<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JULY 17, 1995 (JUNE 30, 1995)
------------------------------------------------
Date of Report (Date of earliest event reported)
REPUBLIC GYPSUM COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 1-7210 75-1155922
- - ------------------------------- ------------------------ -------------------
(State or other jurisdiction of (Commission file number) (IRS employer
incorporation or organization) identification no.)
811 EAST 30TH AVENUE
HUTCHINSON, KANSAS 67502-4341
(Address of principal executive offices, including zip code)
(316) 727-2700
-------------------------------
(Registrant's telephone number,
including area code)
- - --------------------------------------------------------------------------------
Index to exhibits appears on sequentially numbered page 12.
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 30, 1995, the registrant, Republic Gypsum Company (RGC), completed
a previously announced purchase from Old Dominion Box Company, Inc. ("Old
Dominion") of all the operating assets of Halltown Paperboard Company
("Halltown") and certain related assets of Dillard Investment Corporation
("Dillard"). The acquisition was effected through Republic Paperboard Company
of West Virginia, a wholly owned subsidiary of registrant's wholly owned
subsidiary Republic Paperboard Company. The acquisition was closed on June 30,
1995, and included payments totaling $25.4 million to Halltown and Dillard.
The purchase price will be subject to certain postclosing adjustments related
to working capital items. The registrant obtained noncompetition agreements
from Halltown, Dillard, and Old Dominion and three principals of such companies
for a total cost of $200,000. The consideration paid was determined on the
basis of arm's-length negotiations between the parties.
The acquisition was financed through a 7-year term loan in the amount of
$28 million from Boatmen's First National Bank of Kansas City. The term loan
is secured by liens on substantially all of the nonworking capital assets
acquired from Halltown and Dillard. RGC also entered into a $7 million
revolving credit arrangement with such bank.
Halltown operates a recycled paperboard mill with a rated productive
capacity of approximately 70,000 tons per year. The mill manufactures various
uncoated grades of recycled paperboard exclusively from 100% recovered paper
fibers. Halltown recorded sales of approximately $21 million in 1994. RGC
intends to continue operating the Halltown mill as a recycled paperboard mill.
RGC also entered into agreements with Old Dominion to sell Old Dominion
recycled paperboard for use in its carton and box manufacturing plants and to
purchase from Old Dominion its scrap paper.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Halltown Paperboard Company's and Dillard Investment Corporation's
financial statements filed as part of this report are listed on
the Index to Historical and Pro Forma Financial Information as
exhibits 99(i) and 99(ii) of this report.
(b) Pro Forma Financial Information
Pro forma financial statements filed as part of this report are
listed on the Index to Historical and Pro Forma Financial
Information on page 4 of this report.
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<PAGE> 3
(c) Exhibits.
(2) (i) Asset Purchase Agreement dated June 30, 1995,
between Old Dominion Box Company, Inc., Halltown
Paperboard Company, Dillard Investment Corporation,
Republic Gypsum Company, and Republic Paperboard Company
of West Virginia.
(ii) Index of Exhibits and Schedules to Asset Purchase
Agreement
(4) (i) Revolving and Term Credit Agreement dated as of June
30, 1995, among Republic Gypsum Company, Republic
Paperboard Company, Republic Paperboard Company of West
Virginia, and Boatmen's First National Bank of Kansas
City, and exhibits thereto.
(99) (i) Financial Statements of Halltown Paperboard Company
for the years ended December 30, 1994, December 31, 1993,
and January 1, 1993, including Report of Independent
Auditors, and unaudited financial statements for the
three-month periods ended March 26, 1995 and March 27,
1994.
(ii) Financial Statements of Dillard Investment
Corporation for the years ended December 31, 1994, 1993,
and 1992, including Report of Independent Auditors, and
unaudited financial statements for the three months
ended March 31, 1995 and 1994.
(iii) Consent of Independent Public Accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 17, 1995 REPUBLIC GYPSUM COMPANY
By: /s/ DOYLE R. RAMSEY
------------------------------
Doyle R. Ramsey,
Vice President, Finance and
Chief Financial Officer
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REPUBLIC GYPSUM COMPANY
INDEX TO HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
ITEM 7.(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Financial Statements of Halltown Paperboard Company for the years
ended December 31, 1994, 1993, and 1992, including Report of
Independent Auditors, and unaudited financial statements for the
three-month periods ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . 99(i)
Financial Statements of Dillard Investment Corporation for the years
ended December 31, 1994, 1993, and 1992, including Report of
Independent Auditors, and unaudited financial statements for the
three-month periods ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . 99(ii)
</TABLE>
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
ITEM 7.(B) PRO FORMA FINANCIAL INFORMATION
Summary Information Related to the Unaudited Condensed Pro Forma
Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unaudited Condensed Pro Forma Consolidated Balance Sheet of
Republic Gypsum Company as of March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Condensed Pro Forma Consolidated Balance Sheet
as of March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Unaudited Condensed Pro Forma Consolidated Statement of
Operations of Republic Gypsum Company for the nine-month
period ended March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notes to Unaudited Condensed Pro Forma Consolidated Statement of
Operations for the nine-month period ended March 31, 1995 . . . . . . . . . . . . . . . . . . 9
Unaudited Condensed Pro Forma Consolidated Statement of
Operations of Republic Gypsum Company for the year ended June 30, 1994 . . . . . . . . . . . . 10
Notes to Unaudited Condensed Pro Forma Consolidated Statement of
Operations for the year ended June 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 11
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<PAGE> 5
SUMMARY INFORMATION RELATED TO THE
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited condensed pro forma consolidated financial data
consists of the Unaudited Condensed Pro Forma Consolidated Balance Sheet of
Republic Gypsum Company (RGC) as of March 31, 1995, and the Unaudited Condensed
Pro Forma Consolidated Statements of Operations of RGC for the nine-month
period ended March 31, 1995, and the year ended June 30, 1994 (collectively,
the "Pro Forma Statements"). The Unaudited Condensed Pro Forma Consolidated
Balance Sheet gives effect to the purchase of certain assets and the assumption
of certain liabilities of Halltown Paperboard Company ("Halltown") and Dillard
Investment Corporation ("Dillard") (the "Transaction") as if the Transaction
had occurred on March 31, 1995. The Unaudited Condensed Pro Forma Consolidated
Statements of Operations for the nine-month period ended March 31, 1995, and
the year ended June 30, 1994, give effect to the Transaction as if the
Transaction had occurred on July 1, 1993.
The Pro Forma Statements do not purport to represent what the results of
operations of RGC would actually have been if the aforementioned transaction in
fact had occurred on the assumed dates, or to project the results of operations
for any future periods or at any future date.
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<PAGE> 6
REPUBLIC GYPSUM COMPANY
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 1995
<TABLE>
<CAPTION>
Purchase of
Halltown and Dillard
Historical ----------------------------- Pro Forma
ASSETS Balances Debit Credit Balances
------ ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,199,000 $ 1,833,000(a) $ - $ 5,032,000
Investments 1,500,000 - - 1,500,000
Accounts receivable, net 12,466,000 - - 12,466,000
Income tax refund receivable 143,000 - - 143,000
Inventories-
Finished goods 1,269,000 317,000(a) - 1,586,000
Raw materials and supplies 4,258,000 888,000(a) - 5,146,000
------------ ------------ ----------- --------------
Total inventories 5,527,000 1,205,000 - 6,732,000
Prepaid expenses and other 321,000 136,000(a) - 457,000
Net assets held for sale 264,000 - - 264,000
------------ ------------ ----------- --------------
Total current assets 23,420,000 3,174,000 - 26,594,000
Property, plant, and equipment 76,006,000 24,746,000(b) - 100,752,000
Less- Accumulated depreciation 34,888,000 - - 34,888,000
------------ ------------ ----------- --------------
41,118,000 24,746,000 - 65,864,000
Other assets 667,000 215,000(c) - 882,000
------------ ------------ ----------- --------------
Total assets $ 65,205,000 $ 28,135,000 $ - $ 93,340,000
============ ============ =========== ==============
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Current liabilities:
Accounts payable $ 8,105,000 $ - $ - $ 8,105,000
Accrued payroll and benefits 2,219,000 - - 2,219,000
Income taxes payable 1,052,000 - - 1,052,000
Accrued property taxes 428,000 - - 428,000
Current portion of long-term debt - - 1,550,000(d) 1,550,000
Other current liabilities 728,000 - - 728,000
------------ ------------ ----------- --------------
Total current liabilities 12,532,000 - 1,550,000 14,082,000
Deferred income taxes 3,540,000 - - 3,540,000
Other long-term liabilities 888,000 - 135,000(d) 1,023,000
Long-term debt - - 26,450,000(d) 26,450,000
Stockholders' equity-
Common stock, $1 par value 10,557,000 - - 10,557,000
Additional paid-in capital 12,303,000 - - 12,303,000
Retained earnings 25,411,000 - - 25,411,000
Less- Pension liability adjustment (26,000) - - (26,000)
------------ ------------ ----------- --------------
Total stockholders'
equity 48,245,000 - - 48,245,000
------------ ------------ ----------- --------------
Total liabilities and
stockholders' equity $ 65,205,000 $ - $28,135,000 $ 93,340,000
============ ============ =========== ==============
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 7
REPUBLIC GYPSUM COMPANY
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED BALANCE SHEET
As of March 31, 1995
The unaudited condensed pro forma consolidated balance sheet as of March 31,
1995, combines the following information:
1. The historical consolidated balance sheet of RGC and subsidiaries as
of March 31, 1995.
2. The source and uses of funds to acquire Halltown and Dillard assets as
follows:
<TABLE>
<CAPTION>
Amount
------------
<S> <C>
Source of funds:
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,000,000
============
Uses of Funds:
Purchase of assets . . . . . . . . . . . . . . . . . . . . . . . . 25,399,000
Purchase of non-compete agreements . . . . . . . . . . . . . . . . 200,000
Estimated costs and expenses related to the purchase . . . . . . . 568,000
Excess cash available for investment . . . . . . . . . . . . . . . 1,833,000
------------
Total Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . $ 28,000,000
============
Pro forma adjustments to reflect the acquisition of Halltown and Dillard assets are as follows:
(a) The working capital balances of Halltown and Dillard
at June 30, 1995, acquired in the purchase:
Excess cash available . . . . . . . . . . . . . . . . . . . . $ 1,833,000
Finished goods inventory . . . . . . . . . . . . . . . . . . . 317,000
Raw materials and supplies . . . . . . . . . . . . . . . . . . 888,000
Prepaid expenses and other . . . . . . . . . . . . . . . . . . 136,000
(b) To record fair market values, up to consideration paid, of
acquired property, plant, and equipment for Halltown and
Dillard as determined by an independent appraisal . . . . . . 24,746,000
(c) To record other assets as follows:
Identifiable intangibles at fair market value . . . . 200,000
Deferred finance costs related to the
additional financing for the acquisition . . . . . 15,000
--------
215,000
------------
Total assets . . . . . . . . . . . . . . . . . . . . $ 28,135,000
============
(d) To record funds borrowed under the term loan and
liabilities assumed:
Current portion . . . . . . . . . . . . . . . . . . . . . . . (1,550,000)
Long-term portion . . . . . . . . . . . . . . . . . . . . . . (26,450,000)
Environmental reserve . . . . . . . . . . . . . . . . . . . . (135,000)
------------
Total liabilities . . . . . . . . . . . . . . . . . . $ 28,135,000
============
</TABLE>
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<PAGE> 8
REPUBLIC GYPSUM COMPANY
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine-Month Period Ended March 31, 1995
<TABLE>
<CAPTION>
Halltown
Historical and Pro Forma
Nine-Month Dillard Nine-Month
Period Ended Combined Acquisition Period Ended
March 31, 1995 Operations Adjustments March 31, 1995
-------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Gross sales $81,959,000 $19,868,000 $ - $101,827,000
Less- Freight and discount 12,229,000 1,429,000 - 13,658,000
----------- ----------- ----------- ------------
Net sales 69,730,000 18,439,000 - 88,169,000
Costs and expenses:
Cost of sales 48,191,000 14,507,000 582,000(a) 63,280,000
Selling and administrative
expenses 7,088,000 2,453,000 (1,555,000)(b) 7,986,000
----------- ----------- ----------- ------------
55,279,000 16,960,000 (973,000) 71,266,000
----------- ----------- ----------- ------------
Operating profit 14,451,000 1,479,000 973,000 16,903,000
Other income (expense), net 112,000 (280,000) (834,000)(c) (1,002,000)
----------- ----------- ----------- ------------
Income before income taxes 14,563,000 1,199,000 139,000 15,901,000
Provision for income taxes 5,809,000 111,000 391,000(d) 6,311,000
----------- ----------- ----------- ------------
Net income (loss) $ 8,754,000 $ 1,088,000 $ (252,000) $ 9,590,000
=========== =========== =========== ============
Net income per common share $ 0.83 $ 0.90
Weighted average shares outstanding 10,604,000 10,604,000
</TABLE>
The accompanying notes are an integral part of this statement.
-8-
<PAGE> 9
REPUBLIC GYPSUM COMPANY
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine-Month Period Ended March 31, 1995
The unaudited condensed pro forma consolidated statement of operations for the
nine-month period ended March 31, 1995, combines the following information:
1. The historical condensed consolidated statement of operations for RGC
for the nine-month period ended March 31, 1995.
2. The historical condensed consolidated statement of operations of
Halltown and Dillard for the nine-month period ended March 31, 1995.
3. Pro forma adjustments to reflect the Transaction as if the Transaction
had occurred on July 1, 1993 are as follows:
<TABLE>
<S> <C>
(a) To recognize the incremental depreciation due to a new basis
for fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 582,000
(b) The pro forma adjustments to selling and administrative
expenses are as follows:
To recognize the amortization of noncompete
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
To recognize the incremental expenses for flood
insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
To eliminate the corporate allocation as these services
will be provided by RGC without incremental cost . . . . . . . (1,488,000)
To eliminate outside sales commissions as these
commissions will no longer be incurred by RGC . . . . . . . . . (207,000)
-----------
(1,555,000)
(c) To recognize the incremental interest expense due to the term
debt at 1.25% over the average 90-day LIBOR rate (5.75%)
for the nine months plus the amortization of deferred
financing costs, offset by interest income on available cash . . . . . 834,000
(d) To recognize the incremental federal and state income tax
provision resulting from the pro forma adjustments, using
an effective rate of approximately 38% . . . . . . . . . . . . . . . . 391,000
</TABLE>
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<PAGE> 10
REPUBLIC GYPSUM COMPANY
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended June 30, 1994
<TABLE>
<CAPTION>
Halltown
and
Historical Dillard Pro Forma
Year Ended Combined Acquisition Year Ended
June 30, 1994 Operations Adjustments June 30, 1994
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Gross sales $77,131,000 $17,235,000 $ - $94,366,000
Less- Freight and discount 13,931,000 1,602,000 - 15,533,000
----------- ----------- -------- -----------
Net sales 63,200,000 15,633,000 - 78,833,000
Costs and expenses:
Cost of sales 43,603,000 11,415,000 828,000(a) 55,846,000
Selling and administrative
expenses 7,636,000 2,754,000 (1,523,000)(b) 8,867,000
----------- ----------- ----------- -----------
51,239,000 14,169,000 (695,000) 64,713,000
----------- ----------- ----------- -----------
Operating profit 11,961,000 1,464,000 695,000 14,120,000
Other income (expense), net 475,000 (321,000) (877,000)(c) (723,000)
----------- ----------- ----------- -----------
Income (loss) before income taxes 12,436,000 1,143,000 (182,000) 13,397,000
Provision for income taxes 4,697,000 93,000 268,000(d) 5,058,000
----------- ----------- ----------- -----------
Net income (loss) $ 7,739,000 $ 1,050,000 $ (450,000) $ 8,339,000
=========== =========== =========== ===========
Net income per common share $ 0.73 $ 0.79
Weighted average shares outstanding 10,606,000 10,606,000
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 11
REPUBLIC GYPSUM COMPANY
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended June 30, 1994
The unaudited condensed pro forma consolidated statement of operations for year
ended June 30, 1994, combines the following information:
1. The historical condensed consolidated statement of operations for RGC
for the year ended June 30, 1994.
2. The historical condensed consolidated statement of operations of
Halltown and Dillard for the year ended June 30, 1994.
3. Pro forma adjustments to reflect the Transaction as if the Transaction
had occurred on July 1, 1993, are as follows:
<TABLE>
<S> <C>
(a) To recognize the incremental depreciation due to a new basis for fixed assets $ 828,000
(b) The pro forma adjustments to selling and administrative expenses are as follows:
To recognize the amortization of noncompete
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 66,000
To recognize the incremental expenses for flood
insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
To eliminate the corporate allocation as these services
will be provided by RGC without incremental cost . . . . . . . (1,527,000)
To eliminate outside sales commissions as these
commissions will no longer be incurred by RGC . . . . . . . . . (182,000)
-----------
(1,523,000)
(c) To recognize the incremental interest expense due to the term
debt at 1.25% over the average 90-day LIBOR rate (3.75%)
for the year plus the amortization of deferred financing
costs, offset by interest income on available cash . . . . . . . . . . 877,000
(d) To recognize the incremental federal and state income tax
provision resulting from the pro forma adjustments, using
an effective rate of approximately 38% . . . . . . . . . . . . . . . . 268,000
</TABLE>
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<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<S> <C>
(2) (i) Asset Purchase Agreement dated June 30, 1995,
between Old Dominion Box Company, Inc., Halltown
Paperboard Company, Dillard Investment Corporation,
Republic Gypsum Company, and Republic Paperboard Company
of West Virginia.
(ii) Index of Exhibits and Schedules to Asset Purchase
Agreement
(4) (i) Revolving and Term Credit Agreement dated as of June
30, 1995, among Republic Gypsum Company, Republic
Paperboard Company, Republic Paperboard Company of West
Virginia, and Boatmen's First National Bank of Kansas
City, and exhibits thereto.
(99) (i) Financial Statements of Halltown Paperboard Company
for the years ended December 30, 1994, December 31, 1993,
and January 1, 1993, including Report of Independent
Auditors, and unaudited financial statements for the
three-month periods ended March 26, 1995 and March 27, 1994.
(ii) Financial Statements of Dillard Investment
Corporation for the years ended December 31, 1994, 1993,
and 1992, including Report of Independent Auditors, and
unaudited financial statements for the three months
ended March 31, 1995 and 1994.
(iii) Consent of Independent Public Accountants.
</TABLE>
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<PAGE> 1
EXHIBIT (2)(i)
ASSET PURCHASE AGREEMENT
BETWEEN
OLD DOMINION BOX COMPANY, INC.,
HALLTOWN PAPERBOARD COMPANY,
DILLARD INVESTMENT CORPORATION,
REPUBLIC GYPSUM COMPANY
AND
REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Additional Description of the Purchased
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Cash Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Assumption of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III. PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Cash Payable at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Physical Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Additional Payments and Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Allocation and Determination of Expenses
and Capital Expenditure Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV. DATE AND PLACE OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Date and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Sellers' and Old Dominion's Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1.1 Conveyances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1.2 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1.3 Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1.4 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1.5 Supply Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1.6 Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1.7 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Buyer's and Republic's Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2.2 Supply Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2.3 Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2.4 Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Prorations and Adjustments; Expenses; Other
Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3.1 Prorations and Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3.2 Audit Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3.3 Environmental Testing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3.4 Dryer Testing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3.5 Transfer Taxes and Fees; Cost of Title
Insurance and Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3.6 Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3.7 Further Action by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3.8 Further Action by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLERS
AND OLD DOMINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Due Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
6.4 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Physical Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.7 Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.10 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.11 Attachments and Other Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.13 Employee Benefit Plans; Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.14 Availability of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.15 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.16 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.17 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.18 Patents, Trademarks, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.21 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.22 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.23 Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.24 Safety Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.25 Americans With Disabilities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.26 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII. REPRESENTATIONS, WARRANTIES AND COVENANTS
OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Due Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Actions, Suits, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.5 Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.6 Pension Plan Benefits for Bargaining
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.7 Continued Health Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.8 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.9 Worker's Compensation Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.10 Employees; Employee Compensation and
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII. COVENANTS OF SELLERS AND OLD DOMINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Negative Covenants Regarding Conduct of
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.1 Creation of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.2 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.3 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.4 Contracts, Licenses, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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8.1.5 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.6 Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1.7 Extensions of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1.8 Termination of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1.9 Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1.10 Shifting of Revenues, Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1.11 Real Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Affirmative Covenants Regarding Conduct of
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2.1 Ordinary Course of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2.2 Maintenance of Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2.3 Maintenance of the Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2.4 Payment of Obligations in Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2.5 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2.6 Maintenance of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2.7 Access to and Updating of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2.8 Testing; Environmental Information;
Environmental Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.4 Discounts and Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.7 No Solicitation of Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.8 Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.9 Employees; Employee Compensation and
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 Continued Use of Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.11 Additional Environmental Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX. PERFORMANCE BY SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.1 Performance by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Performance by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 Obligations Not Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE X. CONDITIONS TO OBLIGATIONS OF BUYER AND
REPUBLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 Representations and Warranties of Halltown,
Dillard, and Old Dominion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Covenants of Halltown, Dillard, and Old
Dominion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Halltown's, Dillard's, and Old Dominion's
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.4 Certificates of Authorities; Corporate
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.5 No Material Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.7 Satisfactory to Buyer's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.8 Opinion of Sellers' Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.9 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.10 Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.11 Environmental Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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10.12 Due Diligence Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.13 Supply Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.14 Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.15 Water Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.16 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.17 Customer and Supplier Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.18 Release of Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE XI. CONDITIONS TO OBLIGATIONS OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 Representations and Warranties of Buyer
and Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2 Covenants of Buyer and Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3 Buyer's and Republic's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Certificates of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.5 Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6 Satisfactory to Sellers' Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.7 Opinion of Counsel to Buyer and Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8 Environmental Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.9 Supply Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.10 Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XII. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.1 Buyer's Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.2 Sellers' Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.3 Notice of Loss; Indemnified Party's
Negligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.4 Right to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.5 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.6 Special Environmental Indemnity by the
Halltown and Old Dominion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.7 Subrogation, Assignment, and Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.8 Deductible, Co-payment, and Limitation of
Environmental Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.1.1 Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.1.2 By Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.1.3 By Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.1.4 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.1.5 Closing Delayed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.2 No Further Force or Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE XIV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
14.4 Entire Agreement; Modification and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
14.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
14.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
14.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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14.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
14.9 Schedules and Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
14.10 Facts "Known" to a Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
14.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement") made as of June 30, 1995,
by and among OLD DOMINION BOX COMPANY, INC., a Virginia corporation ("Old
Dominion"), HALLTOWN PAPERBOARD COMPANY, a West Virginia corporation
("Halltown"), DILLARD INVESTMENT CORPORATION, a Virginia corporation
("Dillard") (Halltown and Dillard are collectively referred to as "Sellers"),
REPUBLIC GYPSUM COMPANY, a Delaware corporation ("Republic"), and REPUBLIC
PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia corporation ("Buyer").
R E C I T A L S:
Halltown desires to sell all of its assets (excluding certain
specified items) and Dillard desires to sell a portion of its assets that are
utilized in or related to the manufacture and distribution of recycled
paperboard by Halltown (the "Business") from and through Halltown's facilities
in Halltown, West Virginia (the "Facilities"); and
Buyer desires to purchase said assets from Sellers;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms, and subject to the
conditions hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. PURCHASE OF ASSETS
1.1 Purchase and Sale. Sellers shall sell, convey, transfer, assign
and deliver to Buyer, and Buyer shall purchase and accept from Sellers, at the
Closing (as that term is defined in Section 4.1), all of each Seller's right,
title and interest in and to the assets, properties, rights, claims, contracts
and businesses of every kind, character and description, whether tangible or
intangible, whether real, personal or mixed, whether accrued, contingent or
otherwise, and wherever located, that are owned by each Seller, except for the
Excluded Assets hereinafter defined (the assets being purchased hereunder from
Sellers are hereinafter sometimes collectively referred to as the "Purchased
Assets"); in each case, free and clear of any and all options, pledges,
mortgages, security interests, liens, charges, burdens and other encumbrances
whatsoever, except those encumbrances that are permitted by Buyer and are set
forth and described on Exhibit 1.1A. The Purchased Assets shall not include
cash and cash-equivalents, prepaid expenses, notes and accounts receivable
(other than the notes and accounts receivable from employees listed on Exhibit
1.1B which shall be included in the Purchased Assets), rent receivable and cash
value of life insurance and all other assets, properties, rights, claims and
contracts set forth on Exhibit 1.1C (hereinafter and hereinabove referred to as
the "Excluded Assets").
<PAGE> 8
1.2 Additional Description of the Purchased Assets. Subject to the
exceptions set forth in Section 1.1, the Purchased Assets shall include,
without limitation, the following:
(a) All real property, real property interests and
improvements owned by Halltown or Dillard constituting, underlying or
surrounding the Facilities or primarily utilized by or primarily
relating to the Facilities or any of their operations, including,
without limitation, the land, any and all mineral rights (including
surface and subsurface), rights-of-way, easements, rights, liberties,
privileges, hereditaments, water wells, water rights, and the
buildings, improvements and fixtures located thereon (the "Real
Property"), and any leasehold interests in real property utilized in
or related to the Business, wherever located;
(b) All tangible personal property and other tangible
assets owned by Halltown or Dillard, wherever located, utilized in, or
related to, the Business, the other Purchased Assets, the Facilities
or the operations conducted there including, without limitation, (i)
furniture, (ii) fixtures, (iii) any leasehold improvements, (iv)
equipment, (v) machinery, (vi) computers and software, (vii) tools and
dies, (viii) trucks, tractors, trailers and other vehicles, (ix) raw
materials, work in process and finished goods inventories (other than
inventory items specified in Section 2.1(b)(ii)), (x) fuel, (xi)
supplies, stores, maintenance items, and spare parts, and (xii)
originals or copies of all financial, inventory, marketing, personnel
and other books, reports, records, data, plans, specifications,
drawings, product literature and advertising (including, without
limitation, customer lists and files);
(c) All transferable licenses, permits, certificates,
approvals, authorizations, shoprights and memberships relating to the
Business, the other Purchased Assets, the Facilities or the operations
conducted there;
(d) All rights to the name "Halltown Paperboard Company"
and variations thereof, and all marks, logos, symbols, emblems and
designs related thereto; and
(e) Halltown's and Dillard's rights under all contracts,
agreements, leases, arrangements, purchase orders issued to vendors by
Halltown, customer purchase orders, and commitments of Halltown and
Dillard relating to the Business, the other Purchased Assets, and the
Facilities and the operations conducted there, including, but not
limited to, existing contracts and purchase orders for certain capital
expenditure items listed on Exhibits 1.2 and 1.2A that are to be
delivered
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<PAGE> 9
in the future pursuant to the outstanding contracts and purchase
orders listed thereon.
ARTICLE II. PURCHASE PRICE
2.1 Cash Purchase Price. The purchase price for the Purchased
Assets shall be (a) $24,300,000 (the "Base Price"); plus (b) the value, as of
the Closing Date, valued at the lower of cost or current market as of the
Closing Date, of all items historically carried on Halltown's balance sheet as
inventory (including without limitation, finished goods, paper stock,
chemicals, dyes, skids, strapping, fuel, oil, coal, felts, waste water
treatment chemicals, power plant chemicals, fuel oil chemicals and paster
chemical inventory) (sometimes hereinafter collectively referred to as the
"Inventories"); provided, however, that for purposes of calculating the total
purchase price for the Purchased Assets, the Inventories shall exclude the
following: (i) fuels, raw materials and other inventory items subject to
purchase orders to be assumed by Buyer pursuant to Section 2.2 (except to the
extent of any payments therefor actually made by Halltown prior to the Closing
Date) and (ii) finished goods inventories for which Halltown has, prior to the
Closing Date, received payment or recorded a receivable in its accounting
records in accordance with generally accepted accounting practices and
Halltown's past business practices; plus (c) the sum of (i) $209,792.16
(representing amounts paid as payments or deposits made on certain of the
capital expenditures listed on Exhibit 1.2 through June 23, 1995 (the "Capital
Expenditures Cut-off")) and (ii) an amount equal to the amount paid by Sellers
or Old Dominion after the Capital Expenditures Cut-off and prior to 7:00 a.m.
local Daylight Saving Time in Halltown, West Virginia on the Closing Date for
capital expenditure items at the Facilities that have been approved by Buyer in
writing (the "Capital Improvements Price"); plus (d) $2,749.69 (representing
the amount, as of the close of business on June 23, 1995, of Halltown's
employee notes receivable and accounts receivable) (as the same may be adjusted
pursuant to Section 5.3.1, the "Employee Receivables Price").
2.2 Assumption of Certain Obligations. Buyer shall not assume and
shall not be liable for the payment, performance or discharge of any debts,
contracts, agreements, liabilities, obligations, commitments, restrictions,
disabilities or duties, whether direct or indirect, fixed, contingent or
otherwise, of Sellers, except that Buyer shall assume and shall be liable for
the payment, performance and discharge of (a) Halltown's and Dillard's
obligations to render performance arising after the Closing Date under (i) the
contracts, agreements, leases, arrangements and commitments (other than
purchase orders issued to vendors by Halltown and customer purchase orders)
assigned to Buyer pursuant to Section 1.2(e) hereof (but not any obligation for
performance or obligation or liability of Sellers for default or nonperformance
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<PAGE> 10
under said contracts, leases, arrangements and commitments arising on or prior
to the Closing Date), (ii) purchase orders issued to vendors by Halltown prior
to the Closing Date in the ordinary course of business consistent with past
practice (but not any obligation for payment of the purchase price of (A) any
of the capital expenditure items reflected on Exhibit 1.2A or (B) any other
capital expenditure items for which purchase orders have been issued, or
commitments to purchase have been made to vendors, prior to 7:00 a.m. local
Daylight Saving Time in Halltown, West Virginia on the Closing Date that have
not been approved in writing by Buyer, regardless of when such capital
expenditure items are delivered or are to be delivered), (iii) customer
purchase orders entered into by Halltown prior to the Closing Date in the
ordinary course of business consistent with past practice, and (iv) any
Expenses allocated to Buyer under Section 3.4 and (b) wages, salaries, bonuses,
workmen's compensation benefits, medical insurance, disability, vacation, sick
benefits, other employee compensation and benefits and payroll and employment
taxes to the extent that they relate to the employment of Transferred Employees
by Buyer after the Employment Cut-off (as such terms are defined in Section
8.9) and vacation benefits and any related payroll and unemployment taxes for
Transferred Employees who are salaried employees to the extent that they relate
to the employment of such salaried employees by Halltown prior to the
Employment Cut-Off and are in accordance with Halltown's written policies
disclosed on Schedule 6.13B. Nothing in this Section 2.2 shall be deemed to
obligate Buyer to adopt the compensation and benefit programs, plans and
arrangements in effect at or prior to the Closing with respect to employees at
the Facilities or of Halltown except for those set forth in the Labor Contract
(as defined in Section 7.10).
2.3 Allocation of Purchase Price. (a) The Base Price for the
Assets shall be allocated among the Assets as follows:
<TABLE>
<CAPTION>
Halltown:
--------
<S> <C>
Vehicles (including forklifts,
clamp trucks and local use
tractors) $ 194,400
Machinery and Equipment $16,912,800
-----------
Total $17,107,200
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
Dillard:
-------
<S> <C>
Land $ 461,700
Buildings, Fixtures and
Improvements $ 947,700
Vehicles (including forklifts,
clamp trucks and local use
tractors) $ 291,600
Machinery and Equipment $5,491,800
----------
Total $7,192,800
</TABLE>
(b) The Capital Improvements Price shall be allocated to the
assets referred to in Section 2.1(c).
(c) The price paid for the Inventories shall be allocated to the
Inventories.
(d) The Employee Receivables Price shall be allocated to the
employee accounts receivable and employee notes receivable
purchased hereunder.
(e) The aggregate purchase price shall be allocated among the
Purchased Assets for purposes of Section 1060 of the Code in a
manner consistent with the allocation established in Sections
2.3(a), (b), (c) and (d). Buyer and Sellers agree to file
timely with their respective federal income tax returns an
initial asset acquisition statement and any supplemental
statements on Internal Revenue Service Form 8594 required by
Temporary Treasury Regulation Section 1.1060-1T, all in
accordance with and accurately reflecting the agreed upon
allocation of the aggregate purchase price.
ARTICLE III. PAYMENT OF PURCHASE PRICE
3.1 Cash Payable at Closing. At the Closing, Buyer shall deliver
to (a) Dillard a cashier's check or wire transfer of immediately available
funds for an amount equal to the portion of the purchase price allocated to
Purchased Assets sold by Dillard in Section 2.3 hereof, and (b) Halltown a
cashier's check or wire transfer of immediately available funds for an amount
equal to (i) the Base Price, plus (ii) the book value of the Inventories
located at the Facilities as of December 30, 1994, as shown on Halltown's
December 30, 1994 balance sheet (the "Book Value"), plus (iii) the Capital
Improvements Price, plus (iv) the Employee Receivables Price, and less (v) the
amount specified in this Section 3.1(a).
3.2 Physical Inventory. As of 7:00 a.m. local Daylight Saving
Time in Halltown, West Virginia on the Closing Date, the parties shall jointly
conduct a physical count of the Inventories and shall value such Inventories at
the lower of cost or current
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<PAGE> 12
market as of the Closing Date. All shipments of finished goods inventories
prior to 7:00 a.m. local Daylight Saving Time in Halltown, West Virginia on the
Closing Date (including inventory items specified in Section 2.1(b)(ii)) shall
be attributable to Halltown, and Halltown shall be entitled to payment therefor
from the purchasers thereof, and, except for finished goods inventories for
which Halltown has received payment and inventory items specified in Section
2.1(b)(ii), all shipments of finished goods inventories on and after 7:00 a.m.
local Daylight Saving Time in Halltown, West Virginia on the Closing Date shall
be attributable to Buyer and Buyer shall be entitled to payment therefor.
Within 30 days after the Closing, Halltown shall refund to Buyer any excess of
the Book Value over the value of the Inventories as of the Closing Date, as
determined pursuant to this Section 3.2, or Buyer shall pay to Halltown any
excess of the value of the Inventories as of the Closing Date, as so
determined, over the Book Value.
3.3 Additional Payments and Adjustments. The Estimated
Apportionment Payment contemplated to be made on the Closing Date under Section
5.3.1 and the payments contemplated by Section 8.11 shall be made at Closing,
and any other payments or adjustments between the parties contemplated by this
Agreement that can be determined on the Closing Date shall also be made at
Closing. As soon as practicable after the Closing Date, but in any event not
later than 30 days thereafter, the parties shall determine and pay all
post-Closing payments and adjustments between the parties contemplated by this
Agreement that can then be determined, including, without limitation, any
adjustments and payments necessary to fulfill the parties' obligations under
Sections 3.2, 3.4, 5.3.1, 8.4 and 8.9(b) to the extent then determinable.
Thereafter, as adjustments and payments between the parties contemplated by
this Agreement become determinable, determination and payment thereof shall be
promptly made.
