffered or incurred by Purchaser by reason
of the failure of Sawmills to pay or discharge such claims arising out of
compliance with said bulk transfer provisions. Sawmills shall furnish to
Purchaser prior to Closing such evidence as Purchaser may reasonably request to
confirm their compliance with the provisions of this Article.
ARTICLE IX
MISCELLANEOUS
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Section 9.1 Survival of Representations and Warranties. The
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representations, warranties and covenants of Purchaser and Sawmills in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing.
Section 9.2 Exhibits and Schedules. All exhibits and schedules hereto, or
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documents expressly incorporated into this Agreement, are hereby incorporated
into this Agreement and are hereby made a part hereof as if set out in full in
this Agreement.
Section 9.3 Expenses.
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(a) Regardless of whether the transactions provided for in this Agreement
are consummated and except as provided in this Section 9.3 and Section 5.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses (whether or not the transactions hereby are consummated).
(b) Purchaser shall pay all filing fees, if any, under the HSR Act.
(c) Purchaser shall pay all sales and use taxes, if any, imposed on the
transfer of the Sawmills Acquired Assets pursuant to this Agreement, whether
such taxes are assessed initially against Purchaser or Sawmills.
Section 9.4 Time of the Essence; Computation of Time. Time is of the
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essence for each and every provision of this Agreement.
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Section 9.5 Governing Law; Consent to Jurisdiction. This Agreement shall
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be governed by, and construed in accordance with, the internal laws of the State
of Delaware, without reference to the choice of law or conflicts of law
principles thereof. Any legal action or proceeding with respect to this
Agreement or any document related hereto may be brought in the courts of the
State of Delaware or the United States of America, and, by execution and
delivery of this Agreement, each of Purchaser and Sawmills hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including, without limitation any forum non conveniens,
which any of them may now or hereafter have to the bringing of such action or
proceeding in such jurisdictions.
Section 9.6 Assignment; Successors and Assigns; No Third Party Rights.
---------------------------------------------------------
Except as otherwise provided herein, this Agreement may not be assigned, and any
attempted assignment shall be null and void, except that Purchaser may assign,
in its sole discretion, any or all of its rights, interests or obligations
hereunder to any direct or indirect wholly owned subsidiary of Purchaser.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors, permitted
assigns and legal representatives. This Agreement shall be for the sole benefit
of the parties to this Agreement and their respective heirs, successors,
permitted assigns and legal representatives and is not intended, nor shall be
construed, to give any Person, other than the parties hereto and their
respective heirs, successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 9.7 Counterparts. This Agreement may be executed in counterparts,
------------
any one of which may be by facsimile followed by the originally executed
document forwarded immediately thereafter to the other parties hereto, each of
which shall be deemed an original agreement, but all of which together shall
constitute once and the same instrument.
Section 9.8 Titles and Headings. The titles, captions and table of
-------------------
contents in this Agreement are for reference purposes only, and shall not in any
way define, limit, extend or describe the scope of this Agreement or otherwise
affect the meaning or interpretation of this Agreement.
Section 9.9 Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules attached hereto constitute the entire agreement among the parties with
respect to the matters covered hereby and supersede all previous written, oral
or implied understandings among them with respect to such matters, except to the
extent that other written agreements are expressly referred to herein.
Section 9.10 Severability. Any term or provision of this Agreement that
------------
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this
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<PAGE>
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
POTLATCH CORPORATION
By /s/ John M. Richards
___________________________________________
Name: John M. Richards
Title: Chairman and Chief Executive Officer
ANDERSON-TULLY LUMBER COMPANY
By /s/ Parnell S. Lewis
____________________________________
Name: Parnell S. Lewis
Title: Chief Executive Officer
-14-
<PAGE>
EXHIBIT 10.3
LOGGING SUBSIDIARY ASSET PURCHASE AGREEMENT
-------------------------------------------
THIS LOGGING SUBSIDIARY ASSET PURCHASE AGREEMENT (this "Agreement"), dated
as of February 9, 1998, by and among POTLATCH CORPORATION, a Delaware
--------------------
corporation (the "Purchaser"), and ANDERSON-TULLY TIMBER COMPANY, a Mississippi
-----------------------------
corporation ("Logging"),
W I T N E S S E T H:
WHEREAS, Purchaser desires to purchase and Logging desires to sell all of
the assets of Logging on the terms and conditions set forth below; and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser, Timberland Growth Corporation, a Delaware
corporation ("TGC"), Beaver Acquisition Corporation, a Mississippi corporation
("Newsub"), and Anderson-Tully Company, a Mississippi corporation (the
"Company") are entering into that certain Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"), which contemplates, among other
things, TGC's acquisition, immediately prior to the Closing hereunder, of all of
the capital stock of the Company, through the merger of Newsub with and into the
Company (the "Merger"); and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser, Anderson-Tully Veneers, L.P., a Mississippi
limited partnership (the "Partnership"), and Anderson-Tully Management Services
LLC, a Mississippi limited liability company ("LLC"), are entering into that
certain Asset Purchase Agreement, dated as of the date hereof (the "Asset
Purchase Agreement"), which contemplates, among other things, Purchaser's
acquisition, immediately prior to the closing under the Merger Agreement, of
certain assets of Partnership and LLC, including all of the common stock of
Logging; and
WHEREAS, concurrently with the execution and delivery of this Agreement by
the parties hereto, Purchaser and Anderson-Tully Lumber Company, a Mississippi
corporation ("Sawmills"), are entering into that certain Sawmills Subsidiary
Asset Purchase Agreement, dated as of the date hereof (the "Sawmills Asset
Purchase Agreement"), which contemplates, among other things, Purchaser's
acquisition, contemporaneously with the Closing hereunder, of all of the assets
of Sawmills; and
WHEREAS, the parties hereto desire to make certain representations,
warranties and covenants in connection with this Agreement:
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
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<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
-------------------
Section 1.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms have the respective meanings set forth below:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
--------------------
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"Agreement" means this Logging Subsidiary Asset Purchase Agreement.
---------
"Asset Purchase Agreement" has the meaning set forth in the fourth recital
------------------------
of this Agreement.
"Assets Purchase Price" has the meaning set forth in Section 2.4(a).
---------------------
"Assumed Debts" means any Debts of Logging at the Closing Date.
-------------
"Assumed Liabilities" has the meaning set forth in Section 2.2.
-------------------
"Bill of Sale" means the Bill of Sale, Assignment and Assumption Agreement
------------
substantially in the form of Exhibit A hereto.
---------
"Business Day" means a day, other than a Saturday or Sunday, on which
------------
commercial banks in Memphis, Tennessee and in San Francisco, California are open
for the general transaction of business.
"Closing" has the meaning set forth in Section 2.5.
-------
"Closing Date" has the meaning set forth in Section 2.5.
------------
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Debt" means any obligation for borrowed money or representing the purchase
----
price of property deferred and unpaid beyond normal trade terms, or any lease
obligation which under GAAP is to be capitalized, or any guarantee of any such
obligation.
"Effective Time" means the effective time under the Merger Agreement.
--------------
"Excluded Liabilities" has the meaning set forth in Section 2.3.
--------------------
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<PAGE>
"GAAP" means generally accepted accounting principles as in effect in the
----
United States on the date of this Agreement, applied on a consistent basis.
"Governmental Authority" means any national, federal, state, provincial,
----------------------
country, municipal or local government, foreign or domestic, or the government
of any political subdivision of any of the foregoing, or any entity, authority,
agency, ministry or other similar body exercising executive, legislative,
judicial, regulatory or administrative authority or functions of or pertaining
to government, including any authority or other quasi-governmental entity
established to perform any of such functions.
"Hired Employees" has the meaning set forth in Section 5.2.
---------------
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended.
"Logging" has the meaning set forth in the recitals to this Agreement.
-------
"Logging Acquired Assets" has the meaning set forth in Section 2.1.
-----------------------
"Logging Amount" means $3,500,000, (a) minus the aggregate amount of Debt
-------------- -----
of Logging as of the Closing Date, (b) plus the amount of Logging's cash and
----
cash equivalents on hand as of the Closing Date, and (c) minus the aggregate
-----
amount required to be paid by Logging to its officers, directors or employees
which are triggered by this Agreement or by the Merger Agreement or the
consummation of the transactions contemplated hereby or thereby, but excluding
any such amounts actually paid by Logging prior to the Closing Date.
"Logging Business" means the business operated by Logging prior to the date
----------------
hereof involving harvesting standing timber owned by the Company and
transporting, merchandising, storing and reselling logs and pulpwood.
"Material Adverse Effect" means any effect that is materially adverse to
-----------------------
the business, financial condition or results of operations of the Businesses (as
defined in the Asset Purchase Agreement) taken as a whole, including, without
limitation, any effect on the Businesses' future business or future financial
condition or results of operations which is reasonably likely to occur.
"Merger" has the meaning set forth in the recitals to this Agreement.
------
"Merger Agreement" has the meaning set forth in the recitals to this
----------------
Agreement.
"Person" means an individual, partnership, corporation, limited liability
------
company, joint stock company, unincorporated organization or association, trust,
joint venture, association or other organization, whether or not a legal entity,
or a Governmental Authority.
"Sawmills" has the meaning set forth in the first paragraph of this
--------
Agreement.
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<PAGE>
"Sawmills Asset Purchase Agreement" has the meaning set forth in the
---------------------------------
recitals to this Agreement.
"Working Capital" means the total current assets (excluding cash and cash
---------------
equivalents) of Logging at the Closing Date minus the total current liabilities
(excluding short-term Debt and the current portion of long-term Debt) of Logging
at the Closing Date (which difference may be a negative number), calculated in
accordance with GAAP.
"Working Capital Adjustment" means (a) the amount, if any, by which the
--------------------------
Working Capital of Logging exceeds $5,000 or (b) the amount, if any, by which
$5,000 exceeds the Working Capital of Logging.
Section 1.2 Interpretation. Unless otherwise indicated to the contrary
--------------
herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (ii) the word "including" means
"including, but not limited to"; (iii) masculine gender shall also include the
feminine and neuter genders, and vice versa; and (iv) words importing the
singular shall include the plural, and vice versa.
ARTICLE II
SALE OF ASSETS OF LOGGING
-------------------------
Section 2.1 Sale and Purchase of Logging Assets. Subject to the terms and
-----------------------------------
conditions of this Agreement, Logging shall sell, transfer, convey, assign and
deliver to Purchaser, and Purchaser shall purchase at Closing hereunder, all of
Logging's right, title and interest in and to the assets now owned by Logging,
or in which Logging has a right, title or interest at any time prior to Closing
such reference to assets being deemed to refer to assets as above described, of
every nature and kind, tangible or intangible, wheresoever located and whether
or not carried or reflected on the books of account and financial records of
Logging (the "Logging Acquired Assets"), including, but not limited to, the
assets listed on Schedule 2.1.
------------
Section 2.2 Assumed Liabilities. Except as set forth in Section 2.3,
-------------------
Purchaser hereby agrees to assume, satisfy or perform when due all of the
liabilities and obligations (known or unknown, absolute, accrued, contingent or
otherwise) of Logging as of the Closing Date arising from the operation of the
Logging Business prior to the Closing Date, including, without limitation,
obligations of Logging with respect to Debts and current liabilities of Logging
as of the Closing Date (the "Assumed Liabilities").
Section 2.3 Excluded Liabilities. Purchaser shall not assume any
--------------------
liability for Taxes of Logging imposed on or calculated by reference to income
during any period before or after the Closing Date (the "Excluded Liabilities").
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<PAGE>
Section 2.4 Assets Purchase Price.
---------------------
(a) Logging Assets Purchase Price. At Closing, Purchaser shall pay to
-----------------------------
Logging (the "Assets Purchase Price"):
(i) in cash to Logging by wire transfer of immediately available funds
to an account designated in writing by Logging at least three Business Days
prior to the Closing Date, an amount equal to either (A) the Logging Amount
or (B) such other amount less than the Logging Amount as Purchaser and
Logging shall agree prior to the Closing Date; and
(ii) a Promissory Note on such commercially reasonable terms and
conditions as Purchaser and Logging shall agree prior to the Closing Date,
for an amount equal to the difference, if any, between the Logging Amount
and that portion of the Assets Purchase Price paid in cash pursuant to
clause (i) above.
(b) Calculation of Assets Purchase Price. Purchaser and Logging shall
------------------------------------
consult with each other from time to time with respect to the anticipated
Closing Date hereunder. Upon determination of the anticipated Closing Date,
Logging shall promptly prepare and deliver to Purchaser a detailed schedule
showing the estimated amount payable at Closing pursuant to Section 2.4(a) as of
such date, including any change in such amounts anticipated to occur prior to
the anticipated Closing Date. Logging shall make available to Purchaser such
information as Purchaser shall reasonably request to verify the information set
forth in such schedule and shall immediately inform Purchaser of any changes to
the amounts set forth therein. Prior to the Closing, Purchaser and Logging
shall agree on a schedule setting forth the amounts payable at Closing pursuant
to Section 2.4(a), which schedule shall be executed by Purchaser and Logging.
As a means of clarifying the intentions of the parties hereto with respect to
the calculation of the Assets Purchase Price, Schedule 2.4(b) is an example of
---------------
how the Assets Purchase Price would be calculated based on the assumptions set
forth therein.
Section 2.5 Closing. The Closing for the sale and purchase of the Logging
-------
Acquired Assets (the "Closing") shall take place at the offices of Pillsbury
Madison & Sutro LLP, 235 Montgomery Street, San Francisco, California, on the
first Business Day after the Effective Time under the Merger Agreement or such
earlier time as the parties may agree, but in any event following the
satisfaction or waiver of the conditions set forth in Article VI hereof (other
than those conditions that by their nature are to be satisfied at Closing, but
subject to the satisfaction or waiver of those conditions) or at such other
place as the parties may agree in writing (the date and time of the Closing
determined in accordance with this Section 2.5 are herein referred to as the
"Closing Date").
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LOGGING
-----------------------------------------
Logging represents and warrants to Purchaser as follows:
Section 3.1 Organization and Qualification. Logging is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of Mississippi
and has the corporate power and authority and all licenses, permits and
authorizations necessary to own or lease its property and assets and to carry on
its business as presently conducted, and as presently proposed to be conducted,
and is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction wherein the nature of its business or the
ownership of its assets makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have a Material
Adverse Effect. Logging has previously provided or made available to Purchaser
true and complete copies of (i) its articles of incorporation and (ii) its
bylaws as currently in effect (the "Organizational Documents").
Section 3.2 Authorization. Logging has the corporate power and authority
-------------
to execute and deliver this Agreement, to perform its obligations hereunder and
thereunder, all of which have been duly authorized by all requisite action.
This Agreement has been duly authorized, executed and delivered by Logging, and
is enforceable against Logging in accordance with its terms, except as such may
be subject to or limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 3.3 Non-contravention. Neither the execution and delivery of this
-----------------
Agreement nor the consummation of the other transactions contemplated hereby nor
the fulfillment of and the performance by Logging of its obligations hereunder
will (with or without notice or lapse of time) contravene any provision
contained in the Organizational Documents or any resolution or similar corporate
act adopted by the board of directors or shareholders of Logging.
Section 3.4 As Is. THE PURCHASER AND LOGGING HEREBY AGREE THAT, EXCEPT TO
-----
THE EXTENT SET FORTH HEREIN, IN THE SCHEDULES HERETO OR IN ANY INSTRUMENT
DELIVERED IN CONNECTION HEREWITH, (A) THE LOGGING ACQUIRED ASSETS ARE BEING SOLD
ON AN "AS IS, WHERE IS" BASIS AND (B) LOGGING MAKES NO WARRANTIES, EXPRESS OR
IMPLIED, OF MERCHANTABILITY, FITNESS OR OTHERWISE WITH RESPECT TO THE LOGGING
ACQUIRED ASSETS OR OTHER PROPERTY.
-6-
<PAGE>
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
PURCHASER
---------
Purchaser represents and warrants to Logging as follows:
Section 4.1 Organization. Purchaser is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to own or lease its property and
assets and to carry on its business as presently conducted.
Section 4.2 Authorization. Purchaser has the corporate power and
-------------
authority to execute and deliver this Agreement and each other agreement or
instrument to be executed in connection herewith and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the board of directors of Purchaser, and no other corporate proceedings on
the part of Purchaser are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement and each other agreement or
instrument to be executed in connection herewith have been duly authorized,
executed and delivered by Purchaser and constitute a valid and binding agreement
of Purchaser, enforceable against Purchaser in accordance with its terms, except
as such may be subject to or limited by bankruptcy, insolvency, reorganization
or other laws relating to or affecting creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.3 Noncontravention. The execution, delivery and performance by
----------------
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby will not (a) contravene any provision contained in the
articles of incorporation or bylaws of Purchaser, (b) conflict with, violate or
result in a material breach (with or without the lapse of time, the giving of
notice or both) under (i) any material contract, agreement, commitment,
indenture, mortgage, lease, pledge, note, bond, license, permit or other
instrument or obligation or (ii) any judgment, order, decree, statute, law, rule
or regulation or other restriction of any Governmental Authority, in each case
to which Purchaser is a party or by which it is bound or to which any of its
assets or properties are subject.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
--------------------------------
Section 5.1 Commercial Efforts; Further Assurances. (a) Subject to the
--------------------------------------
terms and conditions herein provided, each of the parties hereto shall use its
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Purchaser
-7-
<PAGE>
and Logging will use their respective commercially reasonable efforts to obtain
all consents and other approvals of all Governmental Authorities and third
parties necessary to the consummation of the transactions contemplated by this
Agreement and the Asset Purchase Agreement.
(b) In the event any claim, action, suit, investigation or other proceeding
by any Governmental Authority or other Person is commenced that questions the
validity or legality of any of the transactions contemplated hereby or seeks
damages in connection therewith, the parties agree to cooperate and use
commercially reasonable efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order is issued
in any such action, suit or other proceeding, to use commercially reasonable
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the
transactions contemplated hereby.
(c) (i) Each party agrees that it shall, as soon as reasonably practicable
after it learns of the existence of any facts or circumstances causing any of
the representations and warranties herein made, respectively, by Logging or
Purchaser (including, without limitation, those contained in Article III or
Article IV), to have been incorrect when made or to have thereafter become
incorrect (whether through its discovery of an inadvertent, good faith error at
the time this Agreement was signed or the happening thereafter of any event or
occurrence), deliver to the others written notice of such incorrect
representations and warranties; and (ii) each party shall give prompt written
notice to the other of any failure of Logging or Purchaser, as the case may be,
to comply with or satisfy any material covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
Section 5.2 Employee Benefits. Purchaser shall offer employment to all
-----------------
employees of Logging at the same salaries or wages as in effect immediately
prior to the Closing Dateother than those identified in a notice to be delivered
by Purchaser to Logging at least 30 days prior to the Closing Date. At any time
after the Closing Date, Purchaser, in its sole discretion, may extend to the
employees of Logging who become employees of Purchaser (each, a "Hired
Employee," and collectively, the "Hired Employees"), the employee benefit plans
and programs, including tax-qualified defined benefit and defined contribution
plans, applicable to similarly situated employees of Purchaser and its
Subsidiaries. Until that time, Purchaser shall maintain employee benefit plans
and programs for the Hired Employees of Logging with terms no less favorable to
such employees than the Plans in place as of the Closing Date for such employees
and shall continue to make all contributions to such plans for such period on a
basis consistent with Logging's past practices. The Hired Employees shall be
given credit for all purposes under all of Purchaser's pension, welfare and
fringe benefit plans, including for purposes of determining vacation and
severance pay, for the period during which such employee was employed by Logging
or any ERISA Affiliate (as that term is defined in the Asset Purchase
Agreement); provided, however, that in no event will Purchaser be required to
-------- -------
credit service to a Hired Employee to the extent that such credit would result
in a duplication of benefits. Hired Employees shall be entitled to participate
in the welfare plans maintained by Purchaser for the Hired Employees effective
upon the Closing Date without any waiting periods, any evidence of insurability
or the application of any preexisting condition restrictions, and counting
claims incurred prior to the Closing Date for purposes of applying
-8-
<PAGE>
co-payments, deductibles, out-of-pocket maximums and other such matters.
Effective upon the Closing Date, Purchaser shall become the plan sponsor of all
of the Plans.
Section 5.3 Indemnification.
---------------
(a) Purchaser agrees to indemnify Logging from and against the entirety of
any Adverse Consequences Logging shall suffer caused by any liability or
obligation of Logging which is an Assumed Liability.
(b) Logging agrees to indemnify the Purchaser from and against any Adverse
Consequences the Purchaser shall suffer caused by any liability or obligation of
Logging which is not an Assumed Liability (including any liability of Logging
which is not an Assumed Liability but which becomes a liability of the Purchaser
under any bulk transfer law of any jurisdiction, under any common law doctrine
or statutory provision of de facto merger or successor or transferee liability,
or otherwise by operation of law).
ARTICLE VI
CONDITIONS TO CLOSING
---------------------
Section 6.1 Conditions to the Obligations of All Parties. The Closing of
--------------------------------------------
the transaction contemplated hereby shall take place immediately after the
closing under the Merger Agreement. The respective obligations of each party
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or waiver at or prior to the Closing of each of the
following conditions:
(a) Change in Law. No statute, rule or regulation shall have been enacted
-------------
or issued by any Governmental Authority that makes the consummation of the
transactions contemplated by this Agreement illegal.
(b) Injunction. On the Closing Date, there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any nature
issued and outstanding by a court or Governmental Authority of competent
jurisdiction to the effect that the transactions contemplated by this Agreement
may not be consummated as herein provided, and no proceeding or lawsuit shall
have been commenced by any Governmental Authority for the purpose of obtaining
any such injunction, writ or preliminary restraining order.
(c) Filings and Consents. All material consents, authorizations, orders or
--------------------
approvals of, and filings or registrations with, any Governmental Authority that
are required in connection with the execution and delivery of this Agreement and
the other documents to be executed in connection herewith and the consummation
of the transactions contemplated hereby and thereby shall have been obtained or
made and shall be in full force and effect.
-9-
<PAGE>
(d) HSR Act. Any applicable waiting periods (and any extension thereof)
-------
related to the HSR Act with respect to the transactions contemplated by this
Agreement shall have expired or otherwise have been terminated.
Section 6.2 Conditions to the Obligations of the Purchaser. The
----------------------------------------------
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
------------------------------
made by Logging in this Agreement and the Schedules hereto shall be true,
correct and complete on the date hereof and as of the Closing Date as though
such representations and warranties were made as of the Closing Date (or on the
date when made in the case of any representation or warranty that specifically
relates to an earlier date), except, in any such case, for such changes that
have occurred as contemplated by the transactions provided for herein or in the
Merger Agreement.
(b) Performance by Logging. Logging shall have duly performed or complied
----------------------
with, in all material respects, all of the covenants, obligations and conditions
to be performed or complied with by it under the terms of this Agreement prior
to or at the Closing.
(c) Instruments of Transfer. Logging shall have delivered to Purchaser on
-----------------------
the Closing Date the Bill of Sale, any deeds and any other similar instruments
of conveyance and transfer with respect to the Logging Acquired Assets as may be
reasonably requested by Purchaser.
Section 6.3 Conditions to the Obligations of Logging. The obligations of
----------------------------------------
Logging to consummate the transactions contemplated by this Agreement shall be
subject to satisfaction or waiver at or prior to the Closing of each of the
following conditions:
(a) Representations and Warranties. All representations and warranties
------------------------------
made by the Purchaser in this Agreement and the Schedules hereto shall be true,
correct and complete on the date hereof and as of the Closing Date as though
such representations and warranties were made as of the Closing Date (or on the
date when made in the case of any representation or warranty which specifically
relates to an earlier date), and the Purchaser shall have duly performed or
complied with, in all material respects, all of the covenants, obligations and
conditions to be performed or complied with by it under the terms of this
Agreement prior to or at the Closing.
(b) Payment; Instruments of Assumption. Purchaser shall have made the
----------------------------------
payments required to be made pursuant to Section 2.4 hereof and shall have
executed the Bill of Sale.
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<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to Closing:
(a) by written consent of all of the parties hereto;
(b) by Logging, if there has been a material breach by Purchaser of any
representation, warranty or covenant contained in this Agreement that is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Logging to Purchaser;
(c) by Purchaser, if there has been a material breach by Logging of any
representation, warranty or covenant contained in this Agreement that is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Purchaser to Logging;
(d) by Purchaser or Logging, if any Governmental Authority shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable;
(e) by Purchaser or Logging, if the Merger Agreement shall have been
terminated prior to closing thereunder;
(f) by Purchaser or Logging, if the Asset Purchase Agreement shall have
been terminated prior to closing thereunder; or
(g) by Purchaser or Logging, if the Sawmills Asset Purchase Agreement shall
have been terminated prior to closing thereunder.
Section 7.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 7.1 hereof, all rights and obligations of the parties
hereunder shall terminate and no party shall have any liability to the other
party, except that nothing herein will relieve any party from liability for any
willful breach of any representation, warranty, agreement or covenant contained
herein prior to such termination.
Section 7.3 Amendments. This Agreement may not be amended except by an
----------
instrument in writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Closing, any term, provision
------
or condition of this Agreement may be waived in writing (or the time for
performance of any of the obligations or other acts of the other parties hereto
may be extended) by the party that is entitled to the benefits thereof.
-11-
<PAGE>
ARTICLE VIII
BULK SALES COMPLIANCE
---------------------
Section 8.1 Bulk Sales Compliance. Purchaser hereby waives compliance by
---------------------
Logging with the provisions of the bulk transfer provisions of Mississippi law,
and Logging warrants and agrees to pay and discharge when due all claims of
creditors which could be asserted against Purchaser by reason of such
noncompliance to the extent that such liabilities are not specifically assumed
by Purchaser under this Agreement. Logging shall indemnify and agree to hold
Purchaser harmless from, against and in respect of (and shall on demand
reimburse Purchaser for) any loss, liability, cost or expense, including,
without limitation, attorneys' fees, suffered or incurred by Purchaser by reason
of the failure of Logging to pay or discharge such claims arising out of
compliance with said bulk transfer provisions. Logging shall furnish to
Purchaser prior to Closing such evidence as Purchaser may reasonably request to
confirm their compliance with the provisions of this Article.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.1 Survival of Representations and Warranties. The
------------------------------------------
representations, warranties and covenants of Purchaser and Logging in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing.
Section 9.2 Exhibits and Schedules. All exhibits and schedules hereto, or
----------------------
documents expressly incorporated into this Agreement, are hereby incorporated
into this Agreement and are hereby made a part hereof as if set out in full in
this Agreement.
Section 9.3 Expenses.
--------
(a) Regardless of whether the transactions provided for in this Agreement
are consummated and except as provided in this Section 9.3 and Section 5.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses (whether or not the transactions hereby are consummated).
(b) Purchaser shall pay all filing fees, if any, under the HSR Act.
(c) Purchaser shall pay all sales and use taxes, if any, imposed on the
transfer of the Logging Acquired Assets pursuant to this Agreement, whether such
taxes are assessed initially against Purchaser or Logging.
Section 9.4 Time of the Essence; Computation of Time. Time is of the
----------------------------------------
essence for each and every provision of this Agreement.
-12-
<PAGE>
Section 9.5 Governing Law; Consent to Jurisdiction. This Agreement shall
--------------------------------------
be governed by, and construed in accordance with, the internal laws of the State
of Delaware, without reference to the choice of law or conflicts of law
principles thereof. Any legal action or proceeding with respect to this
Agreement or any document related hereto may be brought in the courts of the
State of Delaware or the United States of America, and, by execution and
delivery of this Agreement, each of Purchaser and Logging hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including, without limitation any forum non conveniens,
which any of them may now or hereafter have to the bringing of such action or
proceeding in such jurisdictions.
Section 9.6 Assignment; Successors and Assigns; No Third Party Rights.
---------------------------------------------------------
Except as otherwise provided herein, this Agreement may not be assigned, and any
attempted assignment shall be null and void, except that Purchaser may assign,
in its sole discretion, any or all of its rights, interests or obligations
hereunder to any direct or indirect wholly owned subsidiary of Purchaser.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors, permitted
assigns and legal representatives. This Agreement shall be for the sole benefit
of the parties to this Agreement and their respective heirs, successors,
permitted assigns and legal representatives and is not intended, nor shall be
construed, to give any Person, other than the parties hereto and their
respective heirs, successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 9.7 Counterparts. This Agreement may be executed in counterparts,
------------
any one of which may be by facsimile followed by the originally executed
document forwarded immediately thereafter to the other parties hereto, each of
which shall be deemed an original agreement, but all of which together shall
constitute once and the same instrument.
Section 9.8 Titles and Headings. The titles, captions and table of
-------------------
contents in this Agreement are for reference purposes only, and shall not in any
way define, limit, extend or describe the scope of this Agreement or otherwise
affect the meaning or interpretation of this Agreement.
Section 9.9 Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules attached hereto constitute the entire agreement among the parties with
respect to the matters covered hereby and supersede all previous written, oral
or implied understandings among them with respect to such matters, except to the
extent that other written agreements are expressly referred to herein.
Section 9.10 Severability. Any term or provision of this Agreement that
------------
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this
-13-
<PAGE>
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
POTLATCH CORPORATION
By /s/ John M. Richards
-------------------------------------------
Name: John M. Richards
Title: Chairman and Chief Executive Officer
ANDERSON-TULLY TIMBER COMPANY
By /s/ Parnell S. Lewis
-----------------------------------
Name: Parnell S. Lewis
Title: Chief Executive Officer
-14-
<PAGE>
EXHIBIT 10.4
TIMBER HARVEST AGREEMENT
------------------------
between
Anderson-Tully Timber Company
and
Anderson-Tully Company
January 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
Purposes of Agreement; Construction
1.1 Purposes of this Agreement......................................... 2
ARTICLE 2
Definitions
2.1 Certain Terms Defined.............................................. 2
2.2 Section References................................................. 2
ARTICLE 3
Basic Agreement
3.1 Timberlands Management............................................ 2
3.2 Harvest of Timber................................................. 2
3.3 Term of Agreement................................................. 3
3.4 Timberlands Subject to this Agreement............................. 3
ARTICLE 4
Compliance, Etc.
4.1 Compliance with Legal Requirements................................ 3
4.2 Indemnity......................................................... 4
4.3 Responsibility for Contractors.................................... 4
4.4 Construction and Maintenance of Roads............................. 5
</TABLE>
I
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5
Harvest Plans
5.1 Contents of Harvest Plan.......................................... 5
5.2 Requirements for Harvest Plan..................................... 6
5.3 Changes in Harvest Plan Due to Unforeseen Circumstances........... 6
5.4 Compliance With Reporting and other Legal Requirements............ 7
5.5 Marking Timber and Boundaries..................................... 7
5.6 Interim Harvest Plan.............................................. 8
ARTICLE 6
Harvest of Timber
6.1 Obligation to Harvest; Required Volumes........................... 8
6.2 Stumpage Prices................................................... 8
6.3 Payments.......................................................... 9
6.4 Scaling........................................................... 10
6.5 Monthly Logging Reports........................................... 10
6.6 Allocation of Costs; Payment of Taxes............................. 11
6.7 Records........................................................... 11
6.8 Disclaimer of Warranties.......................................... 11
6.9 Anderson-Tully's Right to Harvest Timber.......................... 11
ARTICLE 7
Logging Practices, Etc
7.1 Logging Practices in General...................................... 12
7.2 Protection of Improvements; Boundaries; Access; Trespass.......... 12
7.3 Fire Safety; Environmental Matters................................ 12
7.4 Post-Harvest Cleanup.............................................. 13
7.5 Responsibility for Contractors.................................... 13
7.6 Notice of Violations.............................................. 14
7.7 Indemnity......................................................... 14
7.8 Anderson-Tully Inspection; Claims Relating to Damage
or Incomplete and/or Underutilized Harvest....................... 14
</TABLE>
II
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8
Title Matters
8.1 Anderson-Tully's Title to Timberlands............................. 15
8.2 Timber Co.'s Rights to Cut........................................ 16
8.3 Title and Risk of Loss to Cut Timber.............................. 16
8.4 Grant of Access Rights............................................ 16
8.5 Timber Co. to Permit No Liens..................................... 17
ARTICLE 9
Disposition of Timberlands
9.1 No Transfer Without Timber Co. Consent; Exceptions................ 17
ARTICLE 10
Insurance
10.1 Timber Co. Insurance.............................................. 18
10.2 Timber Co. Contractors............................................ 18
10.3 Policy Terms of Timber Co. Insurance.............................. 19
10.4 Anderson-Tully Insurance.......................................... 20
10.5 Anderson-Tully Contractors........................................ 20
10.6 Policy Terms of Anderson-Tully Insurance.......................... 21
10.7 Claims............................................................ 22
ARTICLE 11
Suspension of Performance for Force Majeure
11.1 Suspension of Obligations......................................... 22
11.2 Extension of Time................................................. 22
ARTICLE 12
Default; Remedies
</TABLE>
III
<PAGE>
<TABLE>
<S> <C>
12.1 Timber Co. Default................................................ 22
12.2 Anderson-Tully Default............................................ 23
12.3 Remedies.......................................................... 24
12.4 Termination....................................................... 24
12.5 Right of Other Party To Perform................................... 24
ARTICLE 13
Arbitration of Disputes........................................... 25
ARTICLE 14
Assignment
14.1 Assignment Prohibited............................................. 27
14.2 Exception for Assignment to Corporate Successor................... 28
14.3 Partial Assignment by Timber Co. Permitted........................ 28
ARTICLE 15
Condemnation
15.1 Effect of Condemnation............................................ 28
15.2 Condemnation Award................................................ 29
15.3 Notice............................................................ 29
ARTICLE 16
Notices
16.1 Notices........................................................... 29
ARTICLE 17
Miscellaneous
17.1 Successors and Assigns............................................ 30
17.2 No Agency or Fiduciary Relationship............................... 30
17.3 No Third-Party Beneficiaries...................................... 30
</TABLE>
IV
<PAGE>
<TABLE>
<S> <C>
17.4 Attorneys' Fees................................................... 30
17.5 Entire Agreement.................................................. 30
17.6 Amendments; Waiver................................................ 31
17.7 Governing Law..................................................... 31
17.8 Counterparts...................................................... 31
17.9 Partial Invalidity................................................ 31
17.10 Further Assurances................................................ 32
17.11 Headings.......................................................... 32
17.12 Jurisdiction and Venue............................................ 32
</TABLE>
Appendices and Exhibits
Appendix A Defined Terms
Exhibit A Harvest Plan Data Sheet and Price Sheet
V
<PAGE>
TIMBER HARVEST AGREEMENT
------------------------
THIS TIMBER HARVEST AGREEMENT (this "Agreement"), effective as of January
1, 1998, between Anderson-Tully Timber Company, a Mississippi corporation
("Timber Co."), and Anderson-Tully Company ("Anderson-Tully"), a Mississippi
corporation,
W I T N E S S E T H:
WHEREAS, Anderson-Tully owns and controls approximately 328,000 acres of
timberlands (the "Timberlands") along the Mississippi River between Louisiana
and Southern Illinois that are being held and managed for investment; and
WHEREAS, Anderson-Tully has considerable expertise in the management of
timberlands; and
WHEREAS, the employees and officers of Timber Co. have considerable
expertise in harvesting and merchandising timber and have secured Anderson-Tully
Lumber Company ("Lumber Co.") and Anderson-Tully Veneers, L.P. ("Veneers, L.P.")
and others as customers; and
WHEREAS, Timber Co. desires to assure a steady and reliable source of raw
materials for its customers; and
WHEREAS, both parties hereto desire to enter into an agreement under which
Anderson-Tully will manage the Timberlands and Timber Co. will harvest a portion
of the Timber existing on the date hereof from the Timberlands and will make
payments with respect to such harvested Timber under a contract governed by
section 631(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
all as hereinafter more specifically provided.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Anderson-Tully and Timber Co. agree as follows:
<PAGE>
ARTICLE 1
---------
Purposes of Agreement; Construction
-----------------------------------
1.1 Purposes of this Agreement. The following (the "Agreement
--------------------------
Purposes") are the major purposes of this Agreement:
(a) to secure to Timber Co. a source of Merchantable Timber to supply
raw materials for Lumber Co. and Veneers, L.P. and others; and
(b) to secure to Anderson-Tully, during the Term hereof, treatment
pursuant to (S) 631(b) of the Code and to harvest Anderson-Tully's Merchantable
Timber.
ARTICLE 2
---------
Definitions
-----------
2.1 Certain Terms Defined. As used in this Agreement, the terms listed in
---------------------
Appendix A attached hereto shall have the meanings set forth therein (such
definitions to be equally applicable to the singular and plural forms of the
terms defined).
2.2 Section References. Unless otherwise provided herein, all references
------------------
to numbered sections, articles or exhibits shall refer to the sections and
articles of this Agreement and the exhibits attached to this Agreement.
ARTICLE 3
---------
Basic Agreement
---------------
3.1 Timberlands Management. Throughout the Term, Anderson-Tully shall
----------------------
manage and maintain, at its cost, all of the Timberlands in accordance with the
terms and provisions of Article 4 and the other applicable terms and provisions
of this Agreement and as may be amended from time to time.
3.2 Harvest of Timber. During the Term, Timber Co. shall harvest the
-----------------
Merchantable Timber designated in the Harvest Plan to be harvested in the Term,
in
2
<PAGE>
accordance with the applicable terms and provisions of Article 6 and the other
applicable terms and provisions of this Agreement. Notwithstanding anything in
this Agreement to the contrary, Anderson-Tully agrees that it shall have no
right to receive any payments under this Agreement if such payments would cause
Anderson-Tully to fail to qualify as a real estate investment trust (a "REIT")
for federal income tax purposes.
3.3 Term of Agreement. The term of this Agreement (the "Term") shall
-----------------
commence on January 1, 1998 (the "Commencement Date") and shall expire on
December 31, 1998 (the "Expiration Date").
3.4 Timberlands Subject to this Agreement. The Timberlands subject to
-------------------------------------
this Agreement designated in the Harvest Plan attached hereto shall be subject
to this Agreement throughout the Term.
ARTICLE 4
---------
Compliance, Etc.
----------------
4.1 Compliance with Legal Requirements. (a) Throughout the Term,
----------------------------------
Anderson-Tully at its expense shall comply in all material respects with all
Applicable Laws now or hereafter in effect relating to the ownership,
management and operation of the Timberlands including applicable Environmental
Laws, except to the extent such compliance is the responsibility of Timber Co.
pursuant to the applicable terms and provisions of Article 7 and the other
applicable terms and provisions of this Agreement. Without limiting the
generality of the foregoing, Anderson-Tully shall prepare and file with the
applicable Governmental Authorities all notices, reports, applications,
statements or other filings required under Applicable Laws, and shall obtain, as
and when required under Applicable Laws, all Governmental Approvals relating to
the ownership, management and operation of the Timberlands (except those for
which Timber Co. is responsible pursuant to Section 5.4). Promptly upon Timber
Co.'s request, Anderson-Tully shall deliver to Timber Co. copies of all required
Governmental Approvals or other reasonable evidence of Anderson-Tully's
compliance with such Applicable Laws. Anderson-Tully shall keep Timber Co.
generally apprised of material notices to or filings with Governmental
Authorities given or made by Anderson-Tully.
3
<PAGE>
4.2 Indemnity. Anderson-Tully hereby agrees to indemnify, save, defend
---------
and hold harmless Timber Co. and its officers, agents, contractors,
subcontractors, licensees, invitees and employees ("Timber Co. Indemnified
Parties") from all loss, cost, liability and expense resulting from injury to or
death of any person or persons (including, without limitation, Timber Co.'s
officers, agents, contractors, subcontractors, licensees, invitees and
employees), or destruction of or damage to property (including, without
limitation, the property of any Timber Co. Indemnified Party), or any other
claim of a third party against any Timber Co. Indemnified Party, arising out of
or connected with, either directly or indirectly, the performance by Anderson-
Tully of its obligations hereunder, the presence on the Timberlands of Anderson-
Tully or any partner, officer, agent, employee, contractor, subcontractor,
licensee or invitee of Anderson-Tully, or the condition of the Timberlands or
any portion thereof or improvement thereon, including, without limitation, the
presence on the Timberlands of any hazardous substances or the failure of the
Timberlands to comply with Applicable Laws, except to the extent such injury,
death, destruction, damage or other claim is caused by the negligence or willful
misconduct of Timber Co. or the breach by Timber Co. of its obligations under
this Agreement or is the subject of Timber Co.'s indemnification obligation
under Section 7.7. The obligations of Anderson-Tully under this Section 4.2
shall survive the expiration or termination of this Agreement.
4.3 Responsibility for Contractors.
------------------------------
(a) In the event that Anderson-Tully contracts with a contractor or
subcontractor of any tier to perform any portion of the Timber management
operations described in this Agreement as being performed by Anderson-Tully, it
shall ensure that any such contractor or subcontractor shall be made aware of
and shall abide by all pertinent provisions of this Agreement.
(b) All obligations, duties, liabilities, and responsibilities of
Anderson-Tully arising pursuant to the provisions of this Agreement, or
otherwise in law or in equity, shall apply with equal force to the employees,
agents, contractors of any tier, licensees and suppliers of Anderson-Tully
involved in operations hereunder where the context permits, and Anderson-Tully
shall be responsible and liable to Timber Co. for the activities of such
parties.
(c) Specific use of the terms "subcontractor," "agent," "contractor,"
and the like in certain sections of this Agreement, and omissions of such terms
in other sections, shall not be deemed to nullify or restrict the force and
effect of this Section
4
<PAGE>
only to such sections where such terms are specifically used. Use of the term
"Anderson-Tully" in any section giving rise to duties or obligations of
Anderson-Tully shall be deemed to include the subcontractors, agents,
contractors, employees, and licensees of Anderson-Tully where context permits.
4.4 Construction and Maintenance of Roads. Anderson-Tully shall, at its
-------------------------------------
expense, design, construct and (except as otherwise provided in Section 7.8(b))
maintain, or shall cause its hunting club tenants and/or contractors to design,
construct and maintain, the present system of roads throughout the Timberlands.
Timber Co. shall, at its expense, design, construct and maintain or obtain all
applicable permits necessary for all roads or river transportation sites
necessary for logging, log loading, and log transportation. Notwithstanding the
foregoing, to the extent it is customary for logging contractors to construct
temporary logging roads or perform road maintenance work in connection with
logging operations or construct and maintain river transportation loading sites,
Timber Co. may arrange for logging contractors to perform such work; in such
cases, the costs of such work will be borne by Timber Co.
ARTICLE 5
---------
Harvest Plans
-------------
5.1 Contents of Harvest Plan. Anderson-Tully shall prepare and deliver to
------------------------
Timber Co., no later than January 31, 1998, a Harvest Plan (a "Harvest Plan")
for the Term. The Harvest Plan shall include, for each Block included therein
and for the Term, the following information:
(a) A listing (a "Harvest Plan Data Sheet"), broken down by Block, of
each Compartment proposed to be harvested, and showing for each such Compartment
(i) the acreage; (ii) the estimated volumes to be harvested of each Fiber
Category in such Compartment, and the estimated volumes of each specie to be
harvested in such Compartment (excluding Products which are estimated to
constitute less than five percent (5%) of the total volume of a Fiber Category
in such Compartment); and (iii) whether such Compartment is available for
harvest throughout the Term or stating the portion of the Term when the
Compartment will be available for harvest. Each Harvest Plan Data Sheet shall
describe any known special restrictions or procedures (such as procedures to
protect any environmentally-sensitive areas) which will affect harvest
operations; and
5
<PAGE>
(b) A summary compilation of the data set forth in the Harvest Plan
Data Sheets (a "Harvest Plan Summary"), broken down by Block and showing totals
for the Timberlands subject to the Harvest Plan, listing the following
information: (i) estimated volumes of each Fiber Category and (ii) estimated
volumes of each specie within each Fiber Category.
5.2 Requirements for Harvest Plan. The Harvest Plan shall be consistent
-----------------------------
with the following requirements:
(a) The Harvest Plan shall be consistent with the Agreement Purposes
and shall provide for the harvest of 110 million board feet of saw timber and
660,000 tons of pulpwood; and
(b) If harvest operations in some but not all Compartments are
expected to be materially affected by high water or winter weather, the Harvest
Plan shall include a sufficient number of Compartments which are located in
areas where harvest operations may be performed in high water or winter weather
to permit Timber Co. to harvest the volumes contemplated by the Harvest Plan.
5.3 Changes in Harvest Plan Due to Unforeseen Circumstances.
-------------------------------------------------------
(a) In the event that, at any time, landslide, mudslide, high water,
subsidence or any other cause of damage to or blockage of a road or river
materially impairs access to a Compartment which is to be harvested during the
Term or if any Force Majeure would materially impair harvest operations on such
Compartment, and either party reasonably believes that suitable access for
harvest equipment and logging trucks will not be available, or that the
impairment of harvest operations will not be corrected, in time to complete the
harvest of the affected Compartment during the Term, then the Harvest Plan shall
be modified to delete the affected Compartment and substitute in its place a
Compartment or Compartments which is or are generally comparable in volumes,
types, and species of Merchantable Timber available for harvest. Such
substitute Compartment or Compartments shall be selected by mutual agreement and
the Harvest Plan shall be deemed modified to reflect such substitution.
(b) In the event that, at any time during the Term, Timber Co.
reasonably believes that the Compartments which are to be harvested during the
Term will produce materially different volumes of any one or more species or
Fiber Categories than the volumes reflected in the Harvest Plan, then Timber
Co., upon request to Anderson-Tully, shall have the right to modify the Harvest
Plan by substituting
6
<PAGE>
alternative Compartments. Upon receipt of such request, Anderson-Tully shall
cooperate with Timber Co. in identifying alternative Compartments for harvest
that will more nearly conform to the terms of the Harvest Plan. Any modification
to the Harvest Plan made pursuant to this Section 5.3(b) shall be reflected in a
written instrument, signed by both parties, in which the parties indicate their
consent to such modification.
(c) Any changes to the Harvest Plan pursuant to this Section 5.3 shall
be consummated only upon the receipt of an opinion of counsel to the effect that
such change will not adversely affect the status of Anderson-Tully as a REIT for
federal income tax purposes.
5.4 Compliance With Reporting and other Legal Requirements. In the event
------------------------------------------------------
that Applicable Law requires that any Governmental Authority or other Person
receive any notice, plan or information regarding a contemplated harvest of
forest products or requires that any Governmental Approval be obtained in
connection therewith or requires any other action respecting a contemplated
harvest, Timber Co. shall take all actions necessary to comply in all material
respects with such Applicable Law. Anderson-Tully shall provide such
cooperation as may be necessary to enable Timber Co. to so comply, but Anderson-
Tully shall not be required to incur any material expense in providing such
cooperation. Promptly upon Anderson-Tully's request, Timber Co. shall deliver
to Anderson-Tully copies of all required Governmental Approvals or other
reasonable evidence of Timber Co.'s compliance with such Applicable Laws.
Timber Co. shall keep Anderson-Tully generally apprised of material notices to
or filings with Governmental Authorities given or made by Timber Co.
5.5 Marking Timber and Boundaries. Prior to Timber Co.'s commencement of
-----------------------------
harvest operations on any Compartment, Anderson-Tully shall mark as needed the
Compartment boundaries and any environmentally sensitive areas on or adjacent to
the Compartment and, if the Compartment is to be selectively harvested,
Anderson-Tully shall mark the trees to be cut or shall provide a description of
the method by which Timber Co. is to determine which trees are to be cut
(collectively, "Site Marking"). Timber Co. will give notice to Anderson-Tully
of the date on which Timber Co. proposes to commence harvest operations on a
Compartment and Anderson-Tully shall commence the Site Marking of such
Compartment prior to commencement of harvest.
7
<PAGE>
5.6 Interim Harvest Plan. Anderson-Tully shall prepare and deliver
--------------------
to Timber Co., no later than December 31, 1997, a plan (an "Interim Harvest
Plan"). The Interim Harvest Plan shall include, for each Block included in such
Interim Harvest Plan and for the month of January 1998, information similar to
that required to be included in the Harvest Plan pursuant to Section 5.1. The
rights and obligations of the parties under this Agreement with respect to the
Harvest Plan shall similarly apply to the parties with respect to the Interim
Harvest Plan.
ARTICLE 6
---------
Harvest of Timber
-----------------
6.1 Obligation to Harvest; Required Volumes.
---------------------------------------
(a) Anderson-Tully shall permit Timber Co. to cut and remove, and
Timber Co. shall cut and remove, the Merchantable Timber to be harvested in
accordance with the Harvest Plan (as such Harvest Plan may be modified in
accordance with the provisions of Article 5). Upon and subject to the terms and
conditions of this Agreement, Timber Co. shall make payments with respect to all
such Merchantable Timber.
(b) Timber Co. may log the Compartments specified in the Harvest Plan
in such order as Timber Co. may elect, subject to acceptable site conditions,
but Timber Co. shall use its best efforts to provide ten (10) days notice to
Anderson-Tully but in no event less than two (2) business days notice prior to
commencing logging on a Compartment, which notice shall specify the Compartment
and the dates on which Timber Co. intends to commence and complete logging. In
scheduling harvests, Timber Co. shall make reasonable accommodations to permit
Anderson-Tully or its assignees or designees to perform scheduled silvicultural
activities. In the event that any required Site Marking on a Compartment will
not have been commenced on the date specified in such notice as the date Timber
Co. intends to commence logging, Anderson-Tully shall so notify Timber Co.
within one (1) business day after receipt of Timbers Co.'s notice and Anderson-
Tully and Timber Co. will in good faith determine the date upon which site
marking will commence.
6.2 Stumpage Prices. (a) Timber Co. shall make payments with respect to
---------------
all Merchantable Timber cut in any calendar quarter at a price (per MBF, per
cord or per ton, as applicable under then current Industry Practice) equal to
the Market Stumpage Price prevailing during such quarter for the applicable
Product, as deter-
8
<PAGE>
mined in accordance with this Section 6.2. Market Stumpage Prices shall be
established each calendar quarter, for each Fiber Category and, if Market
Stumpage Prices are different for different species, diameter classes or other
classifications within a Fiber Category, for each specific Product to be
harvested.