3.4 Allocation and Determination of Expenses and Capital
Expenditure Items. The parties agree that (i) all purchases that under
generally accepted accounting principles constitute expenses (as opposed to
capital expenditures) and (ii) all purchases that are on any purchase order
that is for items that in the aggregate cost less than $500.00 (the items in
(i) and (ii) being referred to as "Expenses") that are actually received at the
Facilities prior to 7:00 a.m. local Daylight Saving Time in Halltown, West
Virginia on the Closing Date shall be for the account of, and shall be paid for
by, Sellers and that all purchases that constitute Expenses that are actually
received at the Facilities at or after that time shall be for the account of,
and shall be paid for by, Buyer. To the extent that any purchase order is for
items that are not listed on Exhibits 1.2 and 1.2A that aggregate more than
$500.00 and any or all of such items are equipment, machinery or machinery
parts, the parties shall in good faith determine after the Closing Date
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<PAGE> 13
whether such items should be classified as Expenses or as capital expenditure
items. The cost of items determined to constitute Expenses shall be allocated
between Buyer and Sellers as provided in this Section 3.4. The cost of items
determined to constitute capital expenditures shall be allocated between Buyer
and Sellers as provided in Sections 2.2(a)(ii) and 8.8.
ARTICLE IV. DATE AND PLACE OF CLOSING
4.1 Date and Place of Closing. Subject to satisfaction or waiver
of the conditions to the obligations of the parties, the purchase and sale of
the Purchased Assets pursuant to this Agreement shall be consummated at a
closing (the "Closing") to be held in the offices of Locke Purnell Rain Harrell
(A Professional Corporation) in Dallas, Texas, or such other place as mutually
agreed on by the parties, at 9:00 a.m. local Daylight Saving Time on June 30,
1995, or such other date as the parties may mutually agree upon (the "Closing
Date"). Title to the Purchased Assets shall pass from Sellers to Buyer as of
7:00 a.m., local Daylight Saving Time in Halltown, West Virginia, on the
Closing Date.
ARTICLE V. CLOSING
5.1 Sellers' and Old Dominion's Performance. At the Closing,
concurrently with performance by Buyer and Republic of their obligations to be
performed at the Closing:
5.1.1 Conveyances. (a) Dillard shall execute and deliver to Buyer,
in form and substance acceptable to Buyer, (i) special warranty deed(s)
conveying to Buyer the Real Property owned by it, (ii) warranty bills of sale
conveying to Buyer all tangible personal property and other tangible assets
owned by it and included among the Purchased Assets, (iii) assignments of
Dillard's claims, rights and benefits, to and under the contracts, agreements,
leases, arrangements, and commitments included among the Purchased Assets, (iv)
assignments of all transferable licenses, permits, certificates and
authorizations included among the Purchased Assets, and (v) transfers of and
title certificates to the vehicles owned by it, with appropriate notations
thereon.
(b) Halltown shall execute and deliver to Buyer, in form and substance
acceptable to Buyer, (i) warranty bills of sale conveying to Buyer all tangible
personal property and other tangible assets owned by it and included among the
Purchased Assets, (ii) assignment of all rights in the name "Halltown
Paperboard Company" and any variation thereof and a quitclaim assignment of all
marks, logos, symbols, emblems and designs related thereto, (iii) assignments
of Halltown's claims, rights and benefits, to and under the contracts,
agreements, leases, arrangements, and commitments included among the Purchased
Assets, (iv) assignments of all transferable licenses, permits, certificates
and authorizations
- 7 -
<PAGE> 14
included among the Purchased Assets, and (v) transfers of and title
certificates to the vehicles owned by it, with appropriate notations thereon.
(c) Sellers and Old Dominion shall execute and deliver to Buyer all
other conveyances, bills of sale, assignments, endorsements and instruments of
transfer as shall be necessary or appropriate to carry out the intent of this
Agreement, and as shall be sufficient to vest in Buyer title to all of the
Purchased Assets and all right, title and interest of Sellers thereto. If
requested by Buyer, such documents shall be in a form suitable for recording.
5.1.2 Records. Sellers and Old Dominion shall deliver to Buyer (i)
the originals of all financial, inventory, marketing, personnel and other
books, records and reports, data, plans, specifications, drawings, product
literature and advertising and customer files and lists ("Records") located at
the Facilities, (ii) the originals of all Records included within the specific
categories of information listed on Schedule 5.1.2A and either included among
or pertaining specifically to the Purchased Assets, the Business, the
Facilities or the operations conducted there, and (iii) the originals or true
and complete copies, as Sellers or Old Dominion may elect, of all other Records
included within the specific categories of information listed on Schedule
5.1.2B and either included among or pertaining specifically to the Purchased
Assets, the Business, the Facilities or the operations conducted there.
Sellers and Old Dominion shall make the originals of all Records pertaining in
any way to the Purchased Assets, the Business, the Facilities or the operations
conducted there, but not delivered to Buyer pursuant to this Section 5.1.2,
available to Buyer for inspection and copying upon Buyer's request until
December 31, 1999. After that date, any of such documents, agreements,
reports, books, records and accounts may be destroyed, provided Sellers or Old
Dominion, as applicable, first give Buyer 30 days written notice. If Buyer so
requests within 30 days of such notification, Sellers or Old Dominion, as
applicable, shall ship the documents that Sellers propose to destroy to Buyer
at Buyer's expense. Buyer will make the Records delivered to it pursuant to
this Section 5.1.2. available to Sellers or Old Dominion upon Sellers' or Old
Dominion's request for inspection and copying until December 31, 1999. After
that date, any of the Records may be destroyed, provided Buyer first gives Old
Dominion 30 days written notice. If Sellers or Old Dominion so request within
30 days of such notification, Buyer shall ship the Records that Buyer proposes
to destroy to Old Dominion at Old Dominion's expense.
5.1.3 Certificates and Opinions. Sellers and Old Dominion shall
execute and deliver to Buyer the certificates referred to in Sections 10.3 and
10.4 and deliver to Buyer the certificates of
- 8 -
<PAGE> 15
authorities referred to in Section 10.4 and the opinions of counsel referred to
in Section 10.8.
5.1.4 Title Insurance. Sellers and Old Dominion shall cause to be
delivered to Buyer the commitments for title insurance policies required by
Section 10.9, together with a certified or cashier check payable to the order
of the issuer of the commitment in an amount equal to the premium and other
costs of Lawyers Title Insurance Corporation to be borne by Sellers and Old
Dominion pursuant to Section 5.3.5 and shall satisfy the fees and expenses of
Sellers' counsel in obtaining the issuance of the title insurance policies
issuable pursuant to such commitments.
5.1.5 Supply Agreements. Old Dominion shall execute and deliver to
Buyer and Republic the Paperboard Supply Agreement and the Paper Stock Supply
Agreement among Old Dominion, Buyer, and Republic, the forms of which are
attached hereto as Exhibits 5.1.5A and 5.1.5B (together, the "Supply
Agreements").
5.1.6 Change of Name. Halltown shall execute and file with the
Secretary of State of West Virginia an amendment to its Articles of
Incorporation changing its corporate name from "Halltown Paperboard Company" to
another name acceptable to Buyer and will make all other filings necessary to
relinquish its rights to such name and to permit Buyer to use and/or adopt such
name.
5.1.7 Other Actions. Sellers and Old Dominion shall take all such
other steps as may be necessary or appropriate to put Buyer in actual and
complete ownership and possession of the Purchased Assets; including without
limitation, the transfer to Buyer effective on the Closing Date of all
assignable or transferable permits, licenses, and similar administrative
consents as provided by Environmental Requirements (as defined in Section 6.19)
for the operation of the Real Property, the Business, the Facilities, or any of
the Purchased Assets.
5.2 Buyer's and Republic's Performance. At the Closing,
concurrently with the performance by Sellers and Old Dominion of their
obligations to be performed at the Closing:
5.2.1 Purchase Price. Buyer shall deliver to Sellers the cashier's
checks or wire transfers specified in Section 3.1.
5.2.2 Supply Agreements. Buyer and Republic shall execute and
deliver to Old Dominion the Supply Agreements.
5.2.3 Assumption Agreement. Buyer shall execute and deliver to
Sellers an agreement to assume the liabilities Buyer has agreed to assume
pursuant to Section 2.2.
- 9 -
<PAGE> 16
5.2.4 Certificates and Opinions. Buyer and Republic shall execute
and deliver the certificates referred to in Sections 11.3 and 11.4 and deliver
the certificates of authorities referred to in Section 11.4 and the opinions of
counsel referred to in Section 11.7.
5.3 Prorations and Adjustments; Expenses; Other Instruments. In
addition to the foregoing, the parties agree as follows:
5.3.1 Prorations and Adjustments. Real estate, personal property,
and ad valorem taxes for the tax year including the Closing Date shall be
apportioned pro rata between Buyer and Sellers as of the Closing Date. Utility
charges for the billing periods including the Closing Date shall be apportioned
among Buyer and Halltown based on meter readings taken as of the commencement
of business on the Closing Date. If the amount of taxes for the current year
and the amount of utility charges for the billing periods including the Closing
Date are not ascertainable on the Closing Date, such taxes and utility charges
shall be apportioned based on the immediately preceding tax year and billing
periods, and payment of the net amount thereof (the "Estimated Apportionment
Payment") shall be made on the Closing Date; provided, however, that such taxes
and utility charges shall be re-apportioned based on actual taxes and charges
promptly after such amounts are ascertained and an adjusting payment shall be
made by the parties. As soon as practicable after the Closing Date, Halltown
and Buyer shall determine the actual amount, as of 7:00 a.m. local Daylight
Saving Time on the Closing Date, of Halltown's employee notes receivable and
accounts receivable purchased by Buyer pursuant hereto, and an adjusting
payment shall be made by the parties based on the difference between such
amount and the amount paid at Closing pursuant to Section 2.1(d).
5.3.2 Audit Costs. Buyer will bear the incremental cost of the
additional work necessary to prepare the separate audited, unaudited and pro
forma financial statements of the Business pursuant to Section 8.6.
5.3.3 Environmental Testing Costs. Buyer will bear the cost of
conducting any environmental tests of the Real Property and Facilities and, at
the request of Sellers, will provide Sellers with copies of all written
environmental reports received by Buyer. Such reports and analysis shall, in
accordance with the provisions of Section 14.2, be kept confidential by the
parties hereto and not disclosed to any person, firm, entity, agency or
regulatory body (i) by Buyer or Republic prior to the consummation of the sale
of the Purchased Assets at the Closing without the prior written consent of
Sellers and Old Dominion, which consent shall not be unreasonably withheld or
(ii) by Sellers or Old Dominion thereafter without the prior written consent of
Republic, which consent shall not be unreasonably withheld. The reporting of
any findings in the
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<PAGE> 17
environmental reports or analysis required by law to be disclosed to any agency
or regulatory body shall be the responsibility of Sellers until the sale of the
Purchased Assets shall have been consummated at the Closing and thereafter
shall be the responsibility of the Buyer.
5.3.4 Dryer Testing Costs. Buyer will bear the out-of-pocket cost of
testing the dryers to determine if they meet insurance requirements.
5.3.5 Transfer Taxes and Fees; Cost of Title Insurance and Survey.
Sales, use, excise tax on the privilege of conveying Real Property or other
taxes (except taxes based on income or profits), real estate transfer and
documentary fees, and filing and recording fees incident to the transfer of the
Purchased Assets will be borne by Buyer; provided, however, in the case of such
tax or fee that is the obligation of Sellers under applicable law, the
obligation of Buyer shall be to reimburse Seller for such amounts paid by
Seller, if any. The cost of the owner's title insurance policy on the Real
Property shall be borne by Dillard except that Buyer shall pay (i) the
incremental cost, if any, to increase the amount of coverage of the owner's
title insurance policy from the appraised value of the insured property to
$2,000,000, and (ii) the incremental cost of the comprehensive endorsement
referred to in clause (c) of the first sentence of Section 10.9. The cost of
the loan title insurance policy shall be borne by Buyer. The cost of the
survey for the Real Property shall be borne by Dillard.
5.3.6 Brokerage Fees. Old Dominion shall bear the costs of any and
all brokerage commissions or agent's or finder's fees due and payable in
connection with the transactions contemplated by this Agreement as a result of
arrangements or commitments made by Sellers or Old Dominion, including, without
limitation, the commissions or fees payable to Crestar Securities Corporation.
5.3.7 Further Action by Sellers. At any time and from time to time,
at or after the Closing, upon request of Buyer, Sellers shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may reasonably be required in order to
vest in and confirm to Buyer full and complete title to and, possession of, and
the right to use and enjoy, the Purchased Assets.
5.3.8 Further Action by Buyer. At any time and from time to time, at
or after the Closing, upon request of Sellers, Buyer shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered all such further acts and assurances as may reasonably be required in
order to better assure and confirm to Sellers the assumption by Buyer of the
obligations
- 11 -
<PAGE> 18
to render performance which are to be assumed by Buyer pursuant to this
Agreement.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLERS AND OLD
DOMINION
Old Dominion, Halltown, and Dillard jointly and severally, represent
and warrant to Buyer and Republic that:
6.1 Due Organization and Qualification. Old Dominion is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Virginia. Halltown is a corporation duly organized,
validly existing and in good standing under the laws of the State of West
Virginia. Dillard is a corporation duly organized, validly existing and in
good standing under the laws of the State of Virginia. Each of Halltown and
Dillard is qualified to do business and is in good standing in the State of
West Virginia, and Halltown is qualified to do business and is in good standing
in the States where noted on Exhibit 6.1.
6.2 Corporate Power and Authority. The Boards of Directors of
Halltown, Dillard, and Old Dominion have duly approved this Agreement and the
transactions contemplated hereby and the Boards of Directors of Halltown and
Dillard have recommended approval of same to the stockholders of Halltown and
Dillard and the stockholders of Halltown and Dillard have duly approved this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement and the performance by Halltown, Dillard, and Old Dominion of
their obligations hereunder have been duly authorized by all requisite
corporate action, and no further action or approval is required in order to
permit Halltown, Dillard, and Old Dominion to consummate the transactions
contemplated by this Agreement. Halltown, Dillard, and Old Dominion have full
power, authority and legal right to enter into this Agreement and to consummate
the transactions contemplated hereby. The making and performance of this
Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms hereof will not (a) conflict with the Certificate or
Articles of Incorporation or the Bylaws of Halltown, Dillard, or Old Dominion,
(b) result in any breach or termination of, or constitute a default under, or
constitute an event that with notice or lapse of time, or both, would become a
default under, or result in the creation of any Encumbrance upon any of the
Purchased Assets, or create any rights of termination, cancellation, or
acceleration in any person under any contract, agreement, lease, arrangement or
commitment, or violate any order, writ, injunction or decree by which any of
the Purchased Assets, the Facilities or the Business may be bound or affected
or under which any of the Purchased Assets, the Facilities or the Business
receive benefits, or (c) violate any provision of any law, ordinance,
regulation, rule, requirement or order to which Halltown, Dillard, Old
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<PAGE> 19
Dominion, the Purchased Assets, the Business, the Facilities or the operations
conducted there are subject, except for violations that, in the aggregate,
would not have a material adverse affect upon the business, operations,
condition (financial or otherwise), results of operations, value or prospects
of the Purchased Assets, the Business, the Facilities or the operations
conducted there (a "Material Adverse Effect").
6.3 Title. Sellers have, and upon conveyance, transfer and
assignment of the Purchased Assets to Buyer by Sellers at the Closing, Buyer
will acquire and hold, good and marketable title in fee simple to the Real
Property and to leasehold interests in any of the other Purchased Assets that
are leased as described in the instruments of lease covering such Purchased
Assets, and good and marketable title to all other of the Purchased Assets,
whether real, personal or mixed, in each case, free and clear of any and all
options, rights, pledges, mortgages, security interests, liens, charges,
burdens, servitudes and other encumbrances whatsoever (hereinafter sometimes
collectively referred to as "Encumbrances"), except as set forth in Exhibit
1.1A and such Encumbrances as are placed on the Purchased Assets by Buyer.
Neither Old Dominion, nor any affiliate or subsidiary of Old Dominion (other
than Halltown and Dillard) own or hold under lease any assets of any kind,
character or description that are utilized in or are related to the Business,
the Purchased Assets or the Facilities, except, in the case of Old Dominion and
Dillard, any books and records pertaining to Halltown held by them.
6.4 Inventories. The Inventories consist of current items of a
quality and quantity that are usable or marketable in the ordinary course of
the Business, and items not so usable or marketable in the Business have been
written down in value to estimated net realizable market values. Since
December 30, 1994, the Inventories have been maintained at a level consistent
with the operation of the business of Halltown in its normal course, and no
change has occurred in such Inventories that materially adversely affects or
will materially adversely affect their usability or salability. Orders for
inventory items have not been given for amounts materially in excess of the
amounts necessary to maintain the Inventories of Halltown at normal levels
based on past practice.
6.5 Physical Properties. Schedule 6.5A sets forth an accurate and
complete description of the Real Property. Schedule 6.5B sets forth an
accurate and complete listing, as of the close of business on June 23, 1995, of
all tangible personal property and other tangible assets owned or leased by
Sellers and carried on the books of Sellers other than Inventory, other than
supplies and other similar assets used or consumed in the ordinary course of
business between the date hereof and the Closing Date and other than assets
that are fully depreciated. Exhibits 1.2 and 1.2A,
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collectively set forth a brief description of all pending capital improvement
projects and capital expenditures other than certain capital expenditure items
reflected on Schedule 6.5B, certain other capital expenditure items that under
Section 3.4 are arbitrarily classified as Expenses, certain capital expenditure
items that are to be paid for by Sellers under Sections 2.2(a)(ii) and 8.8 and
certain capital expenditure items that Buyer has approved in writing. All
physical properties included among the Purchased Assets are in good operating
condition and repair and sufficient to operate the Business as presently
conducted, except for equipment being held for salvage and equipment being
repaired in the ordinary course of business, the use or availability of which
is not necessary for the continued operation of the Facilities in the ordinary
course of business. Buyer acknowledges that the dryers used in the production
line at the Facilities have been tested, and accepts the results of such tests
as demonstrating that such dryers meet the standards of the preceding sentence.
Sellers enjoy peaceful possession of the Purchased Assets. Except as set forth
on Schedule 6.5C, to the best knowledge of Halltown, Dillard, and Old Dominion,
the operation of the Purchased Assets, the Business, and the Facilities in the
manner in which they are currently operated does not violate any zoning
ordinances or governmental regulations in such a way as could, if such
ordinances or regulations were enforced, result in any material impairment of
the uses of the respective Purchased Assets, the Business and the Facilities
for the purposes for which they are now operated, and no covenants, easements,
rights-of-way or regulations of record materially impair such uses. There are
no pending or, to the best knowledge of Halltown, Dillard, and Old Dominion,
threatened condemnation or similar proceedings affecting any of the Purchased
Assets, and Halltown, Dillard, and Old Dominion have not received any written
notice and have no knowledge that any such proceedings are contemplated. The
Real Property has full and free access to and from public streets and to
utility services presently serving the same. The Facilities are presently
served by electricity, water (from wells and the stream located on the Real
Property), waste disposal and other utilities that are adequate to operate the
Facilities at their present rates of production and none of the utilities
serving the Facilities have threatened Sellers with a reduction of service or
notified Sellers of any future rate increases. Sellers have not experienced
any difficulties, and are not aware of any potential difficulties, in obtaining
adequate amounts of coal and oil to operate the Facilities at their present
rates of production. The water wells and water rights to be conveyed to Buyer
at the Facilities are presently adequate and sufficient in quality and quantity
to support the present rate of production at the Facilities and, to the best
knowledge of Halltown, Dillard, and Old Dominion, such water wells and water
rights will be adequate and sufficient in quality and quantity to support the
present rate of production at the Facilities. The Facilities have adequate
waste storage to support the present rate
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of production at the Facilities. Except as set forth on Schedule 6.5C, the
waste water treatment facilities to be conveyed to Buyer are operating in
accordance with their design specifications and are adequate and sufficient to
support the present rate of production at the Facilities, and the discharge
from such treatment facilities meets all applicable permit requirements under
both shutdown and operating conditions, including, without limitation, high
groundwater infiltration conditions. Buyer accepts such waste water treatment
facilities in their present condition, subject to Buyer's rights under Section
12.6(a) and (b).
6.6 Contracts. Schedule 6.6 sets forth a brief description of all
material contracts, agreements, leases, arrangements and commitments (whether
oral or written) to which Halltown is a party or by which any of the Purchased
Assets, the Facilities or the Business are affected or are bound, except
employee benefit contracts, arrangements and commitments listed on Schedule
6.13A, contracts and commitments for capital expenditures listed on Exhibits
1.2 and 1.2A, and vendor and customer purchase orders in the ordinary course of
business consistent with past practice. Except as set forth in Schedules 6.6
and 6.13A and Exhibits 1.2 and 1.2A and except for vendor and customer purchase
orders in the ordinary course of business consistent with past practice,
Halltown is not a party to, and neither the Purchased Assets, the Facilities
nor the Business are bound or affected by, any contract, agreement, lease,
arrangement or commitment (whether oral or written) relating to: (a) the
employment of any person other than personnel employed at the pleasure of
Sellers in the ordinary course of the Business at rates of compensation and on
terms consistent with good business practice; (b) collective bargaining with,
or any representation of any employees by, any labor union or association; (c)
the acquisition of services, supplies, equipment or other personal property
involving more than $10,000 or that is not terminable by Sellers upon not more
than 30 days' notice without obligation on the part of Sellers; (d) affecting
ownership of, titles to, or any interest in the Real Property; (e) relating to
the purchase or sale of any real property; (f) distribution or agency; (g) the
lease of real or personal property as lessor or lessee or sublessor or
sublessee; (h) the sale of personal property (other than sales of finished
goods inventory in the ordinary course of business consistent with good
business practices other than pursuant to long-term contracts) under which
payments due after the date of this Agreement exceed $1,000; (i) lending or
advancing of funds other than the extension of credit to trade purchasers and
travel advances to salesmen, in each case in the ordinary course of business
consistent with past practices; (j) any transaction in which an interest is
held by any person or entity which is an "affiliate" of Old Dominion (other
than Halltown) as that term is defined in Rule 144(a)(1) under the Securities
Act of 1933, as amended, or any officer, director, stockholder, or employee of
Halltown, Dillard or Old Dominion or any spouse, descendant,
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parent, brother or sister of any such person (an "Interested Party"); and (k)
any matter or transaction not in the ordinary course of business or
inconsistent with past business practices of the Business.
6.7 Contract Defaults. Sellers are not, and to the best of Old
Dominion's and Sellers' knowledge, no other party thereto is, in default in any
material respect under any of the contracts, agreements, leases, arrangements
and commitments listed on Schedules 6.6 or 6.13A or Exhibits 1.2 and 1.2A and,
to the best of Old Dominion's and Sellers' knowledge, (a) there has not
occurred any event which, with the lapse of time or giving of notice or both,
would constitute such a material default; (b) such contracts, agreements,
leases, arrangements, and commitments are legal, valid, and binding obligations
of the respective parties thereto in accordance with their terms and, except to
the extent reflected in Schedules 6.6 and 6.13A and Exhibits 1.2 and 1.2A, have
not been amended; and (c) no defenses, offsets, or counterclaims thereto have
been asserted, or to the best knowledge of Halltown, Dillard, and Old Dominion,
may validly be made, by any party thereto other than Sellers, nor have Sellers
waived any substantial rights thereunder.
6.8 Litigation. Schedule 6.8A sets forth all actions, suits,
proceedings, investigations, or grievances pending against Sellers or, to the
best knowledge of Halltown, Dillard, and Old Dominion, threatened against
Sellers, and affecting the Purchased Assets, the Facilities, or the Business,
or involving products manufactured at the Facilities, at law, in equity or in
admiralty, before or by any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (hereinafter sometimes collectively referred to as
"Agencies"). None of the actions, suits, proceedings or investigations listed
on Schedule 6.8A, either (a) has resulted in, or would, if adversely
determined, result in, a Material Adverse Effect, or (b) has affected, affects
or would, if adversely determined, affect the right or ability of Sellers to
carry on the Business substantially as now conducted. Except as set forth on
Schedule 6.8B, Old Dominion and Sellers are neither subject to nor in default
of any continuing court or Agency order, writ, injunction or decree, applicable
to the Purchased Assets, the Facilities, the Business or the employees of the
Business.
6.9 Compliance with Laws. Except as listed on Schedule 6.9 A.,
Sellers (a) have complied with, are in compliance with, and have no basis to
believe they are not in compliance with, all environmental and other federal,
state, county and municipal laws, ordinances, regulations, rules, requirements
and orders applicable to the Purchased Assets, the Business or the Facilities,
to the operation of the Business or the Facilities, the breach or violation of
which could have a Material Adverse Effect, (b) have
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filed with the proper authorities all statements and reports required by
environmental and other laws, ordinances, regulations, rules, licensing and
other requirements and orders to which the Purchased Assets, the Business, the
Facilities or any of the employees at the Facilities or of Halltown (because of
his activities on behalf of his employer) is subject the failure to file which
could have a Material Adverse Effect, and none of such statements and reports
contains untrue statements of material fact or omits any statement of material
fact necessary to make such statements and reports not misleading, and (c) have
obtained and maintained all environmental and other licenses, permits and
governmental authorizations necessary for the present and continued ownership
and use of the Purchased Assets and for the conduct of the Business in the
manner in which and in the jurisdictions and places where the Business is now
conducted the failure to have which could have a Material Adverse Effect.
Except as set forth on Schedule 6.9A, Sellers have not received written notice
of any violation of, or any pending investigation under, any of such laws,
ordinances, regulations, rules, licensing and other requirements and orders
during the last three (3) years. Schedule 6.9B correctly lists all material
licenses, permits, certificates, approvals, shoprights, memberships and
authorizations, and all registrations and applications pending before any
agency or authority for the issuance of any licenses, permits, certificates,
approvals, shoprights, memberships or authorizations or the renewal thereof
related to the Business, the Facilities and the operations conducted there.
Halltown has no franchises relating to its Business, and none are presently
required for the conduct thereof.
6.10 Labor Relations. Except as set forth on Schedule 6.10, there
are not any labor disputes or disturbances, or any threats thereof, with
respect to employees at the Facilities. To the best knowledge of Halltown,
Dillard, and Old Dominion, Sellers are not engaged in any unfair labor
practices nor are any unfair labor practices or other complaints, including,
without limitation, sexual harassment and discrimination complaints, against
them filed with or, to best knowledge of Halltown, Dillard, and Old Dominion,
threatened to be filed with or by the National Labor Relations Board, Equal
Employment Opportunity Commission, Department of Labor or any similar agency or
instrumentality of any state or local government with respect to employees at
the Facilities or of Halltown.
6.11 Attachments and Other Proceedings. There are no attachments,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or
pursuant to any debtor relief laws contemplated or filed by Sellers or pending
against Sellers.
6.12 Taxes. Sellers and Old Dominion have duly filed, or have duly
obtained effective extensions for filing, all U.S.
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federal, foreign, state, county, local and other excise, franchise, property,
payroll, income, profits, capital stock, sales and use, and other tax returns
which are required to be filed, and all such returns are true and correct in
all material respects. Except as described in Schedule 6.12, Sellers and Old
Dominion have paid, collected or withheld and remitted to the appropriate
governmental agency all taxes which have become due or have been assessed
against them and all taxes, penalties and interest which any taxing authority
has proposed or asserted to be due and owing. All tax liabilities to which the
Purchased Assets have been subjected have been discharged and there are no
liens for taxes on the Purchased Assets except for property taxes assessed but
not yet payable or as described in Schedule 6.12. Except as described in
Schedule 6.12, there are no tax deficiencies or claims presently being
asserted, or, to the best of Old Dominion's and Sellers' knowledge, threatened,
against Sellers or Old Dominion and neither Old Dominion nor either Seller has
knowledge of any basis for such claims or deficiencies. Neither Old Dominion
nor either Seller has granted any extension to any taxing authority of the
limitation period during which any tax liability may be asserted.
6.13 Employee Benefit Plans; Employees. (a) Schedule 6.13A sets
forth the name of each Plan maintained by or contributed to by Sellers for
employees at the Facilities or of Halltown. "Plan" means any employee benefit
plan as defined in Section 3(3) of ERISA. Copies of all Plans maintained by or
contributed to by Sellers for employees at the Facilities or of Halltown have
been delivered to Buyer. Neither Sellers nor any "ERISA Affiliate" (as defined
herein) are, or since September 25, 1980, were, required to contribute to any
multi-employer plan, within the meaning of Section 4001(a)(3) of ERISA, or any
"multiple employer plan" (within the meaning of Section 4063 of ERISA). "ERISA
Affiliate" means any member of any "affiliated service group" as defined in
Section 414(m) of the Code that includes the Sellers, any member of any
"controlled group of corporations" as defined by Section 414(b) of the Code that
includes the Sellers, or any member of any group of "trades or businesses under
common control" as defined by Section 414(c) of the Code that includes the
Sellers. All Plans fully comply with all requirements of the Code and ERISA,
subject to receipt by Old Dominion of approval by the Internal Revenue Service
of the amended and restated Old Dominion Box Company Pension Plan and the
Halltown Pension Plan for Bargaining Employees filed on or about March 31,
1995. All contributions required to be made to any Plans for employees at the
Facilities or of Halltown have been made on or before their due dates, and all
amounts properly accrued to date as liabilities of the Sellers that have not
been made have been properly recorded on the books of Sellers. No Plan has
applied for or obtained a waiver from the Internal Revenue Service of any
minimum funding requirement under Section 412 of the Code which could have a
Material Adverse Effect. Neither Sellers nor any ERISA Affiliate have
terminated any
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employee pension benefit plan (within the meaning of Section 3(2) of ERISA)
subject to Title IV of ERISA (herein referred to as a "Title IV Plan") under
circumstances giving rise to, or that could give rise to any actual or
potential liability to the Pension Benefit Guaranty Corporation ("PBGC") or any
other person which could have a Material Adverse Effect, (ii) no event or
condition exists which presents a risk of termination of any Title IV Plan by
the PBGC which could have a Material Adverse Effect, and (iii) there is no
actual or potential liability to the PBGC or any other person expected by the
Sellers or any ERISA Affiliate to be incurred with respect to any Title IV
Plan, including, but not limited to, any liability for any accumulated funding
deficiency as defined in Section 302 of ERISA or for any minimum funding
contribution under Section 302 of ERISA which could have a Material Adverse
Effect. No lien imposed under Section 401(a)(29) or Section 412(n) of the
Code, Section 302(f) or Section 4068 of ERISA, or arising out of any action
filed under ERISA Section 4301(b), exists upon any Purchased Assets.
(b) Schedule 6.13B sets forth the name, employment date, and base
compensation of all employees at the Facilities or of Halltown as of June 16,
1995, and a description of all written and oral arrangements relating to
employment, bonuses, vacations, sick leave and pay, stock options, stock
purchases, stock ownership, employee discounts, severance, incentives, or other
benefits (other than Plans). Copies of all such written arrangements have been
delivered to Buyer. Except as set forth on Schedule 6.13B, Sellers have not
granted since December 30, 1994, and are not obligated to grant any increases
in the salaries of, and have not paid since December 30, 1994, and are not
obligated to pay any bonus or similar payment to, any employee at the
Facilities or of Halltown, other than (a) normal periodic increases and bonuses
for Nonbargaining Employees and (b) wage or benefit increases for Bargaining
Employees pursuant to the existing Labor Contract.
(c) The financial statements, and the returns and reports filed with
governmental authorities or received from governmental authorities with respect
to all plans for 1993 and all subsequent periods and the pamphlets and other
informational materials distributed to employees with respect thereto, are
listed and described in Schedule 6.13C and copies thereof have been delivered
to Buyer.
(d) Schedule 6.13D sets forth the accrued benefits (whether or not
vested) under Sellers' employee pension benefit plans (as defined in Section
3(2) of ERISA) for employees at the Facilities or of Halltown, as of January 1,
1994, and a copy of the latest actuarial reports covering such plans.
(e) Dillard has no employees that are employed in the Business or
at the Facilities.
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6.14 Availability of Documents. Sellers and Old Dominion have made
available for inspection by Buyer at the offices of Old Dominion or Halltown
true, correct and complete copies of their Articles or Certificates of
Incorporation and Bylaws and all contracts, agreements, leases, arrangements,
commitments and documents referred to herein or set forth or described in any
Schedule attached hereto in each case together with all amendments and
supplements thereto.
6.15 Consents. Except as set forth on Schedule 6.15, no consent,
approval, authorization or order of any court, Agency or any other person is
required under any law, ordinance, regulation, rule, requirement, order, writ,
judgment, decree, contract, agreement, lease, commitment, charter or bylaw
applicable to or binding upon Old Dominion or Sellers in order to permit Old
Dominion and Sellers to consummate the transactions contemplated by this
Agreement and to perform their obligations hereunder and under the Supply
Agreements.
6.16 Financial Statements. Sellers have previously delivered to
Buyer true, correct and complete copies of the following financial statements:
(a) balance sheets of Halltown as of January 1, 1993, December 31, 1993 and
December 30, 1994 and the related statements of operations, cash flows and
changes in stockholder's equity for the three years ended December 30, 1994 and
(b) balance sheets of Dillard as of December 31, 1992, December 31, 1993 and
December 31, 1994 and the related statements of operations, cash flows and
changes in stockholder's equity for the three years ended December 31, 1994 (the
"Financial Statements"). The Financial Statements, together with the notes
thereto, (a) are in accordance with the books and records and accounting methods
of Halltown or Dillard, as appropriate, (b) present fairly the financial
position and results of operations of Halltown or Dillard, as appropriate, as of
the dates and for the periods indicated, and (c) have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as noted therein and except for year end
audit adjustments and the absence of footnotes. Except as set forth in the
Financial Statements, at December 30, 1994 of Halltown and at December 31, 1994
of Dillard, neither Halltown nor Dillard had any known material obligations or
liabilities, accrued or contingent. Except as reflected in Schedule 6.16,
neither Halltown nor Dillard is liable with respect to, or obligated in any
other way to guarantee, assume or provide funds in respect of, any debt,
obligation or liability of any other corporation, association, partnership,
joint venture, trust or other entity or any individual.
6.17 Absence of Certain Changes or Events. Except as set forth on
Schedule 6.17, since December 30, 1994, neither Halltown nor Dillard has (a)
suffered any extraordinary losses in an amount material to the Business, the
Purchased Assets or the Facilities or
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waived or released any rights or claims of value material to the Business, the
Purchased Assets or the Facilities or allowed any such rights to lapse; (b)
made any change in its method of accounting; (c) made or became obligated to
make capital expenditures, or entered into commitments therefor, except as set
forth on Exhibits 1.2 and 1.2A and except for capital expenditures and
commitments therefor in the ordinary course of business consistent with past
practice; (d) experienced or suffered any change in its business, operations or
assets or suffered any damage, destruction or casualty loss (whether or not
covered by insurance), that has had or could have a Material Adverse Effect;
(e) experienced any increase in the cost of raw materials, packaging or
utilities or of compliance with applicable laws or regulations material to the
Business, the Purchased Assets or the Facilities; (f) experienced or suffered
any change in business relationships with suppliers, customers, or distributors
or received notification of termination of, or intent to terminate, business
relationships, contractual or otherwise, with any person or entity, which
change or termination has had or could have a Material Adverse Effect; (g)
entered into any transaction, commitment or agreement, except in the ordinary
course of business consistent with past practices; (h) received any notice of
claim asserted against Sellers, the Business, the Purchased Assets or the
Facilities by any Agency that could have a Material Adverse Effect; (i) made
any sale or other disposition of, or created any Encumbrance upon, any asset of
Halltown or Dillard, except for sales of Inventory in the ordinary course of
business consistent with past practices and the use or consumption of supplies
and other similar assets; (j) incurred or agreed to incur any material
obligation or liability, accrued or contingent, outside the ordinary course of
business or inconsistent with past practices, or (k) made any material change
in production schedules, acceleration of sales, billing of orders not shipped,
deferral of scheduled downtime, reduction of marketing, advertising or
promotional expenses, or deferral of other expenditures other than in the
ordinary course of business consistent with past practice or taken any other
action the purpose of which is to artificially shift revenues to the period
prior to the Closing Date or defer costs or expenses to the period after the
Closing Date.