(b) Except as otherwise provided in Sections 6.2(c) and 6.2(d), the
term "Market Stumpage Price" means the fair market price of the standing timber,
determined by considering relevant data including, but not limited to, third
party stumpage sales.
(c) If the parties are unable to reach agreement as to the Market
Stumpage Price of any Product on or prior to the fifteenth (15/th/) day of the
applicable calendar quarter of the Term, then the parties shall submit the
dispute to a consulting forester selected by agreement of Timber Co. and
Anderson-Tully, who shall determine such Market Stumpage Price using the
methodology described in Section 6.2(b) no later than the end of the second
month of such calendar quarter. The consulting forester's determination of such
Market Stumpage Price shall be binding upon Anderson-Tully and Timber Co. The
parties shall each bear half of the cost of such forester's services. If the
parties are unable to agree upon a consulting forester within twenty (20)
business days after the beginning of the applicable calendar quarter, then the
consulting forester shall be chosen by arbitration in accordance with Article
13.
(d) In the event that the parties have not agreed upon the Market
Stumpage Price for any Product by the first day of the applicable calendar
quarter of the Term, then until such Market Stumpage Price has been determined,
the Payment Amount shall be calculated as if the Market Stumpage Price for such
Product for the immediately preceding quarter were the Market Stumpage Price for
the current quarter and a reconciliation Payment shall be made concurrently with
the succeeding regular Payment.
6.3 Payments. (a) No later than the sixteenth (16/th/) day of each
--------
month, Timber Co. will remit to Anderson-Tully the amount equal to the sum of
the volume of individual Products cut and scaled times their respective Market
Stumpage Prices for the preceding month (such amount being the "Monthly
Payment"). All payments to be made under this Agreement by either party to the
other shall be made in lawful money of the United States to the other party at
its address for notices as provided in Section 16.1, or at the request of the
party entitled to payment, by wire transfer or automatic funds transfer to such
account as such party may designate in writing from time to time.
9
<PAGE>
(b) Any amount payable under this Agreement which is not paid when due
shall bear interest, from the date payment is due through the date paid, at a
variable rate (the "Default Rate") equal to the sum of (i) the Prime Rate then
in effect, plus (ii) two (2) percent.
6.4 Scaling. (a) Except as may otherwise be specifically provided herein,
-------
the Merchantable Timber cut under this Agreement shall be scaled or weighed as
promptly as practicable after cutting, at Timber Co.'s log yard or such other
place as Timber Co. may designate, by a competent and qualified log scaler
employed or contracted by Timber Co. The scaler shall keep complete log scaling
records, and the scaler's records and procedures shall be subject to checking
and inspection by the representatives of Timber Co. and Anderson-Tully at all
reasonable times. The cost of such scaling shall be borne by Timber Co.
(b) The scaler shall provide scale tickets in five (5) parts for
distribution as follows: one to be retained by the scaler; and the remainder to
be delivered to Anderson-Tully, Timber Co., Timber Co.'s logger, and the
logger's trucker.
(c) Timber Co. and Anderson-Tully agree that the scaler shall employ
customary scaling standards including reasonable provisions for deductions for
defects in accordance with Industry Practice. Sample scaling using a reasonable
sample of each shipment shall be permitted.
(d) Timber Co. shall bear the risk that Products harvested under this
Agreement shall have a higher frequency or severity of defects than is reflected
at the time of the scaling of such Products, and Timber Co. shall not be
entitled to any discount or price reduction for any such defects subsequently
discovered.
6.5 Monthly Logging Reports. No later than sixteen (16) days after the
-----------------------
last day of each calendar month, Timber Co. shall deliver to Anderson-Tully with
its Monthly Payment a report (a "Monthly Logging Report") setting forth (a) for
each Compartment from which any Product was scaled during such month, the volume
of each shipment of such Product scaled, the destination to which each shipment
of such Product was delivered, the Market Stumpage Price then in effect for such
Product shipment, the price for such Product shipment derived by applying such
Market Stumpage Price to such volume, and the total price for all Products
scaled from such Compartment derived by adding together all such Product
shipment prices; and (b) for each Block, the totals for such month of the
Product shipment volumes and
10
<PAGE>
Product prices of each Product included in the portion of the Monthly Logging
Report described in clause (a) above.
6.6 Allocation of Costs; Payment of Taxes. (a) Timber Co. shall pay all
-------------------------------------
of its own costs including Costs of Log and Haul. Anderson-Tully shall pay all
of its own costs including all costs and expenses arising from or related to the
ownership, management and operation of the Timberlands.
(b) All yield taxes, sales taxes, harvest taxes, severance taxes and
other taxes assessed in respect of Timber harvested shall be paid when due by
Timber Co. except so long as the validity or amount of such taxes is being
diligently protested in good faith and by appropriate proceedings (provided that
such taxes shall be paid notwithstanding such protest if necessary to avoid
interest and penalties). Anderson-Tully shall pay all taxes, assessments and
other governmental impositions relating to the ownership, management and
operation of the Timberlands when due, except so long as the validity or amount
of such taxes is being diligently protested in good faith and by appropriate
proceedings (provided that such taxes shall be paid notwithstanding such
protest if necessary to avoid interest and penalties).
6.7 Records. (a) Timber Co. shall maintain detailed operating and
-------
financial records of all harvest operations carried out pursuant to this
Agreement, including operating records setting forth the volumes of each Product
cut and scaled and the date and location of each scaling. Timber Co. shall
maintain such records relating to the Term for not less than three (3) years
after the end of the Term. Such records shall be available for review by
Anderson-Tully or its representatives at Timber Co.'s offices at any time during
normal business hours on not less than three (3) days' prior notice.
6.8 Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS
------------------------
AGREEMENT, Anderson-Tully MAKES NO WARRANTY, EXPRESS OR IMPLIED, IN FACT, BY LAW
OR OTHERWISE, CONCERNING THE QUALITY OR CHARACTER OF THE TIMBER HARVESTED
HEREUNDER AND HEREBY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE.
6.9 Anderson-Tully's Right to Harvest Timber. Anderson-Tully reserves the
----------------------------------------
right during the Term to harvest Timber from the Timberlands, in addition to the
Timber to be harvested by Timber Co. as specified in the Harvest Plan for the
Term,
11
<PAGE>
provided that Anderson-Tully's harvesting operations shall not at any time
impede or interfere with Timber Co.'s harvesting operations.
ARTICLE 7
---------
Logging Practices, Etc.
----------------------
7.1 Logging Practices in General. All Merchantable Timber with respect to
----------------------------
which Timber Co. shall make payments hereunder shall be cut in accordance with
the applicable Harvest Plan, and Timber Co. shall remove all Merchantable Timber
cut from the logging areas. Timber severed hereunder shall be cut as close to
the ground as practicable and utilized in such manner as to yield the greatest
value and quantity of merchantable timber. Timber Co. agrees to cut and remove
the Merchantable Timber harvested pursuant to this Agreement in accordance with
Prudent Logging Practices and to conform in all material respects to the
applicable Harvest Plan and all Applicable Laws in conducting logging operations
hereunder. All logging and transportation contractors engaged by Timber Co.
shall meet standard industry competency standards.
7.2 Protection of Improvements; Boundaries; Access; Trespass. (a) In
--------------------------------------------------------
conducting its logging operations, Timber Co. shall take reasonable precautions
to avoid damage to crops, existing roads, culverts, bridges, fences, utility
poles and lines, and all other structures and improvements. Timber Co. shall,
with reasonable promptness, repair any such damage at its cost.
(b) Timber Co. shall at its own expense obtain all necessary permits,
consents and/or approvals from adjacent landowners and Governmental Authorities
necessary to obtain or maintain access to the Timberlands and to conduct logging
and log transportation activities. Anderson-Tully will cooperate in good faith
with Timber Co. to secure such permits, consents and/or approvals including
consenting to reasonable reciprocal access to the Timberlands or other
reasonable consideration in the circumstances. Timber Co. shall use diligent
efforts to avoid the commission of any trespass onto lands which are not part of
the Timberlands, and, except to the extent Anderson-Tully's Site Marking is
incomplete or inaccurate, Timber Co. shall be solely responsible for any damages
arising from any trespass onto any such lands.
7.3 Fire Safety; Environmental Matters. (a) In conducting its logging
----------------------------------
operations, Timber Co. shall exercise and shall cause its contractors to
exercise every reasonable precaution against fire. In the event any fire
results from Timber Co.'s
12
<PAGE>
logging operations, Timber Co. shall promptly exert every reasonable effort to
suppress such fire. Costs incurred by Timber Co. in such fire suppression
efforts due to fires resulting from Timber Co.'s operations shall be Timber
Co.'s sole responsibility.
(b) In conducting its logging operations, Timber Co. shall exercise
and shall cause its contractors to exercise every reasonable precaution against
damage to rivers, streams, lakes, riparian areas and other environmentally
sensitive areas of which it has knowledge, and shall comply in all material
respects with all applicable Environmental Laws.
7.4 Post-Harvest Cleanup. When logging of a Compartment has been
--------------------
completed, (a) Timber Co. shall remove from such Compartment all equipment,
supplies and waste, and (b) to the extent it is customary for such work to be
performed by a logging contractor, Timber Co. shall cause its logging
contractors to (i) lop and scatter all slash within one hundred (100) feet of
any road; and (ii) restore all landing areas in a manner suitable for Timber-
growing.
7.5 Responsibility for Contractors.
------------------------------
(a) In the event Timber Co. contracts with a contractor or
subcontractor of any tier to perform any portion of the logging or
transportation operations described in this Agreement as being performed by
Timber Co., it shall ensure that any such contractor or subcontractor shall be
made aware of and shall abide by all pertinent provisions of this Agreement.
(b) All obligations, duties, liabilities, and responsibilities of
Timber Co. arising pursuant to the provisions of this Agreement, or otherwise in
law or in equity, shall apply with equal force to the employees, agents,
contractors of any tier, licensees and suppliers of Timber Co. involved in
logging or transportation operations hereunder where the context permits, and
Timber Co. shall be responsible and liable to Anderson-Tully for the activities
of such parties.
(c) Specific use of the terms "subcontractor," "agent," "contractor,"
and the like in certain sections of this Agreement, and omissions of such terms
in other sections, shall not be deemed to nullify or restrict the force and
effect of this Section only to such sections, where such terms are specifically
used. Use of the term "Timber Co." in any section giving rise to duties or
obligations of Timber Co. shall be
13
<PAGE>
deemed to include the subcontractors, agents, contractors, employees, suppliers,
and licensees of Timber Co. where context permits.
7.6 Notice of Violations. If Timber Co. receives any notice from any
--------------------
Governmental Authority or any other Person alleging that Timber Co.'s logging or
transportation operations are in violation of any Applicable Law or that Timber
Co., in conducting such operations, has violated any rights of such Person, and
the amount of damages arising from the alleged violation, or the cost of curing
or correcting the violation, if adversely determined, could reasonably be
expected to exceed One Hundred Thousand Dollars ($100,000.00), then Timber Co.
shall, within ten (10) days after receiving such notice, deliver to Anderson-
Tully a notice describing the allegation in reasonable detail.
7.7 Indemnity. Timber Co. hereby agrees to indemnify, save, defend and
---------
hold harmless Anderson-Tully and its officers, agents, contractors,
subcontractors, licensees, invitees and employees ("Anderson-Tully Indemnified
Parties") from all loss, cost, liability and expense resulting from injury to or
death of any person or persons (including, without limitation, Anderson-Tully's
officers, agents, contractors, subcontractors, licensees, invitees and
employees), or destruction of or damage to property (including, without
limitation, the property of any Anderson-Tully Indemnified Party), or any other
claim of a third party against any Anderson-Tully Indemnified Party, arising out
of or connected with, either directly or indirectly, the performance by Timber
Co. of its obligations hereunder, the presence on the Timberlands of Timber Co.
or any partner, officer, agent, employee, contractor, subcontractor, licensee or
invitee of Timber Co., except to the extent such injury, death, destruction,
damage or other claim is caused by the negligence or willful misconduct of
Anderson-Tully or the breach by Anderson-Tully of its obligations under this
Agreement or is the subject of Anderson-Tully's indemnification obligation under
Section 4.2. The obligations of Timber Co. under this Section 7.7 shall survive
the expiration or termination of this Agreement.
7.8 Anderson-Tully Inspection; Claims Relating to Damage or Incomplete
------------------------------------------------------------------
and/or Underutilized Harvest. (a) Anderson-Tully and its representatives shall
- ----------------------------
have the right to visit and inspect any logging site during logging operations
at any time; provided that all such visits and inspections shall be conducted in
a manner so as to minimize interference with Timber Co.'s performance under this
Agreement. Anderson-Tully shall take all precautions to protect the safety of
its representatives and its property in connection with any such inspection.
14
<PAGE>
(b) As to each Compartment being harvested, Timber Co. shall give
Anderson-Tully notice of the date on which Timber Co. expects to complete
logging operations on such Compartment not less than three (3) days prior to
such date. If, upon Anderson-Tully's inspection of a Compartment, Anderson-
Tully notifies Timber Co. prior to the completion of logging (i.e., before
Timber Co.'s logging contractor or logging personnel have moved off the site) of
damage (other than ordinary wear and tear) caused by Timber Co. to the logging
site, adjacent areas or logging roads, Timber Co. shall cause such damage to be
repaired promptly. If upon such inspection, Anderson-Tully notifies Timber Co.
prior to completion of logging that Timber Co. has failed to complete the
harvest of such Compartment in accordance with the Harvest Plan (e.g., failure
to cut and remove all Timber required to be harvested), or has materially
underutilized the Merchantable Timber cut (e.g., failure to properly classify
timber as saw timber or pulpwood or failure to buck properly) Timber Co. shall
cure such failure promptly. If Timber Co. shall not cure such failure promptly
or otherwise be unable to cure such failure, Anderson-Tully will notify Timber
Co. of the amount of lost revenue or damage arising from such failure. Such
amount will be due with the next payment; provided, however, that such amount
will be payable only upon the receipt of an opinion of counsel to the effect
that payment of such amount (i) will either be treated under Section 631(b) or
will not cause payments for harvests of timber under this Contract not to be
treated under Section 631(b), and (ii) will not adversely affect the status of
Anderson-Tully as a REIT for federal income tax purposes. If Anderson-Tully
notifies Timber Co. of any such damage (other than damage occurring after an
Anderson-Tully inspection) or any such incomplete or underutilized harvest after
Timber Co.'s logging contractor or logging personnel have moved off the site,
Timber Co. shall have no obligation to repair any damage or cure any failure to
complete the harvest, and Anderson-Tully hereby waives any claim for such damage
(other than damage occurring after the Anderson-Tully inspection) or failure
unless notice thereof is given prior to completion of logging operations.
ARTICLE 8
---------
Title Matters
-------------
8.1 Anderson-Tully's Title to Timberlands. (a) Anderson-Tully hereby
-------------------------------------
represents and warrants that, except as provided in the following sentence,
Anderson-Tully is, and covenants that it will throughout the Term remain, the
owner of fee title to all of the Timberlands subject to the Harvest Plan, and
will defend the same and the validity and priority of Timber Co.'s rights under
this Agreement against the lawful claims of all Persons whomsoever; and
Anderson-Tully further represents and warrants that, except as provided in the
following sentence, the Timberlands subject to the Harvest Plan, are, and
covenants that the Timberlands subject to the Harvest Plan, will throughout the
Term remain, free and clear of all liens and encumbrances of any kind, nature or
description, save and except only the following (collectively,
15
<PAGE>
"Permitted Exceptions"): real property taxes for the current fiscal year not
delinquent, those matters which are disclosed in the public real property
records as of the date of this Agreement, those matters which would be disclosed
by a land survey or an inspection of the Timberlands subject to the Harvest
Plan, and those matters which would not, individually or in the aggregate,
materially impair the rights of Timber Co. under this Agreement or materially
reduce the value of Timber Co.'s interests under this Agreement.
(b) Anderson-Tully shall have the right to grant licenses or other
limited use rights to third parties for grazing or recreational use of the
Timberlands subject to the Harvest Plan, only so long as no such use shall (i)
cause material damage to the Timberlands subject to the Harvest Plan or (ii)
materially interfere with Timber Co.'s operations on such Timberlands.
8.2 Timber Co.'s Rights to Cut. From and after the Commencement Date and
--------------------------
during the entire Term, Timber Co. shall have, as to all of the Timber growing
on the Timberlands from time to time and subject to any Harvest Plan, only the
rights to cut such Timber as provided in this Agreement.
8.3 Title and Risk of Loss to Cut Timber. Title to all Timber included in
------------------------------------
the Harvest Plan pursuant to this Agreement remains in Anderson-Tully until it
has been cut in the case of standing Timber.
8.4 Grant of Access Rights. During the entire Term, Anderson-Tully shall
----------------------
provide, and hereby grants to, Timber Co. and its officers, agents, employees,
contractors, subcontractors and consultants full and free access at all times to
the Timberlands and the nonexclusive right to use all roads and other means of
ingress to and egress from the Timberlands. Without limiting the generality of
the foregoing, Anderson-Tully hereby assigns to Timber Co. the nonexclusive
right to use any easement, right of way, license or permit for access heretofore
or hereafter granted to Anderson-Tully ("Access Rights") by any Person to the
extent necessary or useful to Timber Co. in connection with this Agreement. To
the extent such assignment of any Access Right requires the consent or approval
of the grantor of such Access Right, Anderson-Tully shall use its best efforts
to obtain such consent and deliver the same to Timber Co. At Timber Co.'s
reasonable request, Anderson-Tully shall execute and deliver to Timber Co. a
separate assignment of any Access Right, in such form as Timber Co. may
reasonably request.
16
<PAGE>
8.5 Timber Co. to Permit No Liens. Timber Co. shall not permit or suffer
-----------------------------
any lien or liens to be enforced on or against the Timberlands, nor any of the
improvements thereon nor any Timber thereon, for work, labor, materials,
supplies or equipment furnished by or at the request of Timber Co., and Timber
Co. shall hold Anderson-Tully harmless against and defend Anderson-Tully against
any and all such liens. If Timber Co. fails to remove or bond against any such
lien within twenty (20) days after written notice thereof to Timber Co.,
Anderson-Tully shall have the right to pay any amount required to release and
discharge any such lien or liens, or to defend any action brought thereon, and
to pay any judgment entered therein, and Timber Co. shall be liable to Anderson-
Tully for all reasonable costs (including reasonable attorneys' fees) incurred
by Anderson-Tully or for the payment of any of said liens or any judgments
obtained thereon; provided, however, that Timber Co.'s obligations under this
Section 8.5 shall be suspended so long as (i) Timber Co. is reasonably and in
good faith contesting the amount or validity of such lien by appropriate
proceedings, and (ii) Timber Co. shall take all actions necessary (including
payment of or bonding against such lien) to avoid a foreclosure of any such
lien.
ARTICLE 9
---------
Disposition of Timberlands
--------------------------
9.1 No Transfer Without Timber Co. Consent; Exceptions. Without the prior
--------------------------------------------------
written consent of Timber Co., Anderson-Tully shall not sell, transfer, assign
or convey the Timberlands subject to the Harvest Plan, or any portion thereof or
interest therein or any Timber located thereon and shall not permit the
transfer, assignment or conveyance of a Controlling Interest in Anderson-Tully,
whether voluntarily or by operation of law. The sale, transfer, assignment or
conveyance of all or any portion of the Timberlands subject to the Harvest Plan
or any Timber located thereon or the transfer, assignment or conveyance of a
Controlling Interest in Anderson-Tully, whether voluntarily or by operation of
law, without the prior written consent of Timber Co., shall constitute an
Anderson-Tully Event of Default. Notwithstanding anything contained herein to
the contrary, Anderson-Tully hereby waives any right it now has or may hereafter
have to require Timber Co. to prove an impairment of its rights as a condition
to enforcing Anderson-Tully's covenants under this Section 9.1.
17
<PAGE>
ARTICLE 10
----------
Insurance
---------
10.1 Timber Co. Insurance. Timber Co. agrees to carry and maintain at
--------------------
all times during the term of this Agreement:
(a) a policy or policies of liability insurance with limits of not
less than One Million Dollars ($1,000,000.00) protecting Timber Co. and
Anderson-Tully against sums payable as damages because of injury to or
destruction of property of others (whether by fire or otherwise), including the
loss of the use thereof, arising out of an occurrence directly connected with
the logging operations herein described or other operations of Timber Co., its
employees, agents, contractors, subcontractors, licensees, invitees or business
visitors incidental to such logging and management operations, including but not
limited to: (i) damage to or destruction of trucks, trailers or railroad cars,
or other property of others while logs are being loaded or unloaded; provided
that Timber Co. shall not be required to insure against damage to or destruction
of standing Timber or felled or bucked Timber.
(b) a policy of insurance covering automobile, bodily injury,
liability, and property damage on its automobiles with coverage for death or
injury to persons and property damage and a limit of not less than Five Hundred
Thousand Dollars ($500,000.00). (The word "automobile" shall mean any land motor
vehicle, trailer or semi-trailer used for transporting logs, goods or
passengers.)
(c) Workers' Compensation Insurance in compliance with the laws of the
respective States in which the subject Timberlands are located.
10.2 Timber Co. Contractors. During the Term of this Agreement, Timber Co.
----------------------
shall assure that any contractor (of any tier) or agent employed by Timber Co.
to perform any of the work described herein shall be covered by insurance with
the following coverages:
(a) Policies of automobile, bodily injury, liability and property
damage insurance, with coverages of at least Five Hundred Thousand Dollars
($500,000.00) for death of or any injury to any one person, Five Hundred
Thousand Dollars ($500,000.00) for any one accident causing death or injury, and
Two Hundred Thousand Dollars ($200,000.00) for property damage coverage. (The
word "automo-
18
<PAGE>
bile" shall mean any land motor vehicle, trailer or semi-trailer used for
transporting logs, goods, or passengers).
(b) Workers' Compensation Insurance in compliance with the laws of the
respective States in which the subject Timberlands are located.
10.3 Policy Terms of Timber Co. Insurance. Any insurance carried by Timber
------------------------------------
Co. to the extent required by Section 10.2 shall be written by licensed
insurance companies with a Best's Rating of A or better. Each policy shall be
endorsed to provide that:
(a) With the exception of workers' compensation coverage, Anderson-
Tully shall be an additional insured with the understanding that any obligation
imposed upon Timber Co. (including, without limitation, the liability to pay
premiums) shall be the sole obligation of Timber Co. and not that of Anderson-
Tully;
(b) The insurer thereunder waives all rights of subrogation against
Anderson-Tully, any right of set off and counterclaim and any other right to
deduction whether by attachment or otherwise;
(c) Such insurance shall be primary without right of contribution of
any other insurance carried by Anderson-Tully with respect to its interests as
such in the Timberland;
(d) If such insurance is cancelled for any reason whatsoever,
including nonpayment of premium, or any substantial change is made in the
coverage which affects the interests of Anderson-Tully, such cancellation or
change shall not be effective as to Anderson-Tully for thirty (30) days after
receipt by Anderson-Tully of written notice sent by registered mail from each
insurer of such cancellation or change; and
(e) Any liability insurance policy shall be endorsed to provide that,
inasmuch as the policy is written to cover more than one (1) insured, all terms,
conditions, insuring agreements and endorsements, with the exception of limits
of liability, shall operate in the same manner as if there were a separate
policy covering such insured.
19
<PAGE>
Timber Co. shall provide Anderson-Tully with certificates evidencing the
insurance carried by Timber Co. hereunder at reasonable intervals as requested
by Anderson-Tully.
10.4 Anderson-Tully Insurance. Anderson-Tully agrees to carry and maintain
------------------------
at all times during the term of this Agreement:
(a) a policy or policies of liability insurance with limits of not
less than One Million Dollars ($1,000,000.00) protecting Anderson-Tully and
Timber Co. against sums payable as damages because of injury to or destruction
of property of others (whether by fire or otherwise), including the loss of the
use thereof, arising out of an occurrence directly connected with the operations
herein described or other operations of Anderson-Tully, its employees, agents,
contractors, subcontractors, licensees, invitees or business visitors incidental
to such logging and management operations; provided that Anderson-Tully shall
not be required to insure against damage to or destruction of standing Timber or
felled or bucked Timber.
(b) a policy of insurance covering automobile, bodily injury,
liability, and property damage on its automobiles with coverage for death or
injury to persons and property damage and a limit of not less than Five Hundred
Thousand Dollars ($500,000.00). (The word "automobile" shall mean any land motor
vehicle, trailer or semi-trailer used for transporting logs, goods or
passengers.)
(c) Workers' Compensation Insurance in compliance with the laws of the
respective States in which the Timberlands are located.
10.5 Anderson-Tully Contractors. During the Term of this Agreement,
--------------------------
Anderson-Tully shall assure that any contractor (of any tier) or agent employed
by Anderson-Tully to perform any of the work described herein shall be covered
by insurance with the following coverages:
(a) Policies of automobile, bodily injury, liability and property
damage insurance, with coverages of at least Five Hundred Thousand Dollars
($500,000.00) for death of or any injury to any one person, Five Hundred
Thousand Dollars ($500,000.00) for any one accident causing death or injury, and
Two Hundred Thousand Dollars ($200,000.00) for property damage coverage. (The
word "automobile" shall mean any land motor vehicle, trailer or semi-trailer
used for transporting logs, goods, or passengers).