6.18 Patents, Trademarks, Etc. Except for its rights to the
"Halltown" trade name, Halltown neither owns nor has licenses or agreements to
use any trade secrets, know-how, processes, formulae, royalties, inventions,
discoveries, improvements, proprietary or technical information, proprietary
rights, joint venture or joint operating interests, copyrights, patents,
tradenames, trademarks, service marks and applications for copyright, patent,
tradename, trademark and service mark registration (hereinafter sometimes
collectively referred to as "Intangible Rights") for use at, or in connection
with, the operation of the Business or the Facilities. To the best knowledge
of Halltown, Dillard, and Old Dominion, none
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of the products, activities or operations of the Business or the Facilities
infringe or involve or have resulted within three years prior to the date
hereof in (a) the infringement of, or (b) any claim of infringement of, any
Intangible Right of any other person, firm or corporation; and no proceedings
have been instituted, are pending, or, to the best knowledge of Halltown,
Dillard, and Old Dominion, are threatened, that challenge the rights of
Halltown in respect thereof. To the best knowledge of Halltown, Dillard, and
Old Dominion, the "Halltown" tradename is not being infringed by the products,
activities, operations, patents, trade names, trademarks, service marks or
copyrights of any other person or persons and is not subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use thereof.
6.19 Environmental Matters. Except as set forth on Schedule 6.19:
(a) No Hazardous Materials Currently Present: No
Hazardous Materials (as defined below) are now located in, on, at, upon or
under the Subject Property (as defined below), except as listed on Schedule
6.19A.
(b) Absence of Historical Releases: To the best of Old
Dominion's and Sellers' knowledge, no Hazardous Materials have been located in,
on, at, upon or under the Subject Property, or migrated or emanated from the
Subject Property at any time prior to or during the Use (as defined below) of
the Subject Property by Sellers in a manner or quantity requiring reporting,
investigation, or remediation under, or in violation of, Environmental
Requirements (as defined below), except as listed on Schedule 6.19B.
(c) Hazardous Materials Management: To the best of Old
Dominion's and Sellers' knowledge, no Hazardous Materials have been generated,
stored, treated, manufactured, managed, transported, recycled, or sent off-site
from, in, on, at, or upon the Subject Property at any time during the Use of
the Subject Property by Sellers (nor to the best of Old Dominion's and Sellers'
knowledge, prior to the Use of the Subject Property by Sellers) in a manner or
a quantity requiring reporting, investigation, or remediation under, or in
violation of, Environmental Requirements, except as listed on Schedule 6.19C.
(d) Disposal of Hazardous Materials: (i) To the best of Old
Dominion's and Sellers' knowledge, there are no on-site locations at the
Subject Property where Hazardous Materials have been disposed of; and (ii)
there are no off-site locations where Hazardous Materials which were generated
at, manufactured at, managed at, or transported from, the Subject Property have
been stored, treated, recycled, or disposed of in a manner or quantity
requiring reporting, investigation, or remediation under, or in
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violation of, Environmental Requirements during the Use of the Subject
Property by Sellers, nor to the best of the knowledge of Old Dominion and
Sellers, prior to the Use of the Subject Property by Sellers.
(e) Permits; General Compliance: (i) To the best of Old
Dominion's and Sellers' knowledge, Sellers have all permits, licenses or
authorizations from any Environmental Agency (as defined below) that Sellers
are required to have by any Environmental Requirement in order to operate any
aspect of the Subject Property currently operated by them or the Business; (ii)
the Use of the Subject Property by Sellers, including, but not limited to, any
and all Environmental Activity (as defined below) and all Environmental
Conditions (as defined below), are and have been in compliance with all such
permits, licenses, or authorizations and all Environmental Requirements during
the Use of the Subject Property by Sellers, and to the best of Old Dominion's
and Sellers' knowledge, at any time prior to its Use by Sellers except as
listed on Schedule 6.19D; and (iii) all such permits, licenses, or
authorizations are transferable to the Buyer, subject to the approval of
appropriate regulatory agencies. Old Dominion and Sellers are not aware of any
basis for any such agency to deny such approval that relates to the status or
condition of Sellers, Old Dominion, the Business, the Facilities or such
licenses, permits or authorizations themselves (such as the expiration of
"grandfather" rights upon a transfer).
(f) No Environmental Costs: To the best of Old
Dominion's and Sellers' knowledge, with respect to the Subject Property, no
Environmental Costs (as defined in Section 12.6) have been suffered by Sellers
or, to the best of Old Dominion's and Sellers' knowledge, by any third party
prior to or during the Use of the Subject Property by Sellers, and Sellers are
not aware of, and have not received notice of, any past, present or future
events, conditions, circumstances, activities, practices, incidents, actions,
or plans which may result in Environmental Costs or which may give rise to any
common law or legal liability based on or related to any Environmental
Condition or Environmental Activity, except as listed on Schedule 6.19 E.
(g) Human Exposure to Hazardous Materials: To the best
of Old Dominion's and Sellers' knowledge, no person, specifically including
employees, has impaired health as the result of the presence of Hazardous
Materials at the Subject Property.
(h) Investigations, Proceedings, Litigation: To the best of
Old Dominion's and Sellers' knowledge, with respect to Sellers or any of the
Subject Property or its Use, no civil, criminal or administrative action, suit,
claim, hearing, investigation or proceeding has been brought or been threatened
nor have any settlements been reached by or with any parties (i)
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alleging an Environmental Condition in violation of Environmental Requirements,
(ii) alleging Environmental Activity occurring in violation of Environmental
Requirements, or (iii) claiming Environmental Costs, except as listed on
Schedule 6.19F.
(i) Toxic Substances: To the best of Old Dominion's and
Sellers' knowledge, Sellers do not manufacture, and have not manufactured, any
substances regulated by the Toxic Substances Control Act, 15 U.S.C. Section
21001 et seq. The chemicals set forth on Schedule 6.19G are chemicals now used
and previously used by Sellers in their manufacturing process.
(j) Restrictions on Transfer of Development: To the
best of Old Dominions's and Sellers' knowledge, (i) no portion of any Subject
Property currently Used by Sellers is located within 2,000 feet of (A) a
release of Hazardous Materials which has been reported or is required to be
reported under any Environmental Requirements, or (B) a site at which there has
been a significant disposal of Hazardous Materials; (ii) no occurrence or
condition on any Subject Property, including without limitation the presence of
wetlands or endangered species, or any real property adjoining or in the
vicinity of any Subject Property exists which could cause such Subject Property
or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability, or Use of such Subject Property under any
Environmental Requirements; and (iii) no Environmental Requirement requires the
preparation or filing of any property investigation or property disclosure form
related to environmental issues in connection with the transfer of any Subject
Property, except as listed on Schedule 6.19H.
(k) Underground Storage Tanks: To the best of Old Dominion's
and Sellers' knowledge, no underground storage tanks are present at the Subject
Property, except for the two underground storage tanks disclosed in Dames &
Moore's reports.
(l) Environmental Information: Sellers and Old Dominion have
provided to Buyer all Environmental Information in their possession (as defined
in Section 8.2.8.) or actually known to them to exist.
(m) Definitions:
(i) "Environmental Activity" shall mean any storage,
holding, manufacture, emission, discharge, generation, processing, treatment,
abatement, removal, disposition, handling, transportation or disposal, or any
actual, proposed or threatened release of any Hazardous Materials from, under,
into or on any Subject Property or otherwise relating to any Subject Property
or the Use of any Subject Property, including but not limited to (A) the
migration or emanation of Hazardous Materials from the Subject Property onto or
into the environment beyond the physical
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boundaries of the Subject Property; (B) the off-site disposal of Hazardous
Materials from any Subject Property; and (C) any of the previously described
activities occurring in connection with ambient air, surface and subsurface
soil conditions, and all surface and subsurface waters.
(ii) "Environmental Agency" shall mean any federal, state
or local entity or agency with jurisdiction over Environmental Requirements.
(iii) "Environmental Condition" shall mean (A) the presence
or existence in, on, at, or under the Subject Property of any Hazardous
Materials, "industrial or solid waste," as that term is defined under
applicable Environmental Requirements, underground or above-ground storage
tanks, wells, covered-over surface impoundments or similar areas, any
"facility," as that term is defined under applicable Environmental
Requirements, or any wetlands or other environmentally sensitive area and (B)
the presence or existence in, on, at, or under the environment beyond the
physical boundaries of the Subject Property of any Hazardous Materials which
migrated or emanated from the Subject Property.
(iv) "Environmental Requirements" shall mean all laws,
ordinances, statutes, codes, rules, regulations, agreements, judgments, orders,
and decrees enacted, promulgated, or amended as of the date hereof, of the
United States, the states, the counties, the cities, or any other political
subdivisions in which a Subject Property is located, and any other political
subdivision, agency or instrumentality exercising jurisdiction over Sellers,
the Subject Property, or the Use of the Subject Property, relating to
pollution, the protection or regulation of human health, natural resources, or
the environment, or the emission, discharge, release or threatened release into
the environment (including, without limitation, ambient air, surface water,
ground water or land or soil) of pollutants, contaminants, chemicals, or
industrial, solid, toxic or hazardous substances or waste or "Hazardous
Materials" or the treatment, storage, transportation, disposal or any other
activity related to such pollutants, contaminants, substances, or wastes.
(v) "Hazardous Materials" shall mean any substance which
is or contains (A) any "hazardous substance" as now defined in Section 101(14)
of the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA") (42 U.S.C. Section 9601 et seq.) or any regulations
promulgated under CERCLA; (B) any "hazardous waste" as now defined in the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.)("RCRA")
or regulations promulgated under RCRA; (C) any substance regulated by the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.); (D) gasoline, diesel
fuel, or other petroleum hydrocarbons; (E) asbestos and asbestos containing
materials, in any form, whether friable or non-
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friable; (F) polychlorinated biphenyls; (G) radon gas; and any additional
substances or materials which are now or hereafter classified or considered to
be hazardous or toxic under Environmental Requirements or the common law, or
any other applicable laws relating to the Subject Property. Hazardous
Materials shall include, without limitation, any substance the presence of
which on any Subject Property (1) requires reporting, investigation or
remediation under Environmental Requirements; (2) causes a nuisance on any
Subject Property or adjacent property or poses a hazard to the health or safety
of persons on any Subject Property or adjacent property; or (3) which, if it
emanated or migrated from the Subject Property, could constitute a trespass.
(vi) "Subject Property" shall mean the Real Property and
the Facilities, including without limitation, all improvements, fixtures,
equipment, and personal property now or hereafter located on the Real Property.
(vii) "Use" shall mean use, ownership, tenancy,
development, construction, maintenance, management, operation or occupancy and
when referring to Use by the Sellers shall also be deemed to include Use by any
current or former subsidiaries or any other affiliate or predecessor of
Sellers.
6.20 Insurance. The Facilities and the Purchased Assets are
adequately insured with responsible insurers against risks normally insured
against by companies in Halltown's line of business.
6.21 Subsidiaries. Halltown is a wholly owned subsidiary of Old
Dominion. Halltown has no material investment, directly or indirectly (through
subsidiaries or otherwise), in any other corporation, association, partnership,
joint venture, trust or other entity.
6.22 Product Warranties. Sellers have heretofore furnished Buyer
with accurate and complete copies of all warranties issued by Halltown in
connection with its products, under which products sold by Halltown remain
under warranty.
6.23 Brokerage Commissions. Other than commissions or fees
payable to Crestar Securities Corporation, there are no claims for, or rights
to, brokerage commissions or agent's or finder's fees resulting from any action
taken by Old Dominion or Sellers in connection with the transactions
contemplated by this Agreement.
6.24 Safety Requirements. To the best of Sellers' and Old
Dominion's knowledge, the Business and the Facilities are presently in all
material respects in full compliance with all job safety requirements applicable
thereto, including without limitation any and all requirements of the
Occupational Safety and Health Act of 1970, as amended, and any other
requirements of any governmental
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authority with respect to the health or safety of workers of the Business. Any
prior failures to so comply have been remedied. Except as set forth on
Schedule 6.9A, Sellers have not received any notice of any failure to comply
with any such law, order, rule, or regulation, nor is any such complaint
pending or threatened from any other party, nor are the Sellers aware of any
fact or circumstance that could give rise to any such claim. Sellers have
provided Buyer with a copy of all health and safety reports resulting from any
audit, study or review performed with respect to the Business or the
Facilities, except as listed on Schedule 6.24.
6.25 Americans With Disabilities Act. Sellers have not received any
notice of any failure to comply with the Americans With Disabilities Act of
1990 (the "ADA"), nor is any such complaint pending or threatened from any
other party, nor are the Sellers aware of any fact or circumstance that could
give rise to any such claim. Sellers have provided Buyer with a copy of all
reports relating to the ADA resulting from any audit, study or review performed
with respect to the Business or the Facilities.
6.26 Full Disclosure. No representation or warranty of Halltown,
Dillard, or Old Dominion made in this Agreement, nor any written statement,
schedule or certificate heretofore furnished to Buyer by Halltown, Dillard, or
Old Dominion, pursuant hereto, or in connection with the transactions
contemplated hereby, contains, or will contain any untrue statement of a
material fact, or omits, or will omit to state a material fact necessary to
make the statement or facts contained herein or therein not misleading.
Halltown, Dillard, and Old Dominion have not withheld and will not withhold
from Buyer knowledge of any events, conditions or facts, of which Halltown,
Dillard, or Old Dominion have knowledge, that could have a Material Adverse
Effect.
ARTICLE VII. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer and Republic represent and warrant (with respect to Sections 7.1
through 7.5) and covenant (with respect to Sections 7.6 through 7.10) to
Sellers and Old Dominion that:
7.1 Due Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of West Virginia. Republic is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
7.2 Corporate Power and Authority. The Board of Directors of
Buyer and Republic have duly approved this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement and the
performance by Buyer and Republic of their obligations hereunder have been duly
authorized by all requisite corporate action, and no further action or approval
is required in
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order to permit Buyer and Republic to consummate the transactions contemplated
by this Agreement. Buyer and Republic have full power, authority and legal
right to enter into this Agreement and to consummate the transactions
contemplated hereby. The making and performance of this Agreement and the
consummation of the transactions contemplated hereby in accordance with the
terms hereof will not (a) conflict with the Certificate or Articles of
Incorporation or the Bylaws of Buyer or Republic or (b) violate any provision
of any law, ordinance, regulation, rule, requirement, order, writ, judgment,
decree, contract, agreement, lease, arrangement or commitment to which Buyer or
Republic is subject or is a party that, individually or in the aggregate, would
have a material adverse affect upon the ability of Buyer and Republic to
perform their obligations hereunder and under the Supply Agreements.
7.3 Actions, Suits, Etc. There are no actions, suits, proceedings
or investigations pending, or to the knowledge of Buyer or Republic, threatened
against or affecting Buyer or Republic at law or in equity or before any
federal, state, municipal or other instrumentality in which it is sought to
restrain or prohibit or obtain damages in respect of the consummation of the
purchase and sale of the Purchased Assets or the other transactions
contemplated hereby. Moreover, Buyer is, to the best knowledge of Buyer and
Republic, not in default with respect to any order, writ, injunction or decree
of any court, or Agency with respect to the consummation of the purchase and
sale of the Purchased Assets or the other transactions contemplated hereby.
7.4 Consents. No consent, approval, authorization or order of any
court, Agency or any other person is required under any law, ordinance,
regulation, rule, requirement, order, writ, judgment, decree, contract,
agreement, lease, commitment, charter or bylaw applicable to or binding upon
Buyer or Republic in order to permit Buyer and Republic to consummate the
transactions contemplated by this Agreement and to perform their obligations
hereunder and under the Supply Agreement.
7.5 Brokerage Commissions. There are no claims for, or rights to,
brokerage commissions or agent's or finder's fees resulting from any action
taken by Buyer or Republic in connection with the transactions contemplated by
this Agreement.
7.6 Pension Plan Benefits for Bargaining Employees. Buyer hereby
covenants and agrees to establish at Buyer's expense, as of the Employment
Cut-Off (as defined in Section 8.9(c)) a pension plan comparable to the
Halltown Pension Plan for Bargaining Employees, as amended and restated on
January 1, 1995, or another plan, such as a Section 401(k) Plan, that shall
have been agreed to by the Union, which Plan, when established, shall satisfy
the requirements and obligations of the employer under the Labor
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Contract, including without limitation, the provisions of Article XIX thereof.
Buyer will not assume the Halltown Pension Plan for Bargaining Employees or any
obligations thereunder.
7.7 Continued Health Benefits. Buyer shall at its expense provide
the Bargaining Employees of Halltown on and after the Employment Cutoff Date
with health insurance and other benefits required of the employer under the
provisions of the Labor Contract.
7.8 Confidential Information. Buyer and Republic covenant and
agree that they will comply in all respects with the provisions of Section 14.2
hereinafter and in furtherance thereof, without limitation thereof, covenant
and agree that in the event Buyer or Republic or any of their employees, agents
or representatives contact any governmental agency or regulatory body in the
conduct of the Environmental Audit, as defined in Section 8.2.8(c), or
otherwise with respect to or for the purpose of obtaining information about or
related to the Facilities, Business or Purchased Assets, neither Buyer,
Republic nor their employees, agents or representatives shall reveal the
results of such contact or any information obtained from such contact or in the
conduct of the Environmental Audit, to any third party, except in compliance
with Section 14.2. The Environmental Audit report and analysis shall be kept
confidential and not released by Buyer or Republic, their employees, agents or
representatives, to any entity or person not a party to this Agreement, except
in compliance with Section 14.2, without the prior written consent of Sellers
which shall not be unreasonably withheld. The confidentiality provisions of
this Section 7.8, Section 14.2 and any other confidentiality covenant (other
than Section 5.3.3) shall, as to information about Hazardous Materials,
Environmental Activity, Environmental Conditions, or Environmental Laws,
terminate upon consummation of the sale of the Purchased Assets on the Closing
Date.
7.9 Worker's Compensation Claims. From and after the Closing of
this transaction, Buyer and Republic shall provide Sellers with access to their
records with respect to all Bargaining and Nonbargaining Employees employed by
Buyer or its successors and assigns after the Closing who make claims or
threaten to file claims under the West Virginia Worker's Compensation Act for
injuries or illness sustained or alleged to have been sustained by any such
employee prior to the Closing. Buyer shall cooperate with Sellers in the
defense of such claims, threatened or filed, in addition to the cooperation
provided for in Section 12.5 hereinafter.
7.10 Employees; Employee Compensation and Benefits. Buyer shall
employ Halltown's Bargaining Employees identified on Schedule 6.13B from and
after the Employment Cut-Off. As of the Employment Cut-Off, Buyer shall be
signatory to and shall assume Halltown's
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obligations, rights and duties under that Collective Bargaining Agreement dated
January 31, 1993 (the "Labor Contract") between Halltown and the Industrial
Union of Marine and Ship Building Workers of America - International
Association of Machinists, AFL-CIO Local Lodge S-87 (the "Union") as the same
relates to the Purchased Assets or the employees associated with the Purchased
Assets.
ARTICLE VIII. COVENANTS OF SELLERS AND OLD DOMINION
8.1 Negative Covenants Regarding Conduct of Business. Except as
may be otherwise expressly provided herein, from and after the date of this
Agreement and until the Closing Date, with respect to the Purchased Assets, the
Facilities and the Business, without the consent of Buyer, Sellers and Old
Dominion covenant and agree that they will not in respect of the Business, the
Purchased Assets, the Facilities or the operations conducted there:
8.1.1 Creation of Obligations. Incur any obligation or liability,
absolute or contingent, except current liabilities incurred, and obligations
under contracts entered into, in the ordinary course of business consistent
with past practice.
8.1.2 Encumbrances. Execute, grant, create or suffer any Encumbrance
upon the Purchased Assets.
8.1.3 Disposition of Assets. Effect any sale, transfer, Encumbrance
or other disposition of assets and properties that would otherwise be included
in the Purchased Assets, except for sales of Inventories in the ordinary course
of business, except for machinery, equipment, furniture and fixtures replaced
with items of equivalent or greater value and except for supplies and other
similar assets used or consumed in the ordinary course of business.
8.1.4 Contracts, Licenses, Etc. Amend, modify, assign, transfer,
grant or terminate any contract, agreement, lease, arrangement or commitment
listed in Schedule 6.6, any license, permit, certificate, approval, shopright,
membership or authorization listed in Schedule 6.9B.
8.1.5 Employee Benefits. Grant any increase in the salaries or wages
of any employee at the Facilities or of Halltown, amend any employee benefit
plan therefor (except as may be required by changes in the law or pursuant to
the Labor Contract or by Section 8.5), or make any increase in any other
benefits to which such employees may be entitled other than (a) normal periodic
increases for salaried employees and (b) wage or benefit increases for hourly
employees pursuant to the Labor Contract.
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8.1.6 Rights. Waive, modify or release any rights of material value
to the Business, the Facilities or the Purchased Assets.
8.1.7 Extensions of Credit. Make loans or extensions of credit with
respect to the operations of the Business or the Facilities, except extensions
of credit in the ordinary course of business.
8.1.8 Termination of Operations. Terminate, discontinue, close or
dispose of any part of the operations of the Business or the Facilities.
8.1.9 Other Transactions. Enter into any other transaction or series
of transactions other than in the ordinary course of business.
8.1.10 Shifting of Revenues, Costs and Expenses. Make any material
change in production schedules, acceleration of sales, billing of orders not
shipped, deferral of scheduled downtime, reduction of marketing, advertising or
promotional expenses, or deferral of other expenditures other than in the
ordinary course of business consistent with past practice or take any other
action the purpose of which is to artificially shift revenues to the period
prior to the Closing Date or defer costs or expenses to the period after the
Closing Date.
8.1.11 Real Property Taxes. Agree with any local tax authority to an
increased valuation of any real property included in the Purchased Assets.
8.2 Affirmative Covenants Regarding Conduct of Business. From and
after the date of this Agreement and until the Closing Date, Sellers and Old
Dominion covenant and agree that they will:
8.2.1 Ordinary Course of Business. Carry on the operations of the
Business and the Facilities only in the usual, regular and ordinary course
consistent with good business practices and with prior practices.
8.2.2 Maintenance of Relationships. Use their best efforts (but
without extra cost to Sellers or Old Dominion) to maintain and preserve the
business organization of Halltown, to retain its present employees and to
maintain its present relationships with labor unions, customers, suppliers and
others having business dealings with the Business or the Facilities.
8.2.3 Maintenance of the Purchased Assets. Maintain the Purchased
Assets in good operating repair and condition and maintain the level of
Inventories in accordance with past practices at the Facilities.
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8.2.4 Payment of Obligations in Ordinary Course. Pay and discharge
all costs and expenses of carrying on the operations of the Business or the
Facilities and of maintaining and operating the Purchased Assets as they become
due and pay and discharge any such costs and expenses that at the date hereof
are past due, unless contested in good faith.
8.2.5 Representations and Warranties. Use their best efforts to
prevent the occurrence of any change or event that would prevent any of the
representations and warranties of Halltown, Dillard, or Old Dominion contained
herein from being true in all material respects at and as of the Closing Date
with the same effect as though such representations and warranties (in the
exact language contained in this Agreement with appropriate modification of
tense in the case of representations and warranties relating to statements of
fact as of specific dates) had been made at and as of the Closing Date.
8.2.6 Maintenance of Records. Maintain their books, accounts, and
records relating to the Business, the Purchased Assets, the Facilities or the
operations conducted there in the usual, regular and customary manner on a
basis consistently applied.
8.2.7 Access to and Updating of Information. During reasonable
business hours, afford to the officers, attorneys, accountants, and other
authorized representatives of Buyer and Republic, free and full access to the
Purchased Assets, the Facilities, the Business, and the employees of Sellers
and Old Dominion in order that Buyer may have full opportunity to make a
reasonable investigation with respect to the Facilities, the Purchased Assets,
the Business, the contracts, leases, arrangements and commitments listed in
Schedule 6.6 hereto, the books and records of the Business and the Facilities
and their operations, including, without limitation, fixed asset records, sales
records relating to the customers of the Business, purchase records, inventory
records and personnel records relating to employees at the Facilities and
employee compensation and benefits. Sellers and Old Dominion will furnish to
Buyer all such further information concerning the business and affairs of the
Purchased Assets, the Business, and the Facilities as Buyer may reasonably
request. Sellers and Old Dominion will update by amendment or supplement each
of the Schedules referred to herein and any other disclosures made in writing
to Buyer forthwith upon any material change in the information set forth in
said Schedules or other disclosure, and Sellers and Old Dominion represent and
warrant that such Schedules and such written disclosures, as so amended or
supplemented, shall be true, correct and complete in all material respects as
of the date or dates of such amendments or supplements; provided, however, that
the inclusion of any information in any such amendment or supplement, not
included in the original Schedule at or prior to
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the date of this Agreement, shall not limit or impair any rights that Buyer
might otherwise have respecting the representations or warranties of Sellers or
Old Dominion contained in this Agreement.
8.2.8 Testing; Environmental Information; Environmental Covenants.
(a) Provide to the Buyer access to all records and information
concerning all Hazardous Materials, used, stored, generated, treated, or
disposed of by Halltown, all environmental or safety studies conducted by or on
behalf of or relating to Halltown and all reports, correspondence, all filings
to governmental agencies with jurisdiction over Environmental Requirements
concerning the compliance of the Subject Property or the operation of the
Subject Property with Environmental Requirements, all permits issued pursuant
to Environmental Requirements, all policies and procedures manuals or
guidelines utilized by Halltown to comply with Environmental Requirements, and
any other information reasonably requested by the Buyer pertaining to
environmental, health, and safety issues in each case which is in the
possession of Sellers and Old Dominion (the "Environmental Information").
Sellers and Old Dominion agree that the Buyer shall have the right to inspect
the Environmental Information and the Subject Property and, at the discretion
of the Buyer, perform subsurface or other invasive investigations, including
air monitoring, at or near the Subject Property. Sellers and Old Dominion
understand and agree that Buyer and its employees, agents, and representatives
may find it appropriate to contact governmental agencies in connection with
their analysis of the Environmental Information or the result of its other
investigations of the Subject Property subject to the provisions of Section 7.8
and Section 14.2. Notwithstanding any provision of Sections 5.3.3, 7.8 or 14.2
or any other provision of this Agreement to the contrary, Sellers covenant and
agree that Buyer and its representatives may contact regulatory agencies and
specifically discuss with these agencies the current compliance of Sellers with
all permits issued to Sellers by such agencies, the procedures for transfer of
such permits, the procedure for obtaining modifications to such permits, and
any other matter related to such permits. Sellers understand and agree that
the investigation (the "Environmental Audit") to be conducted by Buyer will,
without limitation, analyze whether: (i) the Subject Property, and the Use of
the Subject Property, complies with all Environmental Requirements; (ii) the
Subject Property contains any Hazardous Materials or if any other Environmental
Conditions are present; (iii) the Subject Property is, or has been, the subject
of any past, existing, or threatened investigation, inquiry or proceeding
concerning environmental matters by any Environmental Agencies; (iv) any
report, notice or submission concerning Environmental Activity has been given
or should be given with regard to the Subject Property to Environmental
Agencies; and (v) any permits are required under Environmental Requirements for
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any Environmental Condition or Environmental Activity at the Subject Property.
(b) (i) Comply with all applicable Environmental Requirements
relating to the Subject Property and the Use of the Subject Property, and not
engage in or permit others to engage in any Environmental Activity in violation
of any applicable Environmental Requirements; (ii) maintain current policies,
procedures and programs to monitor and assure compliance with all applicable
Environmental Requirements relating to the Subject Property or the Use of the
Subject Property and provide Buyer upon request with evidence of the existence
and implementation of these policies, procedures, and programs; (iii) deliver
to Buyer no later than three (3) days following the occurrence of any such
event, written notice of the discovery by the Sellers or Old Dominion of any
event, the occurrence of which would render any representation or warranty
contained in Section 6.19 of this Agreement incorrect in any material respect
if made at the time of such discovery; (iv) promptly comply with any
Environmental Requirements requiring the remediation, abatement, removal,
treatment or disposal of Hazardous Materials or remediation of an Environmental
Condition or in Sellers and Old Dominion's sole discretion, terminate this
agreement; (v) cause any party who Uses the Subject Property to comply with
this Section 8.2.8; (vi) not cause or suffer any liens to be recorded against
or imposed against the Subject Property as a result of an Environmental
Condition or Environmental Activity or in Sellers and Old Dominion's sole
discretion, terminate this agreement; and (vii) cooperate with Buyer to
accomplish a transfer at closing or as soon thereafter as practicable of all
permits, licenses, and authorizations required for the Subject Property or the
Use of the Subject Property under Environmental Requirements.
8.3 Consents. As soon as practicable after the date of this
Agreement and prior to the Closing, Sellers and Old Dominion covenant and agree
that they will use their best efforts to secure all waivers, orders, approvals
or consents of third parties (including, without limitation, any waivers,
orders, approvals or consents deemed necessary by Buyer) that shall be required
to consummate the transactions contemplated hereby. Sellers and Old Dominion
will give all necessary notices, and use their best efforts to obtain all
necessary consents and waivers, to permit (i) the prepayment or redemption by
Sellers at the closing of those certain industrial revenue bonds issued by the
County Commission of Jefferson County, a Political Subdivision and Public
Corporation of the State of West Virginia (the "Bonds"), and (ii) the release
at the Closing of all mortgages, liens, security interests or other
encumbrances on the Purchased Assets and Facilities securing the Bonds and any
related obligations. If deemed necessary by Buyer, Sellers will use their best
efforts to obtain the consent of the
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unions at the Facilities to the assumption by Buyer of the Labor Contract.
8.4 Discounts and Freight. Halltown covenants and agrees that it
will be liable for and will make all appropriate and customary adjustments and
credits due to customers and will pay all freight and delivery expenses,
relating to finished goods inventories shipped by Halltown, or with respect to
which Halltown has received payment or recorded a receivable in its accounting
records prior to the Closing Date, provided however, that Buyer shall obtain
Sellers' written approval, which approval shall not be unreasonably withheld,
prior to Buyer's agreement with any such customer to replace products or grant
credit which fall under the provisions of this Section 8.4.
8.5 Pension Benefits. (a) Nonbargaining Employees. All of
Halltown's employees not covered by the Labor Contract are sometimes referred
to herein as "Nonbargaining Employees". All of Halltown's employees that are
employed pursuant to the Labor Contract are sometimes referred to herein as
"Bargaining Employees". Buyer shall not assume any employee pension benefit
plan covering nonbargaining employees at the Facilities, and Halltown covenants
and agrees that it will continue to be liable for all liabilities under the Old
Dominion Box Company, Incorporated Pension Plan, as amended and restated as of
January 1, 1995, pursuant to the current provisions of such plans. Effective
on the Closing Date, Old Dominion covenants and agrees that it shall amend its
Pension Plan to provide that with respect to Nonbargaining Employees employed
prior to January 1, 1994, the continuous service of such Nonbargaining
Employees for Buyer after the Employment Cut-off shall continue to be credited
as service under such Plan for purposes of vesting and eligibility for
retirement benefits. Effective on the Closing Date, Buyer covenants and agrees
that it shall amend its defined contribution plans for salaried employees so
that the Nonbargaining Employees employed by Buyer as of the Employment Cutoff
Date shall receive credit for vesting and eligibility under such plans for
service as an employee of Halltown.
(b) Bargaining Employees. Effective on the Closing Date, Halltown
covenants and agrees that it shall amend its pension plan for Bargaining
Employees as of the Employment Cut-off to cease benefit accruals under such
plan, and to fully vest all accrued benefits under such plan.
8.6 Financial Statements. Halltown, Dillard and Old Dominion
covenant and agree that they will, not less than 5 days prior to the Closing
Date, deliver to Buyer and Republic at Buyer's expense true, correct and
complete copies of unaudited balance sheets of Halltown as of March 24, 1995
and March 25, 1994 and Dillard as of March 31, 1995 and 1994 and of unaudited
statements of Halltown's
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operations, cashflows, and changes in stockholders' equity for Halltown for the
3 periods ending March 24, 1995 and March 25, 1994 and of unaudited statements
of Dillard's operations, cashflows, and changes in stockholders' equity for
Dillard for the 3 months ending March 31, 1995 and March 31, 1994 and will
deliver at Buyer's expense any pro forma financial statements requested by
Buyer in order to comply with the accounting requirements of the Securities and
Exchange Commission. Old Dominion, Halltown and Dillard covenant and agree
that they will allow Republic to cause Cherry, Bekaert & Holland independent
public accountants, to perform at Buyer's expense an audit of the separate
company financial statements of (a) Halltown for the fiscal years ended January
1, 1993, December 31, 1993 and December 30, 1994 and (b) Dillard for the years
ended December 31, 1992, December 31, 1993 and December 31, 1994 and to issue
and deliver its report thereon to Buyer no later than June [19], 1995, which
report shall include its unqualified opinion that such financial statements
present fairly, in accordance with generally accepted accounting principles
consistently applied, the financial position, results of operations, cash
flows, and changes in stockholders' equity of Halltown. The foregoing
financial statements, together with the notes thereto, (a) shall be in
accordance with Halltown's or Dillard's, as appropriate, books and records and
accounting methods, (b) shall present fairly the financial position, results of
operations, of Halltown or Dillard, as appropriate, as of the dates and for the
periods indicated, and (c) shall have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, and in all material respects with the accounting requirements
of the Securities and Exchange Commission.
8.7 No Solicitation of Offers. Until the termination of the
Agreement, Old Dominion and Sellers covenant and agree that they will not (a)
solicit, entertain, encourage or assist any other acquisition proposal or
proposals with respect to the purchase of, and will not sell or agree to sell,
the Business or the Purchased Assets or any portion thereof to any person other
than Buyer or Republic or (b) furnish information regarding the Business or the
Purchased Assets to any person other than Buyer or Republic or their
representatives.
8.8 Capital Commitments. Except for capital expenditures listed on
Exhibit 1.2 in an amount not in excess of the amount stated in Section
2.1(c)(i) (which Buyer has agreed to bear) and any other capital expenditures
that are approved in writing by Buyer, Sellers covenant and agree that they
will be liable for and will promptly and timely pay for (a) all costs and
expenses related to construction projects and commitments related to
construction projects at the Facilities completed, or in progress prior to, the
Closing Date, and (b) all capital expenditure items ordered for the Facilities
by Sellers prior to the Closing Date (including, without
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limitation, those referred to in Section 2.2(a)(ii)(A) and (B)). Sellers
covenant and agree that they will assign to Buyer their rights, benefits and
claims under any warranties related to any of the foregoing construction
projects or fixed assets (including, without limitation, those listed on
Exhibits 1.2 and 1.2A).
8.9 Employees; Employee Compensation and Benefits. (a) Halltown
shall provide Buyer access to its Nonbargaining Employees during regular
business hours for purposes of interviews, and Buyer may in its discretion
extend offers of employment to any or all of such Nonbargaining Employees, upon
such terms and conditions as it may determine, effective at the Employment
Cut-off. Those employees (Bargaining and Nonbargaining) at the Facilities who
are employed by Buyer after the Employment Cut-off are referred to herein as
the "Transferred Employees."
(b) Halltown covenants and agrees, with respect to Transferred
Employees, to bear the cost of, and to pay when due and payable, all wages,
salaries, bonuses, workers' compensation, medical benefits, disability,
vacation, sick benefits, severance, other compensation and benefits and payroll
and unemployment taxes to the extent same (i) are based upon, arise from or
relate to, injury or sickness occurring prior to the Employment Cut-off, (ii)
are based on, arise from or relate to employment service rendered to Sellers
prior to the Employment Cut-off, (iii) are based upon, arise from or relate to
the termination of the employment of such persons by Sellers, or (iv) are not
assumed by Buyer pursuant to Section 2.2. Halltown shall remain obligated, in
accordance with Code Section 4980B and ERISA Section 601, et. seq. ("COBRA
continuation coverage") to provide COBRA continuation coverage to those of its
covered employees, former employees and their qualified beneficiaries entitled
to receive COBRA continuation coverage under a group health plan sponsored by
Sellers or an ERISA Affiliate on account of a qualifying event occurring either
prior to the Closing Date or as a result of the consummation of the
transactions contemplated by this Agreement. The parties understand and agree
that, except for those obligations assumed by Buyer pursuant to Section 2.2,
the cost of vacations and sick benefits and similar benefits and compensation
based upon, arising from or related to employment by Halltown prior to the
Employment Cut-off, (including, without limitation, all vacations accrued for
or earned by Bargaining Employees and weekly Non-Bargaining Employees who are
paid hourly for or with respect to the period commencing June 1, 1994 and
ending May 31, 1995 and the period commencing June 1, 1995 and ending at the
Employment Cut-off) and any payroll and/or unemployment taxes on such vacation
and sick benefits and similar benefits and compensation, shall be borne by
Halltown, whether or not such vacation and sick benefits and similar benefits
and compensation are accrued as of the Employment Cut-off. The parties agree
that the foregoing covenant with respect to vacations for Bargaining Employees
and weekly
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Non-Bargaining Employees who are paid hourly for or with respect to the period
commencing June 1, 1995 and ending at the Employment Cut-off shall be
effectuated by (i) Buyer paying and/or granting all vacation benefits to such
Bargaining Employees and weekly Non-Bargaining Employees who are paid hourly
for such period and paying all payroll and/or unemployment taxes with respect
thereto, and (ii) Halltown paying Buyer cash in the amount of $9,092.00 at the
Closing.
(c) The "Employment Cut-off" shall mean (i) 7:00 a.m., local Daylight
Saving Time in Halltown, West Virginia, on the Closing Date for Nonbargaining
Employees and (ii) 7:00 a.m, Daylight Saving Time in Halltown, West Virginia,
on the Closing Date with respect to Bargaining Employees.
8.10 Continued Use of Licenses and Permits. If any permits,
licenses or authorities held by Sellers with respect to the Business, the
Purchased Assets, the Facilities and the operations conducted with respect
thereto, (including, without limitation, vehicles and trailers) cannot be
transferred to Buyer on the Closing Date or, if not transferable, if Buyer
cannot obtain new permits, licenses or authorities with respect thereto on or
before the Closing Date, then Sellers will cooperate with Buyer (i) to
accomplish such transfer or the grant of new permits, licenses or
authorizations as soon thereafter as practicable, and (ii) so as to permit the
continued conduct and operation of the Business, the Purchased Assets, the
Facilities and the operations conducted with respect thereto, after the Closing
Date, including, without limitation, to the extent permitted by law, continuing
to conduct and operate the Business, the Purchased Assets, the Facilities and
the operations conducted with respect thereto, under their permits, licenses
and authorities for the account of Buyer, or permitting Buyer to conduct and
operate the Business, the Purchased Assets, the Facilities and the operations
conducted with respect thereto, under Sellers' permits, licenses and
authorities, for up to ninety (90) days after Closing, in a manner similar to
the manner in which the same are currently conducted and operated by Sellers.
If continued operation under Sellers' permits, licenses or authorities is
required, then Buyer will reimburse Sellers for Sellers' out-of-pocket costs in
connection therewith and will indemnify Sellers and hold them harmless from,
against, for and in respect of any and all damages, losses, obligations, fines,
liabilities and claims suffered, incurred or required to be paid by Sellers in
fulfillment of their obligations under this Section.
8.11 Additional Environmental Covenants. At the Closing Sellers will
pay Buyer $20,000 with respect to the removal of damaged asbestos-containing
materials identified by Buyer's environmental consultant at the Facilities and
preparation of an operation and maintenance plan with respect thereto. Neither
Sellers nor Old Dominion shall have any further obligation with
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respect to the remediation, encapsulation or removal of asbestos-containing
materials at the Facilities.
ARTICLE IX. PERFORMANCE BY SUBSIDIARIES
9.1 Performance by Sellers. Old Dominion shall cause each of the
Sellers to perform its covenants, agreements and obligations hereunder in
accordance with the terms thereof and guarantees the performance by Sellers of
all such covenants, agreements and obligations of Sellers contained herein.
9.2 Performance by Buyer. Republic shall cause Buyer to perform its
covenants, agreements and obligations hereunder in accordance with the terms
thereof and guarantees the performance by Buyer of all covenants, agreements
and obligations of Buyer contained herein.
9.3 Obligations Not Released. The obligations of Old Dominion under
Section 9.1 and the obligations of Republic under Section 9.2 shall not be
modified, released, diminished or affected by (i) any modification, amendment,
waiver, release, adjustment, indulgence, forbearance, compromise, deferral or
extension of or with respect to any obligations of Sellers or Buyer, as
applicable, hereunder, (ii) any delay or forbearance or lack of diligence by
any party in exercising its rights hereunder against any person, (iii) the
bankruptcy, insolvency, rearrangement, adjustment, composition, liquidation or
dissolution of Sellers or Buyer, as applicable, or any action taken, election
made, preference or claim for refund asserted or sustained in any proceeding
with respect thereto, (iv) any lack of power or authority of Sellers or Buyer
as applicable, (v) the taking or accepting of any other security, collateral or
guaranty or other assurance of performance, or (vi) any other action taken or
omitted to be taken with respect to the covenants, agreements and obligations
of Sellers or Buyer hereunder whether or not such action or omission prejudices
Old Dominion or Republic, respectively, or increases the likelihood that Old
Dominion or Republic will have to perform the obligations of Sellers or Buyer,
respectively.
ARTICLE X. CONDITIONS TO OBLIGATIONS OF BUYER AND REPUBLIC
The obligations of Buyer and Republic under this Agreement are subject
to the satisfaction, or the written waiver thereof by Buyer and Republic, of
the following conditions on or prior to the Closing Date:
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10.1 Representations and Warranties of Halltown, Dillard, and Old
Dominion. All of the representations and warranties of Halltown, Dillard, and
Old Dominion contained in this Agreement shall have been true and correct when
made, and shall be true and correct in all material respects on and as of the
Closing Date, except to the extent that changes shall have been approved in
writing by Buyer.
10.2 Covenants of Halltown, Dillard, and Old Dominion. All of the
covenants and agreements herein on the part of Halltown, Dillard, and Old
Dominion to be complied with or performed on or before the Closing Date, shall
have been fully complied with and performed.
10.3 Halltown's, Dillard's, and Old Dominion's Certificates. There
shall be delivered to Buyer a certificate dated as of the Closing Date and
signed by the Chairman of the Board and the President of Halltown to the effect
set forth in Sections 10.1 and 10.2 as they relate to Halltown, which
certificate shall have the effect of a representation and warranty made by
Halltown on and as of the Closing Date. There shall be delivered to Buyer a
certificate dated as of the Closing Date and signed by the Chairman of the
Board of Dillard to the effect set forth in Sections 10.1 and 10.2 as they
relate to Dillard, which certificate shall have the effect of a representation
and warranty made by Dillard on and as of the Closing Date. There shall be
delivered to Buyer a certificate dated as of the Closing Date and signed by the
Chairman of the Board of Old Dominion to the effect set forth in Sections 10.1
and 10.2 as they relate to Old Dominion, which certificate shall have the
effect of a representation and warranty made by Old Dominion on and as of the
Closing Date.
10.4 Certificates of Authorities; Corporate Documents. Halltown,
Dillard and Old Dominion shall have furnished to Buyer (a) a certificate of the
Secretary of State of West Virginia dated as of a date not more than twenty
days prior to the Closing Date, attesting to the organization and good standing
of Halltown, (b) a certificate of the Secretary of State of Virginia dated as
of a date not more than twenty days prior to the Closing Date, attesting to the
organization and good standing of Dillard, (c) a certificate of the Secretary
of State of Virginia dated as of a date not more than twenty days prior to the
Closing Date, attesting to the organization and good standing of Old Dominion,
(d) a certificate of the Secretary of State of West Virginia dated as of a date
not more than twenty days prior to the Closing date, attesting to the
qualification and good standing of Dillard in West Virginia, (e) copies,
certified by the Secretary or an Assistant Secretary of Halltown as of the
Closing Date, of Halltown's Certificate of Incorporation and all amendments
thereto and Bylaws as amended and in effect at the Closing Date, (f) copies,
certified by the Secretary or an Assistant Secretary of Dillard as of the
Closing
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Date, of Dillard's Certificate of Incorporation and all amendments thereto and
Bylaws as amended and in effect at the Closing Date, (g) copies, certified by
the Secretary or an Assistant Secretary of Old Dominion as of the Closing Date,
of Old Dominion's Certificate of Incorporation and all amendments thereto and
Bylaws as amended and in effect at the Closing Date, (h) a copy, certified by
the Secretary or Assistant Secretary of Halltown, of resolutions duly adopted
by the Board of Directors and stockholder of Halltown duly authorizing this
Agreement, the Non-Competition Agreement of Old Dominion and Sellers and the
transactions contemplated hereby and thereby, (i) a copy, certified by the
Secretary or Assistant Secretary of Dillard, of resolutions duly adopted by the
Board of Directors and stockholder of Dillard duly authorizing this Agreement,
the Non-Competition Agreement of Old Dominion and Sellers and the transactions
contemplated hereby and thereby, and (j) a copy, certified by the Secretary or
Assistant Secretary of Old Dominion, of resolutions duly adopted by the Board
of Directors of Old Dominion duly authorizing this Agreement, the Supply
Agreements, the Non- Competition Agreement of Old Dominion and Sellers and the
transactions contemplated hereby and thereby.
10.5 No Material Adverse Changes. There shall not have occurred any
change in the Business, the Facilities or the Purchased Assets that could have
a Material Adverse Effect, and Halltown shall not have suffered any loss
(whether or not insured) by reason of physical damage caused by fire,
earthquake, flood, wind, accident or other calamity, or by reason of any taking
by eminent domain or condemnation, which could have a Material Adverse Effect.
10.6 Litigation. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before any Agency (a)
in which it is sought to restrain or prohibit or obtain damages in respect of
the consummation of the purchase and sale of the Purchased Assets or the other
transactions contemplated hereby, (b) that could, if adversely determined,
result in a Material Adverse Effect, (c) that could, if adversely determined,
affect the right or ability to carry on the Business at the Facility as now
conducted, or (d) as a result of which, in the reasonable judgment of Buyer,
Buyer could be deprived of the material benefits of its ownership of the
Purchased Assets.
10.7 Satisfactory to Buyer's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto, and all other related matters shall have been satisfactory to Locke
Purnell Rain Harrell (A Professional Corporation), counsel for Buyer and
Republic.
10.8 Opinion of Sellers' Counsel. Buyer and Republic shall have
received an opinion of Edmunds & Williams, P.C., dated the Closing Date, to the
effect that: (a) each of Old Dominion,
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Halltown and Dillard is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and each of
Halltown and Dillard is qualified to carry on its business and is in good
standing under the laws of the State of West Virginia, (b) Old Dominion and
each Seller has full power, authority and legal right to enter into this
Agreement, the Supply Agreements to which it is a party and the Non-Competition
Agreement with Old Dominion and Sellers and to consummate the transactions
contemplated hereby and thereby; (c) all corporate actions required to be taken
by Old Dominion and each Seller to approve this Agreement, the Supply
Agreements to which it is a party, and the Non-Competition Agreement with Old
Dominion and Sellers and the transactions contemplated hereby and thereby and
to authorize execution and delivery of this Agreement, the Supply Agreements to
which it is a party and the Non-Competition Agreement with Old Dominion and
Sellers and the performance by Old Dominion and each Seller of their respective
obligations hereunder and thereunder, have been duly and properly taken, and no
further action or approval is required in order to permit Old Dominion and each
Seller to consummate the transactions contemplated by this Agreement, the
Supply Agreements to which it is a party and the Non-Competition Agreement with
Old Dominion and Sellers; (d) this Agreement, the Supply Agreements and the
Non-Competition Agreement with Old Dominion and Sellers have been duly executed
and delivered by Old Dominion and each Seller that is a party thereto and
constitutes a legal, valid and binding obligation of Old Dominion and each
Seller that is a party thereto enforceable in accordance with its terms
(subject to the availability of the discretionary remedy of specific
performance and, as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws from time to time in
effect but excluding any presently pending proceedings and the exercise by a
court of its general powers of equity); (e) the instruments of transfer of the
Purchased Assets from Sellers to Buyer have been duly authorized, executed and
delivered, and are legal, valid and binding instruments enforceable in
accordance with their terms (subject to the availability of the discretionary
remedy of specific performance and, as to enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect but excluding any presently pending proceedings and
the exercise by a court of its general powers of equity); (f) the execution and
delivery of this Agreement, the Supply Agreements and the Non-Competition
Agreement with Old Dominion and Sellers by Old Dominion and each Seller that is
a party thereto, and the performance by Old Dominion and each Seller that is a
party thereto of its obligations thereunder do not constitute a violation of or
a default under its certificate or articles of incorporation or bylaws, any of
the contracts, agreements, leases, arrangements or commitments listed on
Schedule 6.6, or any writs, orders, judgments or decrees by which it or its
assets are bound and of which counsel has actual knowledge; (g)
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such counsel has no knowledge of any action, suit, proceeding or investigation
that would be required by the terms of Section 6.8 to be listed in Schedule 6.8
that is not listed in Schedule 6.8; and (h) to the best of their knowledge, no
consent, approval, authorization or order of any court or Agency is required
for the sale and delivery by Halltown or Dillard of the Purchased Assets (other
than those permits which are not assignable by law). In rendering the
foregoing opinion, such counsel may rely as to questions of law other than
Virginia or federal law, upon opinions of local counsel retained by Old
Dominion and Sellers, provided that such local counsel, and the form and scope
of the opinion of such local counsel, are satisfactory to Buyer and Republic
and counsel for Buyer and Republic. Copies of any opinions so relied upon by
such counsel shall be attached to their opinion. The opinion of counsel to Old
Dominion and Sellers shall state that Buyer and Republic are justified in
relying upon the opinion of such local counsel.
10.9 Title Insurance. Old Dominion shall have caused to be delivered
to Buyer on or before the Closing Date an owner title policy commitment and a
loan policy commitment issued by Lawyers Title Insurance Corporation on its
current ALTA Owner's Policy format (10/17/92) and an ALTA Loan Policy together
with (a) a contiguity endorsement with respect to the four contiguous parcels,
(b) an endorsement that the property insured is the same property shown on the
survey, and (c) for the loan policy only, a comprehensive endorsement (the
"Endorsements"), for an owner's policy of title insurance in the amount of
$2,000,000 and a loan policy in the amount of $2,000,000 committing the title
company to insure Buyer's fee simple title to the Real Property. Such
commitment shall commit such title company to issue the policy described
therein to Buyer on the Closing Date in the foregoing amount and shall contain
only those Encumbrances listed in Exhibit 1.1A and such other Encumbrances as
are acceptable to Buyer. Buyer shall have had at least ten (10) days prior to
the Closing Date to review such commitment. Such commitment shall be
accompanied by copies of all recorded documents relating to restrictions,
easements, rights-of-way, and other matters described in such commitments (such
copies to be certified by such title company as true and correct copies of the
recorded originals). The costs of such title insurance policies shall be borne
by the parties as provided in Section 5.3.5.
10.10 Survey. Old Dominion, at its sole cost, shall have caused to
be delivered to Buyer, no later than June 26, 1995, a current plat of survey of
the Real Property, which survey shall meet the requirements described in
Exhibit 10.10.
10.11 Environmental Audit. The results of the Environmental Audit or
the results of any remediation conducted pursuant thereto
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by Old Dominion or Sellers shall be satisfactory to Buyer and Republic.
10.12 Due Diligence Investigation. The results of any due diligence
investigations by Buyer of the Business, the Purchased Assets and the
Facilities shall be satisfactory to Buyer in its reasonable discretion.
10.13 Supply Agreements. Old Dominion shall have executed and
delivered to Buyer and Republic the Supply Agreements.
10.14 Non-Competition Agreements. Each of Halltown, Dillard and Old
Dominion shall have executed and delivered to Buyer and Republic a
Non-Competition Agreement in the form attached hereto as Exhibit 10.14A and
each of Frank H. Buhler, Michael O. Buhler and R. Lewis Francis shall have
executed and delivered to Buyer and Republic a Non- Competition Agreement in
the form attached hereto as Exhibit 10.14B.
10.15 Water Rights. The quantity and quality of water available to
the Business and the Facilities, and the title and/or rights thereto to be
acquired by Buyer, shall be satisfactory to Buyer in its reasonable discretion.
10.16 Consents. Old Dominion and Sellers shall have obtained the
orders, approvals or consents of third parties listed on Schedule 10.16 to the
transactions contemplated hereby on terms satisfactory to Buyer and Republic.
10.17 Customer and Supplier Accounts. Buyer shall not have
reasonable cause to believe that any of the top five customers of Halltown (in
terms of sales) or any of the top five suppliers of scrap paper (in terms of
sales) to Halltown intends to cease doing business with the Business following
the Closing.
10.18 Release of Encumbrances. All Encumbrances on the Purchased
Assets and Facilities (other than any imposed or permitted by lenders to Buyer)
shall have been released or assumed by Buyer.
ARTICLE XI. CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers and Old Dominion under this Agreement are
subject to the satisfaction, or the written waiver thereof by Sellers and Old
Dominion, of the following conditions on or prior to the Closing Date:
11.1 Representations and Warranties of Buyer and Republic. All of the
representations and warranties of Buyer and Republic contained in this
Agreement shall have been true and correct when
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made, and shall be true and correct in all material respects on and as of the
Closing Date, except to the extent that changes shall have been approved in
writing by Sellers.
11.2 Covenants of Buyer and Republic. All of the covenants and
agreements herein on the part of the Buyer and Republic to be complied with or
performed on or before the Closing Date shall have been fully complied with and
performed.
11.3 Buyer's and Republic's Certificates. There shall be delivered to
Sellers a certificate dated as of the Closing Date and signed by the President
or a Vice President of Buyer to the effect set forth in Sections 11.1 and 11.2
as they relate to Buyer, which certificate shall have the effect of a
representation and warranty made by Buyer on and as of the Closing Date. There
shall be delivered to Sellers a certificate dated as of the Closing Date and
signed by the President or a Vice President of Republic to the effect set forth
in Sections 11.1 and 11.2 as they relate to Republic, which certificate shall
have the effect of a representation and warranty made by Republic on and as of
the Closing Date.
11.4 Certificates of Authorities. Buyer and Republic shall have
furnished to Sellers (a) a certificate of the Secretary of State of West
Virginia dated as of not more than twenty days prior to the Closing Date,
attesting to the organization and good standing of Buyer, (b) a certificate of
the Secretary of State of Delaware, dated as of a date not more than twenty
days prior to the Closing Date, attesting to the organization and good standing
of Republic, (c) copies, certified by the Secretary or an Assistant Secretary
of Buyer as of the Closing Date, of Buyer's Certificate of Incorporation and
all amendments thereto and Bylaws as amended and in effect at the Closing Date,
(d) copies, certified by the Secretary or an Assistant Secretary of Republic as
of the Closing Date, of Republic's Certificate of Incorporation and all
amendments thereto and Bylaws as amended and in effect at the Closing Date, (e)
a copy, certified by the Secretary or an Assistant Secretary of Buyer, of
resolutions duly adopted by the Board of Directors of Buyer duly authorizing
this Agreement, the Supply Agreements, the Non-Competition Agreements with
Sellers, Old Dominion, Frank H. Buhler, Michael O. Buhler and R. Lewis Francis
and the transactions contemplated hereby and thereby and (f) a copy, certified
by the Secretary or an Assistant Secretary of Republic, of resolutions duly
adopted by the Board of Directors of Republic duly authorizing this Agreement,
the Supply Agreements, the Non-Competition Agreements with Sellers, Old
Dominion, Frank H. Buhler, Michael O. Buhler and R. Lewis Francis and the
transactions contemplated hereby and thereby.
11.5 Injunctions. At the Closing Date, there shall not be in effect
any injunctions or restraining orders restraining or
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prohibiting the consummation of the purchase and sale of the Purchased Assets
or the other transactions contemplated hereby.
11.6 Satisfactory to Sellers' Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related legal matters shall have been satisfactory to
Edmunds & Williams, P.C.
11.7 Opinion of Counsel to Buyer and Republic. Sellers shall have
received an opinion from Locke Purnell Rain Harrell (A Professional
Corporation), counsel for Buyer and Republic, dated the Closing Date, to the
effect that (a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of West Virginia, and Republic is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (b) Buyer and Republic have full power,
authority and legal right to enter into this Agreement and the Supply
Agreements and to consummate the transactions contemplated hereby and thereby;
(c) the execution and delivery of this Agreement the Supply Agreements and the
Non-Competition Agreements with Old Dominion, Sellers, Frank H. Buhler, Michael
O. Buhler and R. Lewis Francis and the performance by Buyer and Republic of
their obligations hereunder and thereunder, have been duly authorized by all
requisite corporate action, and no further action or approval is required in
order to permit Buyer and Republic to consummate the transactions contemplated
by this Agreement, the Supply Agreements and the Non-Competition Agreements
with Old Dominion, Sellers, Frank H. Buhler, Michael O. Buhler and R. Lewis
Francis; and (d) this Agreement, the Supply Agreements and the Non-Competition
Agreements with Old Dominion, Sellers, Frank H. Buhler, Michael O. Buhler and
R. Lewis Francis have been duly executed by Buyer and Republic, and this
Agreement and the Supply Agreements and the Non-Competition Agreements with Old
Dominion, Sellers, Frank H. Buhler, Michael O. Buhler and R. Lewis Francis
constitute valid and binding obligations of Buyer and Republic, enforceable in
accordance with their terms (subject to the availability of the discretionary
remedy of specific performance and, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect but excluding any presently pending proceedings and
the exercise by a court of its general powers of equity); and (e) the execution
and delivery of this Agreement, the Supply Agreements and the Non-Competition
Agreements with Old Dominion, Sellers, Frank H. Buhler, Michael O. Buhler and
R. Lewis Francis by Republic and Buyer and the performance by Republic and
Buyer of their respective obligations thereunder do not constitute a violation
of or a default under their respective certificates or articles of
incorporation or bylaws, or any writs, orders, judgments or decrees by which
either of them are bound and of which counsel has actual knowledge. In
rendering the foregoing opinion, such counsel may rely as to questions of law
other than Delaware or
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federal law, upon opinions of local counsel retained by Buyer and Republic,
provided that such local counsel, are satisfactory to Sellers and Old Dominion
and counsel for Sellers and Old Dominion. Copies of such opinions so relied
upon by such counsel shall be attached to their opinion. The opinion of
counsel to Buyer and Republic shall state that Sellers and Old Dominion are
justified in relying upon the opinion of such local counsel.
11.8 Environmental Audit. The results of the Environmental Audit
shall be satisfactory to Halltown and Old Dominion.
11.9 Supply Agreements. Buyer and Republic shall have executed and
delivered to Old Dominion the Supply Agreements.
11.10 Non-Competition Agreements. Each of Republic and Buyer shall
have executed and delivered to Old Dominion and Sellers a Non-Competition
Agreement in the form attached hereto as Exhibit 10.14A and to each of Frank H.
Buhler, Michael O. Buhler and R. Lewis Francis a Non-Competition Agreement in
the forms attached hereto as Exhibits 10.14B, 10.14C and 10.14D, respectively.
ARTICLE XII. INDEMNIFICATION
12.1 Buyer's Losses. Sellers and Old Dominion, jointly and severally,
agree to indemnify Buyer and Republic and save and hold them harmless from,
against and in respect of any and all damages (including, without limitation,
amounts paid in settlement with Halltown's and Old Dominion's consent), losses,
obligations, liabilities, liens, deficiencies, costs and expenses, including,
without limitation, reasonable attorney's fees and costs incurred to comply
with injunctions and other court and Agency orders, and other costs and
expenses incident to any suit, action, investigation, claim or proceeding or to
establish Buyer's and Republic's right to indemnification hereunder (herein
referred to collectively as the "Buyer's Losses") suffered, sustained, incurred
or required to be paid by Buyer or Republic by reason of (a) any representation
or warranty made by Sellers or Old Dominion in or pursuant to this Agreement
being untrue or incorrect in any respect; (b) any failure by Sellers or Old
Dominion to observe or perform their covenants and agreements set forth in this
Agreement; (c) any liability for product warranties or defective products
arising from sales of finished goods manufactured or sold by Halltown prior to
the Closing Date; (d) any failure by Sellers to satisfy and discharge any other
debt, contract, agreement, liability, obligation, commitment, restriction,
disability or duty, whether direct or indirect, fixed, contingent or otherwise,
not expressly assumed by Buyer pursuant to this Agreement; (e) any and all
claims for wages, salaries, bonuses, workers' compensation, medical insurance,
disability, vacation, severance, sick benefits, other compensation or benefits
or payroll and unemployment taxes that Sellers have agreed to bear and pay
under Section 8.9; (f) any
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and all Bargaining Employee pension plan benefits (including, without
limitation, benefits to be vested under Section 8.5(b)) under Halltown's
Pension Plan for Bargaining Employees and any and all claims arising from any
failure to vest, fund or pay such pension plan benefits; (g) any and all
Nonbargaining Employee retirement benefits arising from the employment by
Halltown of any and all such employees and any and all claims arising from any
failure to vest, fund or pay such pension plan benefits that Sellers have
agreed to vest, fund or pay in accordance with this Agreement; or (h) claims
for COBRA continuation coverage made by or on behalf of employees, former
employees and their qualified beneficiaries on account of a qualifying event
occurring either prior to the Closing Date or as a result of the transactions
contemplated by this Agreement.
12.2 Sellers' Losses. Buyer and Republic, jointly and severally,
agree to indemnify Halltown, Dillard, and Old Dominion and save and hold them
harmless from, against, for and in respect of any and all damages (including,
without limitation, amounts paid in settlement with Buyer's and Republic's
consent), losses, obligations, liabilities, claims, deficiencies, costs and
expenses, including, without limitation, reasonable attorneys' fees and costs
incurred to comply with injunctions and other court and Agency orders, and
other costs and expenses incident to any suit, action, investigation, claim or
proceeding or to establish Halltown's, Dillard's, or Old Dominion's right to
indemnification hereunder (herein referred to collectively as "Sellers'
Losses") suffered, sustained, incurred or required to be paid by Halltown,
Dillard, or Old Dominion by reason of (a) any representation or warranty made
by Buyer in or pursuant to this Agreement being untrue or incorrect in any
respect, (b) any failure by Buyer to observe or perform its covenants and
agreements set forth in this Agreement, (c) any liability for product
warranties or defective products arising from sales of finished goods
manufactured and sold by Buyer after the Closing Date, (d) any failure by Buyer
to satisfy and discharge any liability or obligation expressly assumed by Buyer
pursuant to this Agreement arising after the Closing Date, or (e) any and all
claims made by employees at the Facilities for wages, salaries, bonuses,
workers' compensation, medical insurance, disability, vacation, sick benefits
or other compensation arrangements to the extent same are based on injury or
sickness occurring after the Employment Cut-off or based on employment service
rendered to Buyer after the Employment Cut-off or are based on Buyer's
obligations under Section 2.2 hereof or (f) for a period of seven (7) years
after the Closing Date, for any Environmental Costs arising after the Closing
Date from an Environmental Condition created after the Closing Date; provided,
however, the scope of this indemnification shall not include any Environmental
Costs arising after the Closing Date in connection with (i) an Environmental
Condition in existence on the Closing Date; (ii) the migration or worsening
after the Closing Date of an Environmental Condition in existence on the
Closing
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Date, except to the extent that either (A) the Buyer worsens the condition by
releasing additional Hazardous Substances or by disturbing the Environmental
Condition and causing additional releases; or (B) (I) the condition is unknown
to the Seller as of the closing date, (II) the condition is discovered by the
Buyer and the Buyer fails to give Seller notice of the condition and (III) the
condition worsens during the time period between Buyer's discovery of the
condition and the Seller's receiving actual knowledge of it; or (iii) any
matter for which the Indemnitees are indemnified pursuant to Section 12.6.
12.3 Notice of Loss; Indemnified Party's Negligence. Notwithstanding
anything herein contained, Buyer, Republic, Sellers, and Old Dominion shall not
have any liability under the indemnity provisions of this Agreement with
respect to a particular matter unless a notice setting forth in reasonable
detail the breach that is asserted has been given to the Indemnifying Party (as
hereinafter defined in Section 12.4) and, in addition, if such matter arises
out of a suit, action, investigation or proceeding, such notice is given
promptly after the Indemnified Party (as hereinafter defined in Section 12.4)
shall have been given notice of the commencement of the suit, action,
investigation or proceeding. Notwithstanding the preceding sentence, failure
of the Indemnified Party to give notice hereunder shall not release the
Indemnifying Party from its obligations under this Article XII, except to the
extent the Indemnified Party is actually prejudiced by such failure to give
notice. With respect to Buyer's Losses and Environmental Costs (as defined
below), Sellers and Old Dominion shall be the Indemnifying Parties and Buyer
and Republic shall be the Indemnified Parties. With respect to Sellers'
Losses, Buyer and Republic shall be the Indemnifying Parties and Halltown,
Dillard, and Old Dominion shall be the Indemnified Parties. Sections 12.1,
12.2 and 12.6 are intended to indemnify the Indemnified Parties against the
results of their own negligence. An Indemnified Party's failure to investigate
or lack of due diligence occurring for any reason whatsoever, shall not (a)
constitute negligence for purposes of this Agreement (including, without
limitation, this Section 12.3), (b) constitute a defense to any action or
proceeding brought by the Indemnified Party to enforce his or its rights under
this Article XII, (c) excuse performance by the Indemnifying Party of its
obligations under this Article XII, or (d) entitle the Indemnifying Party to
any right of setoff or counterclaim against amounts owed under this Article
XII.
12.4 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed
by an Indemnified Party, the Indemnifying Party shall be entitled promptly to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding at its own cost and expense. The
Indemnified Party shall have the right, but not the obligation, to participate
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at its own expense in a defense thereof by counsel of its own choosing, but the
Indemnifying Party shall be entitled to control the defense unless the
Indemnified Party has relieved the Indemnifying Party from liability with
respect to the particular matter or the Indemnifying Party fails to assume the
defense of the matter. If the Indemnifying Party fails to defend, contest or
otherwise protect in a timely manner against any such suit, action,
investigation, claim or proceeding, the Indemnified Party shall have the right,
but not the obligation, to defend, contest or otherwise protect against the
same, and make any compromise or settlement thereof and recover the entire cost
thereof from the Indemnifying Party including reasonable attorneys' fees,
disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or the compromise or settlement thereof.
However, if the Indemnifying Party undertakes the defense of such matters, the
Indemnified Party shall not, so long as the Indemnifying Party does not abandon
the defense thereof, be entitled to recover from the Indemnifying Party any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than the reasonable costs of
investigation undertaken by the Indemnified Party with the prior written
consent of the Indemnifying Party.
12.5 Cooperation. Republic, Buyer, Sellers and Old Dominion and each
of their affiliates, successors and assigns shall cooperate with each other in
the defense of any suit, action, investigation, proceeding or claim by a third
party and, during normal business hours, shall afford each other access to
their books and records and employees relating to such suit, action,
investigation, proceeding or claim and shall furnish each other all such
further information that they have the right and power to furnish as may
reasonably be necessary to defend such suit, action, investigation, proceeding
or claim.
12.6 Special Environmental Indemnity by the Halltown and Old Dominion.
(a) Subject to Section 12.8, Sellers and Old Dominion, jointly and severally,
shall and do hereby indemnify, defend and save and hold harmless Buyer and
Republic and their respective officers, directors, employees, representatives,
agents, and attorneys (the "Indemnitees") for a period of seven (7) years from
the Closing Date from and against any and all Environmental Costs (as defined
below) arising in any manner in connection with:
(i) The Use of the Subject Property at any time prior to
or during its Use by Sellers; any Environmental Condition in existence at any
time prior to or during the Use of the Subject Property by Sellers; the
occurrence, at any time prior to or during the Use of any Subject Property by
Sellers, of any Environmental Activity; or any failure of Sellers or any third
party to comply with all applicable Environmental Requirements relating to the
Subject Property or the Use of any Subject Property prior to or
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during its Use by Sellers and, with respect only to the waste water treatment
facilities included in the Subject Property, (i) only during the period
referred to in Section 12.6(b) and (ii) only with respect to Environmental
Costs resulting from discharges of waste water occurring in connection with
shutdowns of the production line for maintenance or in the event of emergencies
and inadvertent discharges of waste water by Buyer in each case that are in
violation of the permit or Consent Order referred to in Section 6.5 and
Schedule 6.5C.
(ii) Any failure of any representation or warranty set forth
in Section 6.19 to be correct in all respects as of the Closing Date;
(iii) Any failure to comply with the covenants set forth in
Section 8.2.8;
(iv) The transportation to, disposal at, or migration onto or
into adjacent property or any off-site location on or before the Closing Date
of any Hazardous Materials from the Subject Property as a result of
Environmental Activity or an Environmental Condition that occurred or existed
prior to or during the Use of the Subject Property by Sellers, whether or not
the transportation or disposal was conducted in full compliance with
Environmental Requirements; and
(v) Any claim, demand or cause of action, or any action
or other proceedings, including any investigation, inquiry, order, hearing,
action or other proceeding by or before any Environmental Agency, whether
meritorious or not, brought or asserted against Buyer or Republic which
directly or indirectly relates to, arises from or is based on any of the
matters described in clauses (i) through (iv) of this Section 12.6(a) or any
allegation of any such matters.
(b) Subject to Section 12.8(e), in addition to the other
indemnification under this Section 12.6, Sellers and Old Dominion, jointly and
severally, shall and do hereby indemnify, defend and save and hold harmless the
Indemnitees from and against all costs and expenses and capital expenditures
and improvements reasonably required to cause the waste water treatment
facilities at the Subject Property to be in compliance with the permit and
Consent Order referred to in Section 6.5 and Schedule 6.5C. The
indemnification under this Section 12.6(b) shall remain in effect until the
earlier to occur of (i) the expiration of a full twelve month period commencing
on or after the Closing Date in which no exceedances in excess of the discharge
parameters established by the permit then in effect have occurred, or (ii) the
seventh (7th) anniversary of the Closing Date.