20
<PAGE>
(b) Workers' Compensation Insurance in compliance with the laws of the
respective States in which the subject Timberlands are located.
10.6 Policy Terms of Anderson-Tully Insurance. Any insurance carried by
----------------------------------------
Anderson-Tully to the extent required by Section 10.3 shall be written by
licensed insurance companies with a Best's Rating of A or better. Each policy
shall be endorsed to provide that:
(a) With the exception of workers' compensation coverage, Timber Co.
shall be an additional insured with the understanding that any obligation
imposed upon Anderson-Tully (including, without limitation, the liability to pay
premiums) shall be the sole obligation of Anderson-Tully and not that of Timber
Co.;
(b) The insurer thereunder waives all rights of subrogation against
Timber Co., any right of set off and counterclaim and any other right to
deduction whether by attachment or otherwise;
(c) Such insurance shall be primary without right of contribution of
any other insurance carried by Timber Co. with respect to its interests as such
in the Timberlands;
(d) If such insurance is cancelled for any reason whatsoever,
including nonpayment of premium, or any substantial change is made in the
coverage which affects the interests of Timber Co., such cancellation or change
shall not be effective as to Timber Co. for thirty (30) days after receipt by
Timber Co. of written notice sent by registered mail from each insurer of such
cancellation or change; and
(e) Any liability insurance policy shall be endorsed to provide that,
inasmuch as the policy is written to cover more than one (1) insured, all terms,
conditions, insuring agreements and endorsements, with the exception of limits
of liability, shall operate in the same manner as if there were a separate
policy covering such insured.
Anderson-Tully shall provide Timber Co. with certificates evidencing the
insurance carried by Anderson-Tully hereunder at reasonable intervals as
requested by Timber Co.
21
<PAGE>
10.7 Claims. With regard to any claim under the policies of insurance
------
carried by either party, the party responsible for carrying such insurance under
this Article 10 shall be responsible for adjusting claims under such policy.
ARTICLE 11
----------
Suspension of Performance for Force Majeure
-------------------------------------------
11.1 Suspension of Obligations. Any obligations, covenants or conditions
-------------------------
imposed upon either party under this Agreement shall (subject to the terms of
Section 5.3(a)) be suspended while and to the extent that compliance or
performance by such party (the "Excused Party") is substantially impaired or
prevented by any one or more of the following: fires, drought, infestation,
pestilence, disease, floods and the elements, accidents, riots, wars, delays in
transportation, interference by government action, changes in Applicable Laws,
strikes, lock-outs, picketing or other form of labor trouble (whether or not
participated in by the employees of the Excused Party or arising from a dispute
with or unfair labor practices charged against the Excused Party) or any other
causes beyond the reasonable control of the Excused Party, whether similar or
dissimilar to the causes specifically mentioned (each a "Force Majeure").
11.2 Extension of Time. Within ten (10) days after commencement (or
-----------------
discovery) of any Force Majeure, the Excused Party shall forward written notice
thereof to the other party and thereupon all time periods set forth in this
Agreement or any plan prepared pursuant to this Agreement for performance of an
obligation shall be extended for a period equal to each period of suspension
during which the Excused Party is prevented from performing its obligations
under this Agreement by reason of the Force Majeure. Upon discontinuance or
termination of any Force Majeure, the Excused Party shall resume within a
reasonable time and prosecute with due diligence the obligations so suspended.
ARTICLE 12
----------
Default; Remedies
-----------------
12.1 Timber Co. Default. Each of the following events (each a "Timber Co.
------------------
Event of Default") shall constitute an event of default by Timber Co. hereunder:
22
<PAGE>
(a) Timber Co. fails to pay Anderson-Tully any amount owed hereunder
within thirty (30) business days after receipt of written notice from Anderson-
Tully that such amount is due;
(b) Timber Co. fails to perform or comply with any other material
obligation of Timber Co. under this Agreement and fails to remedy such default
within thirty (30) days after receipt of written notice from Anderson-Tully to
do so (or, where the default cannot be cured by the payment of money and cannot
be completely remedied within said thirty (30) days, Timber Co. fails to
commence to remedy such default within that period or fails after commencement
to prosecute the remedying thereof with due diligence or complete the remedying
thereof within a reasonable time); and
(c) Timber Co. is dissolved or liquidated without this Agreement being
or having been assigned to a Corporate Successor in accordance with Section
14.2.
12.2 Anderson-Tully Default. Each of the following events (each an
----------------------
"Anderson-Tully Event of Default") shall constitute an event of default by
Anderson-Tully hereunder:
(a) Anderson-Tully fails to pay Timber Co. any amount owed hereunder
within thirty (30) business days after receipt of written notice from Timber Co.
that such amount is due;
(b) an Event of Default described in Section 9.1 occurs;
(c) Anderson-Tully fails to perform or comply with any other material
obligation of Anderson-Tully under this Agreement and fails to remedy such
default within thirty (30) days after receipt of written notice from Timber Co.
to do so (or, where the default cannot be cured by the payment of money and
cannot be completely remedied within said thirty (30) days, Anderson-Tully fails
to commence to remedy such default within that period or fails after
commencement to prosecute the remedying thereof with due diligence or complete
the remedying thereof within a reasonable time); and
(d) Anderson-Tully is dissolved or liquidated without this Agreement
being or having been assigned to a Corporate Successor in accordance with
Section 14.2.
23
<PAGE>
12.3 Remedies. Upon the occurrence of an Event of Default by either party
--------
hereto, the non-defaulting party shall, subject to Section 12.4, have the right
to pursue all remedies available to such party at law or in equity in connection
with such Event of Default, including the right:
(a) to money damages in the amount necessary to compensate the non-
defaulting party for all reasonably foreseeable losses and costs caused by the
Event of Default, together with interest on any award of money damages from the
date of the Event of Default until paid at the Default Rate; and
(b) to injunctive or other equitable relief, including the right to
specific enforcement of the defaulting party's obligations (the parties each
acknowledging that money damages may be an inadequate remedy for a default under
this agreement).
12.4 Termination. (a) This Agreement may be terminated:
-----------
(i) by Timber Co. (A) upon the occurrence of an Anderson-Tully Event
of Default described in Section 12.2(b) or Section 12.2(d), or (B) if
Anderson-Tully, willfully and without reasonable justification, repudiates
this Agreement and ceases to perform its obligations under this Agreement;
or
(ii) by Anderson-Tully (A) upon the occurrence of a Timber Co. Event
of Default described in Section 12.1(c), or (B) if Timber Co., willfully
and without reasonable justification, repudiates this Agreement and ceases
to perform its obligations under this Agreement.
12.5 Right of Other Party To Perform. If either party (a "defaulting
-------------------------------
party") fails to perform any covenant or obligation hereunder on its part to be
performed, and such failure shall continue for ninety (90) days (or such shorter
period as may be reasonable under emergency circumstances) after written notice
thereof by the other party ("non-defaulting party"), the nondefaulting party
may, without waiving or releasing the defaulting party from any obligation
hereunder, perform any such covenant or obligation required to be performed by
the defaulting party, but the non-defaulting party shall not be obligated to do
so. All amounts incurred by the non-defaulting party and all necessary costs of
such performance incurred by the non-defaulting party, together with interest
thereon at the Default Rate from the date of such payment or performance by the
non-defaulting party, shall be paid (and the defaulting party covenants to make
such payment) to the non-defaulting party on demand.
24
<PAGE>
ARTICLE 13
----------
Arbitration of Disputes
-----------------------
ANY CLAIM, CONTROVERSY OR DISPUTE, (COLLECTIVELY, "DISPUTE"), WHETHER
SOUNDING IN CONTRACT, STATUTE, TORT, FRAUD, MISREPRESENTATION OR OTHER LEGAL
THEORY, RELATED DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, OR ITS PERFORMANCE,
NEGOTIATION, FORMATION, INTERPRETATION, ADMINISTRATION, RENEWAL OR OTHERWISE,
WHENEVER BROUGHT AND WHETHER BETWEEN ANY OF THE PARTIES TO THIS AGREEMENT OR
BETWEEN ANY OF THE PARTIES TO THIS AGREEMENT AND THE EMPLOYEES, AGENTS OR
AFFILIATED BUSINESSES OF ANY OTHER PARTY, SHALL BE RESOLVED BY ARBITRATION AS
PRESCRIBED IN THIS SECTION, WHETHER OR NOT SUCH DISPUTE RELATES TO A PROVISION
OF THIS AGREEMENT THAT SPECIFICALLY REFERS TO THIS ARTICLE 13, OR RELATES TO ANY
SPECIFIC PROVISION OF THIS AGREEMENT AT ALL.
THE ARBITRATION SHALL BE TRIPARTITE, WITH EACH OF THE TWO PARTIES TO
THE DISPUTE APPOINTING AN ARBITRATOR, AND WITH THE TWO ARBITRATORS THUS
APPOINTED (THE "PARTY ARBITRATORS") APPOINTING A SINGLE NEUTRAL ARBITRATOR.
SUCH NEUTRAL ARBITRATOR SHALL BE A RETIRED FEDERAL OR MISSISSIPPI JUDGE. THE
ARBITRATORS SHALL CONDUCT THE ARBITRATION UNDER THE THEN-CURRENT COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA"). THE
NEUTRAL ARBITRATOR SHALL BE SELECTED BY MUTUAL AGREEMENT OF THE PARTY
ARBITRATORS, OR IF THEY ARE UNABLE TO REACH AGREEMENT ON THE ARBITRATOR WITHIN
THIRTY (30) DAYS AFTER WRITTEN NOTICE BY ONE PARTY TO THE OTHER(S) INVOKING THIS
ARBITRATION PROVISION, IN ACCORDANCE WITH AAA PROCEDURES FOR THE SELECTION OF
NEUTRAL ARBITRATORS, FROM A LIST OF RETIRED FEDERAL OR MISSISSIPPI JUDGES
MAINTAINED BY THE AAA FOR USE IN MISSISSIPPI. THE ARBITRATION SHALL BE CONDUCTED
IN MISSISSIPPI AT A PLACE DETERMINED BY THE ARBITRATORS AND ALL EXPEDITED
PROCEDURES PRESCRIBED BY THE AAA COMMERCIAL ARBITRATION RULES SHALL APPLY.
25
<PAGE>
THE NEUTRAL ARBITRATOR ACTING ALONE MAY RULE ON PROCEDURAL QUESTIONS,
INCLUDING THE TIME AND PLACE OF HEARINGS, THE MANNER AND METHOD OF SUBMISSION OF
EVIDENCE, PROOFS AND ARGUMENTS, AND ON DISCOVERY ISSUES. THE NEUTRAL ARBITRATOR
SHALL LIMIT THE SCOPE OF DISCOVERY TO MATTERS RELEVANT TO THE ISSUES IN QUESTION
AND SHALL ESTABLISH REASONABLE TIME LIMITS WITHIN WHICH PARTIES TO THE
ARBITRATION MUST COMMENCE AND COMPLETE DISCOVERY. IN ALL OTHER MATTERS, THE ACT
OR DECISION OF AT LEAST TWO OF THE ARBITRATORS SHALL BE THE ACT OF THE
ARBITRATORS. THE ARBITRATORS, BY A VOTE OF AT LEAST TWO OF THEM, MAY PROVIDE
THAT THE HEARING OF EVIDENCE AND ARGUMENT SHALL TAKE PLACE ONLY BEFORE THE
NEUTRAL ARBITRATOR.
THE ARBITRATORS SHALL MAKE A FINAL DECISION AND AWARD, BY THE
CONCURRENCE OF AT LEAST TWO OF THEM, IN A WRITING SIGNED BY AT LEAST TWO OF
THEM. THE ARBITRATORS SHALL HAVE AUTHORITY ONLY TO GRANT SPECIFIC PERFORMANCE
AND TO ORDER OTHER EQUITABLE RELIEF AND TO AWARD COMPENSATORY DAMAGES, BUT SHALL
NOT HAVE THE AUTHORITY TO AWARD PUNITIVE DAMAGES OR OTHER NONCOMPENSATORY
DAMAGES. THE ARBITRATORS SHALL AWARD TO THE PREVAILING PARTY ITS REASONABLE
ATTORNEYS' FEES AND COSTS AND OTHER EXPENSES INCURRED IN THE ARBITRATION, EXCEPT
THAT THE PARTIES SHALL SHARE EQUALLY THE FEES AND EXPENSES OF THE NEUTRAL
ARBITRATOR AND EACH PARTY SHALL PAY THE FEES AND EXPENSES OF THE PARTY
ARBITRATOR SELECTED BY SUCH PARTY. THE ARBITRATORS' DECISION AND AWARD SHALL BE
FINAL AND BINDING AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATORS MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.
NO DISPUTE WHICH IS REQUIRED TO BE ARBITRATED UNDER THIS ARTICLE 13
SHALL BE THE SUBJECT OF ANY ACTION IN COURT OR OTHER TRIBUNAL THAN THE
ARBITRATION PROCEDURE CONTEMPLATED HEREBY, EXCEPT A JUDICIAL PROCEEDING TO
REQUIRE ARBITRATION OR TO RECORD, REDUCE TO JUDGMENT, OR ENFORCE AN AWARD MADE
IN THE ARBITRATION PROCEDURE CONTEMPLATED HEREBY. IF ANY PARTY FILES A JUDICIAL
OR ADMINISTRATIVE ACTION ASSERTING CLAIMS SUBJECT TO ARBITRATION AS PRESCRIBED
26
<PAGE>
HEREIN, AND ANOTHER PARTY SUCCESSFULLY OPPOSES SUCH ACTION OR COMPELS
ARBITRATION OF SAID CLAIMS, THE PARTY FILING SAID ACTION SHALL PAY THE OTHER
PARTY'S COSTS AND EXPENSES INCURRED IN OPPOSING SUCH ACTION OR COMPELLING SUCH
ARBITRATION, INCLUDING REASONABLE ATTORNEYS' FEES AND EXPENSES.
NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE
ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY ARBITRATION AS PROVIDED ABOVE AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR TO
HAVE A JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE LAW. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
TO ARBITRATION AS SET FORTH IN THAT PROVISION.
Timber Co. Initials: __________ Anderson-Tully Initials: __________
ARTICLE 14
----------
Assignment
----------
14.1 Assignment Prohibited. Except as otherwise expressly permitted under
---------------------
Section 14.2 or Section 14.3, neither Timber Co. nor Anderson-Tully shall,
either voluntarily or by operation of law, assign or transfer this Agreement or
any rights hereunder or interest herein, or agree to do so (each of the
foregoing defined herein as a "Transfer"), without the express prior written
consent of the other party, which consent such other party may grant or withhold
in its sole discretion. Any Purported Transfer (whether voluntary or
involuntary, by operation of law or otherwise) without the consent of the other
party shall, at the option of such other party, be void and/or constitute an
Event of Default under this Agreement.
27
<PAGE>
14.2 Exception for Assignment to Corporate Successor. Upon and subject to
-----------------------------------------------
the terms and conditions of this Section 14.2, either party (a "transferor") may
assign or transfer all, but not less than all, of its right, title and interest
in, to and under this Agreement and all of its obligations under this Agreement,
without the consent of the other party to this Agreement, to any of the
following (each a "Corporate Successor"): any corporation or entity Controlled
by the transferor, or to the surviving corporation or entity in the event of a
consolidation or merger of the transferor into such surviving corporation or
entity, or to a transferee as part of a transfer of all or substantially all of
the assets of the transferor (such assignment or transfer being a "Transfer");
provided that, in any such case, (i) in the case of a Transfer by Anderson-
Tully, the transferee shall, simultaneously with such Transfer, acquire all of
the Timberlands subject to the Harvest Plan, (ii) the transferee shall assume,
in a writing reasonably satisfactory to the non-transferring party, all of the
obligations of the transferor under this Agreement, and (iii) the transferor
shall pay all costs and expenses in connection with the Transfer, including,
without limitation, all fees and expenses incurred by the non-transferring
party.
14.3 Partial Assignment by Timber Co. Permitted. (a) Timber Co. shall
------------------------------------------
have the right, from time to time, to assign to any Person or Persons the right
to harvest during the Term any portion of the Timber specified to be harvested
in the Harvest Plan for such Term, provided that: (i) the assignee shall comply
with all of the terms and provisions of this Agreement applicable to the
assigned rights; and (ii) no such assignment shall reduce or otherwise modify
the primary obligations of Timber Co. under this Agreement.
ARTICLE 15
----------
Condemnation
------------
15.1 Effect of Condemnation. In the event any portion of the Timberlands
----------------------
subject to the Harvest Plan is taken for public or quasi-public use in or by
reason of any condemnation proceeding or proceedings in eminent domain, this
Agreement shall terminate as to the portion so taken effective upon transfer of
title pursuant to such taking, and Anderson-Tully will, subject to the
reasonable agreement of Timber Co., substitute a comparable Compartment or
Compartments.
28
<PAGE>
15.2 Condemnation Award. Any award in any such proceedings, and any
------------------
payment in consideration of a voluntary transfer under threat of eminent domain,
with respect to the Timberlands or standing Timber on the Timberlands shall
belong to Anderson-Tully insofar as such award is based upon the value of the
property taken, except for awards for Timber the title to which has passed to
Timber Co. Any award in any such proceedings with respect to Timber the title
to which has passed to Timber Co., or with respect to the value of rights-of-way
and right of access under this Agreement, or with respect to good will lost or
expenses or losses incurred by Timber Co. shall belong to Timber Co.
15.3 Notice. Anderson-Tully shall promptly notify Timber Co. in writing of
------
the commencement or threat deemed material by Anderson-Tully of any condemnation
proceeding or proceedings in eminent domain.
ARTICLE 16
----------
Notices
-------
16.1 Notices. Any notice or other communications required to be made in
-------
writing pursuant hereto shall be effective only if in writing. Notices shall be
delivered to the party's address set forth below, or to such other address as
such party may specify by written notice in accordance with this Section 16.1,
by United States mail with postage thereon fully prepaid, or by a recognized
commercial delivery service, or by facsimile transmission:
If to Timber Co: 1725 N. Washington
Vicksburg, MS 39180
Attention: Claude Tully Hall
Facsimile No.: (601) 638-4719
If to Anderson-Tully: 1242 N. Second St.
Memphis, TN 38107
Attention: Parnell S. Lewis Jr.
Facsimile No.: (901) 521-8647
29
<PAGE>
ARTICLE 17
----------
Miscellaneous
-------------
17.1 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto, and to their respective successors
in interest and assigns permitted hereunder, and wherever reference in this
Agreement is made to either of the parties hereto, such reference shall be
deemed to include, wherever applicable, also a reference to the successors and
permitted assigns of said party.
17.2 No Agency or Fiduciary Relationship. It is understood and agreed that
-----------------------------------
Timber Co. and Anderson-Tully are independent entities; and that all operations
of Timber Co. hereunder shall be performed entirely for Timber Co.'s account and
not as an agent, representative, employee or contractor of Anderson-Tully; and
that all operations of Anderson-Tully hereunder shall be performed entirely for
Anderson-Tully's account and not as an agent, representative, employee or
contractor of Timber Co. Nothing in this Agreement shall be construed as
creating any partnership or other fiduciary relationship between Timber Co. and
Anderson-Tully.
17.3 No Third-Party Beneficiaries. No Person other than Timber Co. and
----------------------------
Anderson-Tully shall have any rights under this Agreement. Timber Co. and
Anderson-Tully do not intend that any other Person shall be a third-party
beneficiary of this Agreement or any covenant, condition or provision herein.
17.4 Attorneys' Fees. If Anderson-Tully or Timber Co. shall bring suit or
---------------
take any other action against the other party to compel performance of or to
recover for breach of any covenant, agreement or condition of this Agreement, or
for declaratory relief, or to otherwise enforce its rights hereunder, the losing
party shall pay to the prevailing party its reasonable attorneys' fees in
addition to the amount of any judgment and costs (including attorneys' fees and
costs in any appeal), and the breaching party shall pay to the nonbreaching
party its reasonable attorney's fees and other costs incurred in connection with
any enforcement action which does not involve rendering a judgment, including,
without limitation, in connection with any bankruptcy or insolvency proceeding
involving the breaching party.
17.5 Entire Agreement. This Agreement, including all Appendices, Exhibits
----------------
and Schedules attached hereto, and the Harvest Plan in effect from time to time,
together with any other agreements or documents expressly incorporated herein
30
<PAGE>
or therein by reference, shall constitute the entire and integrated agreement
among the parties with respect to the subject matter hereof; and all prior
negotiations, understandings, agreements and instruments with respect to such
subject matter are hereby superseded and shall be of no force and effect.
17.6 Amendments; Waiver. Neither this Agreement nor any of the terms
------------------
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
shall be sought. The failure of either party to object to or to assert any
remedy by reason of the other party's failure to perform or observe any covenant
or term hereof or the failure of either party to assert any rights by reason of
the happening or non-happening of any condition hereof shall not be deemed a
waiver of any right to assert and enforce any remedy arising by reason of such
failure or the happening or non-happening of such condition or a waiver of any
rights arising from any subsequent failure of such other party to perform or
observe the same or any other term or covenant or by reason of the subsequent
happening or non-happening of the same or any other condition. No custom or
practice which may develop between the parties hereto during the Term shall be
deemed a waiver of, or in any way affect, the right of the parties hereto to
insist upon performance in strict accordance with the terms hereof.
17.7 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Mississippi applicable to agreements
made and to be performed entirely within that state, including all matters of
construction, validity and performance.
17.8 Counterparts. This Agreement and any amendments, supplements or
------------
modifications hereof may be executed in more than one counterpart each of which
shall be deemed to be an original but all of which taken together shall be
deemed a single instrument.
17.9 Partial Invalidity. In the event that any provision of this Agreement
------------------
shall for any reason be determined to be invalid, illegal, or unenforceable in
any respect, the parties hereto shall attempt in good faith to agree to such
amendments, modifications, or supplements to this Agreement and take such other
appropriate actions as shall, to the maximum extent practicable in light of such
determination, implement and give effect to the intentions of the parties as
reflected herein. The provisions of this Agreement not so affected shall remain
in full force and effect.
31
<PAGE>
17.10 Further Assurances. Timber Co. and Anderson-Tully further covenant to
------------------
cooperate with one another in all reasonable respects necessary to consummate
and give effect to the transactions contemplated by this Agreement (including
executing and delivering such instruments or other writings as the other party
may reasonably request), and each will take all reasonable actions within its
authority to secure cooperation of any necessary third parties.
17.11 Headings. The headings of the sections of this Agreement are for
--------
convenience of reference only and shall not affect the meanings or construction
of any provision of this Agreement.
17.12 Jurisdiction and Venue. EACH PARTY HEREBY IRREVOCABLY AND
----------------------
UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT
OF ANY JUDGMENT IN RESPECT THEREOF, INCLUDING, WITHOUT LIMITATION, ENTRY OF
JUDGMENT UPON ANY AWARD RENDERED BY ARBITRATORS IN ACCORDANCE WITH THIS
AGREEMENT, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF MISSISSIPPI, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
DISTRICT OF MISSISSIPPI, AND APPELLATE COURTS FROM ANY THEREOF;
(b) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY
SUCH ACTION OR PROCEEDING WAS BROUGHT IN ANY INCONVENIENT COURT;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY
AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 16.1;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT THE
SERVICE OF PROCESS IN ANY
32
<PAGE>
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION; AND
(e) WAIVES TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
33
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
ANDERSON-TULLY TIMBER COMPANY
By: /s/ Charles R. Dickinson, Jr.
------------------------------
Title: Vice President
ANDERSON-TULLY COMPANY
By: /s/ E. D. Coombs, Jr.
-----------------------------
Title: Treasurer
34
<PAGE>
APPENDIX A
----------
Defined Terms
-------------
"AAA" shall have the meaning given in Article 13.
---
"Access Rights" shall have the meaning given in Section 8.4.
-------------
"Agreement" shall mean this Timber Harvest Agreement, including all
---------
Exhibits and Appendices attached hereto and the Harvest Plan, as the same may be
amended, modified or supplemented from time to time.
"Agreement Purposes" shall have the meaning given in Section 1.1.
------------------
"Anderson-Tully" shall mean Anderson-Tully Company and any Person who
--------------
may succeed to its rights and obligations under this Agreement.
"Anderson-Tully Event of Default" shall have the meaning given in
-------------------------------
Section 12.2.
"Anderson-Tully Indemnified Parties" shall have the meaning given in
----------------------------------
Section 7.7.
"Applicable Law" shall mean, as to any Person, all laws (statutory or
--------------
common), treaties, rules, regulations, determinations, orders, judgments,
ordinances, decrees, injunctions, writs, interpretations or Governmental
Approvals, in each case applicable to or binding on such Person or any of its
property or to which such Person or any of its property is subject.
"Best's Rating" shall mean the rating assigned to an insurer from time
-------------
to time as published in A. M. Best Company, Inc.'s insurance reports, or in the
event such reports cease to be published, the rating in an alternative generally
recognized insurance company rating report which would be equivalent to a Best's
rating.
"Block" shall mean the geographic area in which Anderson-Tully owns
-----
Timberlands which Anderson-Tully has identified as such in the past, which area
constitutes a distinct forest management area.
35
<PAGE>
"Code" shall have the meaning given in the Preamble hereto.
----
"Commencement Date" shall have the meaning given in Section 3.3.