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(c) The obligations of Sellers and Old Dominion under this
Section shall include the obligation to defend Indemnitees against any claim
or demand for Environmental Costs, the obligation to pay and discharge any
Environmental Costs imposed on Indemnitees, the obligation to reimburse
Indemnitees for any Environmental Costs incurred or suffered by Indemnitees,
and the obligation to pay the costs and expenses incident to establishing
Buyer's or Republic's right to indemnification hereunder, provided in each
instance that the claim for Environmental Costs arises in connection with a
matter for which Indemnitees are entitled to indemnification under this
Agreement.
(d) "Environmental Costs" shall mean any of the following
which arise in any manner regardless of whether based in contract, tort,
implied or express warranty, strict liability, Environmental Requirement or
otherwise: all liabilities, losses, judgments, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including, without
limitation, the reasonable fees and disbursements of legal counsel and
environmental consultants, all costs related to the performance of any required
or necessary assessments, investigations, remediation, response, containment,
closure, restoration, repair, cleanup or detoxification, the preparation and
implementation of any maintenance, monitoring, closure, remediation, abatement
or other plans required by an Environmental Agency or by Environmental
Requirements and any other costs recovered or recoverable under any
Environmental Requirement), fines, penalties or monetary sanctions, provided,
however, that in each instance, except in emergency situations, Sellers and Old
Dominion shall be given written notice in advance of the performance of any
required or necessary assessments, investigations, remediation, response,
containment, closure, restoration, repair, clean-up or detoxification, the
preparation and implementation of any maintenance, monitoring, closure,
abatement or other plans required by an Environmental Agency or by
Environmental Requirements. The failure to give this prior written notice
shall not release Sellers or Old Dominion from any obligations under this
Agreement or otherwise except to the extent that such failure materially
prejudices the rights of Sellers or Old Dominion. Environmental Costs shall
include without limitation: (i) damages for personal injury or death, or
injury to property or to natural resources; (ii) damage to the Subject Property
or other property; (iii) damage resulting from the loss of the use of all or
any part of the Subject Property, or such other property, including but not
limited to business loss; (iv) the cost of any demolition, rebuilding or repair
of the Subject Property, or other property, required by Environmental
Requirements or necessary to restore the Subject Property, or such other
property, to its condition prior to damage caused by an Environmental
Condition, Environmental Activity or by the remediation of an Environmental
Condition or Environmental Activity; and (v) diminution in value of the Subject
Property, or other property. Buyer shall have the
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right to select the consultants, engineers and/or contractors to perform any
investigation or remediation which would constitute Environmental Costs
indemnifiable hereunder, subject to the right of Old Dominion to approve such
consultants, engineers and/or contractors, which consent shall not be
unreasonably withheld.
12.7 Subrogation, Assignment, and Survival. If the Buyer or
Republic pays any Environmental Costs for which it is entitled to
indemnification under this Article, Buyer or Republic, as applicable, shall be
subrogated to any rights Sellers or Old Dominion may have, including any
indemnifications from any present, future or former owners, tenants, or other
occupants or users of the Subject Property (or any portion of the Subject
Property). No consent by Sellers or Old Dominion shall be required for any
assignment or reassignment of the rights of Buyer or Republic under this
Article. Neither the Environmental Audit, nor any inspections conducted by
Buyer or Republic or their representatives, nor the consummation of this
Agreement in light of the matters disclosed in the Environmental Audit or as a
result of these inspections shall affect or modify the obligations of Halltown
and Old Dominion under this Article or the rights and obligations of the
parties to this Agreement under applicable Environmental Requirements,
including but not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et
seq.); provided, however, Seller shall have the right to present, in compliance
with applicable evidentiary or other rules of a proceeding, the Environmental
Audit as evidence of the results of the environmental investigation of the
Property and the condition thereof as of the date of the Environmental Audit.
This evidence will not be considered as an admission or presumption of fact or
as conclusive evidence of fact. This right shall only be exercisable in a
judicial or administrative proceeding or a governmental regulation action and
shall not otherwise effect the other confidentiality provisions of this
Agreement.
12.8 Deductible, Co-payment, and Limitation on Environmental Costs.
Notwithstanding Section 12.6(a) or Section 12.1, (a) Buyer shall bear, and
Sellers and Old Dominion shall have no obligation under Section 12.6(a) or
Section 12.1 (but only insofar as Section 12.1 provides indemnification with
respect to any breach of any representation, warranty or covenant contained in
Sections 6.19 or 8.2.8(b)) (the "Referenced Environmental Indemnification
Provisions") to indemnify and hold harmless the Indemnitees from, the first
$75,000 of Environmental Costs that, but for this Section 12.8, would otherwise
be indemnifiable by Sellers and Old Dominion under the Referenced Environmental
Indemnification Provisions; (b) Buyer shall bear ten percent (10%), and Sellers
and Old Dominion, jointly and severally, shall bear, and indemnify and hold
harmless Indemnitees from, ninety percent (90%), of all Environmental Costs in
excess of $75,000 that, but for this Section 12.8, would
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otherwise be indemnifiable by Sellers and Old Dominion under the Referenced
Environmental Indemnification Provisions, until the Environmental Costs paid by
Old Dominion and Sellers under this Section 12.8(b) equal $7,000,000; (c) Buyer
shall bear, and Sellers and Old Dominion shall have no obligation under the
Referenced Environmental Indemnification Provisions to indemnify and hold
harmless Buyer and Indemnitees from any Environmental Costs in excess of the
sum of the Environmental Costs covered by clauses (a) and (b) of this Section
12.8, (d) Sellers and Old Dominion shall have no obligation under the
Referenced Environmental Indemnification Provisions to indemnify and hold
harmless Indemnitees from Environmental Costs of the type referred to in
Section 12.6(d)(iii) to the extent such indemnification would result in the
payment by Sellers or Old Dominion of such Environmental Costs in excess of
$2,000,000; and (e) notwithstanding Section 12.6(b), Buyer shall bear twenty
percent (20%) and Sellers and Old Dominion, jointly and severally, shall bear,
and indemnify and hold harmless Indemnitees from, eighty percent (80%), of the
costs and expenses and capital expenditures and improvements referred to in
Section 12.6(b) that, but for this Section 12.8(e), would otherwise be
indemnifiable by Sellers and Old Dominion under Section 12.6(b), until the sum
thereof paid by Sellers and Old Dominion equals $50,000; and Sellers and Old
Dominion shall have no obligation under Section 12.6(b) to indemnify and hold
harmless Indemnitees from such costs and expenses and capital expenditures and
improvements referred to in Section 12.6(b) to the extent such indemnification
would result in the payment by Sellers or Old Dominion of such items in excess
of $50,000. The foregoing provisions of this Section 12.8 shall not apply to
any Environmental Costs incurred by Buyer or Sellers in connection with (i) the
removal of underground storage tanks or (ii) any remediation of any
Environmental Condition required in connection therewith or in connection with
the "dry well" identified in the report of Buyer's environmental consultants,
it being agreed by the parties hereto that Buyer shall bear the cost of any
such removal under clause (i) and that Sellers shall bear the cost of any such
remediation under clause (ii); provided, however, that any costs incurred by
Sellers under this sentence shall apply against the $7,000,000 limit in
subsection (b) of this Section 12.8. Sellers' and Old Dominion's obligations
with respect to asbestos-containing materials at the Facilities shall not be
subject to the provisions of this Section 12.8 but shall be limited as provided
in Section 8.11.
ARTICLE XIII. TERMINATION
13.1 Termination. This Agreement may be terminated and abandoned at
any time prior to or on the Closing Date:
13.1.1 Mutual Consent. By the mutual consent in writing of Buyer and
Sellers.
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13.1.2 By Buyer. By Buyer in writing if any of the conditions to the
obligations of Buyer contained herein shall not have been satisfied or, if
unsatisfied, waived as of the Closing Date.
13.1.3 By Sellers. By Sellers in writing if any of the conditions to
the obligations of Sellers herein contained shall not have been satisfied or,
if unsatisfied, waived as of the Closing Date.
13.1.4 Environmental. By Buyer or Sellers in writing if the results
of the Environmental Audit is not satisfactory to them.
13.1.5 Closing Delayed. By Buyer or Sellers in writing if the
Closing shall not have occurred by June 30, 1995.
13.2 No Further Force or Effect. In the event of termination and
abandonment of this Agreement pursuant to the provisions of Section 13.1, this
Agreement shall be of no further force or effect, except for Sections 14.1 and
14.2 which shall not be affected by termination of this Agreement.
ARTICLE XIV. MISCELLANEOUS
14.1 Expenses. Except as otherwise expressly provided herein,
Halltown, Dillard, Old Dominion, Buyer, and Republic shall each pay its own
expenses in connection with the preparation of this Agreement, and the
consummation of the transactions contemplated hereby, including, without
limitation, fees of its own counsel, auditors and other experts, whether or not
such transactions be consummated.
14.2 Confidentiality. Buyer and Republic shall use all information
concerning Sellers, the Purchased Assets and the Business furnished by Sellers
or their representatives (including, without limitation, Crestar Investment
Bank) solely for the purposes of the transactions contemplated hereby and shall
keep all such information confidential, and will not disclose any such
information other than to their respective officers, counsel, accountants and
other representatives in connection with the transactions contemplated hereby
and to persons providing or potentially providing financing for the
transactions contemplated hereby and their respective officers, counsel,
accountants and other representatives, except as otherwise required by law. If
the discussions between Sellers and Buyer are discontinued, Buyer will return
to Sellers all information furnished by it (confidential or otherwise) and will
not retain any copies thereof. The confidentiality agreement in letter form
dated November 9, 1993, by and between Buyer and Crestar Investment Bank shall
remain in full force and effect.
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14.3 Notices. All notices, requests or other communications hereunder
shall be in writing, addressed to Halltown, Dillard, Old Dominion, Buyer, or
Republic at the following addresses:
(i) If to Halltown, Dillard, and Old Dominion:
Old Dominion Box Company, Inc.
P.O. Box 680
Lynchburg, Virginia 24505
or
300 Elon Road
Madison Heights, Virginia 24572
Attention: Frank H. Buhler
Telecopier: (804) 929-5462
(ii) If to Buyer and Republic:
Republic Paperboard Company of West Virginia
P.O. Box 1307
Hutchinson, Kansas 67504
or
811 East 30th Avenue
Hutchinson, Kansas 67502
Attention: Stephen L. Gagnon
Telecopier: (316) 727-2727
The address of either party may be changed by giving notice in writing at any
time to the other party. Any notice to be given under this Agreement shall be
deemed duly given if (i) delivered personally, (ii) sent by telecopy, (iii)
delivered by overnight express, or (iv) sent by United States registered or
certified mail, postage prepaid. Any notice that is delivered personally, or
sent by telecopy or overnight express in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party. Any notice that is addressed and mailed in the manner
provided herein shall be conclusively presumed to have been given to the party
to which it is addressed at the close of business, local time of the recipient,
on the third day after it is so placed in the mail.
14.4 Entire Agreement; Modification and Waiver. This Agreement sets
forth all of the promises, covenants, agreements, conditions and understandings
between the parties hereto and supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions, expressed or implied,
oral or written. This Agreement may be amended, modified, superseded or
cancelled and any of the terms, covenants, representations, warranties or
conditions hereof or any breach thereof may be waived only in writing signed by
Sellers and Buyer, or in the case of a waiver, by the party waiving compliance.
No waiver by any party of any condition, or the breach of any term,
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covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition or of the breach of any other term, covenant, representation or
warranty set forth in this Agreement.
14.5 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of West
Virginia (other than its choice of law principles).
14.6 Captions. The captions of the various Articles and Sections are
for convenience of reference only and shall not affect the interpretation of
the provisions hereof.
14.7 Successors and Assigns. This Agreement, and the rights and
obligations hereunder of Buyer, may be assigned by Buyer to an "Affiliate" of
Republic or Buyer, provided, however, any agreements, waivers, or consents made
or given by Buyer hereunder shall be binding upon any such assignee and any
such assignee shall assume the obligations of Buyer hereunder. No such
assignment shall relieve the assignor of its obligations hereunder. For
purposes of this Section, the term "Affiliate" shall mean any corporation,
partnership, association, trust or other legal entity in which Republic or
Buyer has a direct or indirect majority equity interest. Except as set forth
above, this Agreement may not be assigned by any party except with the prior
written consent of the other parties. This Agreement, and all of the terms,
covenants and representations, or warranties and conditions hereof, shall be
binding upon, and inure to the benefit and be enforceable by, the parties
hereto and their successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer or shall confer upon any person other than the
parties hereto, their successors and permitted assigns and the Indemnitees any
rights or remedies under or by reason of this Agreement.
14.8 Survival. All covenants and agreements set forth in this
Agreement, or any agreement furnished pursuant hereto, shall survive the
Closing and any investigation made by or in behalf of any party hereto. All
representations and warranties set forth in this Agreement, or any schedule or
document furnished pursuant hereto, shall survive the Closing and any
investigation made by or in behalf of any party hereto for a period of three
years from the Closing Date; provided, however, that the representations and
warranties in the first sentence of Section 6.3 shall survive indefinitely,
Section 6.12 shall survive until the statutes of limitations applicable to the
matters covered by such Section have expired, running from the Closing Date and
Section 6.19 shall survive for a period of seven (7) years from the Closing
Date.
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<PAGE> 64
14.9 Schedules and Certificates. All statements contained in any
disclosure schedule, certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated
hereby, are an integral part of this Agreement, and shall be deemed
representations and warranties hereunder, but shall not be deemed an admission
of wrong-doing, liability, or responsibility of Sellers or Old Dominion.
14.10 Facts "Known" to a Corporation. Whenever a representation or
warranty is made herein as being "to the best of knowledge," "to the knowledge
of," or "known" to a party, it is understood and agreed that such
representation or warranty is made by such party based on and limited to facts
within the actual knowledge of such party or within the actual knowledge of
current Management. No such party or member of Management shall be required to
have made or cause to be made an investigation of such representation or
warranty except to the extent that facts within the actual knowledge of such
person would cause a reasonable and prudent person to believe that an
appropriate further investigation of such facts is necessary to accurately make
a particular representation or warranty hereunder. Nothing in this Section
shall be deemed to impart personal liability to any member of Management of a
party to this Agreement. "Management" of a party shall mean any officer of
such party. In the case of Halltown, "Management" shall also include its plant
manager, office manager and mill superintendent.
14.11 Severability. If any provision or provisions of this
Agreement or any portion of any provision hereof, shall be deemed invalid or
unenforceable pursuant to a final determination of any court of competent
jurisdiction or as a result of future legislative action, such determination or
action shall be construed so as not to affect the validity or enforceability
hereof and shall not affect the validity or effect of any other portion hereof.
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IN WITNESS WHEREOF, the parties have duly caused this Agreement to be
executed as of the day and year first above written.
OLD DOMINION BOX COMPANY, INC.
ATTEST:
/s/ R. LEWIS FRANCIS By: /s/ FRANK H. BUHLER
R. Lewis Francis, Secretary Frank H. Buhler, Chairman of the Board
HALLTOWN PAPERBOARD COMPANY
ATTEST:
/s/ R. LEWIS FRANCIS By: /s/ FRANK H. BUHLER
R. Lewis Francis, Secretary Frank H. Buhler, Chairman of the Board
DILLARD INVESTMENT CORPORATION
ATTEST:
/s/ R. LEWIS FRANCIS By: /s/ FRANK H. BUHLER
R. Lewis Francis, Secretary Frank H. Buhler, Chairman of the Board
REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA
ATTEST:
/s/ JANEY L. SOWELL By: /s/ PHIL SIMPSON
Janey L. Sowell, Secretary Phil Simpson, Chairman of the
Board, President and Chief
Executive Officer
REPUBLIC GYPSUM COMPANY
ATTEST:
/s/ JANEY L. SOWELL By: /s/ PHIL SIMPSON
Janey L. Sowell, Secretary Phil Simpson, Chairman of the
Board, President and Chief
Executive Officer
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STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Frank H. Buhler and R. Lewis Francis known to me to be the
persons whose names are subscribed to the foregoing instrument, and known to me
to be the Chairman of the Board and the Secretary of Old Dominion Box Company,
Inc., a Virginia corporation, and each acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, and as the act
of said corporation.
Given under my hand and official seal this 30th day of June 1995.
[S E A L] Notary Public, State of Texas
My Commission Expires:
/s/ YVONNE M. PATTERSON
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Frank H. Buhler and R. Lewis Francis known to me to be the
persons whose names are subscribed to the foregoing instrument, and known to me
to be the Chairman of the Board and the Secretary of Halltown Paperboard
Company, a West Virginia corporation, and each acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed,
and as the act of said corporation.
Given under my hand and official seal this 30th day of June 1995.
[S E A L] Notary Public, State of Texas
My Commission Expires:
/s/ YVONNE M. PATTERSON
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<PAGE> 67
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Frank H. Buhler and R. Lewis Francis known to me to be the
persons whose names are subscribed to the foregoing instrument, and known to me
to be the Chairman of the Board and the Secretary of Dillard Investment
Corporation, a Virginia corporation, and each acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed,
and as the act of said corporation.
Given under my hand and official seal this 30th day of June 1995.
[S E A L] Notary Public, State of Texas
My Commission Expires:
/s/ YVONNE M. PATTERSON
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Phil Simpson and Janey L. Sowell known to me to be the
persons whose names are subscribed to the foregoing instrument, and known to me
to be the Chairman of the Board, President and Chief Executive Officer, and
Secretary, of Republic Gypsum Company, a Delaware corporation, and each
acknowledged to me that he or she executed said instrument for the purposes and
consideration therein expressed, and as the act of said corporation.
Given under my hand and official seal this 30th day of June, 1995.
[S E A L] Notary Public, State of Texas
My Commission Expires:
/s/ YVONNE M. PATTERSON
- 61 -
<PAGE> 68
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Phil Simpson and Janey L. Sowell known to me to be the
persons whose names are subscribed to the foregoing instrument, and known to me
to be the Chairman of the Board, President and Chief Executive Officer, and
Secretary of Republic Paperboard Company of West Virginia, a West Virginia
corporation, and each acknowledged to me that he or she executed said
instrument for the purposes and consideration therein expressed, and as the act
of said corporation.
Given under my hand and official seal this 30th day of June, 1995.
[S E A L] Notary Public, State of Texas
My Commission Expires:
/s/ YVONNE M. PATTERSON
This document prepared by
and should be returned to:
Bryan E. Bishop
Locke Purnell Rain Harrell
(A Professional Corporation)
2200 Ross Avenue
Suite 2200
Dallas, TX 75201
- 62 -
<PAGE> 1
EXHIBIT (2)(ii)
INDEX OF EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit 1.1A Permitted Encumbrances
Exhibit 1.1B Employee Receivables
Exhibit 1.1C Excluded Assets
Exhibit 1.2 Additional Purchased Assets
Exhibit 1.2A Old Dominion's Asset Purchase Responsibility
Exhibit 5.1.5A Paperboard Supply Agreement
Exhibit 5.1.5B Paper Stock Supply Agreement
Exhibit 6.1 Authority to Transact Business
Exhibit 10.10 Survey Requirements
Exhibit 10.14A Company Non-Compete Agreement
Exhibit 10.14B Individual Non-Compete Agreements
Schedule 5.1.2A Original Record Categories
Schedule 5.1.2B Original or True Copy Record Categories
Schedule 6.5A Description of Real Property
Schedule 6.5B Description of Tangible Personal Property
Schedule 6.5C Consent Order
Schedule 6.6 Schedule of Primary Contracts and
Agreements
Schedule 6.8A Schedule of Suits, Proceedings, Etc.
Schedule 6.8B Court of Agency Orders
Schedule 6.9A Schedule of Notices of Violations and Pending
Investigations
Schedule 6.9B Schedule of Material Licenses, Permits, Certificates,
Approvals, Registrations, Shoprights,
Authorizations and Memberships
Schedule 6.10 Labor Disputes
Schedule 6.12 Unpaid Taxes
Schedule 6.13A Employee Benefit Plans
Schedule 6.13B Employee Information
Schedule 6.13C Employee Benefit Plan Filings
Schedule 6.13D Pension Accrued Benefits and Actuarial Reports
</TABLE>
<PAGE> 2
INDEX OF EXHIBITS AND SCHEDULES - PAGE 2
<TABLE>
<S> <C>
Schedule 6.15 Consents
Schedule 6.16 Liabilities
Schedule 6.17 Absence of Certain Changes or Events
Schedule 6.19A Hazardous Materials Currently Present
Schedule 6.19B Hazardous Materials Historically Present
Schedule 6.19C Hazardous Materials Management
Schedule 6.19D Permit & Regulation - Non Compliance
Schedule 6.19E Environmental Costs
Schedule 6.19F Violations of Environmental Requirements
Schedule 6.19G Schedule of Chemicals used at Halltown Paperboard
Company
Schedule 6.19H Restrictions on Transfer of Development
Schedule 6.24 Safety Requirements
Schedule 10.16 Consents
</TABLE>
Pursuant to Item 601(b)(2) of Regulation S-K, the foregoing Exhibits
and Schedules have not been filed. The Registrant agrees to furnish
supplementally a copy of any of such omitted Exhibits and Schedules to the
Commission upon request.
<PAGE> 1
EXHIBIT (4)(i)
REVOLVING AND TERM CREDIT AGREEMENT
Dated as of June 30, 1995
By and Among
REPUBLIC GYPSUM COMPANY,
REPUBLIC PAPERBOARD COMPANY,
REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA
and
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2: LINE OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Agreement to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Revolving Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3: TERM LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Agreement to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Term Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 4: DISBURSEMENT, PAYMENTS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1. Revolving Loan Disbursement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2. Term Loan Disbursement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4. Revolving Loan Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5. Term Loan Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 5: CONDITIONS TO MAKING LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1. Delivery of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2. No Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3. Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4. Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.5. Proper Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.6. Required Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.7. Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.8. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 6: REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1. Corporate Existence and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2. Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.3. No Conflict; Governmental Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.4. Compliance with Laws; Environmental and Safety Matters . . . . . . . . . . . . . . . . . . . . . . . 7
6.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.7. Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.9. Litigation; Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.10. Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.11. Investment Company Act; Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . 9
6.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
6.13. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.14. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.15. No Undisclosed Dividend Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 7: AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1. Conduct of Business and Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3. Compliance with Laws and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4. Financial Statements, Reports, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5. Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6. Access to Properties and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.7. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.8. Primary Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9. Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10. Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12. Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 8: NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.1. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3. Sale and Lease-Back Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.4. Mergers, Consolidations and Transfers of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.5. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6. Dividend Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.7. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.8. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 9: EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 10: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.2. Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.3. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.5. Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.6. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.7. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.8. Waivers; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.9. Interest Rate Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.13. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.14. Jurisdiction; Consent to Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.15. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
(ii)
<PAGE> 4
REVOLVING AND TERM CREDIT AGREEMENT
THIS REVOLVING AND TERM CREDIT AGREEMENT, dated as of the 30th day of
June, 1995, by and among REPUBLIC GYPSUM COMPANY, a Delaware corporation
("RGC"), REPUBLIC PAPERBOARD COMPANY, a Kansas corporation ("RPC"), REPUBLIC
PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia corporation ("RPCWV"), and
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY, a national banking association
(the "Bank");
WITNESSETH THAT:
WHEREAS, RGC has applied to the Bank for an unsecured revolving line
of credit in the amount of Seven Million Dollars ($7,000,000.00), and RGC
intends to use the proceeds thereof, in part, to fund intercompany loans and
advances to RPC and RPCWV;
WHEREAS, RGC and RPCWV have applied to the Bank for a secured term
loan in the amount of Twenty-Eight Million Dollars ($28,000,000.00); and
WHEREAS, the Bank has agreed to make such a line of credit loan and
such a term loan available to such parties upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties agree as follows:
ARTICLE 1: DEFINITIONS. Certain terms used in this Agreement are
specifically defined herein. Certain other terms used herein are defined in
Exhibit 1, attached hereto and incorporated herein by this reference.
ARTICLE 2: LINE OF CREDIT.
2.1. Agreement to Lend. The Bank agrees, on the terms and
subject to the conditions set forth in this Agreement, to make loans
(each a "Revolving Loan") to RGC ("Revolving Loan Borrower"), from
time to time during the period beginning on the Closing Date and
ending on the day next preceding the second anniversary of the Closing
Date (the "Revolving Credit Maturity Date") or the date of termination
of the commitments hereunder pursuant to Article 9 upon the occurrence
of an Event of Default, in such amounts as Borrower shall request as
provided in Section 4.1 hereof; provided, however, that the Bank shall
have no obligation to make a requested Revolving Loan if, after the
making of such Revolving Loan, the aggregate unpaid principal balance
of
<PAGE> 5
all Revolving Loans made by the Bank to Revolving Loan Borrower
hereunder would exceed the Revolving Credit Commitment or if a Default
has occurred and is continuing. Notwithstanding the foregoing,
Revolving Loan Borrower and the Bank agree that on the first
anniversary of the Closing Date, and on each anniversary of the
Closing Date thereafter, the Revolving Credit Maturity Date may be
extended for an additional one-year period as Revolving Loan Borrower
and the Bank may mutually agree, so that at each such anniversary on
which the maturity of the Revolving Loan is extended, the Revolving
Credit Maturity Date shall be the date that is two years after such
anniversary.
2.2. Revolving Note. The Revolving Loans shall initially
be evidenced by and repaid in accordance with a Revolving Credit
Promissory Note executed by Revolving Loan Borrower, in the form of
Exhibit 2.2 hereto, dated as of the Closing Date, and payable to the
order of the Bank. Such note and any and all amendments, extensions,
modifications, renewals, reaffirmations, restatements, replacements
and substitutions thereof and therefor are herein referred to as the
"Revolving Note."
2.3. Interest Rate. Interest shall accrue on the unpaid
principal balance of the Revolving Note outstanding from time to time
at a rate or rates determined as provided therein.
2.4. Guaranty. In order to induce the Bank to make the
Revolving Loans, without which inducement the Bank would be unwilling
to make the Revolving Loans, and in order to assure that RGC will have
available funds with which to make intercompany loans and advances to
RPC and RPCWV, RPC and RPCWV agree to jointly and severally
unconditionally guarantee the Revolving Loans and further agree to
execute the Revolving Loan Guaranty Agreement ("Revolving Loan
Guaranty") in the form of Exhibit 2.4 hereto.
ARTICLE 3: TERM LOAN.
3.1. Agreement to Lend. In addition to making the
Revolving Loans pursuant to Section 2.1 hereof, the Bank agrees, on
the terms and subject to the conditions set forth in this Agreement,
to make a term loan (the "Term Loan") to RGC and RPCWV (collectively
"Term Loan Borrower") in a principal amount not exceeding the Term
Loan Commitment. The Term Loan shall be fully disbursed to Term Loan
Borrower on the Closing Date.
3.2. Term Note. The Term Loan shall be evidenced by and
repaid in accordance with a Term Loan Promissory Note executed by Term
Loan Borrower, in the form of Exhibit 3.2 hereto, dated as of the
Closing Date, and payable to the order of the Bank. Such note and any
and all amendments,
2
<PAGE> 6
extensions, modifications, renewals, reaffirmations, restatements,
replacements and substitutions thereof and therefor are herein
referred to as the "Term Note."
3.3. Interest Rate. Interest shall accrue on the unpaid
principal balance of the Term Loan Note outstanding from time to time
at a rate or rates determined as provided therein.
3.4. Guaranty. In order to induce the Bank to make the
Term Loan and the Revolving Loan, without which inducement the Bank
would be unwilling to make the Term Loan or the Revolving Loan, RPC
agrees to unconditionally guarantee all of the obligations of the Term
Loan Borrower with respect to the Term Loan and further agrees to
execute the Term Loan Guaranty Agreement ("Term Loan Guaranty") in the
form of Exhibit 3.4 hereto.
3.5. Collateral. For value received, and as security for
the payment and performance of the Term Loan, RPCWV hereby mortgages,
pledges, sells, assigns, transfers and grants unto the Bank a first
lien and first security interest in all of the right, title and
interest of RPCWV in and to the Collateral as set forth in the
Security Agreement ("Security Agreement") in the form of Exhibit
3.5(a) attached hereto, and in the Deed of Trust ("Deed of Trust") in
the form of Exhibit 3.5(b) attached hereto, and in such other
documents encumbering the Collateral as may be required by the Bank.
Until all obligations with respect to the Term Loan have been
satisfied, the Banks liens and security interests in and to all of the
Collateral, and all products and proceeds thereof, shall continue in
full force and effect as set forth in the Security Agreements and the
Deed of Trust. RPCWV shall perform any and all steps requested by the
Bank to perfect, maintain and protect the Bank's liens and security
interests in the Collateral.
ARTICLE 4: DISBURSEMENT, PAYMENTS AND FEES.
4.1. Revolving Loan Disbursement Procedures. Revolving
Loans shall be disbursed by the Bank upon request by Revolving Loan
Borrower from time to time on or after the Closing Date, in such
amounts as Revolving Loan Borrower may request, provided, however,
that Revolving Loans shall be disbursed only in increments of
$100,000, subject to the limitations on the Bank's obligations to make
Revolving Loans set forth in Section 2.1 hereof. Subject to the terms
of this Agreement, Revolving Loan Borrower may borrow, repay and
reborrow Revolving Loans at any time prior to the Revolving Credit
Maturity Date or the date of termination of the commitments hereunder
pursuant to Article 9 upon the occurrence of an Event of Default. All
Revolving Loans shall be made in strict compliance with the terms and
provisions of this Agreement. Each request for a Revolving
3
<PAGE> 7
Loan shall be delivered to the Bank in writing or by telex or
facsimile transmission in the manner provided in Section 10.1 hereof,
not later than 10:00 a.m., Kansas City, Missouri time, on the date on
which Revolving Loan Borrower desires disbursement of the Revolving
Loan, which date shall be a Business Day, shall be specified in the
request and is hereinafter referred to as a "Disbursement Date." The
Bank may rely and act upon any such request which is received from a
person believed by the Bank in good faith to be authorized to make
such request on behalf of Revolving Loan Borrower. Subject to all of
the terms and conditions of this Agreement, the Bank shall make
available to Revolving Loan Borrower, not later than 1:00 p.m., Kansas
City, Missouri time, on each Disbursement Date, the amount of the
requested Revolving Loan to be disbursed on such Disbursement Date, by
crediting, in immediately available funds, an account maintained by
Revolving Loan Borrower with the Bank. The Bank shall record in its
records all Revolving Loans made by the Bank to Revolving Loan
Borrower pursuant to this Agreement and all payments made on the
Loans.
4.2. Term Loan Disbursement Procedures. The Term Loan
shall be disbursed on the Closing Date and shall be in the amount of
the Term Loan Commitment, by crediting, in immediately available
funds, an account maintained by Term Loan Borrower with the Bank.
4.3. Payments. All payments of principal, interest, Fees,
taxes, charges, expenses and other items payable by any Borrower
hereunder and under the Notes shall be made in dollars and shall be
credited on the date of receipt by the Bank if received by the Bank at
its principal office in Kansas City, Missouri, in immediately
available funds, prior to 2:00 p.m., Kansas City, Missouri time, on a
Business Day. Payments made in funds which are not immediately
available shall be credited only when the funds are collected by the
Bank, and payments received (whether from any Borrower in immediately
available funds or through the collection of funds which were not
immediately available at the time payment was tendered by any
Borrower) after 2:00 p.m. will be credited on the next Business Day.
The Bank reserves the right to apply all payments received by it from
any Borrower and designated or authorized to be applied to a Note
first to any Fees and other charges then due to the Bank, then to
accrued interest on such Note and then to reduction of the principal
balance of such Note, or such other order as the Bank may determine in
its sole discretion. The Bank shall also record in its records, in
accordance with customary accounting practice, all interest, Fees,
taxes, charges, expenses and other items properly chargeable to any
Borrower with respect to the Loans, all payments received by the Bank
for application to the Obligations, and all other appropriate debits
and credits. The Bank's records shall
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constitute prima facie evidence of the amount of Obligations
outstanding from time to time.
4.4. Revolving Loan Commitment Fee. With respect to the
Revolving Loan, Revolving Loan Borrower shall pay to the Bank, within
ten (10) Business Days after the end of each fiscal quarter of
Revolving Loan Borrower, an unused commitment fee equal to one-eighth
of one percent per annum (0.125%) of the average daily difference
during such quarter between (a) the Revolving Credit Commitment and
(b) the outstanding principal balance of the Revolving Note.
4.5. Term Loan Commitment Fee. With respect to the Term
Loan, Term Loan Borrower has paid to the Bank a nonrefundable
commitment fee of $15,000.
ARTICLE 5: CONDITIONS TO MAKING LOANS. The Bank's obligation to
make the Loans shall be subject to the satisfaction of the following conditions
as of the Closing Date and, in the case of the conditions set forth in Sections
5.2, 5.6, 5.7 and 5.8, as of each other Disbursement Date:
5.1. Delivery of Loan Documents. Each of the Borrowers
and each Guarantor shall have executed the Loan Documents (to which
they are parties) and delivered them to the Bank.
5.2. No Adverse Changes. Since the date hereof, there
shall have been no material adverse change in the business,
operations, financial condition or prospects of any Borrower. The
representations and warranties contained in Article 6 hereof shall be
true and correct with the same force as though made on and as of the
Closing Date or such other Disbursement Date, as the case may be, and
no Default shall have occurred and be continuing on the Closing Date
or such other Disbursement Date, as the case may be.
5.3. Legal Opinion. The Bank shall have received from
Locke Purnell Rain & Harrell and from Jackson & Kelly, opinions, dated
the Closing Date, in the forms attached hereto as Exhibit 5.3.
5.4. Certificate. The Bank shall have received
certificates, dated the Closing Date of RGC, RPC and RPCWV, in the
forms attached hereto as Exhibits 5.4(a), (b) and (C).
5.5. Proper Proceedings. Each Borrower and each Guarantor
shall have taken all corporate proceedings necessary to authorize this
Agreement and the transactions contemplated hereby, and shall have
delivered to the Bank a certificate, dated the Closing Date and signed
by its respective Secretary, in the form attached hereto as Exhibits
5.5(a), (b) and (c).
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5.6. Required Consents and Approvals. All other necessary
consents, approvals and authorizations of any Governmental Authority
or any other Person to the execution and performance of the Loan
Documents and the consummation of the transactions contemplated hereby
shall have been obtained and shall be in full force and effect.
5.7. Legality. The making of the Term Loan or the making
of the Revolving Loan to be made on the Disbursement Date in question
shall not subject the Bank to any penalty or special tax, shall not be
prohibited by any law or governmental order or regulations applicable
to the Bank or to any Borrower and shall not violate any voluntary
credit restraint program of the executive branch of the government of
the United States, the Board or any other Governmental Authority, and
all necessary consents, approvals and authorizations of any
Governmental Authority to or of such Loan shall have been obtained.
5.8. General. All instruments and legal and corporate
proceedings in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to
the Bank and its counsel, Lathrop & Norquist, L.C., and the Bank shall
have received copies of all other documents, including records of
corporate proceedings and opinions of counsel, which the Bank may have
reasonably requested in connection therewith, such documents where
appropriate to be certified by proper corporate or governmental
authorities.