-----------------
"Compartment" shall mean a Timber-growing site of approximately 160
-----------
acres on which the growing conditions (such as soil composition, drainage,
aspect, elevation, etc.) are of general uniformity, such that the site is an
appropriate forest management unit.
"Controlling Interest" shall mean a direct or indirect beneficial
--------------------
ownership interest in any Person which confers upon the holder thereof Control
of such Person.
"Control," "Controlled" and "Controlling" shall mean (i) as to a
------- ---------- -----------
corporation, direct or indirect beneficial ownership of 50% or more of the
aggregate voting power of the voting securities of such corporation, (ii) as to
a partnership, direct or indirect beneficial ownership of a Controlling Interest
of a general partner of such partnership, and (iii) as to a partnership, limited
liability company or other entity, the direct or indirect beneficial ownership
of 50% or more of the voting power of the ownership interests in such entity.
"Corporate Successor" shall have the meaning given in Section 14.2.
-------------------
"Costs of Log and Haul" means, with respect to any shipment of a
---------------------
Product harvested and delivered under this Agreement, the actual costs incurred
by Timber Co. (whether out-of-pocket costs or internal costs of Timber Co. for
personnel and equipment) in logging and transporting such Product to the mill
where it is to be processed, including, without limitation, all costs of
personnel, equipment, fuel, licenses and taxes (including yield taxes or sales
taxes which Timber Co. is required to pay in accordance with Section 6.6(b))
incurred in obtaining access to the logging site; transporting logging equipment
to and from the logging site; preparing the logging site for logging operations;
felling, delimbing and bucking Timber; skidding logs to a sorting and staging
area; sorting logs for transport; loading logs onto logging trucks; performing
road repairs and maintenance; completing post-harvest operations at the logging
site; transporting logs to a destination mill; and supervising the work of
contractors. Notwithstanding the foregoing, Costs of Log and Haul shall not
include any amount incurred for any work to the extent such amount is in excess
of the reasonable cost (under applicable market conditions) for the same work
(but Timber Co. shall not be required to accept a low bid for work if Timber Co.
believes a higher bid will provide a better value due to greater reliability,
trustworthiness, efficiency or
36
<PAGE>
skill of the higher bidder). Any item of Costs of Log and Haul which relate to
multiple shipments of Products shall be fairly allocated among those shipments.
"Default Rate" shall have the meaning given in Section 6.3(b).
------------
"Environmental Laws" shall mean any and all federal, state and local
------------------
laws, regulations, ordinances, codes and policies, and any and all judicial or
administrative interpretations thereof by governmental authorities relating to
pollution or protection of the environment, of natural resources, of wildlife or
of public health and safety, including, without limitation, those relating to
emissions, discharges, releases or threatened releases of Hazardous Materials
into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, release, transport or handling
of Hazardous Materials, and any and all orders and decrees pursuant thereto.
"Event of Default" shall mean an Anderson-Tully Event of Default or a
----------------
Timber Co. Event of Default.
"Excused Party" shall have the meaning given in Section 11.1.
-------------
"Expiration Date" shall have the meaning given in Section 3.3.
---------------
"Fiber Categories" shall mean, collectively, Hardwood Merchantable
----------------
Sawtimber, Hardwood Merchantable Pulpwood, Softwood Merchantable Sawtimber and
Softwood Merchantable Pulpwood.
"Force Majeure" shall have the meaning given in Section 11.1.
-------------
"Governmental Approvals" shall mean all consents, rights, exemptions,
----------------------
concessions, permits, easements, rights of way, licenses, authorizations,
certificates, orders, franchises, determinations or other approvals of or
notices to or filings with any Governmental Authority.
"Governmental Authority" shall mean any governmental department,
----------------------
commission, board, regulatory authority, bureau, legislative body, agency, or
any instrumentality of any federal, state, local or municipal government or
domestic court.
37
<PAGE>
"Hardwood" shall mean Timber of those species, commonly referred to as
--------
"hardwood," which are deciduous and have broad leaves (such as oak, cottonwood,
hackberry, sweet gum, ash, sycamore, willow, poplar and hickory).
"Harvest Plan" shall have the meaning set forth in Section 5.1.
------------
"Harvest Plan Data Sheet" shall have the meaning given in Section
-----------------------
5.1(a).
"Harvest Plan Summary" shall have the meaning given in Section 5.1(b).
--------------------
"Hazardous Materials" shall mean substances which are explosive,
-------------------
corrosive, radioactive or toxic and any substances defined as hazardous
substances, hazardous materials, toxic substances, toxic air contaminants or
hazardous wastes under federal, state or local laws or regulations, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. (S) 9601 et seq.), the Superfund Amendments and
-- ----
Reauthorization Act of 1986 (Pub. L. 99-499, 100 Stat. 1617 (October 17,
1986)), and all amendments to these laws and regulations adopted or publications
promulgated pursuant to these laws. Hazardous Materials shall also include,
without limitation, those asbestos-containing materials defined and described in
Environmental Protection Agency Report No. 560/5-85-024 (June 1985), or any
related or successor report, or other applicable government regulations defining
or describing such materials.
"Market Stumpage Price" shall have the meaning given in Section
---------------------
6.2(b).
"MBF" shall mean one thousand (1000) board feet, and a board foot is a
---
standard unit of measure for Timber, logs and lumber equal to a board one foot
(1') wide, one foot (1') long and one inch (1") thick.
"Merchantable Pulpwood" shall mean wood fiber other than Merchantable
---------------------
Sawlogs which, under Industry Practice, is saleable for use as raw materials in
the manufacturing of fiberboard, oriented strandboard, paper products or other
processed wood products.
"Merchantable Sawlog" shall mean, generally, a log of suitable size
-------------------
and quality for the production of lumber as determined in accordance with
Industry Practice.
38
<PAGE>
"Merchantable Timber" shall mean Timber that will produce at least one
-------------------
(1) Merchantable Sawlog or Merchantable Pulpwood.
"Monthly Logging Report" shall have the meaning given in Section 6.5.
----------------------
"Monthly Payment" shall have the meaning set forth in Section 6.3(a).
---------------
"Permitted Exceptions" shall have the meaning given in Section 8.1(a).
--------------------
"Person" shall mean an individual, a partnership, a limited liability
------
company, a corporation, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity (or any department, agency
or political subdivision thereof).
"Prime Rate" shall mean the publicly announced prime rate or reference
----------
rate charged on the relevant date by the Memphis Office of NationsBank (or any
successor bank thereto), or if there is no such publicly announced rate, the
rate quoted by such bank in pricing ninety (90) day commercial loans to
substantial commercial borrowers.
"Product" shall mean a subcategory of a Fiber Category which, as of
-------
the relevant time, has a distinct Market Stumpage Price based on its species,
size, quality or other characteristics. For example, two Merchantable Sawlogs
of the same species may have different prices per board foot based on their
different diameters; each would constitute a distinct Product. Conversely, two
Merchantable Pulpwood logs of different diameters and different species would
constitute a single Product if they would realize the same price per ton. A
single log may consist of multiple Products (e.g., the small end may be of
insufficient diameter to constitute a Merchantable Sawlog, but may constitute
Merchantable Pulpwood).
"Prudent Logging Practices" shall mean those practices, procedures,
-------------------------
methods, specifications and standards, including, but not limited to, best
management practices as may be required by applicable law, as the same may
change from time to time, as are commonly utilized by experienced and competent
loggers of timberlands of significant size in the applicable Resource Region as
good, safe and prudent logging practices.
"Site Marking" shall have the meaning given in Section 5.5.
------------
39
<PAGE>
"Softwood" shall mean Timber of those species, commonly referred to as
--------
"softwood," which are conifers and generally nondeciduous, such as firs, pines,
spruce and cedar.
"Term" shall have the meaning given in Section 3.3.
----
"Timber" shall mean a tree or trees standing uncut in the woods and
------
which is more than six years old.
"Timber Co." shall mean Anderson-Tully Timber Co., a Mississippi
----------
corporation, and any Person who may succeed to its rights and obligations under
this Agreement.
"Timber Co. Event of Default" shall have the meaning given in Section
---------------------------
12.1.
"Timber Co. Indemnified Parties" shall have the meaning given in
------------------------------
Section 4.2.
"Timberlands" shall mean the Timber-growing property from time to time
-----------
owned or leased by Anderson-Tully and a portion of which is subject to the
Harvest Plan and accordingly is subject to this Agreement. Such Timberlands
consist in the aggregate of approximately 328,000 acres along the Mississippi
River between Louisiana and Southern Illinois, and are more precisely described
on Exhibit A hereto.
"Transfer" shall have the meaning given in Section 14.2.
--------
40
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made this 28th day of March, 1994, by and between
ANDERSON-TULLY COMPANY, a Mississippi corporation ("Company"); and PARNELL S.
LEWIS, JR., of Memphis, Tennessee ("Executive").
WITNESSETH:
WHEREAS, the Executive is presently employed by the Company as President
and Chairman of the Board;
WHEREAS, the Board of Directors of the Company acting through its Salary
and Benefits Committee ("Board") recognizes that the Executive's contribution to
the growth and success of the Company over the past years has been substantial;
WHEREAS, the Board desires to assure the Company of the continued superior
performance of the Executive, and to make certain changes in the Executive's
employment arrangements with the Company which the Board has determined will
reinforce and encourage the continued attention and dedication to the Company of
the Executive as the leader of the Company's management team, in the best
interest of the Company and its shareholders; and
-1-
<PAGE>
WHEREAS the Executive is willing to commit himself to continue to serve the
Company, in a superior fashion;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
Section 1. Executive Employment. The Executive agrees that he will
continue to perform his regular duties as President and Chairman of the Board of
the Company, and such other duties as may be assigned to him by the Board.
Notwithstanding the foregoing, the Board may terminate the Executive's
employment at any time, subject to the Company's providing the benefits
hereinafter specified, if applicable.
Section 2. Termination. The Executive shall be entitled to the benefits
provided in Section 3 hereof upon the termination of his employment by the
Company, unless such termination is (a) because of the Executive's death or
Retirement, (b) by the Company for Cause or Disability, (c) by the Executive
other than for Good Reason.
-2-
<PAGE>
(i) Disability; Retirement.
----------------------
(A) Termination by the Company of the Executive's employment for
"Disability" shall mean termination because of his absence from
his duties with the Company on a full time basis for one hundred
thirty (130) consecutive business days as a result of his
incapacity due to physical or mental illness, unless within
thirty (30) days after Notice of Termination (as hereinafter
defined) is given following such absence he shall have returned
to the full time performance of his duties.
(B) Termination by the Company or the Executive of the Executive's
employment for "Retirement" shall mean termination in accordance
with the Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(ii) Cause. Termination by the Company of the Executive's employment
for "Cause" shall mean termination upon (A) the willful and continued
failure by the Executive to substantially perform his duties with the
Company (other than any such failure resulting
-3-
<PAGE>
from his incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to the Executive by the
Board, which specifically identifies the manner in which the
Executive has not substantially performed his duties; or (B) the
willful engaging by the Executive in misconduct which is materially
injurious to the Company, monetarily or otherwise. For purposes of
this paragraph, no act, or failure to act, on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief that
his action or omission is in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been
delivered to him a copy of a Notice of Termination from the Board,
after a reasonable opportunity has been afforded him, together with
his counsel, to be heard before the Board, and a finding in good
faith by the Board that the Executive was guilty of conduct set forth
in clauses (A) or (B) of the first sentence of this paragraph,
specifying the particulars thereof in detail.
-4-
<PAGE>
(iii) Good Reason. Termination by the Executive of his employment for
"Good Reason" shall mean termination based on:
(A) without the Executive's express written consent, the assignment
to him of any duties inconsistent with his positions, duties,
responsibilities and status with the Company as of the date of
this Agreement, or a change in his reporting responsibilities,
titles or offices as in effect as of the date of this Agreement,
or any removal of him from or any failure to re-elect him to any
of such positions, except in connection with the termination of
his employment for Cause, Disability or Retirement or as a result
of his death or by him other than for Good Reason;
(B) except where such action is taken at the same time and is
proportionate with the same action relative to all other
executives of the Company,
(1) a reduction by the Company in the Executive's base salary as
in effect on the date of this Agreement or as the same may
be increased from time to time;
-5-
<PAGE>
(2) a failure by the Company to continue any bonus plans in which
the Executive is entitled to participate from time to time,
or his participation in such plans;
(3) the failure by the Company to continue in effect any benefit
or compensation plan, including but not limited to any
retirement plan, life insurance plan, health-and-accident
plan or disability plan in which the Executive is
participating at the time of this Agreement (or plans
providing him with substantially similar benefits), the
taking of any action by the Company which would adversely
affect the Executive's participation in or materially reduce
his benefits under any such plans or deprive him of any
material fringe benefit enjoyed by him at the time of this
Agreement, the failure by the Company to include the
Executive in any such plan, benefit or arrangement which may
become applicable in the future to other similarly-situated
executives of the Company or the failure by the Company to
provide the Executive with the number of paid vacation days
to which
-6-
<PAGE>
he is then entitled in accordance with the Company's
normal vacation policy in effect on the date of this
Agreement;
(C) without the Executive's express written consent, the Company's
requiring him to be based anywhere other than within fifty (50)
miles of his present Memphis, Tennessee office location, except
for required travel on the Company's business to an extent
substantially consistent with his present business travel
obligations;
(D) the failure by the Company to obtain the assumption of this
Agreement by any successor as contemplated in Section 4 hereof; or
(E) Any purported termination of the Executive's employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (iv) below (and, if applicable,
paragraph (ii) above); and for purposes of this Agreement, no such
purported termination shall be effective.
(iv) Notice of Termination. Any purported termination by the Company
pursuant to paragraph (i) or (ii) above or by the Executive pursuant to
subparagraph (B) of
-7-
<PAGE>
paragraph (i) or paragraph (iii) above shall be communicated by written
Notice of Termination to the other party. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(v) Date of Termination. For purposes of this Agreement, "Date of
Termination" shall mean (A) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the performance
of his duties on a full-time basis during such thirty (30) day period);
(B) if the Executive's employment is terminated pursuant to paragraph
(ii) above, the date specified in the Notice of Termination; and (C) if
the Executive's employment is terminated for any other reason, the date
on which a Notice of Termination is given; provided that if within
thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the
-8-
<PAGE>
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or
decree of a court of competent jurisdiction entered upon such
arbitration award (the time for appeal therefrom having expired and no
appeal having been perfected).
Section 3. Certain Benefits Upon Termination. If the Executive's
employment by the Company shall be terminated (a) by the Company other than for
Cause, Retirement or Disability, or (b) by the Executive for Good Reason (and
other than for Retirement or by death), then the Executive shall be entitled to
the benefits provided under paragraphs (i), (ii) and (iii) immediately below:
(i) the Company shall pay to the Executive his full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus credit for any vacation earned but not taken
and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to him under any bonus plan;
-9-
<PAGE>
(ii) the Company shall pay as supplemental deferred compensation to the
Executive, no later than the fifth day following the Date of Termination
(or in the event of the Executive's death following his entitlement to
benefits hereunder and prior to payment thereof, as soon as reasonably
practicable, but in no event more than sixty (60) days following his
death), a lump sum cash amount equal to the product of the Executive's
average annual compensation payable to him by the Company in his
capacity as President and Chairman of the Board and includible in his
gross income for Federal income tax purposes during his most recent five
(5) taxable years ending before the Date of Termination (or during such
shorter number of his most recent taxable years as he has served as
President and Chairman of the Board, with any partial year being
annualized for the purpose of this computation), multiplied by three (3)
and less $1.00; and
(iii) the Company at its sole expense shall maintain in full force and effect
for the benefit of the Executive and his eligible dependents the health-
and-accident plan coverage provided the Executive immediately prior to
the Notice of Termination, until the earlier of (A) the expiration of
twenty-four (24)
-10-
<PAGE>
months following the Date of Termination or (B) eligibility of the
Executive and his dependents for coverage under the health-and-accident
plan of a successor employer of the Executive providing comparable
benefits to that of the Company provided, however, if such continued
coverage is barred for any reason, the Company shall provide comparable
coverage during such period; provided further, however, if at the time
continued coverage hereunder is to terminate, the Executive presents
verifiable evidence to the Company of his uninsurability thereafter
under a health-and-accident plan providing comparable benefits, the
Company shall make such coverage available to the Executive at the
Executive's sole expense, as determined on a reasonable actuarial basis.
In no event shall the Executive be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 3 be reduced by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
-11-
<PAGE>
Section 4. Successors; Binding Agreement.
-----------------------------
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, by agreement in form and
substance satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 4 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he
had continued to live, all such amounts, unless
-12-
<PAGE>
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or other designee or, if there be
no such designee, to his estate.
Section 5. Notice. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
If to the Company:
Anderson-Tully Company
P.O. Box 28
Memphis, TN 38101
Attention: Secretary
If to the Executive:
Parnell S. Lewis, Jr.
212 E. Chickasaw Parkway
Memphis, Tennessee 38111
-13-
<PAGE>
or other such address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
Section 6. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged, unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. The rights of the Executive
hereunder shall be solely those of a general unsecured creditor of the Company.
All payments hereunder shall be made from the general assets of the Company. The
interest of the Executive hereunder is not subject to pledge, assignment or
other alienation, any attempt at which shall be void. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Tennessee.
Section 7. Validity. The invalidity or unenforceability of any provisions
of this Agreement shall not effect the validity or
-14-
<PAGE>
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
Section 8. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
ANDERSON-TULLY COMPANY
By: The Salary and Benefits
Committee of the Board of
Directors of Anderson-Tully
Company (the "Committee")
/s/ Paul M. Jepson
------------------------------
Paul M. Jepson, Director and
Member of the Committee
/s/ Russell E. Bloodworth
------------------------------
Russell E. Bloodworth, Jr.,
Director and Member of the Committee
/s/ John Dicken, Jr.
------------------------------
John Dicken, Director and
Member of the Committee
/s/ Parnell S. Lewis, Jr.
- ---------------------------
PARNELL S. LEWIS, JR.
-15-
<PAGE>
AGREEMENT
---------
THIS AGREEMENT dated December 10, 1996, is made by and between
Anderson-Tully Company, a Mississippi corporation (the "Company"), and Parnell
S. Lewis, Jr. (the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by management and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and the only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER PORTION OF TOTAL SHAREHOLDER
CONSIDERATION PAID IN CONSIDERATION PAID
RESPECT OF THE CHANGE TO BE PAID TO EXECUTIVE
IN CONTROL --------------------------
- -----------------
If not in excess of 0.15%
$60,000,000
If in excess of $60,000,000 $90,000, plus 0.24% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $232,000, plus 0.3% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $414,000, plus 0.45% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $684,000, plus 0.6% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above, and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements are subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code from the third (3rd) day following the Change in Control to the date of
repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business and
/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
Parnell S. Lewis, Jr.
1242 North Second Street
Memphis, Tennessee 38107
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the Code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" means, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that it (or they) (i)
intends to take, (ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located);
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause (b) is terminated,
or any such transaction is abandoned.
A "Change in Control" is "Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ John Dicken, Jr.
---------------------------
Name:
Title: Director
/s/ Parnell S. Lewis, Jr.
--------------------------
Parnell S. Lewis, Jr.
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and Parnell S. Lewis, Jr.
(the "Executive"), dated December 10, 1996.
1. REQUIREMENT OF ARBITRATION. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. DEFINITIONS. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. DEMAND TO ARBITRATE. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. PROCEDURE
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND CLARIFYING AGREEMENT
-------------------------------------
THIS SUPPLEMENTAL AND CLARIFYING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and Parnell S. Lewis, Jr. (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated December 10, 1996, by authority of the Salary and Benefits
Committee (the "Committee") of the Board of Directors of the Company, designed
to foster the continuous employment of key personnel, align the Company's key
executives' interests as closely as possible with those of its shareholders, and
insure the attention of the Company's management to their responsibilities in
the case of any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to qualify
as a real estate investment trust ("REIT") and has already taken steps in
furtherance of that objective, including a substantial distribution of earnings
and profits effected by resolution of the Board of Directors adopted September
22, 1997; and
WHEREAS, it would not be equitable to permit the restructuring of the
Company in connection with its becoming a REIT, which is in the interests of the
Company and its shareholders, to negate or restrict the benefits contemplated by
the Agreement or to interfere with its purposes in any way; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Clarifying Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
<PAGE>
NOW, THEREFORE, in consideration of the premises, of the Agreement, and of
the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. Defined Terms. Terms defined in the Agreement are used herein in their
-------------
defined meanings.
2. Revision of Definition of "Total Shareholder Consideration Paid." The
---------------------------------------------------------------
final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or (c)
of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Partnership"), or where at any
time during the Related Potential Change of Control the Company or such
subsidiary was such general partner and in connection with such Change of
Control any Person succeeds to the entirety or a substantial amount of the
business or assets of, or the partnership interests in the Partnership, any
consideration paid to or received, directly or indirectly, by the limited
partners or assignees of partnership interests in the Partnership with
respect thereto and the value of any retained assets of the Partnership,
shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid." In the case of any Change in Control
falling within clauses (b) or (c) of the definition thereof in Section
10.3, at a time when the Company has taken action looking towards its
qualification as a REIT (whether or not it has actually so qualified) any
distribution to shareholders (otherwise than a distribution by way of
ordinary dividends reflecting current earnings for the current fiscal
period or the immediately preceding fiscal period) made within 18 months
next preceding the date of the Change in Control, shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." Without limiting the generality of the foregoing, the distribution
of $100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid" in
respect of any Change of Control occurring within 18 months after such
distribution.
-2-
<PAGE>
3. Revision of Definition of "Cause." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
", or the participation by the Executive in any activity in opposition to
or obstruction of a Potential Charge of Control or Change of Control which
has been approved by the Board, or the engaging or attempting to engage in
competition with the Company or the Partnership or any of their
subsidiaries during the time of employment of the Executive, or within one
year thereafter, including, without limitation, the direct or indirect
hiring away or seeking to hire away of any employee or employees of the
Company, the Partnership or any of their subsidiaries, whether such
activities are conducted for the Executive's own account or for the account
of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give Executive
notice that such termination is changed to a termination for Cause and upon
the giving of such notice, such termination shall be deemed to have been
for Cause, if such Cause in fact exists."
4. Agreement Not Otherwise Amended. Except as expressly set forth herein,
-------------------------------
all terms and conditions of the Agreement shall remain in full force and effect,
and shall be applicable to the Agreement as amended by this Supplemental
Agreement.
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement to
be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Marye Helen Owen /s/ Parnell S. Lewis, Jr.
________________________________ ____________________________
Executive
-3-
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made this 10 day of July, 1987, by and between
ANDERSON-TULLY COMPANY, a Mississippi corporation ("Company"); and E. DAVID
COOMBS, of Memphis, Tennessee ("Executive").
WITNESSETH:
WHEREAS, the Executive is presently employed by the Company as Vice
President and Treasurer; and
WHEREAS, the Board of Directors of the Company ("Board") recognizes that
the Executive's contribution to the growth and success of the Company over the
past fifteen years has been substantial; and
WHEREAS, the Board desires to assure the Company of the continued superior
performance of the Executive, and to make certain changes in the Executive's
employment arrangements with the Company which the Board has determined will
reinforce and encourage the continued attention and dedication to the Company of
the Executive as a member of the Company's management team, in the best interest
of the Company and its shareholders; and
-1-
<PAGE>
WHEREAS the Executive is willing to commit himself to continue to serve the
Company, in a superior fashion;
NOW, THEREFORE, in consideration of the promises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
Section 1. Executive Employment. The Executive agrees that he will
--------------------
continue to perform his regular duties as Vice President and Treasurer of the
Company, and such other duties as may be assigned to him by the Chief Executive
Officer of the Company ("Chief Executive Officer"). Notwithstanding the
foregoing, the Chief Executive Officer may terminate the Executive's employment
at any time, subject to the Company's providing the benefits hereinafter
specified, if applicable.
Section 2. Termination. The Executive shall be entitled to the benefits
-----------
provided in Section 3 hereof upon the termination of his employment by the
Company, unless such termination is (a) because of the Executive's death or
Retirement, (b) by the Company for Cause or Disability, (c) by the Executive
other than for Good Reason.
(i) Disability; Retirement.
----------------------
(A) Termination by the Company of the Executive's employment for
"Disability" shall mean termination because of his absence from
his duties with the Company on a full time basis for one hundred
thirty (130)
-2-
<PAGE>
consecutive business days, as a result of his incapacity
due to physical or mental illness, unless within thirty (30)
days after Notice of Termination (as hereinafter defined) is
given following such absence he shall have returned to the
full time performance of his duties.
(B) Termination by the Company or the Executive of the
Executive's employment for "Retirement" shall mean
termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to
its salaried employees.
(ii) Cause. Termination by the Company of the Executive's employment
-----
for "Cause" shall mean termination upon (A) the willful and
continued failure by the Executive to substantially perform his
duties with the Company (other than any such failure resulting
from his incapacity due to physical or mental illness) after a
demand for substantial performance is delivered to the Executive
by the Chief Executive Officer, which specifically identifies the
manner in which the Executive has not substantially performed his
duties; or (B) the willful engaging by the Executive in misconduct
which is materially injurious to the Company, monetarily or
otherwise. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that his action or omission is in
the
-3-
<PAGE>
best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of
a Notice of Termination from the Chief Executive Officer, after a
reasonable opportunity has been afforded him, together with his
counsel, to be heard before the Chief Executive Officer, and a
finding in good faith by the Chief Executive Officer that the
Executive was guilty of conduct set forth in clauses (A) or (B) of
the first sentence of this paragraph, specifying the particulars
thereof in detail.