ARTICLE 6: REPRESENTATIONS AND WARRANTIES. Each Borrower and
Guarantor represents and warrants to the Bank that:
6.1. Corporate Existence and Standing. Each of RGC and
the Subsidiaries is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has all requisite authority to conduct its business
in each jurisdiction where the failure to so qualify would have a
material adverse effect on the business, properties, assets,
operations or condition (financial or otherwise), of RGC or such
Subsidiary.
6.2. Authorization and Validity. Each Borrower and
Guarantor has the corporate power and authority and legal right to
execute and deliver the Loan Documents and to perform its obligations
thereunder. Such execution and delivery have been duly authorized by
proper corporate proceedings, and the Loan Documents constitute legal,
valid and binding obligations of such party, enforceable against such
party in accordance with their terms.
6.3. No Conflict; Governmental Consent. Except as set
forth on Schedule 6.3, the execution, delivery and
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<PAGE> 10
performance of the Loan Documents will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding
on RGC or any Subsidiary or RGC's or any Subsidiary's articles or
certificate of incorporation or by-laws or the provisions of any
indenture, instrument or agreement to which RGC or any Subsidiary is a
party or is subject, or by which it, or its property, is bound, or
conflict therewith or constitute a default thereunder, or result in
the creation or imposition of any Lien in, of or on the property of
RGC or any Subsidiary pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration
with, or exemption by, any Governmental Authority is required to
authorize, or is required in connection with the execution, delivery
and performance of, or the legality, validity, binding effect or
enforceability of, any of the Loan Documents.
6.4. Compliance with Laws; Environmental and Safety
Matters. (a) RGC and each Subsidiary have complied with all applicable
statutes, rules, regulations, orders and restrictions of any domestic
or foreign government or Governmental Authority, having jurisdiction
over the conduct of their respective businesses or the ownership of
their respective properties except to the extent that such
non-compliance will not have a material adverse effect on the financial
condition or business operations of RGC or any Subsidiary.
(b) RGC and each Subsidiary has complied with all
Federal, state, local and other statutes, ordinances, orders,
judgments, rulings and regulations relating to environmental
pollution, environmental regulation or control, or employee health or
safety, except to the extent that such non-compliance will not have a
material adverse effect on the financial condition or business
operations of RGC or any Subsidiary. Neither RGC nor any Subsidiary
has received written notice of any failure so to comply. RGC's and
the Subsidiaries' facilities do not treat, store or dispose of any
hazardous wastes, hazardous substances, hazardous materials, toxic
substances, toxic pollutants or substances ("Hazardous Materials")
similarly denominated, as those terms or similar terms are used in
RCRA, CERCLA, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the Clean Air Act, the Clean Water Act, the
Occupational Safety and Health Act, or any other applicable law
relating to environmental pollution, environmental regulation or
control, or employee health and safety ("Environmental Laws") at its
facilities in a quantity or manner that requires a permit,
registration, or another notification or authorization from a
Governmental Authority except as set forth on Schedule 6.4(b) and
except for the treatment, storage, or disposal of Hazardous Materials
in a
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<PAGE> 11
quantity or manner which, if in non-compliance with Environmental Laws
would not have a material adverse effect on the financial condition or
business operations of RGC or any Subsidiary. RGC is aware of no
events, conditions or circumstances involving environmental pollution
or contamination or employee health or safety that could reasonably be
expected to result in liability on the part of RGC or any Subsidiary
except as set forth on Schedule 6.4(b).
6.5. Financial Statements. RGC has heretofore furnished to
the Bank its (i) consolidated balance sheets and statements of income
and changes in stockholders' equity and cash flows as of and for the
fiscal year ended June 30, 1994, audited by and accompanied by the
opinion of Arthur Andersen L.L.P., independent public accountants, and
(ii) an unaudited consolidated balance sheet and unaudited statements
of income as of and for the fiscal quarter and the nine-month period
ended March 31, 1995 and an unaudited consolidated statement of cash
flows for the nine-month period then ended, certified by its chief
financial officer, and (iii) an unaudited consolidating balance sheet
and statements of income for the nine-month period ended March 31,
1995, certified by its chief financial officer. Such financial
statements fairly state the financial condition and results of
operations of RGC and the Consolidated Subsidiaries as of such dates
and for such periods. Such balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of RGC and
the Consolidated Subsidiaries as of the dates thereof. Such financial
statements were prepared in accordance with GAAP applied on a
consistent basis.
6.6. No Material Adverse Change. No material adverse
change in the business, properties, financial condition, prospects or
results of operations of RGC and the Consolidated Subsidiaries has
occurred since March 31, 1995.
6.7. Ownership of Properties. On the date hereof, each of
RGC and the Subsidiaries has good title, free of all Liens (other than
those permitted by Section 8.2 hereof), to all of the properties and
assets reflected in its financial statements as owned by it.
6.8. Subsidiaries. Schedule 6.8 contains an accurate list
of all of the Subsidiaries on the date hereof, setting forth their
respective jurisdictions of organization and the percentage of their
respective ownership interest held by RGC or other Subsidiaries. All
of the issued and outstanding shares of capital stock or other
ownership interests of such Subsidiaries have been duly authorized and
issued and are fully paid and non-assessable.
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<PAGE> 12
6.9. Litigation; Contingent Obligations. Except as set
forth in Schedule 6.9, (a) there is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the
knowledge of any of their officers, threatened against or affecting
RGC or any Subsidiary and (b) neither RGC nor any Subsidiary has any
material contingent obligations.
6.10. Material Agreements. Neither RGC nor any Subsidiary
is a party to any agreement or instrument or subject to any charter or
other corporate restriction materially and adversely affecting its
business, properties, assets, operations or condition (financial or
otherwise). Neither RGC nor any Subsidiary is in default in any
material respect in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement
or instrument to which it is a party.
6.11. Investment Company Act; Public Utility Holding
Company Act. (a) Neither RGC nor any subsidiary is an "investment
company" or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
(b) Neither RGC nor any subsidiary is a "holding company"
or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
6.12. Taxes. RGC and the Subsidiaries have filed all United
States federal tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by RGC or any
subsidiary, including without limitation all federal and state
withholding taxes and all taxes required to be paid pursuant to
applicable law, except such taxes, if any, as are being contested in
good faith and as to which adequate reserves have been set aside. The
United States income tax returns of RGC and the Subsidiaries have been
audited by the Internal Revenue Service through the fiscal year ended
June 30, 1989. No tax Liens have been filed, and no claims are being
asserted with respect to any such taxes (other than Liens and claims
which are being contested in good faith by appropriate proceedings).
The charges, accruals and reserves on the books of RGC and the
Subsidiaries in respect of any taxes or other governmental charges are
adequate.
6.13. Accuracy of Information. No information, exhibit or
report furnished by RGC or any Subsidiary to the Bank in connection
with the negotiation of the Loan Documents contained any material
misstatement of fact or
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<PAGE> 13
omitted to state a material fact or any fact necessary to make the
statements contained therein not misleading.
6.14. Employee Benefit Plans. The Unfunded Liabilities of
all Plans do not in the aggregate exceed $200,000. Each Plan complies
in all material respects with all applicable requirements of law and
regulations. No Reportable Event has occurred with respect to any
Plan. Except as disclosed on Schedule 6.14, neither RGC nor any other
member of any Controlled Group has withdrawn from any Plan or
initiated steps to do so, and no steps have been taken to terminate
any Plan. There exists no other fact which might constitute grounds
for termination of any Plan by the PBGC or for the appointment of a
trustee to administer any Plan. Neither RGC nor any Subsidiary has
any obligations under any Multi employer Plan or has incurred or is
expected by RGC to incur any material liability to the PBGC, other
than for premiums.
6.15. No Undisclosed Dividend Restrictions. Except for
limitations on the payment of dividends under applicable law, none of
the Subsidiaries is subject to any agreement, amendment, covenant or
understanding that limits or restricts the ability of such entity to
declare or pay dividends.
6.16. Disclosure. The pro forma financial information
contained in such materials is based upon good faith estimates and
assumptions believed by RGC to be reasonable at the time made. There
is no fact known to RGC (other than matters of a general economic
nature) that has had or could reasonably be expected to have a
material adverse effect and that has not been disclosed herein or in
such other documents, certificates and statements furnished to the
Bank for use in connection with the transactions contemplated by this
Agreement.
ARTICLE 7: AFFIRMATIVE COVENANTS. Each Borrower and Guarantor
covenants and agrees with the Bank that, so long as this Agreement shall remain
in effect or any Obligations shall be unpaid, unless the Bank shall otherwise
consent in writing:
7.1. Conduct of Business and Maintenance of Properties.
(a) RGC will, and will cause each Subsidiary to, carry on and conduct
its business in substantially the same manner and in substantially the
same fields of enterprise as it is presently conducted and do all
things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of
incorporation and maintain all requisite authority to conduct its
business in each jurisdiction in which its business is conducted.
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<PAGE> 14
(B) RGC will, and will cause each Subsidiary to,
maintain, preserve, protect and keep their properties in good repair,
working order and condition.
7.2. Insurance. RGC will, and will cause each Subsidiary
to, maintain with financially sound and reputable insurance companies
insurance on all their property in such amounts and covering such
risks as is consistent with sound business practice and as may be
required pursuant to the Security Agreements and the Deed of Trust,
and RGC will furnish to the Bank upon request full information as to
the insurance carried.
7.3. Compliance with Laws and Taxes. (a) RGC will, and
will cause each Subsidiary to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards
to which it may be subject.
(b) RGC will, and will cause each Subsidiary to, pay when
due all taxes, assessments and governmental charges and levies upon it
or its income, profits or property, except those which are being
contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside.
7.4. Financial Statements, Reports, etc. RGC will
maintain, for itself and each Subsidiary, a system of accounting
established and administered in accordance with GAAP and will furnish
to the Bank:
(a) within 90 days after the close of each of its
fiscal years, (i) an unqualified (except for qualifications
relating to changes in accounting principles or practices
reflecting changes in GAAP and required or approved by RGC's
independent certified public accountants) audit report
certified by independent certified public accountants, of
nationally recognized standing, prepared in accordance with
GAAP on a consolidated basis for itself and the Consolidated
Subsidiaries, including balance sheets as of the end of such
period and related statements of income and changes in
stockholders' equity and cash flows (which requirement may be
satisfied by delivery of RGC's Annual Report to stockholders
and Form 10-K meeting the above requirements), accompanied by
a certificate of said accountants that, in the course of their
examination necessary for their certification of the
foregoing, they have obtained no knowledge of any Default or
Event of Default, or if, in the opinion of such accountants,
any Default or Event of Default shall exist, stating the
nature and status thereof and (ii) unaudited consolidating
balance sheets and income statements for itself and the
Consolidated Subsidiaries, accompanied by a certificate of
RGC's
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<PAGE> 15
chief financial officer that such consolidating statements are
fairly stated in all material respects in relation to the
consolidated financial statements of RGC;
(b) within 45 days after the close of each
quarter of each of its fiscal years, for itself and the
Consolidated Subsidiaries, an unaudited consolidated balance
sheet and an unaudited consolidated statement of income for
such quarter and an unaudited consolidated statement of cash
flows for the period from the beginning of such fiscal year to
the end of such quarter, setting forth, in comparative
columnar form, the figures for the corresponding periods of
the preceding fiscal year (which requirements with respect to
consolidated information on may be satisfied by delivery of
the quarterly Form 10-Q Report), and all certified by RGC'S
Chief Financial Officer; an unaudited consolidating statement
of income for the period from the beginning of such fiscal
year to the end of such quarter, all certified by RGC'S Chief
Financial Officer;
(c) together with each set of financial
statements required under paragraphs (a) and (b) of this
Section 7.4, a compliance certificate of RGC in substantially
the form of Exhibit 7.4(c) signed on its behalf by its chief
financial officer or its secretary/treasurer, showing the
calculations necessary to determine compliance with all
financial covenants contained in this Agreement and stating
that no Default or Event of Default exists, or if any Default
or Event of Default exists, stating the nature and status
thereof;
(d) as soon as possible and in any event within
10 days after RGC knows that any Reportable Event has occurred
with respect to any Plan, a statement, signed by an authorized
officer of RGC, describing said Reportable Event and the
action which RGC proposes to take with respect thereto;
(e) as soon as possible and in any event within
10 days after receipt by RGC, a copy of (i) any notice or
claim to the effect that RGC or any Subsidiary is or may be
liable to any person as a result of the release by RGC, any of
the Subsidiaries, or any other person of any toxic or
hazardous waste or substance into the environment or that all
or any of its properties is subject to an Environmental Lien
and (ii) any notice alleging any violation of any Federal,
state or local environmental, health or safety law or
regulation by RGC or any Subsidiary;
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(f) promptly upon the furnishing thereof to the
shareholders of RGC, copies of any and all financial
statements, reports and proxy statements so furnished;
(g) promptly upon the filing thereof, copies of
any and all registration statements and annual, quarterly,
monthly or other regular reports which RGC or any Subsidiary
files with the Securities and Exchange Commission;
(h) promptly upon the release thereof, copies of
all press releases, public announcements and any other
information disseminated by RGC or any Subsidiary to the
public;
(i) such other information (including financial
information) as the Bank may from time to time reasonably
request.
7.5. Other Notices. RGC will, and will cause each
Subsidiary to, give prompt notice in writing to the Bank of the
occurrence of any Default or Event of Default and of any other
development, financial or otherwise, which might materially and
adversely affect its business, properties or affairs or the ability of
any Borrower to repay the Obligations.
7.6. Access to Properties and Inspections. RGC will, and
will cause each Consolidated Subsidiary to, permit the Bank to make
reasonable inspections of the properties, corporate books and
financial records of RGC and each Consolidated Subsidiary, to make
reasonable examinations and copies of the books of account and other
financial records of RGC and each Consolidated Subsidiary, and to
discuss the affairs, finances and accounts of RGC and each
Consolidated Subsidiary with, and to be advised as to the same by,
their respective officers at such reasonable times and intervals as
the Bank may designate.
7.7. Use of Proceeds. Revolving Loan Borrower will use
the proceeds of the Revolving Loan for its working capital and general
corporate purposes and for no other purposes. The proceeds of the
Term Loan will be used solely for the purchase of the assets of the
Halltown Paperboard Company, payment of the closing costs associated
with such asset acquisition, making of certain capital improvements
with respect to the Halltown Paperboard Company, for working capital
and for no other purposes.
7.8. Primary Depository. RGC and its Subsidiaries shall
maintain their primary depository accounts with the Bank.
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7.9. Tangible Net Worth. RGC shall maintain a
Consolidated Tangible Net Worth equal to or greater than the sum of
(i) $42,616,000 plus (ii) fifty percent (50%) of the sum of
Consolidated Net Income for each fiscal quarter ending on or after
June 30, 1995, plus (iii) an amount equal to 90% of the cash and
non-cash proceeds of any equity securities issued by RGC after the
date of this Agreement.
7.10. Current Ratio. RGC shall at all times maintain a
Consolidated Current Ratio of not less than 1.50 to 1.00.
7.11. Leverage Ratio. RGC shall at all times maintain a
Consolidated Leverage Ratio of not greater than 1.20 to 1.00.
7.12. Working Capital. RGC shall at all times maintain
Consolidated Net Working Capital of at least $6.5 million.
7.13. Fixed Charge Coverage Ratio. RGC shall at all times
maintain a Fixed Charge Coverage Ratio of not less than 2.00 to 1.00.
ARTICLE 8: NEGATIVE COVENANTS. Each Borrower and Guarantor
covenants and agrees with the Bank that, so long as this Agreement shall remain
in effect or the principal of or interest on any Loan or any Fees, taxes,
charges, expenses or other items payable under any Loan Document shall be
unpaid, unless the Bank shall otherwise consent in writing:
8.1. Indebtedness. (a) RGC will not, nor will it permit
any Subsidiary to incur, create or suffer to exist any Indebtedness
(other than the Loans) in the aggregate exceeding $15 million,
including, without limitation,
(i) Indebtedness (secured by Liens) existing on
the date hereof and described in Schedule 8.1 but not the
increase, refunding, or extension or maturity thereof in whole
or in part; and
(ii) Indebtedness incurred to finance all or a
portion of the purchase price of assets acquired in the
ordinary course of their businesses, which Indebtedness is
secured solely by a Lien on the assets being acquired,
provided that such Indebtedness would not cause a Default or
an Event of Default under any other Section of this Agreement.
(b) Notwithstanding the foregoing, RGC and its
Subsidiaries may incur Indebtedness in excess of $15 million provided
that such Indebtedness in excess of $15 million shall not cause RGC's
Total Debt to Capitalization to exceed 45%. Furthermore, any
Indebtedness which would cause RGC's Fixed Charge Coverage Ratio for
the immediately preceding
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<PAGE> 18
four quarters, after taking into account the additional debt service
requirements, to be less than 2.25 to 1.00, shall require prior
written approval by the Bank.
8.2. Liens. RGC will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any other Lien in, of
or on any of their respective properties (now owned or hereafter
acquired), or on any income or revenues or rights in respect of any
thereof, except:
(a) Liens in favor of the Bank pursuant to the
Security Agreement and the Deed of Trust;
(b) Liens for taxes, assessments or governmental
charges or levies, if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings;
(c) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar Liens
arising in the ordinary course of business, that secure
payment of obligations not more than 60 days past due except
for such Liens as are being contested in good faith by
appropriate proceedings;
(d) Liens arising out of pledges or deposits
under laws relating to WORKER'S compensation, unemployment
insurance, old age pensions, or other social security or
retirement benefits, or under similar laws;
(e) Utility easements, building restrictions and
such other encumbrances or charges against real property as
are of a nature generally existing with respect to properties
of a similar character and that do not in any material way
affect the marketability of the same or interfere with the use
thereof in the business of RGC or the Subsidiary;
(f) Liens existing on the date hereof and
described in Schedule 8.2 hereto, provided that such Liens
shall secure only those obligations that they secure on the
date hereof; and
(g) Liens granted solely to secure Indebtedness
evidencing all or a portion of the purchase price of Fixed
Assets acquired after the Closing Date, provided that such
Lien attaches only to such Fixed Assets being so acquired and
that any such refinancing may increase the aggregate principal
amount of Indebtedness, but only to the extent that such
Indebtedness would not result in a Default or an Event of
Default under
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Sections 7.9 through 7.13 or Section 8.1 of this Agreement.
8.3. Sale and Lease-Back Transactions. RGC will not, and
will not permit any Subsidiary to, enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent
or lease such property or other property which it intends to use for
substantially the same purpose or purposes as the property being sold
or transferred (a "Sale and Leaseback Transaction"), provided,
however, that RGC and its Subsidiaries may enter into Sale and
Leaseback Transactions which do not exceed $1,000,000.
8.4. Mergers, Consolidations and Transfers of Assets. RGC
will not, and will not permit any Subsidiary to, merge into or
consolidate with any other person, or permit any other person to merge
into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) more
than twenty-five percent (25%) of the total consolidated assets of RGC
and its Subsidiaries (whether now owned or hereafter acquired) or any
capital stock of any Subsidiary, except that (a) subject to the
provisions of the Security Agreements and the Deed of Trust, RGC and
any Subsidiary may sell assets in the ordinary course of business, (b)
RGC or any Subsidiary may sell assets other than in the course of
ordinary business provided that (i) the proceeds of such sale are used
to purchase similar assets to be used in the business of such entity,
(ii) the Bank's prior written consent to such sale is obtained and,
(iii) if the Bank's Lien on any of the assets which are sold is
released or terminated, the Bank is granted a lien of the same
priority on the assets so acquired, and (c) if at the time thereof and
immediately after giving effect thereto no Event of Default or Default
shall have occurred and be continuing (i) any wholly owned Subsidiary
may merge into RGC in a transaction in which RGC is the surviving
corporation, and (ii) any wholly owned Subsidiary may merge into or
consolidate with any other wholly owned Subsidiary in a transaction in
which the surviving entity is a wholly owned Subsidiary and no person
other than RGC or a wholly owned Subsidiary receives any
consideration.
8.5. Transactions with Affiliates. Borrower will not, and
will not permit any Subsidiary to, sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates
(other than any Subsidiary), except that Borrower or any Subsidiary
may engage in any of the foregoing transactions in the ordinary course
of business at prices and on terms and conditions not
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<PAGE> 20
less favorable to Borrower or such Subsidiary than could be obtained
on an arm's-length basis from unrelated third parties.
8.6. Dividend Restrictions. Borrower will not, and will
not permit any Subsidiary to be bound by or enter into any agreement,
amendment, covenant, understanding or revision to any agreement which
prohibits or restricts the ability of any Subsidiary to declare and
pay dividends or make any loans or advances or any other distribution
to RGC (except for limitations on the payment of dividends set forth
in Schedule 8.6 or imposed by applicable law).
8.7. Negative Pledge. Except as permitted under Section
8.2, RGC will not, nor will it permit any Subsidiary to, create, incur
or suffer to exist any Lien in or on, any of its Current Assets or
Existing Fixed Assets without the prior written consent of the Bank.
Provided, RGC or any Subsidiary may create, incur or suffer to exist a
Lien in or on any Fixed Assets acquired after the Closing Date.
8.8. Use of Proceeds. RGC will not, nor will it permit
any subsidiary to, use any of the proceeds of the Loans (a) for any
purpose that entails a violation of, or that is inconsistent with, the
provisions of the Regulations of the Board, including without
limitation Regulations G, U and X or (b) to make any acquisition for
which the board of directors of the target company has not given its
consent or approval.
ARTICLE 9: EVENTS OF DEFAULT. In case of the happening of any
of the following events ("Events of Default"):
(a) any representation or warranty made or deemed made by
or on behalf of RGC or any Subsidiary to the Bank under or in
connection with this Agreement, any Loan, or any certificate or
information delivered in connection with this Agreement or any other
Loan Document shall be materially false on the date as of which made;
(b) nonpayment, within ten (10) days after the same
become due, of: (i) principal of any Note, (ii) interest upon any
Note, or (iii) any Fee or other Obligations;
(c) the breach by RGC or any Subsidiary of any of the
terms or provisions of this Agreement or any other Loan Document;
(d) the failure of RGC or any Subsidiary to make any
payment of principal or interest when due on any Indebtedness in
excess of $1,000,000 in aggregate; or any Indebtedness in excess of
$1,000,000 in aggregate principal amount shall be declared to be due
and payable or required
17
<PAGE> 21
to be prepaid (other than by a regularly scheduled payment) prior to
the stated maturity thereof;
(e) RGC or any Subsidiary shall (i) have an order for
relief entered with respect to it under the Federal Bankruptcy Code,
(ii) not pay, or admit in writing its inability to pay, its debts
generally as they become due, (iii) make an assignment for the benefit
of creditors, (iv) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its property, (v)
institute any proceeding seeking an order for relief under the Federal
Bankruptcy Code, an adjudication that it is a bankrupt or is
insolvent, or the dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or fail to file an answer or
other pleading denying the material allegations of any such proceeding
filed against it, (vi) take any corporate action to authorize or
effect any of the foregoing actions set forth in this paragraph (e),
or (vii) fail to contest in good faith any appointment or proceeding
described in paragraph (f) of this Article 9;
(f) without the application, approval or consent of RGC
or any Subsidiary, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for RGC or any Subsidiary or any
substantial part of its property, or a proceeding described in clause
(v) of paragraph (e) of this Article 9 shall be instituted against RGC
or any Subsidiary and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60
consecutive days;
(g) RGC or any Subsidiary shall fail within 45 days to
pay, bond or otherwise discharge any judgment or order for the payment
of money in excess of $1,000,000 that is not stayed on appeal or
otherwise being appropriately contested in good faith;
(i) any Reportable Event shall occur in connection with
any Plan, or the Unfunded Liabilities of all Plans shall exceed, in
the aggregate, $5,000,000;
(j) at any time any person, or any two or more persons
acting as a partnership, limited partnership, syndicate, or other
group for the purpose of acquiring, holding or disposing of securities
of RGC, shall become, according to public announcement or filing, the
"beneficial owner" (as defined in Rule 13d-3 issued under the
Securities Exchange Act of 1934, as amended), directly or indirectly,
of securities of RGC representing 50% or more (calculated in
18
<PAGE> 22
accordance with such Rule 13d-3,) of the combined voting power of
RGC'S then outstanding voting securities;
(K) any Guarantor attempts to terminate its guaranty.
then, and in every such event (other than an event with respect to RGC or any
Subsidiary described in paragraph (e) or (f) of this Article 9), and at any
time thereafter during the continuance of such event, the Bank may, by notice
to Borrower, take either or both of the following actions, at the same or
different times: (i) terminate forthwith the Commitments and (ii) declare the
Loans then outstanding to be forthwith due and payable in whole or in part,
whereupon the principal of the Loans so declared to be due and payable,
together with all accrued interest thereon and all other Obligations, shall
become forthwith due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived by the
Borrowers and Guarantors, anything contained herein or in any other Loan
Document to the contrary notwithstanding; and in any event with respect to RGC
or any Subsidiary described in paragraph (e) or (f) of this Article 9, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with all accrued interest thereon and all other
Obligations, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrowers and Guarantors, anything contained herein or
in any other Loan Document to the contrary notwithstanding.
ARTICLE 10: MISCELLANEOUS.
10.1. Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telecopy or other
telegraphic communications equipment of the sending party, as follows:
(a) if to any Borrower, to it at P. 0. Box 1307,
Hutchinson, Kansas 67504, Attention of Stephen L. Gagnon
(Telecopy No. (316) 727-2727) [If by hand delivery or
overnight courier service then the post office box is
eliminated, the address 811 E. 30th Avenue is added and the
zip code is 67502];
(b) if to any Guarantor, to it at P. 0. Box 1307,
Hutchinson, Kansas 67504, Attention of Stephen L. Gagnon
(Telecopy No. (316) 727-2727) [If my hand delivery or
overnight courier service then the post office box is
eliminated, the address of 811 E. 30th Avenue is added and the
zip code is 67502];
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<PAGE> 23
(c) if to the Bank, to it at 10th & Baltimore,
P.0. Box 419038, Kansas City, Missouri 64183, Attention of
Barry P. Sullivan (Telecopy No. (816) 691-7426) [If by hand
delivery or overnight courier service then the post office box
is eliminated and the zip code is 64105];
or to such other address or telecopy number as any party may direct by
notice given as provided in this Section 10.1. All notices and other
communications given to any party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or
sent by telecopy or other telegraphic communications equipment of the
sender, if received on or before 5:00 p.m., local time of the
recipient, on a business day, or on the next business day if received
after 5:00 p.m. on a business day or on a day that is not a business
day, or on the date five (5) Business Days after dispatch by certified
or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section 10.1 or
in accordance with the latest unrevoked direction from such party
given in accordance with this Section 10.1.
10.2. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Borrower herein and in the
certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Bank and shall survive the
making by the Bank of the Loans, and the execution and delivery to the
Bank of the Notes, regardless of any investigation made by the Bank or
on its behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any other
Obligations are outstanding and so long as the Commitments have not
been terminated. Provided, however, that such covenants, agreements
and representations shall be deemed to terminate three (3) years after
the last liquidated monetary obligation hereunder is paid in full.
10.3. Binding Effect. This Agreement shall become
effective when it shall have been executed by Borrowers, Guarantors
and the Bank, and thereafter shall be binding upon and inure to the
benefit of Borrowers, Guarantors, the Bank and their respective
successors and assigns, except that no Borrower or Guarantor shall
have the right to assign or delegate any of its rights or duties
hereunder or any interest herein without the prior consent of the
Bank.
10.4. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and permitted assigns of
such party.
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<PAGE> 24
(b) The Bank may, with the consent of RGC, which shall
not be unreasonably withheld or delayed, assign or delegate to one or
more persons all or a portion of its interests, rights and obligations
under this Agreement (including all or a portion of the Commitments,
the Loans and the Notes), provided that no such assignment shall
release the Bank from any of its obligations hereunder.
(c) The Bank may without the consent of Borrowers or
Guarantors sell participations to one or more persons in all or a
portion of its rights and obligations under this Agreement (including
all or a portion of the Commitments, the Loans and the Notes);
provided, however, that (i) the Bank's obligations under this
Agreement shall remain unchanged, (ii) the Bank shall remain solely
responsible for the performance of such obligations, and (iii)
Borrowers shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this
Agreement, and the Bank shall retain the sole right to enforce the
obligations of Borrowers relating to the Loans and to approve any
amendment, modification or waiver of any provision of this Agreement.
(d) The Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 10.4, disclose to the assignee or participant or proposed
assignee or participant any information relating to Borrowers and
Guarantors furnished to the Bank by or on behalf of Borrowers and
Guarantors.
10.5. Expenses; Indemnity. (a) Borrowers agree to pay all
reasonable out-of-pocket expenses incurred by the Bank in connection
with the preparation of this Agreement and the other Loan Documents or
in connection with any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated) or incurred by the Bank in
connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in
connection with the Loans made or the Notes issued hereunder,
including the fees, charges and disbursements of Lathrop & Norquist,
L.C., counsel for the Bank, and, in connection with any such
amendment, modification or waiver or any such enforcement or
protection, the fees, charges and disbursements of any other counsel
for the Bank. Borrowers further agree that they shall indemnify the
Bank from and hold it harmless against any documentary taxes,
assessments or charges made by any Governmental Authority by reason of
the execution and delivery of this Agreement or any of the other Loan
Documents.
(b) Borrowers agree to indemnify the Bank and its
directors, officers, employees and agents (each such person being
called an "Indemnitee") against, and to hold each
21
<PAGE> 25
Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees,
charges and disbursements, incurred by or asserted against any
Indemnitee arising out of, in any way connected with, or as a result
of (i) the execution or delivery of this Agreement or any other Loan
Document or any agreement or instrument contemplated thereby, the
performance by the parties thereto of their respective obligations
thereunder or the consummation of the transactions contemplated
thereby, (ii) the use of the proceeds of the Loans or (iii) any claim,
litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related
expenses (i) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the negligence
or wilful misconduct of such Indemnitee and (ii) have not, in whole or
in part, arisen out of or resulted from any act, or omission to act,
of Borrowers or any of its Affiliates.
(c) The provisions of this Section 10.5 shall remain
operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the invalidity
or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the
Bank, provided, however, that obligations under this Section shall be
deemed to terminate three (3) years after the last liquidated monetary
obligation hereunder is paid in full. All amounts due under this
Section 10.5 shall be payable on written demand therefor.
10.6. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness
at any time owing by the Bank to or for the credit or the account of
Borrowers against any and all of the obligations, irrespective of
whether or not the Bank shall have made any demand under this
Agreement or such other Loan Document and notwithstanding that such
Obligations may be unmatured. The rights of the Bank under this
Section 10.6 are in addition to other rights and remedies (including
other rights of setoff) which the Bank may have.
10.7. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WHOLLY WITHIN SAID STATE.
22
<PAGE> 26
10.8. Waivers; Amendment. No failure or delay of the Bank
in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Bank hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies which they would otherwise
have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by any Borrower therefrom shall
in any event be effective unless the same shall be contained in a
written instrument signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on Borrowers in any case shall
entitle Borrowers to any other or further notice or demand in similar
or other circumstances.
10.9. Interest Rate Limitation. Notwithstanding anything
herein or in the Notes to the contrary, if at any time the applicable
interest rate, together with all fees and charges which are treated as
interest under applicable law (collectively the "Charges"), as
provided for herein or in any other document executed in connection
herewith, or otherwise contracted for, charged, received, taken or
reserved by the Bank, shall exceed the maximum lawful rate (the
"Maximum Rate") which may be contracted for, charged, taken, received
or reserved by the Bank in accordance with applicable law, the rate of
interest payable under the Notes, together with all Charges payable to
the Bank, shall be limited to the Maximum Rate.
10.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative
to the subject matter hereof. Any previous agreement among the
parties with respect to the subject matter hereof is superseded by
this Agreement and the other Loan Documents. Nothing in this Agreement
or in the other Loan Documents, expressed or implied, is intended to
confer upon any party other than the parties hereto and thereto any
rights, remedies, obligations or liabilities under or by reason of
this Agreement or the other Loan Documents.
10.11. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document
should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic
23
<PAGE> 27
effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
10.12. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original but
all of which when taken together shall constitute but one contract,
and shall become effective as provided in Section 10.3.
10.13. Headings. Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.
10.14. Jurisdiction; Consent to Service of Process. (a)
Each Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any
Missouri State court or Federal court of the United States of America
sitting in the State of Missouri, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to
this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such
Missouri State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right
that the Bank may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against
Borrower or its properties in the courts of any jurisdiction.
(b) Each Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so,
any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to
this agreement or the other Loan Documents in any Missouri State or
Federal court. Each of the parties hereto hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 10.1.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
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<PAGE> 28
10.15. Terms Generally. The definitions contained in this
Agreement and in Exhibit 1 hereto shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation." All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall
otherwise require. Except as otherwise expressly provided herein, all
terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time, provided,
however, that, for purposes of determining compliance with any
covenant set forth in Article 8, such terms shall be construed in
accordance with GAAP as in effect on the date of this Agreement
applied on a basis consistent with the application used in preparing
the Borrower's audited financial statements referred to in Section
6.05.
[Remainder of this page intentionally left blank.]
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<PAGE> 29
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO
EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
(BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT,
ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE
AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO
MODIFY IT.
THIS DOCUMENT, TOGETHER WITH OTHER WRITTEN AGREEMENTS BETWEEN REPUBLIC
GYPSUM COMPANY, REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA AND
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY, IS THE FINAL EXPRESSION
OF THE CREDIT AGREEMENT BETWEEN SUCH PARTIES. THIS DOCUMENT MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS ORAL CREDIT
AGREEMENTS OR PRIOR WRITTEN CREDIT AGREEMENTS BETWEEN SUCH PARTIES
RELATING TO THE SUBJECT MATTER HEREOF. ANY ADDITIONAL TERMS OF THE
CREDIT AGREEMENT BETWEEN SUCH PARTIES ARE SET FORTH BELOW.
THERE ARE NO SUCH ORAL AGREEMENTS BETWEEN SUCH PARTIES.
DEBTOR: CREDITOR: BOATMEN'S FIRST
NATIONAL BANK OF
REPUBLIC GYPSUM COMPANY KANSAS CITY
By: /s/ PHIL SIMPSON By: /s/ BARRY P. SULLIVAN
Phil Simpson Barry P. Sullivan
Chairman of the Board, Vice President
President and Chief
Executive Officer
REPUBLIC PAPERBOARD COMPANY OF
WEST VIRGINIA
By: /s/ PHIL SIMPSON
Phil Simpson
Chairman of the Board,
President and Chief
Executive Officer
26
<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement, by their
duly authorized officers, as of the day and year first above written.