(iii) Good Reason. Termination by the Executive of his employment for
-----------
"Good Reason" shall mean termination based on:
(A) without the Executive's express written consent, the
assignment to him of any duties inconsistent with his
positions, duties, responsibilities and status with the
Company as of the date of this Agreement, or a change in his
reporting responsibilities, titles or offices as in effect as
of the date of this Agreement, or any removal of him from or
any failure to re-elect him to any of such positions, except
in connection with the termination of his employment for
Cause, Disability or Retirement or as a result of his death
or by him other than for Good Reason;
-4-
<PAGE>
(B) except where such action is taken at the same time and is
proportionate with the same action relative to all other
executives of the Company,
(1) a reduction by the Company in the Executive's base salary as
in effect on the date of this Agreement or as the same may be
increased from time to time;
(2) a failure by the Company to continue any bonus plans in which
the Executive is entitled to participate from time to time,
or his participation in such plans;
(3) the failure by the Company to continue in effect any benefit
or compensation plan, including but not limited to any
retirement plan, life insurance plan, health-and-accident
plan or disability plan in which the Executive is
participating at the time of this Agreement (or plans
providing him with substantially similar benefits), the
taking of any action by the Company which would adversely
affect the Executive's participation in or materially reduce
this benefits under any such plans or deprive him of any
material fringe benefit enjoyed by him at the time of this
Agreement, the failure by the Company to include the
Executive in any such plan, benefit or arrangement which may
become
-5-
<PAGE>
applicable in the future to other similarly-situated
executives of the Company or the failure by the Company to
provide the Executive with the number of paid vacation days
to which he is then entitled in accordance with the
Company's normal vacation policy in effect on the date of
this Agreement;
(C) without the Executive's express written consent, the Company's
requiring him to be based anywhere other than within fifty (50)
miles of his present Memphis, Tennessee office location, except
for required travel on the Company's business to an extent
substantially consistent with his present business travel
obligations;
(D) the failure by the Company to obtain the assumption of this
Agreement by any successor as contemplated in Section 4 hereof; or
(E) Any purported termination of the Executive's employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (iv) below (and, if applicable,
paragraph (ii) above); and for purposes of this Agreement, no such
purported termination shall be effective.
-6-
<PAGE>
(iv) Notice of Termination. Any purported termination by the Company
---------------------
pursuant to paragraph (i) or (ii) above or by the Executive pursuant to
subparagraph (B) of paragraph (i) or paragraph (iii) above shall be
communicated by written Notice of Termination to the other party. For
purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(v) Date of Termination. For purposes of this Agreement, "Date of
-------------------
Termination" shall mean (A) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the performance
of his duties on a full-time basis during such thirty (30) day period);
(B) if the Executive's employment is terminated pursuant to paragraph
(ii) above, the date specified in the Notice of Termination; and (C) if
the Executive's employment is terminated for any other reason, the date
on which a Notice of Termination is given; provided that if within
thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination,
-7-
<PAGE>
the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction
entered upon such arbitration award (the time for appeal therefrom
having expired and no appeal having been perfected).
Section 3. Certain Benefits Upon Termination. If the Executive's
---------------------------------
employment by the Company shall be terminated (a) by the Company other than for
Cause, Retirement or Disability, or (b) by the Executive for Good Reason (and
other than for Retirement or by death), then the Executive shall be entitled to
the benefits provided under paragraphs (i), (ii) and (iii) immediately below:
(i) the Company shall pay to the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus credit for any vacation
earned but not taken and the amount, if any, of any bonus for a
past fiscal year which has not yet been awarded or paid to him
under any bonus plan;
(ii) the Company shall pay as supplemental deferred compensation to the
Executive, no later than the fifth day following the Date of
Termination (or in the event of the Executive's death following
his entitlement to benefits hereunder and prior to payment
thereof, as soon as reasonably practicable, but in no
-8-
<PAGE>
event more than sixty (60) days following his death), a lump sum
cash amount equal to the product of the Executive's average annual
compensation payable to him by the Company and includible in his
gross income for Federal income tax purposes during his most
recent five (5) taxable years ending before the Date of
Termination, multiplied by three (3); provided, however, such
amount shall be limited to the highest amount which would not
result in the creation of a "parachute payment" under Section 280G
of the Internal Revenue Code of 1986, as amended; and
(iii) the Company at its sole expense shall maintain in full force and
effect for the benefit of the Executive and his eligible
dependents the health-and-accident plan coverage provided the
Executive immediately prior to the Notice of Termination, until
the earlier of (A) the expiration of twenty-four (24) months
following the Date of Termination or (B) eligibility of the
Executive and his dependents for coverage under the health-and-
accident plan of a successor employer of the Executive providing
comparable benefits to that of the Company provided, however, if
such continued coverage is barred for any reason, the Company
shall provide comparable coverage during such period; provided
further, however, if at the time continued coverage hereunder is
to terminate, the Executive presents verifiable evidence to the
Company of his uninsurability thereafter under a health-and-
accident plan providing comparable
-9-
<PAGE>
benefits, the Company shall make such coverage available to the
Executive at the Executive's sole expense, as determined on a
reasonable actuarial basis.
In no event shall the Executive be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 3 be reduced by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
Section 4. Successors; Binding Agreement.
-----------------------------
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company,
by agreement in form and substance satisfactory to the Executive,
to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the agreement
provided for in this Section 4 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of
law.
-10-
<PAGE>
(ii) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and
legatees. If the Executive should die while any amount would still
be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his devisee,
legatee or other designee or, if there be no such designee, to his
estate.
Section 5. Notice. For the purpose of this Agreement, notices and all
------
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
If to the Company:
John M. Tully, President
-----------------------------------
Anderson-Tully Company
P.O. Box 28
-----------------------------------
Memphis, TN 38101
-----------------------------------
If to the Executive:
E. D. Coombs, Jr.
-----------------------------------
1118 Billy Bryant
-----------------------------------
Collierville, TN 38017
-----------------------------------
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<PAGE>
or other such address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
Section 6. Miscellaneous. No provisions of this Agreement may be modified,
-------------
waived or discharged, unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. The rights of the Executive
hereunder shall be solely those of a general unsecured creditor of the Company.
All payments hereunder shall be made from the general assets of the Company. The
interest of the Executive hereunder is not subject to pledge, assignment or
other alienation, any attempt at which shall be void. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Tennessee.
Section 7. Validity. The invalidity or unenforceability of any provisions
--------
of this Agreement shall not effect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
-12-
<PAGE>
Section 8. Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Attest: ANDERSON-TULLY COMPANY
/s/ Mary Ann Sanders By: /s/ John M. Tully
- -------------------- ----------------------------------
Secretary Title: President
----------------------------------
/s/ E. David Coombs
----------------------------------
E. DAVID COOMBS
-13-
<PAGE>
AGREEMENT
---------
THIS AGREEMENT dated December 11, 1996, is made by and between
Anderson-Tully Company, a Mississippi corporation (the "Company"), and E. David
Coombs, Jr. (the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by managaement and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER
CONSIDERATION PAID IN PORTION OF TOTAL SHAREHOLDER
RESPECT OF THE CHANGE CONSIDERATION PAID
IN CONTROL TO BE PAID TO EXECUTIVE
- ----------------- --------------------------
If not in excess of 0.15%
$60,000,000
If in excess of $60,000,000 $90,000, plus 0.24% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $232,000, plus 0.3% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $414,000, plus 0.45% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $684,000, plus 0.6% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements is subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with the interest at the rate provided in Section
1274(b)(2)(B) of the Code from the third (3rd) day following the Change in
Control to the date of repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business and
/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
E. David Coombs, Jr.
1242 North Second Street
Memphis, Tennessee 38107
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the Code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" means, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that if (or they) (i)
intends to take,(ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located);
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause (b) is terminated,
or any such transaction is abandoned.
A "Change in Control" is "Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr.
---------------------------
Name:
Title: President
/s/ E. David Coombs, Jr.
---------------------------
E. David Coombs, Jr.
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and E. David Coombs, Jr.
(the "Executive"), dated December 11, 1996.
1. REQUIREMENT OF ARBITRATION. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. DEFINITIONS. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. DEMAND TO ARBITRATE. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. PROCEDURE
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND CLARIFYING AGREEMENT
-------------------------------------
THIS SUPPLEMENTAL AND CLARIFYING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and E. David Coombs, Jr. (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated December 11, 1996, by authority of the Salary and Benefits
Committee (the "Committee") of the Board of Directors of the Company, designed
to foster the continuous employment of key personnel, align the Company's key
executives' interests as closely as possible with those of its shareholders, and
insure the attention of the Company's management to their responsibilities in
the case of any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to qualify
as a real estate investment trust ("REIT") and has already taken steps in
furtherance of that objective, including a substantial distribution of earnings
and profits effected by resolution of the Board of Directors adopted September
22, 1997; and
WHEREAS, it would not be equitable to permit the restructuring of the
Company in connection with its becoming a REIT, which is in the interests of the
Company and its shareholders, to negate or restrict the benefits contemplated by
the Agreement or to interfere with its purposes in any way; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Clarifying Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
<PAGE>
NOW, THEREFORE, in consideration of the premises, of the Agreement, and of
the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. Defined Terms. Terms defined in the Agreement are used herein in their
-------------
defined meanings.
2. Revision of Definition of "Total Shareholder Consideration Paid." The
---------------------------------------------------------------
final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or (c)
of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Partnership"), or where at any
time during the Related Potential Change of Control the Company or such
subsidiary was such general partner and in connection with such Change of
Control any Person succeeds to the entirety or a substantial amount of the
business or assets of, or the partnership interests in the Partnership, any
consideration paid to or received, directly or indirectly, by the limited
partners or assignees of partnership interests in the Partnership with
respect thereto and the value of any retained assets of the Partnership,
shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid." In the case of any Change in Control
falling within clauses (b) or (c) of the definition thereof in Section
10.3, at a time when the Company has taken action looking towards its
qualification as a REIT (whether or not it has actually so qualified) any
distribution to shareholders (otherwise than a distribution by way of
ordinary dividends reflecting current earnings for the current fiscal
period or the immediately preceding fiscal period) made within 18 months
next preceding the date of the Change in Control, shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." Without limiting the generality of the foregoing, the distribution
of $100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid" in
respect of any Change of Control occurring within 18 months after such
distribution.
-2-
<PAGE>
3. Revision of Definition of "Cause." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
", or the participation by the Executive in any activity in opposition to
or obstruction of a Potential Charge of Control or Change of Control which
has been approved by the Board, or the engaging or attempting to engage in
competition with the Company or the Partnership or any of their
subsidiaries during the time of employment of the Executive, or within one
year thereafter, including, without limitation, the direct or indirect
hiring away or seeking to hire away of any employee or employees of the
Company, the Partnership or any of their subsidiaries, whether such
activities are conducted for the Executive's own account or for the account
of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give Executive
notice that such termination is changed to a termination for Cause and upon
the giving of such notice, such termination shall be deemed to have been
for Cause, if such Cause in fact exists."
4. Agreement Not Otherwise Amended. Except as expressly set forth herein,
-------------------------------
all terms and conditions of the Agreement shall remain in full force and effect,
and shall be applicable to the Agreement as amended by this Supplemental
Agreement.
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement to
be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr. /s/ E. D. Coombs, Jr.
--------------------------------- -----------------------
Parnell S. Lewis, Jr., President Executive
-3-
<PAGE>
EXHIBIT 10.7
AGREEMENT
---------
THIS AGREEMENT dated January 11, 1997, is made by and between
Anderson-Tully Company, a Mississippi corporation (the "Company"), and Tony R.
Parks (the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by management and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER PORTION OF TOTAL SHAREHOLDER
CONSIDERATION PAID IN CONSIDERATION PAID
RESPECT OF THE CHANGE TO BE PAID TO EXECUTIVE
IN CONTROL --------------------------
- -----------------
If not in excess of 0.1%
$60,000,000
If in excess of $60,000,000 $60,000, plus 0.16% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $156,000, plus 0.2% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $276,000, plus 0.3% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $456,000, plus 0.4% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements is subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code from the third (3rd) day following the Change in Control to the date of
repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
Tony R. Parks
1242 North Second Street
Memphis, Tennessee 38107
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d)) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the Code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" mans, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that if (or they) (i)
intends to take, (ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located;)
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause (b) is terminated, or
any such transaction is abandoned.
A "Change in Control" is Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr.
---------------------------
Name:
Title: President
/s/ Tony R. Parks
------------------------
Tony R. Parks
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and Tony R. Parks (the
"Executive"), dated January 11, 1997.
1. Requirement of Arbitration. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. Definitions. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. Demand to Arbitrate. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. Procedure
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND AMENDING AGREEMENT
-----------------------------------
THIS SUPPLEMENTAL AND AMENDING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and Tony R. Parks (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated January 11, 1997 by authority of the Salary and Benefits
Committee (the "Committee") of the Board of Directors of the Company, designed
to foster the continuous employment of key personnel, align the Company's key
executives' interests as closely as possible with those of its shareholders, and
insure the attention of the Company's management to their responsibilities in
the case of any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to
qualify as a real estate investment trust ("REIT") and has already taken steps
in furtherance of that objective, including a substantial distribution of
earnings and profits effected by resolution of the Board of Directors adopted
September 22, 1997; and
WHEREAS, the Executive had been continuously employed with the Company
for several years; and
WHEREAS, in conjunction with the restructuring of the Company, the
Executive's employment with the Company is being terminated and the Executive is
to commence employment with Anderson-Tully Lumber Company ("New Employer");
WHEREAS, it would not be equitable to negate the payments and benefits
contemplated by the Agreement by reason of the Executive's employment by New
Employer in connection with the restructuring or otherwise by the Restructuring,
or to permit interference with the purpose of the Agreement in any way; and
<PAGE>
WHEREAS, the Company will derive economic benefit from the Executive's
continued employment with New Employer; and
WHEREAS, the Company desires to ensure that the Executive's termination
of employment with the Company and continued employment with New Employer shall
not be deemed to be a termination of employment for purposes of Section 5.1 of
the Agreement; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Amending Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
NOW, THEREFORE, in consideration of the premises, of the Agreement, and
of the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. DEFINED TERMS. Terms defined in the Agreement are used herein in
-------------
their defined meanings.
2. REVISION OF SECTION 5.1. The first clause of Section 5.1 of the
-----------------------
Agreement is hereby amended to read as follows:
5.1 BASIC CALCULATION. Upon the occurrence of a Change in Control,
-----------------
the Executive, if then employed by the Company or Anderson-Tully Lumber
Company ("New Employer") or if Terminated by the Company or by New
Employer without Cause in Anticipation of the Change of Control in
question, shall receive in cash the amount computed under the following
table:
3. NO OBLIGATION OF NEW EMPLOYER. Nothing herein contained shall be
-----------------------------
deemed to impose any obligation upon New Employer with respect to the employment
of Executive or to impose any obligation whatsoever under the Agreement upon New
-2-
<PAGE>
Employer or to make New Employer responsible for the performance of any of the
obligations of the Company under the Agreement.
4. REVISION OF DEFINITION OF "TOTAL SHAREHOLDER CONSIDERATION PAID."
---------------------------------------------------------------
The final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company
or any subsidiary of the Company is general partner of Anderson-Tully
Veneers, L.P., a Mississippi limited partnership ("Partnership"), or
where at any time during the Related Potential Change of Control the
Company or such subsidiary was such general partner and in connection
with such Change of Control any Person succeeds to the entirety or a
substantial amount of the business or assets of, or the partnership
interests in the Partnership, any consideration paid to or received,
directly or indirectly, by the limited partners or assignees of
partnership interests in the Partnership with respect thereto and the
value of any retained assets of the Partnership shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." In the case of any Change in Control falling within clauses (b)
or (c) of the definition thereof in Section 10.3, at a time when the
Company has taken action looking towards its qualification as a REIT
(whether or not it has actually so qualified) any distribution to
shareholders (otherwise than a distribution by way of ordinary dividends
reflecting current earnings for the current fiscal period or the
immediately preceding fiscal period) made within 18 months next preceding
the date of the Change in Control, shall also be taken into account,
without duplication, as part of "Total Shareholder Consideration Paid."
Without limiting the generality of the foregoing, the distribution of
$100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid"
in respect of any Change of Control occurring within 18 months after such
distribution.
-3-
<PAGE>
5. REVISION OF DEFINITION OF "CAUSE." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
", or the participation by the Executive in any activity in opposition to
or obstruction of a Potential Charge of Control or Change of Control
which has been approved by the Board, or the engaging or attempting to
engage in competition with the Company or the Partnership or any of their
subsidiaries during the time of employment of the Executive, or within
one year thereafter, including, without limitation, the direct or
indirect hiring away or seeking to hire away of any employee or employees
of the Company, the Partnership or any of their subsidiaries, whether
such activities are conducted for the Executive's own account or for the
account of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give Executive
notice that such termination is changed to a termination for Cause and
upon the giving of such notice, such termination shall be deemed to have
been for Cause, if such Cause in fact exists."
6. AGREEMENT NOT OTHERWISE AMENDED. Except as expressly set forth
-------------------------------
herein, all terms and conditions of the Agreement shall remain in full force and
effect, and shall be applicable to the Agreement as amended by this Supplemental
Agreement.
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement to
be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr. /s/ Tony R. Parks
-------------------------- ---------------------
Parnell S. Lewis, Jr., Executive
President
-4-
<PAGE>
EXHIBIT 10.8
AGREEMENT
---------
THIS AGREEMENT dated May 6, 1997, is made by and between Anderson-
Tully Company, a Mississippi corporation (the "Company"), and Claude Tully Hall
(the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by managaement and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER PORTION OF TOTAL SHAREHOLDER
CONSIDERATION PAID IN CONSIDERATION PAID
RESPECT OF THE CHANGE TO BE PAID TO EXECUTIVE
IN CONTROL --------------------------
- -----------------
If not in excess of 0.05%
$60,000,000
If in excess of $60,000,000 $30,000, plus 0.08% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $78,000, plus 0.1% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $138,000, plus 0.15% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $228,000, plus 0.2% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payments or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G9d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements are subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with the interest at the rate provided in Section
1274(b)(2)(B) of the Code from the third (3rd) day following the Change in
Control to the date of repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business and
/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
Claude Tully Hall
1242 North Second Street
Memphis, Tennessee 38107
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" means, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that if (or they) (i)
intends to take,(ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located;)
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause 9b) is terminated,
or any such transaction is abandoned.
A "Change in Control" is Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis Jr.
--------------------------
Name:
Title: President
/s/ Claude Tully Hall
------------------------
Claude Tully Hall
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and Claude Tully Hall
(the "Executive"), dated May 6, 1997.
1. REQUIREMENT OF ARBITRATION. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. DEFINITIONS. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. DEMAND TO ARBITRATE. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. PROCEDURE
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND AMENDING AGREEMENT
-----------------------------------
THIS SUPPLEMENTAL AND AMENDING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and Claude Tully Hall (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated December 12, 1996 by authority of the Salary and Benefits
Committee (the "Committee") of the Board of Directors of the Company, designed
to foster the continuous employment of key personnel, align the Company's key
executives' interests as closely as possible with those of its shareholders, and
insure the attention of the Company's management to their responsibilities in
the case of any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to
qualify as a real estate investment trust ("REIT") and has already taken steps
in furtherance of that objective, including a substantial distribution of
earnings and profits effected by resolution of the Board of Directors adopted
September 22, 1997; and
WHEREAS, the Executive had been continuously employed with the Company
for several years; and
WHEREAS, in conjunction with the restructuring of the Company, the
Executive's employment with the Company is being terminated and the Executive is
to commence employment with Anderson-Tully Lumber Company ("New Employer");
WHEREAS, it would not be equitable to negate the payments and benefits
contemplated by the Agreement by reason of the Executive's employment by New
Employer in connection with the restructuring or otherwise by the Restructuring,
or to permit interference with the purpose of the Agreement in any way; and
<PAGE>
WHEREAS, the Company will derive economic benefit from the Executive's
continued employment with New Employer; and
WHEREAS, the Company desires to ensure that the Executive's termination
of employment with the Company and continued employment with New Employer shall
not be deemed to be a termination of employment for purposes of Section 5.1 of
the Agreement; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Amending Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
NOW, THEREFORE, in consideration of the premises, of the Agreement, and
of the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. DEFINED TERMS. Terms defined in the Agreement are used herein in
-------------
their defined meanings.
2. REVISION OF SECTION 5.1. The first clause of Section 5.1 of the
-----------------------
Agreement is hereby amended to read as follows:
5.1 BASIC CALCULATION. Upon the occurrence of a Change in Control,
-----------------
the Executive, if then employed by the Company or Anderson-Tully Lumber
Company ("New Employer") or if Terminated by the Company or by New
Employer without Cause in Anticipation of the Change of Control in
question, shall receive in cash the amount computed under the following
table:
3. NO OBLIGATION OF NEW EMPLOYER. Nothing herein contained shall be
-----------------------------
deemed to impose any obligation upon New Employer with respect to the employment
of Executive or to impose any obligation whatsoever under the Agreement upon New
-2-
<PAGE>
Employer or to make New Employer responsible for the performance of any of the
obligations of the Company under the Agreement.
4. REVISION OF DEFINITION OF "TOTAL SHAREHOLDER CONSIDERATION PAID."
---------------------------------------------------------------
The final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company
or any subsidiary of the Company is general partner of Anderson-Tully
Veneers, L.P., a Mississippi limited partnership ("Partnership"), or
where at any time during the Related Potential Change of Control the
Company or such subsidiary was such general partner and in connection
with such Change of Control any Person succeeds to the entirety or a
substantial amount of the business or assets of, or the partnership
interests in the Partnership, any consideration paid to or received,
directly or indirectly, by the limited partners or assignees of
partnership interests in the Partnership with respect thereto and the
value of any retained assets of the Partnership shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." In the case of any Change in Control falling within clauses (b)
or (c) of the definition thereof in Section 10.3, at a time when the
Company has taken action looking towards its qualification as a REIT
(whether or not it has actually so qualified) any distribution to
shareholders (otherwise than a distribution by way of ordinary dividends
reflecting current earnings for the current fiscal period or the
immediately preceding fiscal period) made within 18 months next preceding
the date of the Change in Control, shall also be taken into account,
without duplication, as part of "Total Shareholder Consideration Paid."
Without limiting the generality of the foregoing, the distribution of
$100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid"
in respect of any Change of Control occurring within 18 months after such
distribution.
5. REVISION OF DEFINITION OF "CAUSE." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
-3-
<PAGE>
", or the participation by the Executive in any activity in opposition to
or obstruction of a Potential Charge of Control or Change of Control
which has been approved by the Board, or the engaging or attempting to
engage in competition with the Company or the Partnership or any of their
subsidiaries during the time of employment of the Executive, or within
one year thereafter, including, without limitation, the direct or
indirect hiring away or seeking to hire away of any employee or employees
of the Company, the Partnership or any of their subsidiaries, whether
such activities are conducted for the Executive's own account or for the
account of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give Executive
notice that such termination is changed to a termination for Cause and
upon the giving of such notice, such termination shall be deemed to have
been for Cause, if such Cause in fact exists."
6. AGREEMENT NOT OTHERWISE AMENDED. Except as expressly set forth
-------------------------------
herein, all terms and conditions of the Agreement shall remain in full force and
effect, and shall be applicable to the Agreement as amended by this Supplemental
Agreement.
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement to
be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr. /s/ Claude Tully Hall
-------------------------------- ------------------------
Parnell S. Lewis, Jr., President Executive
-4-
<PAGE>
EXHIBIT 10.9
AGREEMENT
---------
THIS AGREEMENT dated June 10, 1997, is made by and between
Anderson-Tully Company, a Mississippi corporation (the "Company"), and Martin S.
Lewis (the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by management and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER PORTION OF TOTAL SHAREHOLDER
CONSIDERATION PAID IN CONSIDERATION PAID
RESPECT OF THE CHANGE TO BE PAID TO EXECUTIVE
IN CONTROL --------------------------
- -----------------
If not in excess of 0.1%
$60,000,000
If in excess of $60,000,000 $60,000, plus 0.16% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $156,000, plus 0.2% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $276,000, plus 0.3% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $456,000, plus 0.4% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements is subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code from the third (3rd) day following the Change in Control to the date of
repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
Martin S. Lewis
80 Long Lake Road
Vicksburg, MS 39180
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d)) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the Code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" mans, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that if (or they) (i)
intends to take, (ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located;)
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause (b) is terminated, or
any such transaction is abandoned.
A "Change in Control" is Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr.
---------------------------
Name: Parnell S. Lewis, Jr.
Title: President
/s/ Martin S. Lewis
------------------------
Martin S. Lewis
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and Martin S. Lewis (the
"Executive"), dated June 10, 1997.
1. Requirement of Arbitration. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. Definitions. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. Demand To Arbitrate. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. Procedure
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND AMENDING AGREEMENT
-----------------------------------
THIS SUPPLEMENTAL AND AMENDING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and Martin S. Lewis (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated June 10, 1997 by authority of the Salary and Benefits
Committee (the "Committee") of the Board of Directors of the Company, designed
to foster the continuous employment of key personnel, align the Company's key
executives' interests as closely as possible with those of its shareholders, and
insure the attention of the Company's management to their responsibilities in
the case of any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to
qualify as a real estate investment trust ("REIT") and has already taken steps
in furtherance of that objective, including a substantial distribution of
earnings and profits effected by resolution of the Board of Directors adopted
September 22, 1997; and
WHEREAS, the Executive had been continuously employed with the Company
for several years; and
WHEREAS, in conjunction with the restructuring of the Company, the
Executive's employment with the Company is being terminated and the Executive is
to commence employment with Anderson-Tully Veneers, L.P. ("New Employer");
WHEREAS, it would not be equitable to negate the payments and benefits
contemplated by the Agreement by reason of the Executive's employment by New
Employer in connection with the restructuring or otherwise by the Restructuring,
or to permit interference with the purpose of the Agreement in any way; and
1
<PAGE>
WHEREAS, the Company will derive economic benefit from the Executive's
continued employment with New Employer; and
WHEREAS, the Company desires to ensure that the Executive's termination
of employment with the Company and continued employment with New Employer shall
not be deemed to be a termination of employment for purposes of Section 5.1 of
the Agreement; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Amending Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
NOW, THEREFORE, in consideration of the premises, of the Agreement, and
of the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. DEFINED TERMS. Terms defined in the Agreement are used herein in
-------------
their defined meanings.
2. REVISION OF SECTION 5.1. The first clause of Section 5.1 of the
-----------------------
Agreement is hereby amended to read as follows:
5.1 BASIC CALCULATION. Upon the occurrence of a Change in Control,
-----------------
the Executive, if then employed by the Company or Anderson-Tully Veneers,
L.P. ("New Employer") or if Terminated by the Company or by New Employer
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
3. NO OBLIGATION OF NEW EMPLOYER. Nothing herein contained shall be
-----------------------------
deemed to impose any obligation upon New Employer with respect to the employment
of Executive or to impose any obligation whatsoever under the Agreement upon New
2
<PAGE>
Employer or to make New Employer responsible for the performance of any of the
obligations of the Company under the Agreement.
4. REVISION OF DEFINITION OF "TOTAL SHAREHOLDER CONSIDERATION PAID."
---------------------------------------------------------------
The final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company
or any subsidiary of the Company is general partner of Anderson-Tully
Veneers, L.P., a Mississippi limited partnership ("Partnership"), or
where at any time during the Related Potential Change of Control the
Company or such subsidiary was such general partner and in connection
with such Change of Control any Person succeeds to the entirety or a
substantial amount of the business or assets of, or the partnership
interests in the Partnership, any consideration paid to or received,
directly or indirectly, by the limited partners or assignees of
partnership interests in the Partnership with respect thereto and the
value of any retained assets of the Partnership shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." In the case of any Change in Control falling within clauses (b)
or (c) of the definition thereof in Section 10.3, at a time when the
Company has taken action looking towards its qualification as a REIT
(whether or not it has actually so qualified) any distribution to
shareholders (otherwise than a distribution by way of ordinary dividends
reflecting current earnings for the current fiscal period or the
immediately preceding fiscal period) made within 18 months next preceding
the date of the Change in Control, shall also be taken into account,
without duplication, as part of "Total Shareholder Consideration Paid."
Without limiting the generality of the foregoing, the distribution of
$100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid"
in respect of any Change of Control occurring within 18 months after such
distribution.
5. REVISION OF DEFINITION OF "CAUSE." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
3
<PAGE>
", or the participation by the Executive in any activity in opposition to
or obstruction of a Potential Charge of Control or Change of Control
which has been approved by the Board, or the engaging or attempting to
engage in competition with the Company or the Partnership or any of their
subsidiaries during the time of employment of the Executive, or within
one year thereafter, including, without limitation, the direct or
indirect hiring away or seeking to hire away of any employee or employees
of the Company, the Partnership or any of their subsidiaries, whether
such activities are conducted for the Executive's own account or for the
account of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give Executive
notice that such termination is changed to a termination for Cause and
upon the giving of such notice, such termination shall be deemed to have
been for Cause, if such Cause in fact exists."
6. AGREEMENT NOT OTHERWISE AMENDED. Except as expressly set forth
-------------------------------
herein, all terms and conditions of the Agreement shall remain in full force and
effect, and shall be applicable to the Agreement as amended by this Supplemental
Agreement.
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement to
be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr. /s/ Martin S. Lewis
-------------------------- -------------------
Executive
4
<PAGE>
EXHIBIT 10.10
AGREEMENT
---------
THIS AGREEMENT dated December 11, 1996, is made by and between
Anderson-Tully Company, a Mississippi corporation (the "Company"), and Charles
Robert Dickinson, Jr. (the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by management and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and the only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER PORTION OF TOTAL SHAREHOLDER
CONSIDERATION PAID IN CONSIDERATION PAID
RESPECT OF THE CHANGE TO BE PAID TO EXECUTIVE
IN CONTROL --------------------------
- -----------------
If not in excess of 0.05%
$60,000,000
If in excess of $60,000,000 $30,000, plus 0.08% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $78,000, plus 0.1% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $138,000, plus 0.15% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $228,000, plus 0.2% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements is subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with the interest at the rate provided in Section
1274(b)(2)(B) of the Code from the third (3rd) day following the Change in
Control to the date of repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
Charles Robert Dickinson, Jr.
1242 North Second Street
Memphis, Tennessee 38107
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" means, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that if (or they) (i)
intends to take,(ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located;)
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause (b) is terminated,
or any such transaction is abandoned.
A "Change in Control is "Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr.
---------------------------
Name:
Title: President
/s/ Charles Robert Dickinson, Jr.
---------------------------------
Charles Robert Dickinson, Jr.
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and Charles Robert
Dickinson, Jr. (the "Executive"), dated December 11, 1996.
1. REQUIREMENT OF ARBITRATION. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. DEFINITIONS. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. DEMAND TO ARBITRATE. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. PROCEDURE
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND CLARIFYING AGREEMENT
-------------------------------------
THIS SUPPLEMENTAL AND CLARIFYING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and Charles Robert Dickinson, Jr. (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated December 11, 1996, by authority of the Salary and Benefits
Committee (the "Committee") of the Board of Directors of the Company, designed
to foster the continuous employment of key personnel, align the Company's key
executives' interests as closely as possible with those of its shareholders, and
insure the attention of the Company's management to their responsibilities in
the case of any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to qualify
as a real estate investment trust ("REIT") and has already taken steps in
furtherance of that objective, including a substantial distribution of earnings
and profits effected by resolution of the Board of Directors adopted September
22, 1997; and
WHEREAS, it would not be equitable to permit the restructuring of the
Company in connection with its becoming a REIT, which is in the interests of the
Company and its shareholders, to negate or restrict the benefits contemplated by
the Agreement or to interfere with its purposes in any way; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Clarifying Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
<PAGE>
NOW, THEREFORE, in consideration of the premises, of the Agreement, and of
the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. Defined Terms. Terms defined in the Agreement are used herein in their
-------------
defined meanings.
2. Revision of Definition of "Total Shareholder Consideration Paid." The
---------------------------------------------------------------
final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or (c)
of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Partnership"), or where at any
time during the Related Potential Change of Control the Company or such
subsidiary was such general partner and in connection with such Change of
Control any Person succeeds to the entirety or a substantial amount of the
business or assets of, or the partnership interests in the Partnership, any
consideration paid to or received, directly or indirectly, by the limited
partners or assignees of partnership interests in the Partnership with
respect thereto and the value of any retained assets of the Partnership,
shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid." In the case of any Change in Control
falling within clauses (b) or (c) of the definition thereof in Section
10.3, at a time when the Company has taken action looking towards its
qualification as a REIT (whether or not it has actually so qualified) any
distribution to shareholders (otherwise than a distribution by way of
ordinary dividends reflecting current earnings for the current fiscal
period or the immediately preceding fiscal period) made within 18 months
next preceding the date of the Change in Control, shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." Without limiting the generality of the foregoing, the distribution
of $100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid" in
respect of any Change of Control occurring within 18 months after such
distribution.
-2-
<PAGE>
3. Revision of Definition of "Cause." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
", or the participation by the Executive in any activity in opposition
to or obstruction of a Potential Charge of Control or Change of Control
which has been approved by the Board, or the engaging or attempting to
engage in competition with the Company or the Partnership or any of
their subsidiaries during the time of employment of the Executive, or
within one year thereafter, including, without limitation, the direct
or indirect hiring away or seeking to hire away of any employee or
employees of the Company, the Partnership or any of their subsidiaries,
whether such activities are conducted for the Executive's own account
or for the account of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give
Executive notice that such termination is changed to a termination for
Cause and upon the giving of such notice, such termination shall be
deemed to have been for Cause, if such Cause in fact exists."
4. Agreement Not Otherwise Amended. Except as expressly set forth
-------------------------------
herein, all terms and conditions of the Agreement shall remain in full force and
effect, and shall be applicable to the Agreement as amended by this Supplemental
Agreement.
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement
to be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr. /s/ Charles R. Dickinson, Jr.
-------------------------------- -----------------------------
Parnell S. Lewis, Jr., President Executive
-3-
<PAGE>
EXHIBIT 10.11
AGREEMENT
---------
THIS AGREEMENT dated December 10, 1996, is made by and between
Anderson-Tully Company, a Mississippi corporation (the "Company"), and Marye
Helen Owen (the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by managaement and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER PORTION OF TOTAL SHAREHOLDER
CONSIDERATION PAID IN CONSIDERATION PAID
RESPECT OF THE CHANGE TO BE PAID TO EXECUTIVE
IN CONTROL --------------------------
- -----------------
If not in excess of 0.05%
$60,000,000
If in excess of $60,000,000 $30,000, plus 0.08% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $78,000, plus 0.1% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $138,000, plus 0.15% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $228,000, plus 0.2% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G9d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements are subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with the interest at the rate provided in Section
1274(b)(2)(B) of the Code from the third (3rd) day following the Change in
Control to the date of repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business and
/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
Marye Helen Owen
1242 North Second Street
Memphis, Tennessee 38107
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the Code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" means, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that if (or they) (i)
intends to take,(ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located;)
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause (b) is terminated,
or any such transaction is abandoned.
A "Change in Control" is "Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr.
---------------------------
Name:
Title: President
/s/ Marye Helen Owen
------------------------
Marye Helen Owen
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and Marye Helen Owen
(the "Executive"), dated December 10, 1996.
1. REQUIREMENT OF ARBITRATION. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. DEFINITIONS. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. DEMAND TO ARBITRATE. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. PROCEDURE
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND CLARIFYING AGREEMENT
-------------------------------------
THIS SUPPLEMENTAL AND CLARIFYING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and Marye Helen Owen (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated December 10, 1996, by authority of the Salary and Benefits
Committee (the "Committee") of the Board of Directors of the Company, designed
to foster the continuous employment of key personnel, align the Company's key
executives' interests as closely as possible with those of its shareholders, and
insure the attention of the Company's management to their responsibilities in
the case of any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to qualify
as a real estate investment trust ("REIT") and has already taken steps in
furtherance of that objective, including a substantial distribution of earnings
and profits effected by resolution of the Board of Directors adopted September
22, 1997; and
WHEREAS, it would not be equitable to permit the restructuring of the
Company in connection with its becoming a REIT, which is in the interests of the
Company and its shareholders, to negate or restrict the benefits contemplated by
the Agreement or to interfere with its purposes in any way; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Clarifying Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
<PAGE>
NOW, THEREFORE, in consideration of the premises, of the Agreement, and of
the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. Defined Terms. Terms defined in the Agreement are used herein in their
-------------
defined meanings.
2. Revision of Definition of "Total Shareholder Consideration Paid." The
---------------------------------------------------------------
final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or (c)
of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Partnership"), or where at any
time during the Related Potential Change of Control the Company or such
subsidiary was such general partner and in connection with such Change of
Control any Person succeeds to the entirety or a substantial amount of the
business or assets of, or the partnership interests in the Partnership, any
consideration paid to or received, directly or indirectly, by the limited
partners or assignees of partnership interests in the Partnership with
respect thereto and the value of any retained assets of the Partnership,
shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid." In the case of any Change in Control
falling within clauses (b) or (c) of the definition thereof in Section
10.3, at a time when the Company has taken action looking towards its
qualification as a REIT (whether or not it has actually so qualified) any
distribution to shareholders (otherwise than a distribution by way of
ordinary dividends reflecting current earnings for the current fiscal
period or the immediately preceding fiscal period) made within 18 months
next preceding the date of the Change in Control, shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." Without limiting the generality of the foregoing, the distribution
of $100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid" in
respect of any Change of Control occurring within 18 months after such
distribution.
-2-
<PAGE>
3. Revision of Definition of "Cause." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
", or the participation by the Executive in any activity in opposition to
or obstruction of a Potential Charge of Control or Change of Control which
has been approved by the Board, or the engaging or attempting to engage in
competition with the Company or the Partnership or any of their
subsidiaries during the time of employment of the Executive, or within one
year thereafter, including, without limitation, the direct or indirect
hiring away or seeking to hire away of any employee or employees of the
Company, the Partnership or any of their subsidiaries, whether such
activities are conducted for the Executive's own account or for the account
of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give Executive
notice that such termination is changed to a termination for Cause and upon
the giving of such notice, such termination shall be deemed to have been
for Cause, if such Cause in fact exists."
4. Agreement Not Otherwise Amended. Except as expressly set forth herein,
-------------------------------
all terms and conditions of the Agreement shall remain in full force and effect,
and shall be applicable to the Agreement as amended by this Supplemental
Agreement .
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement to
be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr. /s/ Marye Helen Owen
________________________________ _____________________
Parnell S. Lewis, Jr., President Executive
-3-
<PAGE>
EXHIBIT 10.12
AGREEMENT
---------
THIS AGREEMENT dated December 12, 1996, is made by and between
Anderson-Tully Company, a Mississippi corporation (the "Company"), and Bartlett
Tully Lewis (the "Executive").
WHEREAS, the Company considers it generally in its best interests and
those of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Company considers it appropriate that the interests of
its key executives be aligned as closely as possible with those of its
shareholders; and
WHEREAS, the Salary and Benefits Committee (the "Committee") of the
Board of Directors of the Company (the "Board") recognizes that when the
possibility of a Change in Control (as defined in Section 10.2 hereof) exists,
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders, and the Committee recognizes that in such a case
there is a special need to insure the attention of the Executive to any
responsibilities that the Executive may have in connection with preparing for
the Change in Control, without distraction; and
WHEREAS, the Committee has determined that appropriate steps should
be taken (a) to reinforce and encourage the continued attention and dedication
of key members of the Company's management, including the Executive, to their
assigned duties without distraction concerning the possibility of a Change in
Control, (b) to secure the performance of such duties by managaement and the
Executive in connection with the proposed Change in
<PAGE>
Control as may be assigned to management and to the Executive, and (c) to
compensate Executive for Executive's efforts in performing his duties to the
Company and to recognize Executive's contributions to the appreciation of the
value of the Company upon realization or recognition in connection with a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in Section 10 and elsewhere in this Agreement.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall remain in effect thereafter until April 30, 1999; provided, however, that
--------
the obligations of the Company and the Executive provided for herein arising out
of a Change in Control effected prior to that date shall continue thereafter
until the obligations of such parties have been performed in full; and provided
--------
further that this Agreement may be terminated for Cause as set forth in Section
- -------
3.3. This Agreement may be continued after April 30, 1999, by the mutual written
agreement of the Company and the Executive executed before or after that date.
3. Company's Basic Covenant Summarized; Limitation on Employment
-------------------------------------------------------------
Commitment; Termination of this Agreement for Cause.
- ---------------------------------------------------
3.1 Basic Covenant. In order to induce the Executive to remain in the
--------------
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under and subject to the terms
and conditions set forth herein, that (a) upon a Change in Control during the
term of this Agreement, certain benefits shall be paid to the extent set
-2-
<PAGE>
forth in Section 5 hereof, and (b) if the Executive is discharged or terminated
without Cause in Anticipation of a Change of Control, the Company shall pay to
the Executive the benefits and other payments provided for hereunder to the same
extent as if the Executive had remained employed by the Company on the date of
the Change in Control.
3.2 Limitation; No Employment Commitment. This Agreement is not
-------------------------------------
a commitment or agreement by the Company to employ the Executive. It does not,
however, modify or change any other written agreement between the Company and
the Executive providing for the Executive's employment, although it supersedes
any agreement or purported agreement between the Company and the Executive with
respect to the Executive's employment which is not evidenced by a writing signed
on behalf of the Company by an authorized officer and by the Executive. Without
limiting the generality of the foregoing, the Company, without obligation under
this Agreement, may discharge the Executive at any time (subject in such case
only to the Executive's rights under any other written agreement referred to
above) with or without Cause, but subject to clause (b) of Section 3.1.
3.3 Termination of this Agreement for Cause. This Agreement may
---------------------------------------
be terminated at any time for Cause by the Board or the chief executive officer
of the Company by a notice in writing, whether or not the Executive's employment
is terminated in connection with such Cause; and upon such termination of this
Agreement for Cause, this Agreement shall have no further force or effect and
neither party shall have any rights under it.
4. The Executive's Employment Covenants. (a) The Executive agrees
------------------------------------
that, subject to the terms and conditions of this Agreement, in the event of
each and every Potential Change in Control, the Executive will remain in the
-3-
<PAGE>
employ of the Company until the earliest of (i) a date which is nine (9) months
after the date of such Potential Change of Control; (ii) the date on which such
Potential Change of Control shall cease to exist; or (iii) the date of a Change
in Control. The agreement of Executive in this clause (a) of this Section 4
contained shall come into effect each time that there shall be a Potential
Change in Control during the term hereof. The Executive is not obligated by this
Agreement to remain employed by the Company at any time other than the times
referred to in the first sentence of this clause (a) of this Section 4 and may,
as far as this Agreement is concerned, terminate his employment at any time
other than within the time periods referred to in such sentence. The only
consequences of a violation by the Executive of the Agreement contained in the
first sentence of this clause (a) of this Section 4 is the loss of entitlement
to any and all benefits or other sums payable by the Company hereunder. Nothing
in this Agreement contained affects the obligations of the Executive with
respect to the Executive's employment by the Company under any other written
agreement between the Company and the Executive.
(b) The Executive agrees that if incident to a Change in Control a
Person shall succeed to the Company, or a Person shall be merged into the
Company, Executive will remain in the employ of the Company or such successor
for a period of one year following the Change in Control, if so requested in
writing by such successor prior to the Change in Control or by the Company
immediately following the Change in Control; provided that, the Company or such
successor shall: (i) during such year compensate Executive by way of base salary
and other compensation arrangements and plans (apart from this Agreement or any
agreement referred to in the final sentence of this clause (b) of this Section
4) at no less than the level prevailing at the Company
-4-
<PAGE>
immediately prior to the Change in Control; (ii) require of Executive only
duties of commensurate responsibility to those which Executive had immediately
prior to such Change in Control; and (iii) not require any change in the place
of employment of Executive more than 25 miles from the place at which Executive
was employed immediately prior to the Change of Control. This clause (b) of this
Section 4 shall not affect the payment or the time of payment of any sums
payable under Sections 5, 6 or 8, and only remedy of the Company or such
successor in the case of any breach of this clause (b) of this Section 4 by
Executive shall be compensatory damages for loss of services, brought in an
arbitration subject to Section 9.14. If Executive and the Company have, prior to
the date of this Agreement, entered into another agreement providing for
payments to Executive upon the termination of Executive's employment, for the
purposes of such agreement the employment of Executive shall have deemed to have
been terminated by the Company without cause upon the Change in Control,
regardless of whether the Company or its successor exercises its option to
continue Executive's employment under this clause (b) of this Section 4.
5. Payment in the Event of a Change in Control.
-------------------------------------------
5.1 Basic Calculation. Upon the occurrence of a Change in Control, the
-----------------
Executive, if then employed by the Company or if Terminated by the Company
without Cause in Anticipation of the Change of Control in question, shall
receive in cash the amount computed under the following table:
-5-
<PAGE>
TOTAL SHAREHOLDER PORTION OF TOTAL SHAREHOLDER
CONSIDERATION PAID IN CONSIDERATION PAID
RESPECT OF THE CHANGE TO BE PAID TO EXECUTIVE
IN CONTROL --------------------------
- -----------------
If not in excess of 0.05%
$60,000,000
If in excess of $60,000,000 $30,000, plus 0.08% of the
but not in excess of excess over $60,000,000
$120,000,000
If in excess of $120,000,000 $78,000, plus 0.1% of the
but not in excess of excess over $120,000,000
$180,000,000
If in excess of $180,000,000 $138,000, plus 0.15% of the
but not in excess of excess over $180,000,000
$240,000,000
If in excess of $240,000,000 $228,000, plus 0.2% of the
excess over $240,000,000
5.2 Payment. The Company shall, within three (3) days
-------
following the Change in Control, pay any amount calculated under Section
5.1 and under Section 6 to Executive, subject to Section 7.
5.3 Limitation. In no case shall more than one Change in
----------
Control be taken into account under this Section 5, and following a Change
in Control, there shall be no liability of the Company or any of its
successors for the making of any payment under this Section 5 in respect of
any subsequent Change in Control; and upon such first Change of Control the
obligations of payment and employment provided for by Sections 3, 4, 5 and
6 hereof shall cease and have no further effect, but the obligations of
the Company and the Executive under any other agreement of employment shall
remain in full force and effect subject to their terms, unless by their
terms they terminate upon such Change in Control, and in any case subject
to any other applicable provision for their termination.
-6-
<PAGE>
6. Gross-Up Payment. (a) In the event that the Executive becomes
----------------
entitled to any payments under Section 5 or Section 8 of this Agreement, or
under any other agreement, plan or arrangement for the making of payments to the
Executive upon a Change in Control or upon the termination of employment caused
by, subsequent to, or otherwise with respect to a Change in Control (together,
the "Total Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Benefits and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 6, shall be equal to the Total Benefits. If no payment is due
Executive upon a Change of Control under Section 5 of this Agreement, no payment
shall be made under this Section 6.
(b) For purposes of determining whether any of the Total Benefits
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel ("Tax Counsel") selected by the Company's independent auditors
and acceptable to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such
-7-
<PAGE>
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payments or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G9d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(calculated by assuming that any reduction under Section 68 of the Code in the
amount of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion
-8-
<PAGE>
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment to the Executive in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined.
(d) If Executive is entitled to any other payments or
benefits in connection with a Change in Control or the termination of
Executive's employment, as referred to in clause (b) of this Section 6,
otherwise than those payable under this Agreement (collectively, "Other
Arrangements"), and if any of those Other Arrangements are subject to a
limitation designed to prevent payments under them from being "parachute
payments" or "excess parachute payments" within the meaning of the
provisions of the Code referred to in clause (b) of this Section 6 through
an express reference to such limitations in the Code, then, if any amount
is payable to Executive under Section 5 of this Agreement, such limitations
shall no longer be deemed to be effective for any purpose of those Other
Arrangements or in making calculations under this Section 6.
7. Timing of Section 6 Payments. The payments provided for in
----------------------------
Section 6 shall be made not later than the third (3rd) day following the
Change in Control, provided, however, that if the amounts of such payments
cannot be
-9-
<PAGE>
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the third (3rd) day following the Change of Control to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with the interest at the rate provided in Section
1274(b)(2)(B) of the Code from the third (3rd) day following the Change in
Control to the date of repayment of such excess).
8. REIMBURSEMENT OF CERTAIN LEGAL COSTS. The Company shall pay to the
------------------------------------
Executive all reasonable actual legal fees and expenses incurred by the
Executive as a result of a Change in Control which entitles the Executive to any
payments under this Agreement relating to such entitlement including without
limitation all such fees and expenses, if any, incurred (a) in seeking in good
faith to obtain or enforce (subject to Section 9.14) any right or benefit
provided by this Agreement or (b) in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-10-
<PAGE>
9. Miscellaneous.
-------------
9.1 No Mitigation. The Company agrees that in the case of a
-------------
Termination without Cause of the Executive in Anticipation of a Change in
Control, the Executive will not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, the amount of any payment or benefit
provided for under this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or by offset against any amount claimed to be owed by the
Executive to the Company (including, without limitation, any claim by the
Company or a successor to the Company for breach of the agreement contained in
clause (b) of Section 4), except such amount as may be evidenced by promissory
notes or similar obligations executed by the Executive.
9.2 Successors. In addition to any obligations imposed by law
----------
upon any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business and
/or assets of the Company expressly to assume and agree, in an instrument in
writing, to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no such succession
had taken place, subject, however, to Section 5.3 hereof. Failure of the Company
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall deemed to be a breach of this Agreement in which the successor
shall be deemed to have participated.
9.3 Incompetency. Any benefit payable to or for the benefit of
------------
the Executive, if legally incompetent or incapable of giving a receipt therefor,
-11-
<PAGE>
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to the Company to be providing for the care of
such person, and such payment shall fully discharge the Company.