[SEAL] REPUBLIC GYPSUM COMPANY, a Delaware
Corporation
ATTEST:
By: /s/ JANEY L. SOWELL By: /s/ PHIL SIMPSON
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
[SEAL] REPUBLIC PAPERBOARD COMPANY, a
Kansas corporation
ATTEST:
By: /s/ JANEY L. SOWELL By: /s/ PHIL SIMPSON
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
[SEAL] REPUBLIC PAPERBOARD COMPANY OF WEST
VIRGINIA, a West Virginia corporation
ATTEST:
By: /s/ JANEY L. SOWELL By: /s/ PHIL SIMPSON
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
BOATMEN'S FIRST NATIONAL BANK OF
KANSAS CITY
By: /s/ BARRY P. SULLIVAN
Barry P. Sullivan
Vice President
27
<PAGE> 31
List of Exhibits and Schedules
<TABLE>
<S> <C> <C>
Exhibit 1 - Definitions
Exhibit 2.2 - Revolving Note
Exhibit 2.3 - Revolving Note Maker Election
Exhibit 2.4 - Revolving Loan Guaranty
Exhibit 3.2 - Term Note
Exhibit 3.3 - Term Note Maker Election
Exhibit 3.4 - Term Loan Guaranty
Exhibit 3.5(a) - Security Agreement
Exhibit 3.5(b) - Deed of Trust
Exhibit 5.3 - Legal Opinion
Exhibit 5.4(a) - RGC's Officer's Certificate
Exhibit 5.4(b) - RPC's Officer's Certificate
Exhibit 5.4(c) - RPCWV's Officer's Certificate
Exhibit 5.5(a) - RGC'S Secretary's Certificate
Exhibit 5.5(b) - RPC's Secretary's Certificate
Exhibit 5.5(c) - RPCWV'S Secretary's Certificate
Exhibit 7.4(c) - Compliance Certificate
Schedule 6.3 - Disclosure of Conflicts
Schedule 6.4(b) - Environmental Disclosures
Schedule 6.8 - Subsidiaries
Schedule 6.9 - Litigation
Schedule 6.14 - Employee Benefit Plan Disclosures
Schedule 8.1 - Existing Indebtedness
Schedule 8.2 - Existing Liens
Schedule 8.6 - Limitations on Dividends
</TABLE>
28
<PAGE> 32
EXHIBIT 1 TO REVOLVING AND TERM CREDIT AGREEMENT AMONG REPUBLIC GYPSUM
COMPANY, REPUBLIC PAPERBOARD COMPANY, REPUBLIC PAPERBOARD COMPANY
OF WEST VIRGINIA AND BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY
For purposes of the Revolving and Term Credit Agreement dated as of
June 30, 1995, among and Republic Gypsum Company, Republic Paperboard Company,
Republic Paperboard Company of West Virginia and Boatmen's First National Bank
of Kansas City (the "Agreement"):
1. The following terms shall have the meanings set forth in the
Agreement. The Location set forth opposite each such term is for convenience
of reference only.
<TABLE>
<CAPTION>
Location (Section
unless otherwise
Term indicated)
---- ------------------
<S> <C>
"Deed of Trust" 3.5
"Disbursement Date" 4.1
"Event of Default" Article 9
"Revolving Credit Maturity Date" 2.1
"Revolving Loan" 2.1
"Revolving Loan Borrower" 2.1
"Revolving Loan Guaranty" 2.4
"Revolving Note" 2.2
"Security Agreement" 3.5
"Sale and Leaseback Transaction" 8.3
"Subordinated Indebtedness" 8.1(b)
"Term Loan" 3.1
"Term Loan Borrower" 3.2
"Term Loan Guaranty" 3.4
"Term Loan Maturity Date" 3.1
"Term Note" 3.2
</TABLE>
2. The following terms shall have the meanings specified below:
1
<PAGE> 33
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified and in any case shall include, when used with respect to the Borrower
or any Subsidiary, any joint venture in which the Borrower or such Subsidiary
holds an equity interest.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrower" shall mean collectively, the Revolving Loan Borrower and
the Term Loan Borrower.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Missouri) on which banks in
the State of Missouri are open for business.
"Capitalized Lease Obligations" of any person shall mean the
obligations of such person under any lease that would be capitalized on a
balance sheet of such person prepared in accordance with GAAP, and the amount
of such obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986.
"Closing Date" shall mean June 30, 1995.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time.
"Collateral" shall mean all equipment and other property described in
the Security Agreement and the real property and other property described in
the Deed of Trust, and any other assets acquired by RPCWV in its acquisition of
the assets of Halltown Paper Company.
"Commitments" shall mean the Revolving Credit Commitment and the Term
Loan Commitment.
"Consolidated Current Maturities of Long Term Debt" shall mean for any
period, the sum of (i) principal payments or maturities of debt due within one
year by RGC and the Consolidated Subsidiaries, and (ii) payments due within one
year on Capitalized Lease Obligations by RGC and the Consolidated Subsidiaries.
"Consolidated Current Ratio" shall mean the ratio of: (i) the amount
of all assets which, under GAAP, would appear as current assets on the
consolidated balance sheet of RGC and the
2
<PAGE> 34
Consolidated Subsidiaries; to (ii) the amount of all liabilities which, under
GAAP, would appear as current liabilities on such balance sheet, including,
without limitation, (a) all liabilities payable on demand or maturing (whether
by reason of specified maturity, fixed prepayment, sinking funds or accruals of
any kind, or otherwise) within twelve (12) months or less from the date of the
relevant statement, (b) all lease and rental obligations due within twelve (12)
months or less, and (c) all customers' advances and progress billings on
contracts.
"Consolidated EBITDA" shall mean, for any period, the earnings before
interest, taxes, depreciation, amortization, and extraordinary items for such
period, determined on a consolidated basis for RGC and its Subsidiaries in
accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, all
interest paid or accrued by RGC and the Consolidated subsidiaries with respect
to any Indebtedness and the interest portion of any Capitalized Lease
Obligations, all as determined in accordance with GAAP during such period.
"Consolidated Leverage Ratio" shall mean, for any period, the ratio of
(i) the Consolidated Total Liabilities, to (ii) Consolidated Tangible Net-Worth.
"Consolidated Net Income" shall mean, for any period, all operating
and non-operating income, less all operating and non-operating expenses,
including taxes, depreciation, amortization and interest expenses, all as
determined in accordance with GAAP for RGC and its Consolidated Subsidiaries.
In calculating Consolidated Net Income, there shall be excluded extraordinary
gains and losses (as determined in accordance with GAAP), any revenues and
expenses from disposition of capital assets and insurance policies and
condemnation awards and gifts, donations, grants, pledges, devises, legacies,
requests and contributions which are specifically designated or restricted as
to use by their terms.
"Consolidated Net Working Capital" shall mean, on any date, an amount
equal to the difference between: (i) the amount of all assets which, under
GAAP, would appear as current assets on the consolidated balance sheet of RGC
and the Consolidated Subsidiaries; less (ii) the amount of all liabilities
which, under generally accepted accounting principles, would appear as current
liabilities on such balance sheet, including, without limitation, (a) all
liabilities payable on demand or maturing (whether by reason of specified
maturity, fixed prepayment, sinking funds or accruals of any kind, or
otherwise) within twelve (12) months or less from the date of the relevant
statement, (b) all lease and rental obligations due within twelve (12) months
or less, and (c) all customers' advances and progress billings on contracts.
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<PAGE> 35
"Consolidated Net Worth" shall mean, on any date, with respect to RGC
and the Consolidated Subsidiaries on a consolidated basis, stockholders equity
on such date, computed and consolidated in accordance with GAAP.
"Consolidated Subsidiary" shall mean each Subsidiary the financial
statements of which are required to be consolidated with the financial
statements of the Borrower in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, on any date, the total
of all assets which, under GAAP, would appear as assets on the consolidated
balance sheet of RGC and the Consolidated Subsidiaries, less all of the
following: (i) the book amount of all such assets which would be treated as
intangibles under GAAP, including, without limitation, all such items as
goodwill, trademarks, trademark rights, trade names, trade name rights, brands,
copyrights, patents, patent rights, licenses, deferred charges and unamortized
debt discount and expense; (ii) any write-up in the book value of any such
assets resulting from a revaluation thereof subsequent to the date of the
financial statements furnished to the Bank; (iii) all reserves, including
reserves for depreciation, obsolescence, depletion, insurance and inventory
valuation, but excluding contingency reserves not allocated for any particular
purpose and not deducted from assets; (iv) the amount, if any, at which any
shares of RGC's and the Consolidated Subsidiaries' "Treasury Stock" are valued;
(v) "Consolidated Total Liabilities"; and (vi) all investments in foreign
Affiliates and nonconsolidated domestic Affiliates.
"Consolidated Total Liabilities" shall mean, on any date, the total of
all liabilities of RGC and the Consolidated Subsidiaries which, under GAAP,
would appear on a consolidated balance sheet of RGC and the Consolidated
Subsidiaries.
"Consolidated Total Indebtedness" shall mean, on any date, the sum of
all Indebtedness of RGC and the Consolidated Subsidiaries computed on a
consolidated basis in accordance with GAAP.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any Subsidiary, are treated
as a single employer under Section 414(b) or 414(c) of the Code.
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<PAGE> 36
"Current Assets" shall mean the cash, instruments, accounts, notes
receivable, inventory, general intangibles and contracts of RGC and the
Subsidiaries.
"Default" shall mean any event or condition which upon notice, lapse
of time or both would constitute an Event of Default.
"dollars" or "$" shall mean lawful money of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Existing Fixed Assets" shall mean the machinery, equipment and real
property which are owned by RGC or any Subsidiary as of the Closing Date.
"Fees" shall mean the unused commitment fees payable under Section 4.3
of the Agreement.
"Fixed Assets" shall mean machinery, equipment and real property which
are owned by RGC or any Subsidiary at any time.
"Fixed Charge Coverage Ratio" shall mean, at the end of any fiscal
quarter of RGC, the ratio of: Consolidated EBITDA for the immediately preceding
four fiscal quarters of RGC; to the sum of (i) Consolidated Interest Expense
for the immediately preceding four fiscal quarters, and (ii) Consolidated
Current Maturities of Long Term Debt.
"GAAP" shall mean generally accepted accounting principles, applied on
a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body,
"Guarantee" or "Guaranty" of a person shall mean any agreement by
which such person assumes, guarantees, endorses, contingently agrees to
purchase or provide funds for the payment of, or otherwise becomes liable upon,
the obligation of any other person, or agrees to maintain the net worth or
working capital or other financial condition of any other person or otherwise
assures any creditor of such other person against loss, including, without
limitation, any comfort letter, operating agreement or take-or-pay contract and
shall include, without limitation, the contingent liability of such person in
connection with any application for a Letter of Credit. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" shall mean, collectively, the makers of the Revolving Loan
Guaranty and the Term Loan Guaranty.
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<PAGE> 37
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes, acceptances, equipment trust
certificates or similar instruments, (c) all obligations of such person issued
or assumed as the deferred purchase price of property or services other than
accounts payable arising in the ordinary course of such person's business on
terms customary in the trade, (d) all obligations of such person, whether or
not assumed, secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien or payable
out of the proceeds or production from property owned or acquired by such
person, (e) Capitalized Lease Obligations of such person, (f) all Guarantees by
such person of Indebtedness of others and (g) any other obligations or
securities which such person is directly or indirectly obligated to repay,
redeem, retire, extinguish or repurchase (i) at a fixed or determinable date,
whether by operation of a sinking fund or otherwise, (ii) at the option of any
other person, or (iii) upon the occurrence of a condition not solely within the
control of such person, such as a redemption out of future earnings, The
Indebtedness of any person shall include the Indebtedness of any partnership in
which such person is a general partner.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset
and (c) in the case of securities, any purchase option, call or similar right
of a third party with respect to such securities.
"Loan" shall mean a Revolving Loan or the Term Loan.
"Loans" shall mean all Revolving Loans and the Term Loan, collectively.
"Loan Documents" shall mean, collectively, the Agreement, the Notes,
the Security Agreements, the Deed of Trust, the Guaranties, and all other
documents and agreements executed by any Borrower or Guarantor in favor of Bank
in connection with the transactions contemplated by the Agreement.
"Multiemployer Plan" shall mean a Plan that is a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
"Note" shall mean the Revolving Note or the Term Note.
"Notes" shall mean the Revolving Note and the Term Note, collectively.
"Obligations" shall mean all unpaid principal of and accrued and
unpaid interest on the Notes, all accrued and unpaid Fees and
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<PAGE> 38
all other obligations of Borrower to the Lenders arising under the Loan
Documents.
"PBGC" shall mean the Pension Benefit Guarantee Corporation referred
to and defined in ERISA.
"person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any agency
or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan that is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code as to which the Borrower or any Subsidiary may have any liability.
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time.
"Regulation G" shall mean Regulation G of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Reportable Event" shall mean any reportable event, as defined in
Section 4043 of ERISA and the regulations issued under such Section, with
respect to a Plan, excluding, however, such events as to which the PBGC by
regulation has waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event; provided that a
failure to meet the minimum funding standard of Section 412 of the Code and of
Section 302 of ERISA involving an amount aggregating $50,000 or more shall be a
Reportable Event regardless of the issuance of any waiver in accordance with
Section 412(d) of the Code,
"Revolving Credit Commitment" shall mean Seven Million Dollars
($7,000,000).
"subsidiary" shall mean, with respect to any person (herein referred
to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or more than 50% of the general partnership interests are, at the
time any determination is being made, owned, controlled or held by the parent,
or (b) which is, at the time any determination is made,
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<PAGE> 39
otherwise Controlled by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of RGC or RPC.
"Term Loan Commitment" shall mean Twenty-Eight Million Dollars
($28,000,000),
"Total Debt To Capitalization" shall mean the ratio, expressed as a
percentage, of: Consolidated Total Indebtedness divided by the sum of (i)
Consolidated Total Indebtedness plus (ii) Consolidated Tangible Net Worth; and
multiplied by one hundred.
"Unfunded Liabilities" shall mean, on any date of determination all
"unfunded benefit liabilities" as defined in Section 4001(a)(18) of ERISA,
determined using an interest rate equal to 7%.
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<PAGE> 40
EXHIBIT 2.2
REVOLVING CREDIT PROMISSORY NOTE
$7,000,000.00 Kansas City, Missouri
June 30, 1995
FOR VALUE RECEIVED, REPUBLIC GYPSUM COMPANY, a Delaware corporation
(the "Maker"), hereby promises to pay to the order of BOATMEN'S FIRST NATIONAL
BANK OF KANSAS CITY (the "Bank"), the principal sum of SEVEN MILLION DOLLARS
($7,000,000.00) (or such lesser amount as may be advanced in reliance on this
Note), together with interest on the unpaid principal balance outstanding from
time to time, from date until Maturity (as hereinafter defined), at a rate or
rates per annum determined as hereinafter provided.
As used in this Note, the following terms shall have the
meanings indicated:
(a) "Applicable Margin" means, if the Maker's Fixed Charge
Coverage Ratio is: (i) less than 2.25 to 1.00,150 basis points; (ii) equal to
or greater than 2.25 to 1.00 but less than 3.00 to 1.00, 120 basis points;
(iii) equal to or greater than 3.00 to 1.00 but less than 4.00 to 1.00, 100
basis points; (iv) equal to or greater than 4.00 to 1.00 but less than 5.00 to
1.00, 75 basis points; (v) equal to or greater than 5.00 to 1.00, 62.5 basis
points. The initial Applicable Margin shall be 100 basis points. The
Applicable Margin shall be established annually on the anniversary date of this
Note, based, in each instance, on the Maker's average Fixed Charge Coverage
Ratio for the immediately preceding four fiscal quarters, determined on a
consolidated basis for Maker and its subsidiaries in accordance with Generally
Accepted Accounting Principles consistently applied ("GAAP"). For this
purpose, Fixed Charge Coverage Ratio shall mean the ratio of: Consolidated
EBITDA, to the sum of (i) Consolidated Interest Expense and (ii) Consolidated
Current Maturities of Long Term Debt, For this purpose, (i) Consolidated EBITDA
means, for any period, the earnings before interest, taxes, depreciation,
amortization, and extraordinary items for such period, determined on a
consolidated basis for Maker and its subsidiaries in accordance with GAAP; (ii)
Consolidated Interest Expense means, for any period, all interest paid or
accrued by Maker and its subsidiaries with respect to any Indebtedness and the
interest portion of any Capitalized Lease Obligations, all as determined in
accordance with GAAP during such period; (iii) Consolidated Current Maturities
of Long Term Debt means for any period, the sum of principal payments or
maturities of debt due within one year, and payments due within one year on
Capitalized Lease Obligations; and (iv) Capitalized Lease Obligations of any
person means the obligations of such person under any lease that would
<PAGE> 41
be capitalized on a balance sheet of such person prepared in accordance with
GAAP, and the amount of such obligations at any time shall be the capitalized
amount thereof at such time determined in accordance with GAAP.
(b) "Board" means the Board of Governors of the Federal Reserve
System or any other body or agency succeeding to its authority to set reserve
requirements for banks.
(c) "Business Day" means any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Missouri) on which banks in
the State of Missouri are open for business.
(d) "CBR" means, at any time, the Corporate Base Rate of the Bank,
as set by the Bank from time to time and distributed to its officers and
employees for their use in fixing and adjusting interest rates on loans,
whether or not otherwise published or utilized and irrespective of the rate
charged by the Bank on any particular loan. The Corporate Base Rate is but one
of several interest rate bases used by the Bank, and the Bank lends at rates
above and below the Corporate Base Rate. There is no representation that the
Corporate Base Rate is the best or a favorable rate of interest.
(e) "Credit Agreement" means the Revolving and Term Credit
Agreement dated June 30, 1995, to which the Maker and the Bank, among others,
are parties, as amended from time to time.
(f) "Dollars" and "$" mean lawful money of the United
States of America.
(g) "Effective Change Date" means the date of this Note and
the first day of each succeeding fiscal quarter of Maker.
(h) "Interest Due Date" means each January 31, April 30, July 31
and October 31 commencing after the date of this Note and prior to Maturity or,
if such day is not a Business Day, the next succeeding Business Day; provided,
however, that as hereinafter provided, the first interest payment due and
payable hereunder shall be due and payable on October 31, 1995 rather than July
31, 1995.
(i) "Interest Period" means a period commencing on an Effective
Change Date and ending on the day immediately preceding the next succeeding
Effective Change Date. Notwithstanding the foregoing, (A) each Interest Period
which would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day, (B) if the Maker fails to make a Maker Election
prior to 10:00 a.m. on the Business Day immediately preceding the last Business
Day of any Interest Period, then the Revolver Base Rate shall be the Rate
Option in effect from the end of such Interest Period until the earlier of
Maturity or next succeeding Effective Change Date.
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<PAGE> 42
(j) "Interest Rate" means the rate at which interest shall accrue
on the unpaid principal balance of this Note from time to time under the terms
hereof.
(k) "Maker Election" means an election by the Maker, delivered to
the Bank in writing or communicated to the Bank by telephone, telex or
facsimile transmission, to select the Rate Option. Each Maker Election
communicated by telephone shall be confirmed promptly in writing or by telex or
facsimile transmission. Each Maker Election other than one communicated by
telephone, and each written confirmation of a Maker Election communicated by
telephone, shall be in the form attached to the Credit Agreement as Exhibit
2.3, as the same may be revised from time to time by agreement between the
Maker and the Bank, and shall specify the Rate Option which is to go into effect
as of the next succeeding Effective Change Date. Each Maker Election must be
received by the Bank no later than 10:00 a.m. two Business Days prior to the
next succeeding Effective Change Date. If a Maker fails to timely make a Maker
Election, then the Revolver Base Rate shall be the Rate Option in effect from
the end of such Interest Period until the earlier of Maturity or the next
succeeding Effective Change Date.
(l) "Maturity" means the day next preceding the second anniversary
of the date hereof, or such earlier date to which the maturity of this Note
shall be accelerated as hereinafter provided.
(m) "Rate Option" means the formula (which shall be either the
Revolver Base Rate or the Revolver Eurodollar Rate under which the Interest
Rate is to be determined from time to time.
(n) "Revolver Base Rate" means, as of any date, (i) the CBR minus
(ii) three quarters of one percent.
(o) "Revolver Eurodollar Rate" means, as of any date, the sum of
(i) the Applicable Margin plus (ii) the rate obtained by dividing (A) the rate
most recently reported as the "London Interbank Offered Rate" for one month
maturity in The Wall Street Journal, or, if no such rate for such maturity has
been reported in The Wall Street Journal on any of the five (5) Business Days
next preceding such date, the "London Interbank Offered Rate" for one month
maturity most recently reported, by an on-line database generally available to
banks in the United States and selected by the Bank, as a prevailing rate,
based on rates offered by banks in the London Market for interbank dollar
deposits of one month maturity, or, if no such rate for such one month maturity
has been reported by any such database on any of the twenty (20) Business Days
next preceding such date, the average of the rates then offered for interbank
dollar deposits of the one month maturity by any three banks in the London
Market selected by the Bank, by (B) a percentage equal to 100% minus the
current percentages specified by the Board for determining the maximum
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<PAGE> 43
reserve requirement (including, but not limited to, any marginal, special,
emergency or supplemental reserve requirement) for the Bank in respect of
liabilities consisting of or including (among other liabilities) Eurocurrency
Liabilities, as defined in the Board's Regulation D or any successor
regulation. The result of the foregoing calculation shall be adjusted to the
nearest one-thousandth of one percent (0.001%),
Concurrently with the delivery of this Note, the Maker has delivered
to the Bank a written election which identifies the Rate Option to be
applicable during the initial Interest Period. The Maker may make Maker
Elections no later than two Business Days prior to the end of each Interest
Period and the Rate Option so elected shall become effective as of the next
succeeding Effective Change Date, subject to the provisions of paragraph (i),
above. If a Maker fails to timely make a Maker Election, then the Revolver
Base Rate shall be the Rate Option in effect from the end of such Interest
Period until the earlier of Maturity or the next succeeding Effective Change
Date. Anything herein to the contrary notwithstanding, in no event shall the
principal balance of this Note bear interest at a rate greater than the highest
rate of interest permitted by applicable law.
The principal of this Note shall be payable in full at Maturity.
Accrued interest at the Interest Rate shall be due and payable on each Interest
Due Date and at Maturity, provided, however, that the first interest payment
due and payable hereunder shall be due and payable on October 31, 1995 rather
than July 31, 1995. Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, During any Interest Period for which the
Rate Option in effect is the Revolver Eurodollar Rate, the Interest Rate shall
be adjusted monthly on the first day of each month during such Interest Period
based on the Revolver Eurodollar Rate determined as of such first day of such
month, except that in the event any adjustment of the Applicable Margin becomes
effective during such Interest Period, the Interest Rate shall change effective
concurrently with the adjustment of the Applicable Margin. During any Interest
Period for which the Rate Option in effect is the Revolver Base Rate, the
Interest Rate shall change on the same day as each change in the CBR.
The principal of this Note may be prepaid, in whole or in part, at any
time and from time to time, without penalty or fee, but only upon not less than
one Business Day's prior notice to the Bank, and subject to the limitations
that unless the Bank shall otherwise in its sole discretion agree, any partial
prepayments shall be in the amount of $100,000 or an integral multiple thereof,
and no prepayment of principal may be made at a time when any previously-
scheduled interest payment has not been paid in full.
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<PAGE> 44
After Maturity, whether Maturity occurs by reason of acceleration or
passage of time, and notwithstanding any other provision of this Note or any
Maker Election, this Note shall bear interest at a rate per annum equal to the
CBR plus three percent (3%), adjusted daily, not to exceed the highest rate of
interest permitted by applicable law.
As used herein, the term "Holder" refers to the Bank and also to any
other person in possession of this Note if this Note has been endorsed to such
person, to his order, to bearer or in blank, The amount of interest due on any
Interest Due Date may be specified by notice from the Holder to the Maker prior
to such Interest Due Date, but the Holder shall have no obligation to give any
such notice. In the event any such notice is not given, in the event the amount
of interest is miscalculated in any such notice, or in the event of a change in
the Interest Rate subsequent to the preparation of any such notice and prior to
the Interest Due Date, then any resultant underpayment or overpayment of
interest shall be added to or deducted from the next scheduled interest
payment. Nothing herein shall relieve the Maker or any other person liable for
the payment of this Note from the obligation to pay the full amount of interest
accruing from time to time on the unpaid principal balance, and any and all
accrued interest not previously paid for any reason whatsoever shall be due and
payable at Maturity.
All payments of principal and interest on this Note shall be due and
payable at 2:00 P.M. (local time in the city in which the Bank's principal
office is located) on the scheduled due date at the principal office of the
Bank, 14 West 10th Street, Kansas City, Missouri 64105. or at such other place
as the Holder may designate to the Maker in writing from time to time.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSOURI APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY WITHIN SAID STATE, EXCEPT TO THE EXTENT SUCH LAWS
ARE PREEMPTED (EXPRESSLY OR BY IMPLICATION) BY LAWS OF THE UNITED STATES. THIS
NOTE MAY NOT BE MODIFIED OR CANCELED EXCEPT BY A WRITING SIGNED BY THE HOLDER.
To the extent not prohibited by law, all parties who now are or
hereafter become liable for the payment of this Note, whether as maker,
co-maker, principal, surety, guarantor or endorser, including any accommodation
party as defined in the uniform Commercial Code as enacted in Missouri, hereby
(a) waive presentment for payment, demand, protest, notice of protest, notice
of dishonor, and, except as required hereby or by the Credit Agreement, all
other notices in connection with the delivery, acceptance, performance, default
and enforcement of this Note; (b) consent to any number of extensions,
postponements or deferrals of any payment due hereunder, for any length of time
and on any lawful terms (including but not limited to any change in the
Interest Rate or the method of determining the Interest
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<PAGE> 45
Rate from time to time), to the grant of any other indulgence to, any release
of and any covenant not to sue any party liable for the payment hereof, all
without notice to or express reservation of rights against any of said parties;
and (c) jointly and severally agree (subject to any limitations contained in
the agreements or instruments by virtue of which they respectively are liable
for the payment hereof) to perform all obligations of the Maker hereunder (as
modified by any such extension, postponement or deferral) when due, without
requiring any prior demand on or action against any other person.
In the event any installment of principal or interest is not paid when
due, or in the event there occurs any event which, under the terms of the
Credit Agreement, permits the obligations referred to therein to be declared
due and payable or causes or permits the maturity of such obligations to be
accelerated, then the Holder shall have the right and power, at its option, to
accelerate the maturity of this Note and to declare the unpaid principal
balance and all accrued interest immediately due and payable in full.
In the event of any default in the payment of the principal or
interest hereunder, the Maker shall pay all costs and expenses of collection,
including the reasonable fees and expenses of any attorney or firm of attorneys
retained by the Holder in connection with such collection, whether or not suit
is commenced and including fees and expenses in connection with any bankruptcy,
insolvency or reorganization proceedings and any proceedings in appellate
courts, all to the extent not prohibited by applicable law.
[SEAL] REPUBLIC GYPSUM COMPANY, a Delaware
corporation
ATTEST:
By: By:
Janey L, Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief Executive
Officer
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<PAGE> 46
EXHIBIT 2.3
MAKER ELECTION
To: Boatmen's First National Bank
of Kansas City
Pursuant to the terms of our Revolving Credit Promissory Note dated
June 30, 1995, and payable to your order in the principal amount of $7,000,000
(the "Note"), the unpaid principal balance of which is $_________, we hereby
elect to establish or select the Rate Option. Effective on the Effective Change
Date, which shall be _____________, 19__ [the first day of the next succeeding
fiscal quarter of Maker], the Rate Option shall be:
( ) The Revolver Eurodollar Rate.
( ) The Revolver Base Rate.
This Maker Election is subject to all of the terms of the Note, and
terms used herein with initial capital letters which are defined in the Note
shall, as used herein, have the meanings given to them in the Note.
Dated this _____ day of ________________, 19__.
REPUBLIC GYPSUM COMPANY
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE> 47
EXHIBIT 2.4
REVOLVING LOAN GUARANTY AGREEMENT
THIS REVOLVING LOAN GUARANTY AGREEMENT is made as of the 30th day of
June, 1995, by the undersigned, whether one or more, (hereinafter referred to
jointly and severally as "Guarantors" and individually as "Guarantor") to
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY, a national banking association
(hereinafter referred to as "Lender"),
RECITALS:
1. REPUBLIC GYPSUM COMPANY, a Delaware corporation (hereinafter
referred to as "Borrower"), has contemporaneously with the execution herewith
borrowed or will borrow up to the principal sum of $7,000,000 (said debt and
all interest and other sums accruing thereon herein sometimes referred to as
the "Revolving Loan") from Lender as evidenced or to be evidenced by a
Revolving Credit Promissory Note of approximately even date herewith
(hereinafter referred to as the "Revolving Note") but it is understood that
Guarantors' obligations hereunder are not limited to said $7,000,000 amount;
and
2. Borrower also has contemporaneously executed or will execute a
Revolving and Term Credit Agreement, and certain other documents described
therein otherwise evidencing or securing the Revolving Loan (all of such
documents, including the Revolving and Term Credit Agreement and the Revolving
Note and are hereinafter sometimes collectively referred to as the "Loan
Documents" as such term is defined in the Revolving and Term Credit Agreement);
and
3. Guarantors have offered to Lender and Lender has accepted the
Guarantors' unconditional guaranty of payment and performance of the Revolving
Loan and other obligations of Borrower, and Lender would not or will not make
the Revolving Loan but for the guaranty of Guarantors; and
4. In consideration of the substantial benefits flowing to
Guarantors by virtue of the above-described loan transaction, Guarantors have
agreed to fully guarantee any and all debts, obligations and liabilities of
Borrower under the Revolving Note and all of the other Loan Documents; and
5. Guarantors wish to set forth their guaranty in writing for the
benefit of Lender.
<PAGE> 48
NOW, THEREFORE, in consideration of Lender's agreement to make the
above-described loan to Borrower; in consideration of the terms, covenants and
provisions of the Loan Documents; and with the understanding and agreement on
the part of Guarantors that the above-described loan and other financial
accommodations by Lender to Borrower are and will be of direct interest,
benefit and advantage to Guarantors, and for other good and valuable
considerations, the receipt and sufficiency of which is hereby acknowledged,
each Guarantor hereby states and agrees as follows:
1. Request to Make Revolving Loan. Guarantors hereby request
Lender to make the Revolving Loan to Borrower and to extend credit, to permit
credit to remain outstanding and to give financial accommodations to Borrower,
as Borrower may desire and as Lender may grant, from time to time, whether to
Borrower alone or to Borrower and others, and specifically to make the
Revolving Loan described in the Loan Documents.
2. Guaranty. For the consideration described herein, each
Guarantor hereby absolutely, unconditionally and jointly and severally
guarantees full and punctual payment when due, whether at stated maturity, by
acceleration or otherwise, and at all times thereafter, of (i) the Note; (ii)
all obligations and indebtedness of Borrower arising under any of the Loan
Documents; (iii) any and all other existing and future indebtedness,
obligations and liabilities of Borrower to Lender for sums borrowed, including
all renewals, extensions and modifications thereof, whether now existing or
hereafter incurred, whether contracted by Borrower alone or jointly with
others; and (iv) all expenses, including, without limitation, reasonable
attorneys' fees to the extent not prohibited by applicable law, whether or not
suit be commenced, incurred by Lender in the collection of any of the
liabilities or other indebtedness now or hereafter owed by Borrower to Lender,
the enforcement of all rights and remedies under the Loan Documents or any
other security therefor or in enforcing any of Lender's rights under this
Guaranty Agreement or under any of the Loan Documents, including, without
limitation, all fees and expenses incurred by Lender in connection with any
bankruptcy type proceedings (all of the above are hereinafter collectively
referred to as the "Liabilities"). The covenants of Guarantors in this section
are hereinafter collectively referred to as the "Guaranty." This is an
unconditional guaranty and each Guarantor further understands and agrees that
there are no conditions, oral or otherwise, on the effectiveness of this
Guaranty.
3. Renewals, Extensions and Releases. Guarantors hereby agree to
and give their consent that, without notice to or further assent by Guarantors,
the obligations of Borrower or any other party for the Liabilities may be
renewed, extended,
- 2 -
<PAGE> 49
modified, premature, accelerated or released by Lender, the interest rate on
any of them may be increased or decreased, or additional credit extended to
Borrower all as Lender may deem advisable in its sole discretion, and that any
security or securities, security interests or collateral which Lender may hold
or in which Lender may have an interest may be exchanged, sold, released or
surrendered by it, all as it may deem advisable in its sole discretion and
regardless of Borrower's financial or other condition at the time of such
action, without impairing or affecting the obligations of Guarantors hereunder
in any way whatsoever.
4. Waivers by Guarantors, Etc. Guarantors hereby waive each of the
following: (a) any and all notice of the acceptance of this Guaranty or of the
creation, renewal or accrual of any Liabilities, present or future; (b) any and
all objections to the reliance of Lender upon this Guaranty; (c) notice of the
existence or creation of any Loan Document or of any of the Liabilities; (d)
protest, presentment, demand for payment, notice of default or nonpayment,
notice of dishonor to or upon Guarantors, Borrower or any other party liable
for any of the Liabilities hereby guaranteed; (e) any and all other notices or
formalities to which Guarantors may otherwise be entitled, including notice of
Lender's granting the Borrower any indulgences or extensions of time on payment
of any of the Liabilities and of the increase or decrease of the interest rate
on any of them; and (f) promptness in making any claim or demand hereunder. All
Liabilities shall conclusively be presumed to have been created, contracted, or
incurred in reliance upon this Guaranty and all dealings between Borrower and
Lender shall likewise be presumed to be in reliance upon this Guaranty. No
delay or failure on the part of Lender in the exercise of any right or remedy
against either Borrower or Guarantors, or any other party against whom Lender
may have any right, and no single or partial exercise by Lender of any right or
remedy herein shall preclude other or further exercise thereof or the exercise
of any other right or remedy whether contained herein or in the Revolving Note
or any of the other Loan Documents. The remedies provided herein and in any
other Loan Document shall be cumulative and not exclusive of any remedies
provided by law. No action of Lender permitted hereunder shall in any way
impair or affect this Guaranty. Guarantors further agree that: (a) Guarantors
have established adequate means of obtaining from the Borrower on a continuing
basis financial and other information pertaining to the Borrower's affairs or
business; and (b) Guarantors are now and will be familiar with the affairs,
business, operations and condition of the Borrower and its assets. Guarantors
hereby waive any duty on the part of Lender to disclose to Guarantors any
matter relating to the affairs, business, operations or conditions (financial
or other) of the
- 3 -
<PAGE> 50
Borrower and its assets now or hereafter known to Lender. With respect to the
creation of any Liabilities, the Lender need not inquire into the power or
authority of the Borrower or any officer, director, partner or agent acting or
purporting to act on Borrower's behalf, and any Liabilities created in reliance
upon the professed exercise of such power or authority shall be guaranteed
hereunder. Lender shall have no obligation to disclose or discuss with
Guarantors its assessment of the financial condition of Borrower.
5. Guaranty of Payment; Independent Obligations. This Guaranty
shall be construed as an absolute, irrevocable and unconditional guaranty of
payment and performance, without regard to the validity, regularity or
enforceability of any obligation or purported obligation of Borrower. The
obligations of Guarantors are independent of the obligations of Borrower, and a
separate action or actions for payment, damages or performance may be brought
and prosecuted against Guarantors or any of them, whether or not an action is
brought against Borrower or any security for the Liabilities, and whether or
not Borrower is joined in any such action or actions.
6. Liabilities Guaranteed. This Guaranty is made and shall
continue as to any and all Liabilities without regard to collateral, security,
guarantees or other obligors, if any, or to the validity, effectiveness or
enforceability of any and all thereof or any and all of the Liabilities or Loan
Documents. Any and all such collateral, security, guarantees and other obligors
if any, may, from time to time, without notice to or consent of Guarantors, be
granted, sold, released, surrendered, exchanged, settled, compromised, waived,
subordinated or modified, with or without consideration, on such terms or
conditions as may be acceptable to Lender, without in any manner affecting or
impairing the liability of Guarantors. Additionally, no delay or failure on
the part of Lender to take any collateral or security for the Revolving Note or
other Liabilities nor any delay or failure on the part of Lender to obtain or
have executed any or all of the Loan Documents shall in any manner affect or
impair the liability of the Guarantors. No set-off, claim, reduction or
diminution of any Liability or any defense of any kind or nature which Borrower
or any Guarantor has or may hereafter have against Lender shall be available to
any Guarantor against Lender with respect to the Liabilities.