9.4 Death. This Agreement shall inure to the benefit of and be
-----
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is payable to the Executive hereunder
(other than obligations which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate. If the Executive shall die after a Potential Change in
Control shall have occurred and a Related Change of Control thereafter occurs,
the Executive shall be deemed for the purposes of Sections 5 and 6 hereof to
have been employed by the Company upon the date of the Change in Control, and
the same shall be the case in the event the Executive shall have been Terminated
following a Potential Change of Control without Cause in Anticipation of a
Change in Control and shall have died prior to the Related Change in Control. In
no other case shall an Executive who is dead upon the date of a Change in
Control receive any payments under this Agreement.
9.5 Notices. For the purpose of this Agreement, notices and all
-------
other communications required or permitted in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may
-12-
<PAGE>
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Anderson-Tully Company
1242 North Second Street
Memphis, Tennessee 38107
Attention: President
To the Executive:
Bartlett Tully Lewis
1242 North Second Street
Memphis, Tennessee 38107
9.6 Modification, Waiver. No provision of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and on behalf of the Company by
such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
9.7 Entire Agreement. No agreements or representations, oral or
----------------
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9.8 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION
-------------
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MISSISSIPPI WITHOUT REFERENCE TO ANY CONFLICT-OF-LAWS PRINCIPLES.
-13-
<PAGE>
9.9 Statutory Changes. All references to sections of the
-----------------
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
9.10 Withholding. Any payments provided for hereunder shall be
-----------
subject to any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
9.11 Validity. The invalidity or unenforceability or any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.12 No Right to Continued Employment. Nothing in this
--------------------------------
Agreement shall be deemed to give any Executive the right to be retained in the
employ of the Company, or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful reason, subject in all
cases only to the express terms of this Agreement.
9.13 No Assignment of Benefits. Except as otherwise provided
-------------------------
herein or by law, no right or interest of any Executive under the Agreement
shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy,
garnishment, attachment or pledge, or in any other manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under this Agreement shall be liable for, or subject to, any
obligation or liability of such Executive.
9.14 ARBITRATION. NO SUIT SHALL BE BROUGHT IN ANY COURT FOR THE
-----------
PAYMENT OF ANY SUM PAYABLE UNDER THIS AGREEMENT, OR IN ANY WAY ARISING UNDER
THIS AGREEMENT, AND NO SUIT SHALL BE BROUGHT IN ANY COURT TOUCHING OR
-14-
<PAGE>
CONCERNING THIS AGREEMENT OR ITS SUBJECT MATTER WHETHER OR NOT FOR THE PAYMENT
OF MONEY, EXCEPT A SUIT TO REQUIRE THE MAKING OF THE ARBITRATION CONTEMPLATED BY
THE ARBITRATION PROTOCOL ATTACHED HERETO AS ATTACHMENT A OR TO OBTAIN A JUDGMENT
UPON ANY SUCH AWARD MADE IN SUCH ARBITRATION, OR TO ENFORCE ANY SUCH JUDGMENT;
BUT WITH SUCH EXCEPTIONS, ANY SUCH MATTER OR DISPUTE SHALL BE SUBMITTED TO
ARBITRATION UNDER SUCH ARBITRATION PROTOCOL.
9.15 Reduction of Benefits By Legally Required Benefits.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law (other than under this Agreement or other written
contract) to pay severance pay, a termination indemnity, notice pay, or the
like, or if the Company is obligated by law or by contract to provide advance
notice of separation ("Notice Period"), then any amounts payable under Section 5
hereof shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
9.16 Headings; Sections. The headings and captions herein are
------------------
provided for reference and convenience only, shall not be considered part of the
Agreement, and shall not be employed in the construction of the Agreement.
References to "Sections" herein, other than to the Code or the Exchange Act, are
references to the Sections of this Agreement.
10. Definitions.
-----------
10.1 "Business Combination" has the meaning set forth in
--------------------
Section 10.3(b).
-15-
<PAGE>
10.2 "Cause" means:
-----
(a) The willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the chief executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties; or
(b) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially injurious to the Company; or
(c) The initiation by the Executive of discussions or
negotiations with any Person who would be involved in effecting a Change of
Control concerning a Potential Change of Control or Change of Control (whether
with that Person or any other Person), or the participation by the Executive in
any discussions or negotiations whatsoever with any Person who would be involved
in effecting a Change in Control concerning a Potential Change of Control or
Change of Control, unless such discussions or negotiations have been expressly
approved in writing by the Board or by the chief executive officer of the
Company; or
(d) The disclosure at any time prior to a Change in
Control by the Executive to any Person (except as provided for by law, or to the
auditors of the Company in connection with the making of their audit) of this
Agreement or any similar agreement or of the material terms hereof or thereof,
without the written approval of the Board or the chief executive officer of the
Company, except in connection with any enforcement of this Agreement.
-16-
<PAGE>
10.3 A "Change in Control" means:
-----------------
(a) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, whether or not the Company is then
subject to such Section 13(d) of 50% or more of the shares of common stock of
the Company, other than by any such Person who on November 15, 1996, had
beneficial ownership (within the meaning aforesaid) of 25% of the shares of
common stock of the Company;
(b) The consummation of any merger, reorganization,
recapitalization, consolidation or other form of business combination (a
"Business Combination") if, following consummation of such Business Combination,
the Persons who were stockholders of the Company immediately prior to the
consummation of such Business Combination are not, as a result of such Business
Combination and of such stockholding in the Company, the owners of more than 50%
of the total voting power of all outstanding voting securities of the surviving
entity or entities;
(c) The consummation of any sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation (or other business entity) of which the Persons who were
stockholders of the Company immediately prior to such sale or disposition own as
a result of such stockholdings in the Company pro rata to such stockholdings,
more than 50% of the total voting power of all outstanding voting securities of
such corporation (or other business entity), or
(d) The approval by shareholders of a liquidation or
dissolution of the Company otherwise than in connection with such a sale or
other disposition.
-17-
<PAGE>
10.4 "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
10.5 "Company" means Anderson-Tully Company, a Mississippi
-------
corporation. If the Executive becomes employed by a subsidiary or affiliate of
the Company, the "Company" shall be deemed to refer to the subsidiary (or
affiliate) thereof by which the Executive is employed, except for the purposes
of Section 9.3. In such case, references to payments, benefits, privileges or
other rights to be accorded by the "Company" shall be deemed to refer to such
payments, benefits, privileges or other rights to be provided by the subsidiary
or affiliate by which the Executive is employed or to Anderson-Tully Company, as
the case may be, to correspond to the corporate entity obligated to make
payments or provide benefits, privileges or other rights pursuant to employee
benefit plans affected by the provisions hereof, and in the absence of any such
existing plans or provisions, such reference shall be deemed to be to Anderson-
Tully Company. As used in this Section 10.5, a "subsidiary" is any corporation
or limited liability company 50% or more whose common stock or ownership
interests or voting securities or interests are owned by the Company, either
directly or through one or more subsidiaries, and an "affiliate" of the Company
is any entity other than a subsidiary which is otherwise controlled by the
Company, including, without limitation, any limited partnership in which the
Company and/or one or more of its subsidiaries is or are the only general
partner or general partners or in which the Company or one of its subsidiaries
is the managing general partner.
10.6 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended from time to time.
-18-
<PAGE>
10.7 "Excise Tax" means any excise tax imposed under
----------
Section 4999 of the code.
10.8 "Person" shall have the meaning given in Section
------
3(a)(9) of the Exchange Act, as modified and used in Section 13(d)(3)
thereof.
10.9 A "Potential Change in Control" means, and shall
---------------------------
commence upon the occurrence of, any of the following:
(a) The Company, beneficial owners of 50% or more
of the Company's common stock or any Person acting or purporting to act on
their behalf, make or makes a public announcement that if (or they) (i)
intends to take,(ii) is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being defined for this
purpose as any statement quoted or otherwise reported in any print,
broadcast, wire service or other means of publication available to the
public in the locality in which the principal executive offices of the
Company are located;)
(b) The Company enters into any contract,
agreement or other arrangement with any Person which would lead to a Change
in Control; or
(c) The Board of the Company approves a
transaction described in clause (b) or (c) of the definition of Change in
Control contained in Section 10.3 hereof.
A Potential Change of Control shall terminate when any such
announcement referred to in clause (a) is rescinded, any such contract,
agreement or other arrangement referred to in clause 9b) is terminated,
or any such transaction is abandoned.
A "Change in Control" is Related to" a "Potential Change in
Control" when the Change in Control involves (apart from the Company) the
same Person
-19-
<PAGE>
(or any Person controlled by, controlling, or under common control with the same
Person) as that involved in the Potential Change of Control.
10.10 A "Termination in Anticipation of a Change in Control" means a
--------------------------------------------------
termination of the employment of Executive by the Company during a Potential
Change of Control if there shall subsequently be a Change of Control within the
term of this Agreement that is Related to such Potential Change of Control.
10.11 "Total Shareholder Consideration Paid" means:
------------------------------------
(a) In the case of a Business Combination, the Value of the total
consideration paid to or received by the shareholders of the Company (assuming
that no shareholders dissent and seek any available appraisal remedy for their
shares), except that if the Business Combination takes the form of a sale or
other disposition of assets, it shall be subject to clause (b) below.
(b) In the case of a sale of all or substantially all of the
Company's assets for securities or cash or other property, whether or not
constituting a Business Combination, the Value of the consideration paid for
such sale or disposition, less any liabilities of the Company not assumed by the
Person to which such sale or disposition is made, plus the Value of any assets
not sold or disposed of by the Company;
(c) In the case of a liquidation or dissolution of the Company
otherwise than in connection with the sale of all or substantially all of the
assets of the Company, the Value of the assets of the Company less the
liabilities of the Company; and
(d) In the case of a Change of Control as defined in clause (a) of
Section 10.3, the highest price per share of the Company's Common Stock paid by
the Person acquiring or holding such 50% or more of the shares of
-20-
<PAGE>
Common Stock of the Company in the period of 12 months next preceding the date
upon which such Person first became the beneficial owner of such 50% or more of
the Common Stock of the Company, times the total number of shares of Common
Stock of the Company outstanding at such time.
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company or
any subsidiary of the Company is general partner of Anderson-Tully Veneers,
L.P., a Mississippi limited partnership ("Veneers"), and when the partnership
interests in Veneers are transferable only in tandem with shares of the
Company's Common Stock, and in connection with such Change of Control the Person
succeeding to the business of the Company, or a Person affiliated with such
Person, succeeds to the business, assets or partnership interests in Veneers,
any consideration paid to or received by the shareholders of the Company in
their capacities as limited partners or assignees of partnership interests in
Veneers shall also be taken into account, without duplication, as part of "Total
Shareholder Consideration Paid."
10.12 "Value" means, in the case of cash or evidences of
-----
indebtedness, the face or principal amount of such cash or evidence of
indebtedness; in the case of stocks or other securities (other than
nonconvertible evidences of indebtedness) traded on a national securities
exchange or upon a nationally-recognized automated quotation system, the
average of the reported closing sales prices in consolidated trading, or, if
sales prices are not reported, the mean of the reported closing bid and asked
prices, in each case for the five days on which trading of stocks on the New
York Stock Exchange takes place next preceding the date of the determination and
as reported in the Wall Street Journal or, if the Wall Street Journal be not
published, another newspaper chosen by the Board publishing market quotations;
and in the case of a securities not so
-21-
<PAGE>
listed or so traded and any other property or asset, its fair
market value as determined in good faith by the Board.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement, all as of
the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis
----------------------
Name:
Title: President
/s/ Bartlett Tully Lewis
------------------------
Bartlett Tully Lewis
-22-
<PAGE>
Attachment A
ARBITRATION PROTOCOL
--------------------
This is the "Arbitration Protocol" referred to in Section 9.14 of the
Agreement ("Agreement") between Anderson-Tully Company and Bartlett Tully Lewis
(the "Executive"), dated December 12, 1996.
1. REQUIREMENT OF ARBITRATION. No dispute concerning or relating to the
--------------------------
construction or enforcement of the Agreement, relating to the entitlement to or
quantum of any payment hereunder, or in any way touching or concerning the
subject matter of this Agreement shall be the subject of any complaint, civil
action or other proceeding in court (except to require the arbitration provided
for in this Arbitration Protocol or to enforce its award or a judgment entered
on such award), but all such disputes shall be submitted to arbitration, in
accordance with this Arbitration Protocol.
2. DEFINITIONS. Terms defined in Section 10 or elsewhere in the Agreement
-----------
are used herein in their defined senses. The term "Parties" refers to the
Company and the Executive or any other claimant or claimants or respondent or
respondents in a Dispute. Other terms are defined in the remaining sections of
this Arbitration Protocol.
3. DEMAND TO ARBITRATE. If the Parties do not resolve any Dispute by
-------------------
agreement any Party may give the other Parties written notice of its intention
to arbitrate the Dispute and a demand for arbitration (a "Demand Notice"). If a
Party gives a Demand Notice, such Dispute shall be determined and settled by
arbitration conducted in accordance with this Arbitration Protocol. Such Demand
Notice shall be given within a reasonable time after the Dispute has arisen;
<PAGE>
-2-
provided, however, that in no event shall such Demand Notice be given after the
- -------- -------
date upon which any legal or equitable proceeding with respect thereto would be
barred by any applicable statute of limitations.
4. PROCEDURE
---------
(a) Within twenty (20) days after delivery of the Demand Notice, each
Party shall deliver to the other(s) a list of acceptable arbitrators who are not
affiliated with, or have substantial business or personal relations with, any
Party. Thereafter, the Parties who have submitted such lists shall attempt to
agree upon selection of a single arbitrator from such lists. If the Parties are
unable to agree within twenty (20) additional days after the exchange of such
lists, any Party may apply to the American Arbitration Association ("AAA") for
the appointment of a single arbitrator in accordance with the procedures
therefor contained in Section 13 of the Commercial Arbitration Rules of the AAA
as in effect on November 1, 1993. All arbitrations conducted under this
Arbitration Protocol shall be before a single arbitrator. (The arbitrator so
selected is referred to in this Arbitration Protocol as the "Arbitrator" or
"Arbitrators"). Notwithstanding the foregoing, if only one Party (or
Arbitrator) shall deliver a list of acceptable arbitrators in accordance with
this paragraph (a), then that Party (or Arbitrator) may select an Arbitrator
from its list to arbitrate the Dispute.
(b) Every Dispute submitted to arbitration pursuant to this Protocol
shall be resolved in a single hearing (or such limited number of hearings as the
Arbitrator reasonably deems necessary), such single hearing (or first hearing)
to be held as soon as possible upon ten (10) days' written notice from the
Arbitrator but in no event later than thirty (30) days after completion of such
discovery by the parties as the Arbitrator may permit, which discovery shall,
absent good reason to the contrary, (i) be as permitted by the Federal Rules of
Civil
<PAGE>
-3-
Procedure then in effect, but (ii) without discovery from non-Parties. The
hearing shall be held in Memphis, Tennessee, in accordance with the procedures
of the Commercial Arbitration Rules of the AAA and the provisions of this
Arbitration Protocol. If the Arbitrator is chosen by the AAA, or if any Party
shall by notice in writing demand that the arbitration shall be administered by
the AAA, the arbitration shall be administered by the AAA under the Commercial
Arbitration Rules of the AAA. In any case, whether or not administered by the
AAA, such Commercial Arbitration Rules and this Arbitration Protocol shall
govern the procedure in such arbitration, and shall apply to the making of the
award in the arbitration and to the determination of any question, matter or
issue that may arise in connection with the arbitration, and such award and any
such determination shall be made by the Arbitrator. Such award (or other
determination) of the Arbitrator shall be final and binding on the Parties and
may be enforced by any court of competent jurisdiction. In the case of a
conflict between this Arbitration Protocol and the Commercial Arbitration Rules
of the AAA, this Arbitration Protocol shall govern.
5. CONFIDENTIALITY. The arbitration shall be closed to the public and
---------------
only the Arbitrator, his, her or their support staff, the Parties, and counsel
for the Parties (apart from witnesses when actually giving testimony) shall be
permitted to attend the arbitration proceedings, and the arbitration, the
evidence introduced at it, and the award shall be kept confidential, except to
the extent necessary to enforce the award or any other determination of the
Arbitrator or as required in connection with the proceedings for such
enforcement.
6. FEES. The Arbitrator shall be paid a reasonable fee for his or her
----
services, and, if the arbitration is conducted under the administration of the
AAA, the administrative charges and fees of the AAA shall be paid, and shall
<PAGE>
-4-
constitute costs. After the conduct of any arbitration, the Arbitrator shall
determine what amount of any such administrative charges and fees, Arbitrator's
fees, and related expenses of such arbitration each Party shall bear. If the
Arbitrator fails so to determine, the Parties shall each pay an equal share of
such charges and expenses. Subject to the provisions of Section 9 of the
Agreement, which the Arbitrator shall have jurisdiction to interpret, apply and
enforce, each Party shall pay its own legal fees incurred in connection with any
arbitration subject to Section 9.14 of the Agreement.
7. MODIFICATIONS. Modifications of the procedures provided for in this
-------------
Arbitration Protocol may be made as to any arbitration through an instrument in
writing signed by the Parties to such arbitration.
<PAGE>
SUPPLEMENTAL AND AMENDING AGREEMENT
-----------------------------------
THIS SUPPLEMENTAL AND AMENDING AGREEMENT, dated as of December 31, 1997,
is made by and between Anderson-Tully Company, a Mississippi corporation (the
"Company"), and Bartlett Tully Lewis (the "Executive").
WHEREAS, the Company and the Executive entered into an agreement (the
"Agreement") dated May 6, 1997 by authority of the Salary and Benefits Committee
(the "Committee") of the Board of Directors of the Company, designed to foster
the continuous employment of key personnel, align the Company's key executives'
interests as closely as possible with those of its shareholders, and insure the
attention of the Company's management to their responsibilities in the case of
any Change in Control; and
WHEREAS, the Company is being restructured (the "Restructuring") to
qualify as a real estate investment trust ("REIT") and has already taken steps
in furtherance of that objective, including a substantial distribution of
earnings and profits effected by resolution of the Board of Directors adopted
September 22, 1997; and
WHEREAS, the Executive had been continuously employed with the Company
for several years; and
WHEREAS, in conjunction with the restructuring of the Company, the
Executive's employment with the Company is being terminated and the Executive is
to commence employment with Anderson-Tully Timber Company ("New Employer");
WHEREAS, it would not be equitable to negate the payments and benefits
contemplated by the Agreement by reason of the Executive's employment by New
Employer in connection with the restructuring or otherwise by the Restructuring,
or to permit interference with the purpose of the Agreement in any way; and
<PAGE>
WHEREAS, the Company will derive economic benefit from the Executive's
continued employment with New Employer; and
WHEREAS, the Company desires to ensure that the Executive's termination
of employment with the Company and continued employment with New Employer shall
not be deemed to be a termination of employment for purposes of Section 5.1 of
the Agreement; and
WHEREAS, the Committee has authorized the execution and delivery of this
Supplemental and Amending Agreement (this "Supplemental Agreement") making
certain amendments and clarifications to give effect to the foregoing and to
make certain clarifying revisions in the definition of "Cause";
NOW, THEREFORE, in consideration of the premises, of the Agreement, and
of the mutual covenants herein contained, the Company and the Executive hereby
agree as follows:
1. Defined Terms. Terms defined in the Agreement are used herein in
-------------
their defined meanings.
2. Revision of Section 5.1. The first clause of Section 5.1 of the
-----------------------
Agreement is hereby amended to read as follows:
5.1 Basic Calculation. Upon the occurrence of a Change in Control,
-----------------
the Executive, if then employed by the Company or Anderson-Tully Timber
Company ("New Employer") or if Terminated by the Company or by New
Employer without Cause in Anticipation of the Change of Control in
question, shall receive in cash the amount computed under the following
table:
3. No Obligation of New Employer. Nothing herein contained shall be
-----------------------------
deemed to impose any obligation upon New Employer with respect to the employment
of Executive or to impose any obligation whatsoever under the Agreement upon New
-2-
<PAGE>
Employer or to make New Employer responsible for the performance of any of the
obligations of the Company under the Agreement.
4. Revision of Definition of "Total Shareholder Consideration Paid."
---------------------------------------------------------------
The final, unnumbered paragraph of Section 10.11 of the Agreement ("Total
Shareholder Consideration Paid") is hereby amended to read as follows:
In the case of any Change in Control falling within clauses (b) or
(c) of the definition thereof in Section 10.3, at a time when the Company
or any subsidiary of the Company is general partner of Anderson-Tully
Veneers, L.P., a Mississippi limited partnership ("Partnership"), or
where at any time during the Related Potential Change of Control the
Company or such subsidiary was such general partner and in connection
with such Change of Control any Person succeeds to the entirety or a
substantial amount of the business or assets of, or the partnership
interests in the Partnership, any consideration paid to or received,
directly or indirectly, by the limited partners or assignees of
partnership interests in the Partnership with respect thereto and the
value of any retained assets of the Partnership shall also be taken into
account, without duplication, as part of "Total Shareholder Consideration
Paid." In the case of any Change in Control falling within clauses (b)
or (c) of the definition thereof in Section 10.3, at a time when the
Company has taken action looking towards its qualification as a REIT
(whether or not it has actually so qualified) any distribution to
shareholders (otherwise than a distribution by way of ordinary dividends
reflecting current earnings for the current fiscal period or the
immediately preceding fiscal period) made within 18 months next preceding
the date of the Change in Control, shall also be taken into account,
without duplication, as part of "Total Shareholder Consideration Paid."
Without limiting the generality of the foregoing, the distribution of
$100,000 per share paid to the stockholders of the Company by authority
of the resolution of the Board adopted September 22, 1997, shall be so
taken into account as part of the "Total Shareholder Consideration Paid"
in respect of any Change of Control occurring within 18 months after such
distribution.
5. Revision of Definition of "Cause." Section 10.2 of the Agreement is
--------------------------------
hereby amended: (i) by inserting in paragraph (b) thereof, before the final ";
or" the following:
-3-
<PAGE>
", or the participation by the Executive in any activity in opposition to
or obstruction of a Potential Charge of Control or Change of Control
which has been approved by the Board, or the engaging or attempting to
engage in competition with the Company or the Partnership or any of their
subsidiaries during the time of employment of the Executive, or within
one year thereafter, including, without limitation, the direct or
indirect hiring away or seeking to hire away of any employee or employees
of the Company, the Partnership or any of their subsidiaries, whether
such activities are conducted for the Executive's own account or for the
account of any other Person."
and (ii) by adding the following paragraph at the end of such Section 10.2:
"If a termination of employment is originally without Cause and
thereafter Cause occurs or is discovered, the Company may give Executive
notice that such termination is changed to a termination for Cause and
upon the giving of such notice, such termination shall be deemed to have
been for Cause, if such Cause in fact exists."
6. Agreement Not Otherwise Amended. Except as expressly set forth
-------------------------------
herein, all terms and conditions of the Agreement shall remain in full force and
effect, and shall be applicable to the Agreement as amended by this Supplemental
Agreement.
IN WITNESS WHEREOF, the Company has caused this Supplemental Agreement to
be executed by its officer, thereunto duly authorized, and Executive has
executed this Agreement, all as of the day and year first above written.
ANDERSON-TULLY COMPANY
By /s/ Parnell S. Lewis, Jr. /s/ Bartlett Tully Lewis
-------------------------- ------------------------
Executive
-4-
<PAGE>
Exhibit 21.1
------------
Subsidiaries of the Registrant
------------------------------
Jurisdiction of
Subsidiary Organization
- ---------- ------------
Anderson-Tully Veneers, L.P. Mississippi
Anderson-Tully GP Company Mississippi
Anderson-Tully Timber Company Mississippi
Anderson-Tully Lumber Company Mississippi
Anderson-Tully Management Services LLC Mississippi
Patton-Tully Transportation LLC Mississippi
Tenarc Construction Company Tennessee
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JULY 31, 1997 AND
THE FIVE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 5-MOS
<FISCAL-YEAR-END> JUL-31-1997 DEC-31-1997
<PERIOD-START> AUG-01-1996 AUG-01-1997
<PERIOD-END> JUL-31-1997 DEC-31-1997
<CASH> 1,749 1,711
<SECURITIES> 0 0
<RECEIVABLES> 9,684 15,948
<ALLOWANCES> 0 0
<INVENTORY> 4,783 5,408
<CURRENT-ASSETS> 18,731 25,632
<PP&E> 75,474 64,300
<DEPRECIATION> (45,675) (36,393)
<TOTAL-ASSETS> 136,486 132,099
<CURRENT-LIABILITIES> 17,065 22,849
<BONDS> 46,344 96,787
0 0
0 0
<COMMON> 1,159 1,159
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 136,486 132,099
<SALES> 74,262 37,710
<TOTAL-REVENUES> 96,908 52,485
<CGS> 60,825 29,341
<TOTAL-COSTS> 85,055 45,495
<OTHER-EXPENSES> (492) (7,555)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (3,380) (2,374)
<INCOME-PRETAX> 11,361 (565)
<INCOME-TAX> 3,891 (629)
<INCOME-CONTINUING> 11,853 6,990
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,650 (1,316)
<EPS-PRIMARY> 9,749 (2,271)
<EPS-DILUTED> 0 0
</TABLE>