7. Subrogation. Guarantors will not exercise any rights which
Guarantors may have acquired by way of subrogation under this Guaranty, by any
payment made hereunder or otherwise, unless and until all of the Liabilities
shall have been fully paid and performance completed. If any payment shall be
made by any person to the undersigned on account of such subrogation rights
- 4 -
<PAGE> 51
at any time when all of the Liabilities have not been paid in full, then any
amount so paid will be forthwith paid by Guarantors to Lender to be credited
and applied to any of the Liabilities, whether matured or unmatured, in such
order and according to such priority as Lender may, in its sole discretion,
determine.
8. Payment. When any of the Liabilities become due and remain due
and unpaid Guarantors will, upon demand, pay to Lender the amount due thereon.
Guarantors agree that the liability of Guarantors hereunder is joint and
several and is independent of any other guaranty at any time in effect with
respect to all or any part of the Liabilities. Lender also shall have the
unconditional right to demand and receive full payment from any Guarantor of
all of the Liabilities and all interest then accrued thereon upon the
occurrence of an Event of Default (as defined in the Revolving and Term Credit
Agreement). Any amounts received by Lender from any sources and applied by
Lender towards the payment of the Liabilities shall be applied in such order of
application as Lender may from time to time elect in its sole discretion.
9. Lender's Collection Rights Against Guarantors; Collateral.
Guarantors agree to pay Lender any and all costs, expenses and reasonable
attorneys fees, to the extent not prohibited by applicable law, paid or
incurred by Lender in collecting or endeavoring to collect any Liabilities or
in enforcing or endeavoring to enforce this Guaranty whether or not suit be
brought. Guarantors hereby grant, convey, transfer and deliver to Lender a
continuing security interest and lien as security for this Guaranty, as well as
security for any other obligations or liabilities (present or future, absolute
or contingent, due or not due) of Guarantors to Lender, upon all property of
Guarantors now or at any time hereafter in the possession or custody of Lender
for any purpose (including property left in safekeeping or custody), by or for
the account of Guarantors, and also upon any deposits with or any credit or
claim of Guarantors against Lender, existing from time to time. Lender is
hereby irrevocably and unconditionally authorized and empowered, upon the
occurrence of any Event of Default, to appropriate, seize and apply to the
payment and extinguishment of the Liabilities any and all monies, property,
securities, deposits, or credit balances held by Lender without demand,
advertisement, or notice, all of which are hereby expressly waived by
Guarantors. Further, Guarantors agree that should Lender repay (either by
reason of court order or judgment or in settlement of a controversy) to
Borrower or the estate or Trustee of Borrower as a bankruptcy
debtor-in-possession any sum because of a claim of a preference or for any
other reason whatsoever,
- 5 -
<PAGE> 52
this Guaranty shall continue to be effective or shall (if previously deemed
terminated) be reinstated, as the case may be, as if such payment had not been
made or performance completed and Guarantors shall immediately reimburse Lender
for any sums so repaid plus (a) interest on such sums, from the date Lender
makes such payment until such payment is reimbursed in full, at the rate last
charged on any of the Liabilities, and (b) all expenses incurred by Lender in
enforcing such reimbursement and in resisting such repayment.
10. Transfer of Liabilities. Subject to Section 10.4 of the
Revolving and Term Credit Agreement, Lender may, without notice or consent of
any kind, sell, assign or transfer all or any of the Liabilities, and in such
event each and every immediate and successive assignee, transferee, or holder
of all or any of the Liabilities shall enjoy all rights, power and benefits of
Lender hereunder and shall have the full right to enforce this Guaranty by suit
or otherwise, for the benefit of such assignee, transferee or holder, as fully
as if such assignee, transferee or holder were herein by name specifically
given such right, powers and benefits. Lender shall have an unimpaired right,
prior and superior to that of any such assignee, transferee or holder, to
enforce this Guaranty for the benefit of Lender, with regard to those
Liabilities which Lender has not sold, assigned or transferred.
11. Duration; Termination. This Guaranty shall be a continuing
guaranty and may be terminated as to any Guarantor only upon written notice by
registered mail signed by such Guarantor and actually received by an officer of
Lender and to be effective as of the opening of business on the next business
day following the day of receipt. Such termination shall be effective only as
to that portion of the Liabilities incurred after such termination time, and
this Guaranty shall remain in full force and effect as to all Liabilities
incurred before that time and as to any interest and other charges subsequently
accruing thereon and as to any expenses subsequently incurred by Lender in
endeavoring to collect any such pre-termination Liabilities and in enforcing
this Guaranty. Regardless of when a renewal or extension of pre-termination
Liabilities occurs (with or without adjustment of the interest rate or payment
or other terms), the renewed or extended Liabilities are deemed to have been
incurred prior to termination, and shall continue to be fully covered by this
Guaranty. Any notice of termination by any Guarantor shall not affect the
obligations hereunder of any other Guarantor. This Guaranty also shall continue
in full force and effect whether or not the Liabilities are from time to time
reduced to zero dollars. Provided, however, notwithstanding the foregoing, no
termination shall be effective until the initial Revolving Loan amount, if any,
set forth above and any interest
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<PAGE> 53
or other charges accruing thereon and any expenses incurred by Lender in
attempting to collect the same has been paid in full. When said conditions
have been fully met, Lender will, upon request, furnish to Guarantors at
Guarantors' expense a written cancellation of this Guaranty.
12. Jurisdiction. Guarantors irrevocably: (a) agree that Lender
or any other holder or holders of the Liabilities may bring suit, action or
other legal proceedings arising out of this Guaranty Agreement or the
transactions contemplated hereby in the courts of the State of Missouri in
Jackson County, Missouri or the courts of the United States for the Western
District of Missouri, but shall not be restricted to such courts; (b) consent
to the jurisdiction of each such court in any such suit, action or proceeding;
and (c) waive venue of any such suit, action or proceeding in any of such
courts.
13. Claims in Bankruptcy. Guarantors will file all claims against
Borrower in any bankruptcy or other proceeding in which the filing of claims is
required by law upon any indebtedness of Borrower to Guarantors and will assign
to Lender all right of Guarantors thereunder. If Guarantors do not file any
such claim, Lender, as attorney-in-fact for the undersigned hereby irrevocably
appointed, is hereby authorized to do so in the name of the undersigned or, in
Lender's discretion, to assign the claim and to cause proof of claim to be
filed in the name of Lender's nominee. In all such cases, whether in
administration, bankruptcy or otherwise, the person or persons authorized to
pay such claim shall pay to Lender the full amount thereof and, to the full
extent necessary for that purpose, Guarantors hereby assign to Lender all of
Guarantors' rights to any such payments or distributions to which Guarantors
would otherwise be entitled.
14. Guarantors' Representations and Warranties. Each of the
Guarantors represents, warrants and covenants to and with Lender that except as
otherwise disclosed in Schedules to the Revolving and Term Credit Agreement:
a. There is no action or proceeding pending or to the
knowledge of such Guarantor, threatened against such Guarantor before
any court or administrative agency which might result in any material
adverse change in the business or financial condition of such
Guarantor or in the property of such Guarantor;
b. Such Guarantor has filed all Federal and State income
tax returns which such Guarantor has been required to file, and has
paid all taxes as shown on said returns and on all assessments
received by such Guarantor to the extent that such taxes have become
due;
- 7 -
<PAGE> 54
c. Neither the execution nor delivery of this Guaranty
Agreement nor fulfillment of nor compliance with the terms and
provisions hereof will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any
property or assets of such Guarantor under any agreement or instrument
to which such Guarantor is now a party or by which such Guarantor may
be bound;
d. This Agreement is a valid and legally binding
agreement of such Guarantor and is enforceable against such Guarantor
in accordance with its terms;
e. Such Guarantor has either examined the Loan Documents
or has had an opportunity to examine the Loan Documents and has waived
the right to examine them; and
f. Such Guarantor has the full power, authority, and legal
right to execute and deliver this Agreement.
15. Notices, Etc. Any notice, demand or request by Lender to the
Guarantors, or any of them, or by the Guarantors, or any of them, to Lender
shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telecopy or other telegraphic communications
equipment of the sending party as follows:
a. If to any Guarantor, to it at:
P.O. Box 1307
Hutchinson, Kansas 67504
Attention of Stephen L. Gagnon
(Telecopy No. (316) 727-2727)
[If by hand delivery or overnight courier service
then the post office box is eliminated, the address
811 E. 30th Avenue is added and the zip code is
67502]
b. If to Lender, to it at:
10th & Baltimore
P.O. Box 419038
Kansas City, Missouri 64183
Attention of Barry P. Sullivan
(Telecopy No. (816) 691-7426)
[If by hand delivery or overnight courier service
then the post office box is eliminated and the zip
code is 64105]
- 8 -
<PAGE> 55
or to such other address or telecopy number as any party may direct by notice
given as provided in this paragraph. All notices and other communications given
to any party hereto in accordance with the provisions of the Guaranty shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telecopy or other telegraphic
communications equipment of the sender, if received on or before 5:00 p.m.,
local time of the recipient, on a business day, or on the next business day if
received after 5:00 p.m. on a business day or on a day that is not a business
day, or on the date five (5) business after dispatched by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this paragraph or in accordance with
the latest unrevoked direction from such party given in accordance with this
paragraph.
16. General Provisions. Each Guarantor agrees to perform any
further acts and deliver any additional documents that may be reasonably
requested by Lender to carry out the intent and provisions of this Guaranty.
Should any part, term or provision of this Guaranty be declared illegal or in
conflict with any law, rule, or regulation, the validity of the remaining
portions, terms or provisions shall not be affected thereby. The terms and
conditions contained herein constitute the entire agreement of the parties and
supersede all prior or contemporaneous written and oral agreements and
understandings relating to the subject matter of this Guaranty. The captions at
the beginning of Sections are used for convenience only and are not to be used
in attempting to construe any part of this guaranty. Unless the context
indicates otherwise, words importing the singular number shall include the
plural and vice versa, words importing persons shall include firms,
associations, partnerships and corporations, including public bodies and
entities, as well as natural persons, and words of masculine gender shall be
deemed and construed to include correlative words of the feminine and neuter
genders and vice versa. None of the provisions of this Guaranty may be amended
without the written consent of the Guarantor affected thereby and Lender. This
Guaranty shall be binding upon and inure to the benefit of and be enforceable
by the heirs, legal representatives, successors and assigns of Guarantor and
Lender as the case may be. This Guaranty may be executed at different times and
in any number of originals or counterparts, each of which shall be deemed an
original, but all of which together shall constitute only one instrument. THIS
GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MISSOURI.
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<PAGE> 56
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
of the day and year first above written.
[SEAL] REPUBLIC PAPERBOARD COMPANY, a
Kansas corporation
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
[SEAL] REPUBLIC PAPERBOARD COMPANY OF WEST
VIRGINIA, a West Virginia corporation
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
GUARANTORS
- 10 -
<PAGE> 57
STATE OF_______________________ )
) ss.
COUNTY OF_______________________ )
On this ____ day of June, 1995, before me, a Notary Public, appeared
Phil Simpson, to me personally known, who being by me duly sworn, did say that
he is the Chairman of the Board, President and Chief Executive officer of
REPUBLIC PAPERBOARD COMPANY, a Kansas corporation, and that the seal affixed to
the foregoing instrument is the corporate seal of said corporation and that
said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said Phil Simpson acknowledged said
instrument to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
notarial seal at my office in ____________________________, the day and year
last above written.
___________________________________
Notary Public in and for said
County and State
My Commission Expires:
_____________________________
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<PAGE> 58
STATE OF_______________________ )
) ss.
COUNTY OF_______________________ )
On this ____ day of June, 1995, before me, a Notary Public, appeared
Phil Simpson, to me personally known, who being by me duly sworn, did say that
he is the Chairman of the Board, President and Chief Executive Officer of
REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia corporation, and
that the seal affixed to the foregoing instrument is the corporate seal of said
corporation and that said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors, and said Phil Simpson
acknowledged said instrument to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
notarial seal at my office in ____________________________, the day and year
last above written.
___________________________________
Notary Public in and for said
County and State
My Commission Expires:
_____________________________
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<PAGE> 59
EXHIBIT 3.2
TERM LOAN PROMISSORY NOTE
$28,000,000.00 Kansas City, Missouri
June 30, 1995
FOR VALUE RECEIVED, REPUBLIC GYPSUM COMPANY, a Delaware corporation,
and REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia corporation
(collectively, the "Maker"), hereby jointly and severally promise to pay to the
order of BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY (the "Bank"), the
principal sum of TWENTY-EIGHT MILLION DOLLARS ($28,000,000,00), together with
interest on the unpaid principal balance outstanding from time to time, from
date until Maturity (as hereinafter defined), at a rate or rates per annum
determined as hereinafter provided,
As used in this Note, the following terms shall have the meanings
indicated:
(a) "Applicable Margin" means, if the Maker's Fixed Charge
Coverage Ratio is: (i) less than 2.25 to 1.00, 175 basis points; (ii) equal to
or greater than 2.25 to 1.00 but less than 3.00 to 1.00, 150 basis points;
(iii) equal to or greater than 3.00 to 1.00 but less than 4.00 to 1.00, 125
basis points; (iv) equal to or greater than 4.00 to 1.00 but less than 5.00 to
1.00, 100 basis points; (v) equal to or greater than 5.00 to 1.00, 75 basis
points. The initial Applicable Margin shall be 125 basis points. The
Applicable Margin shall be established annually on the anniversary date of this
Note, based, in each instance, on the Makers average Fixed Charge Coverage
Ratio for the immediately preceding four fiscal quarters, determined on a
consolidated basis for Maker and its subsidiaries in accordance with Generally
Accepted Accounting Principles consistently applied ("GAAP"). For this
purpose, Fixed Charge Coverage Ratio shall mean the ratio of: Consolidated
EBITDA; to the sum of (i) Consolidated Interest Expense and (ii) Consolidated
Current Maturities of Long Term Debt, For this purpose, (i) Consolidated EBITDA
means, for any period, the earnings before interest, taxes, depreciation,
amortization, and extraordinary items for such period, determined on a
consolidated basis for Maker and its subsidiaries in accordance with GAAP; (ii)
Consolidated Interest Expense means, for any period, all interest paid or
accrued by Maker and its subsidiaries with respect to any Indebtedness and the
interest portion of any Capitalized Lease Obligations, all as determined in
accordance with GAAP during such period; (iii) Consolidated Current Maturities
of Long Term Debt means for of any period, the sum of principal payments or
maturities of debt due within one year, and payments due within one year on
Capitalized Lease Obligations; and (iv) Capitalized Lease Obligations of any
person means the obligations of such person under any lease that would
<PAGE> 60
be capitalized on a balance sheet of such person prepared in accordance with
GAAP, and the amount of such obligations at any time shall be the capitalized
amount thereof at such time determined in accordance with GAAP.
(b) "Board" means the Board of Governors of the Federal Reserve
System or any other body or agency succeeding to its authority to set reserve
requirements for banks.
(c) "Business Day" means any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Missouri) on which banks in
the State of Missouri are open for business.
(d) "CBR" means, at any time, the Corporate Base Rate of the Bank,
as set by the Bank from time to time and distributed to its officers and
employees for their use in fixing and adjusting interest rates on loans,
whether or not otherwise published or utilized and irrespective of the rate
charged by the Bank on any particular loan. The Corporate Base Rate is but one
of several interest rate bases used by the Bank, and the Bank lends at rates
above and below the Corporate Base Rate, There is no representation that the
Corporate Base Rate is the best or a favorable rate of interest.
(e) "Credit Agreement" means the Revolving and Term Credit
Agreement dated June 30, 1995, to which the Maker and the Bank, among others,
are parties, as amended from time to time.
(f) "Dollars" and "$" mean lawful money of the United States of
America.
(g) "Effective Change Date" means the date of this Note and the
first day of each succeeding fiscal quarter of Maker.
(h) "Interest Due Date" means each January 31, April 30, July 31
and October 31 commencing after the date of this Note and prior to Maturity or,
if such day is not a Business Day, the next succeeding Business Day; provided,
however, that as hereinafter provided, the first interest payment due and
payable hereunder shall be due and payable on October 31, 1995 rather than July
31, 1995.
(i) "Interest Period" means a period commencing on an Effective
Change Date and ending on the day immediately preceding the next succeeding
Effective Change Date. Notwithstanding the foregoing, (A) each Interest Period
which would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day, (B) if the Maker fails to make a Maker Election
prior to 10:00 a.m. on the Business Day immediately preceding the last Business
Day of any Interest Period, then the Term Base Rate shall be the Rate Option in
effect from the end of such Interest Period until the earlier of Maturity or
the next succeeding Effective Change Date.
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<PAGE> 61
(j) "Interest Rate" means the rate at which interest shall accrue
on the unpaid principal balance of this Note from time to time under the terms
hereof.
(k) "Maker Election" means an election by the Maker, delivered to
the Bank in writing or communicated to the Bank by telephone, telex or
facsimile transmission, to select the Rate Option. Each Maker Election
communicated by telephone shall be confirmed promptly in writing or by telex or
facsimile transmission. Each Maker Election other than one communicated by
telephone, and each written confirmation of a Maker Election communicated by
telephone, shall be in the form attached to the Credit Agreement as Exhibit
3.3 as the same may be revised from time to time by agreement between the
Maker and the Bank, and shall specify the Rate Option which is to go into
effect as of the next succeeding Effective Change Date. Each Maker Election
must be received by the Bank no later than 10:00 a,m. two Business Days prior
to the next succeeding Effective Change Date. If a Maker fails to timely make
a Maker Election, then the Term Base Rate shall be the Rate Option in effect
from the end of such Interest Period until the earlier of Maturity or the next
succeeding Effective Change Date.
(l) "Maturity" means April 30, 2002, or such earlier date to which
the maturity of this Note shall be accelerated as hereinafter provided.
(m) "Principal Installment Due Date" means the dates set forth in
the definition of Principal Installments contained herein which are the dates
upon which Principal Installments are due and payable hereunder.
(n) "Principal Installments" means installments of principal in
the following amounts due and payable on each of the Principal Installment Due
dates:
<TABLE>
<CAPTION>
DATE AMOUNT
---- ------
<S> <C>
October 31, 1995 $1,550,000
April 30, 1996 $1,610,000
October 31, 1996 $1,670,000
April 30, 1997 $1,740,000
October 31, 1997 $1,800,000
April 30, 1998 $1,870,000
October 31, 1998 $1,940,000
April 30, 1999 $2,015,000
October 31, 1999 $2,090,000
April 30, 2000 $2,170,000
October 31, 2000 $2,255,000
April 30, 2001 $2,340,000
October 31, 2001 $2,430,000
April 30, 2002 $2,520,000
</TABLE>
- 3 -
<PAGE> 62
(o) "Rate Option" means the formula (which shall be either the
Term Eurodollar Rate or the Term Base Rate) under which the Interest Rate is to
be determined from time to time.
(p) "Specified Maturity" means either one (1) or three (3) months.
(q) "Term Base Rate" means, as of any date, (i) the CBR minus (ii) one
half of one percent.
(r) "Term Eurodollar Rate" means, as of any date, for a Specified
Maturity, the sum of (i) the Applicable Margin plus (ii) the rate obtained by
dividing (A) the rate most recently reported as the "London Interbank Offered
Rate" for the Specified Maturity in The Wall Street Journal, or, if no such
rate for such Specified Maturity has been reported in The Wall Street Journal
on any of the five (5) Business Days next preceding such date, the "London
Interbank Offered Rate" for the Specified Maturity most recently reported, by
an on-line database generally available to banks in the United States and
selected by the Bank, as a prevailing rate, based on rates offered by banks in
the London Market for interbank dollar deposits of the Specified Maturity, or,
if no such rate for such Specified Maturity has been reported by any such
database on any of the twenty (20) Business Days next preceding such date, the
average of the rates then offered for interbank dollar deposits of the one
month maturity by any three banks in the London Market selected by the Bank, by
(B) a percentage equal to 100% minus the current percentages specified by the
Board for determining the maximum reserve requirement (including, but not
limited to, any marginal, special, emergency or supplemental reserve
requirement) for the Bank in respect of liabilities consisting of or including
(among other liabilities) Eurocurrency Liabilities, as defined in the Board's
Regulation D or any successor regulation. The result of the foregoing
calculation shall be adjusted to the nearest one-thousandth of one percent
(0.001%).
Concurrently with the delivery of this Note, the Maker has delivered
to the Bank a written election which identifies the Rate Option to be
applicable during the initial Interest Period. The Maker may make Maker
Elections no later than two Business Days prior to the end of each Interest
Period, and the Rate Option so elected shall become effective as of the next
succeeding Effective Change Date, at any time and from time to time, subject to
the provisions of paragraph (i), above. If a Maker fails to timely make a
Maker Election, then the Term Base Rate shall be the Rate Option in effect from
the end of such Interest Period until the earlier of Maturity or the next
succeeding Effective Change Date, Anything herein to the contrary
notwithstanding in no event shall the principal balance of this Note bear
interest at a rate greater than the highest rate of interest permitted by
applicable law.
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<PAGE> 63
Principal Installments shall be paid on each Principal Installment
Date, and the balance of all unpaid principal of this Note shall be payable in
full at Maturity. Accrued interest at the Interest Rate shall be due and
payable on each Interest Due Date and at Maturity, provided, however, that the
first interest payment due and payable hereunder shall be due and payable on
October 31, 1995 rather than July 31, 1995. Interest shall be computed on the
basis of a 360-day year for the actual number of days elapsed. During any
Interest Period for which the Rate Option in effect is the Term Eurodollar
Rate; (i) if the Specified Maturity is one (1) month, the Interest Rate shall
be adjusted monthly on the first day of each month during such Interest Period
based on the Term Eurodollar Rate determined as of such first day of such
month, or (ii) if the Specified Maturity is three (3) months, the Interest Rate
shall be fixed for the entire Interest Period based on the Term Eurodollar Rate
determined as of the Effective Change Date on which such Interest Period
commences. Provided, however, that in the event any adjustment of the
Applicable Margin becomes effective during such Interest Period, the Interest
Rate shall change effective concurrently with the adjustment of the Applicable
Margin. During any Interest Period for which the Rate Option in effect is the
Term Base Rate, the Interest Rate shall change on the same day as each change
in the CBR.
The principal of this Note may be prepaid, in whole or in part, at any
time and from time to time, without penalty or fee, but only upon not less than
one Business Day's prior notice to the Bank, and subject to the limitations
that unless the Bank shall otherwise in its sole discretion agree, any partial
prepayments shall be in the amount of not less than $500,000 or an integral
multiple thereof, and no prepayment of principal may be made at a time when any
previously-scheduled interest payment has not been paid in full. Any
prepayments of principal shall reduce Principal Installments in inverse order
of maturity.
After Maturity, whether Maturity occurs by reason of acceleration or
passage of time, and notwithstanding any other provision of this Note or any
Maker Election, this Note shall bear interest at a rate per annum equal to the
CBR plus three percent (3%), adjusted daily, not to exceed the highest rate of
interest permitted by applicable law.
As used herein, the term "Holder" refers to the Bank and also to any
other person in possession of this Note if this Note has been endorsed to such
person, to his order, to bearer or in blank. The amount of interest due on any
Interest Due Date may be specified by notice from the Holder to the Maker prior
to such Interest Due Date, but the Holder shall have no obligation to give any
such notice. In the event any such notice is not given, in the event the amount
of interest is miscalculated in any such notice, or in the event of a change in
the Interest Rate subsequent to the preparation of any such notice and prior to
the
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<PAGE> 64
Interest Due Date, then any resultant underpayment or overpayment of interest
shall be added to or deducted from the next scheduled interest payment. Nothing
herein shall relieve the Maker or any other person liable for the payment of
this Note from the obligation to pay the full amount of interest accruing from
time to time on the unpaid principal balance, and any and all accrued interest
not previously paid for any reason whatsoever shall be due and payable at
Maturity.
All payments of principal and interest on this Note shall be due and
payable at 2:00 P.M. (local time in the city in which the Bank's principal
office is located) on the scheduled due date at the principal office of the
Bank, 14 West 10th Street, Kansas City, Missouri 64105, or at such other place
as the Holder may designate to the Maker in writing from time to time.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSOURI APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY WITHIN SAID STATE, EXCEPT TO THE EXTENT SUCH LAWS
ARE PREEMPTED (EXPRESSLY OR BY IMPLICATION) BY LAWS OF THE UNITED STATES. THIS
NOTE MAY NOT BE MODIFIED OR CANCELED EXCEPT BY A WRITING SIGNED BY THE HOLDER.
To the extent not prohibited by law, all parties who now are or
hereafter become liable for the payment of this Note, whether as maker,
co-maker, principal, surety, guarantor or endorser, including any accommodation
party as defined in the Uniform Commercial Code as enacted in Missouri, hereby
(a) waive presentment for payment, demand, protest, notice of protest, notice
of dishonor, and, except as required hereby or by the Credit Agreement, all
other notices in connection with the delivery, acceptance, performance, default
and enforcement of this Note; (b) consent to any number of extensions,
postponements or deferrals of any payment due hereunder, for any length of time
and on any lawful terms (including but not limited to any change in the
Interest Rate or the method of determining the Interest Rate from time to
time), to the grant of any other indulgence to, any release of and any covenant
not to sue any party liable for the payment hereof, and any extension of
additional credit, any sale, exchange, release or surrender by Holder of any
interest in any security, securities, security interests or collateral which
Holder may hold, all without notice to or express reservation of rights against
any of said parties; and (c) jointly and severally agree (subject to any
limitations contained in the agreements or instruments by virtue of which they
respectively are liable for the payment hereof) to perform all obligations of
the Maker hereunder (as modified by any such extension, postponement or
deferral) when due, without requiring any prior demand on or action against any
other person. No delay or failure on the part of Holder in the exercise of any
right or remedy against either Maker, or any other party against whom Holder
may have any right, and no single or partial exercise by Holder of any right or
remedy herein shall preclude other or further exercise thereof or
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<PAGE> 65
the exercise of any other right or remedy whether contained herein or in any of
the other Loan Documents as defined in the Credit Agreement. The remedies
provided herein and in any other Loan Document, as defined in the Credit
Agreement, shall be cumulative and not exclusive of any remedies provided by
law. No action of Holder permitted hereunder shall in any way impair or affect
this Note. Each Maker further agrees that: (a) each Maker has established
adequate means of obtaining from the other Maker on a continuing basis
financial and other information pertaining to such other Maker's affairs or
business; and (b) each Maker is now and will be familiar with the affairs,
business, operations and condition of the other Maker and its assets. Each
Maker hereby waives any duty on the part of Holder to disclose to such Maker
any matter relating to the affairs, business, operations or conditions
(financial or other) of the other Maker and its assets now or hereafter known
to Holder. Holder shall have no obligation to disclose or discuss with either
Maker its assessment of the financial condition of the other Maker,
In the event any installment of principal or interest is not paid when
due, or in the event there occurs any event which, under the terms of the
Credit Agreement, permits the obligations referred to therein to be declared
due and payable or causes or permits the maturity of such obligations to be
accelerated, then the Holder shall have the right and power, at its option, to
accelerate the maturity of this Note and to declare the unpaid principal
balance and all accrued interest immediately due and payable in full.
In the event of any default in the payment of the principal or
interest hereunder, the Maker shall pay all costs and expenses of collection,
including the reasonable fees and expenses of any attorney or firm of attorneys
retained by the Holder in connection with such collection, whether or not suit
is commenced and including fees and expenses in connection with any bankruptcy,
insolvency or reorganization proceedings and any proceedings in appellate
courts, all to the extent not prohibited by applicable law.
(SEAL) REPUBLIC GYPSUM COMPANY, a Delaware
corporation
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
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<PAGE> 66
[SEAL] REPUBLIC PAPERBOARD COMPANY OF WEST
VIRGINIA, a West Virginia corporation
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
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<PAGE> 67
EXHIBIT 3.3
MAKER ELECTION
To: Boatmen's First National Bank of
Kansas City
Pursuant to the terms of our Term Loan Promissory Note dated June 30,
1995, and payable to your order in the principal amount of $28,000,000 (the
"Note"), the unpaid principal balance of which is $________________, we hereby
elect to establish or select the Rate Option. Effective on the Effective Change
Date, which shall be _____________, 19__ [the first day of the next succeeding
fiscal quarter of Maker], the Rate Option shall be:
( ) The Term Eurodollar Rate for ___________________ months.
[one or three]
( ) The Term Base Rate.
This Maker Election is subject to all of the terms of the Note, and
terms used herein with initial capital letters which are defined in the Note
shall, as used herein, have the meanings given to them in the Note.
Dated this ____ day of ____________________, 19__.
REPUBLIC GYPSUM COMPANY
BY:________________________________
NAME:______________________________
Title:_____________________________
REPUBLIC PAPERBOARD COMPANY OF WEST
VIRGINIA
BY:________________________________
NAME:______________________________
Title:_____________________________
<PAGE> 68
EXHIBIT 3.4
TERM LOAN GUARANTY AGREEMENT
THIS TERM LOAN GUARANTY AGREEMENT is made as of the 30th day of June,
1995, by the undersigned (hereinafter referred to as "Guarantor"), to BOATMEN'S
FIRST NATIONAL BANK OF KANSAS CITY, a national banking association (hereinafter
referred to as "Lender").
RECITALS:
1. REPUBLIC GYPSUM COMPANY, a Delaware corporation, and REPUBLIC
PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia corporation (hereinafter
referred to jointly and severally as "Borrowers", and individually as
"Borrower"), intend to borrow up to the principal sum of $28,000,000 (said debt
and all interest and other sums accruing thereon herein sometimes referred to
as the "Term Loan") from Lender as evidenced or to be evidenced by a Term Loan
Promissory Note (hereinafter referred to as the "Term Note") but it is
understood that Guarantor's obligations hereunder are not limited to said
$28,000,000 amount; and
2. Republic Gypsum Company has contemporaneously with the
execution herewith borrowed or will borrow up to the principal sum of
$7,000,000 (said debt and all interest in other sums accruing thereon here and
sometimes referred to as the "Revolving Loans") from Lender as evidenced or to
be evidenced by a Revolving Credit Promissory Note of approximately even date
herewith (hereinafter referred to as the "Revolving Notes"), and Republic
Gypsum Company intends to use the proceeds of the Revolving Loan, in part, to
fund intercompany advances to Guarantor; and
3. Borrowers also have contemporaneously executed or will execute
a Revolving Credit and Term Loan Agreement, and certain other documents
described therein creating liens upon, granting security interests in, or
otherwise evidencing or securing the Term Loan (all of such documents,
including the Revolving and Term Credit Agreement and the Term Note are
hereinafter sometimes collectively referred to as the "Loan Documents" as such
term is defined in the Revolving and Term Credit Agreement); and
4. Guarantor has offered to Lender and Lender has accepted the
Guarantor's unconditional guaranty of payment and performance of the Term Loan
and other obligations of Borrowers, and Lender would not or will not make the
Term Loan or the Revolving Loan but for the guaranty of Guarantor; and
5. In consideration of the substantial benefits flowing to Guarantor
by virtue of the above-described loan transaction,
<PAGE> 69
Guarantor has agreed to fully guarantee any and all debts, obligations and
liabilities of Borrowers under the Term Note and all of the other Term Loan
Documents; and
6. Guarantor wishes to set forth its guaranty in writing for the
benefit of Lender.
NOW, THEREFORE, in consideration of Lender's agreement to make the
above-described loan to Borrowers; in consideration of the terms, covenants and
provisions of the Loan Documents; and with the understanding and agreement on
the part of Guarantor that the above-described loan and other financial
accommodations by Lender to Borrowers are and will be of direct interest,
benefit and advantage to Guarantor, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby states and agrees as follows:
1. Request to Make Term Loan. Guarantor hereby requests Lender to
make the Term Loan to Borrowers and to extend credit, to permit credit to
remain outstanding and to give financial accommodations to Borrowers, as
Borrowers may desire and as Lender may grant, from time to time, whether to
either Borrower alone, to Borrowers jointly and severally, or to either or both
Borrowers and others, and specifically to make the Term Loan described in the
Loan Documents.
2. Guaranty. For the consideration described herein, Guarantor
hereby absolutely and unconditionally guarantees full and punctual payment when
due, whether at stated maturity, by acceleration or otherwise, and at all times
thereafter, of (i) the Term Note; (ii) all obligations and indebtedness of
Borrowers arising under any of the Term Loan Documents; (iii) any and all other
existing and future indebtedness, obligations and liabilities of Borrower to
Lender for sums borrowed, including all renewals, extensions and modifications
thereof, whether now existing or hereafter incurred, whether contracted by
Borrowers alone or jointly with others,; and (iv) all expenses, including,
without limitation, reasonable attorneys' fees to the extent not prohibited by
applicable law, whether or not suit be commenced, incurred by Lender in the
collection of any of the liabilities or other indebtedness now or hereafter
owed by either or both Borrower to Lender, the enforcement of all rights and
remedies under the Loan Documents or any other security therefor or in
enforcing any of Lender's rights under this Guaranty Agreement or under any of
the Loan Documents, including, without limitation, all fees and expenses
incurred by Lender in connection with any bankruptcy type proceedings (all of
the above are hereinafter collectively referred to as the "Liabilities"), The
covenants of Guarantor in this section are hereinafter collectively referred to
as the "Guaranty." This is an unconditional guaranty and Guarantor further
understands and agrees that there are no
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<PAGE> 70
conditions, oral or otherwise, on the effectiveness of this Guaranty.
3. Renewals, Extensions and Releases. Guarantor hereby agrees to
and gives its consent that, without notice to or further assent by Guarantor,
the obligations of Borrowers or any other party for the Liabilities may be
renewed, extended, modified, prematured, accelerated or released by Lender, the
interest rate on any of them may be increased or decreased, or additional
credit extended to either or both Borrowers as Lender may deem advisable in its
sole discretion, and that any security or securities, security interests or
collateral which Lender may hold or in which Lender may have an interest may be
exchanged, sold, released or surrendered by it, as it may deem advisable in its
sole discretion and regardless of such Borrower's financial or other condition
at the time of such action, without impairing or affecting the obligations of
Guarantor hereunder in any way whatsoever.
4. Waivers by Guarantor, Etc. Guarantor hereby waives each of
the following: (a) any and all notice of the acceptance of this Guaranty or of
the creation, renewal or accrual of any Liabilities, present or future; (b) any
and all objections to the reliance of Lender upon this Guaranty; (c) notice of
the existence or creation of any Loan Document or of any of the Liabilities;
(d) protest, presentment, demand for payment, notice of default or nonpayment,
notice of dishonor to or upon Guarantor, either or both Borrowers or any other
party liable for any of the Liabilities hereby guaranteed; (e) any and all
other notices or formalities to which Guarantor may otherwise be entitled,
including notice of Lender's granting either or both Borrowers any indulgences
or extensions of time on payment of any of the Liabilities; and (f) promptness
in making any claim or demand hereunder. All Liabilities shall conclusively be
presumed to have been created, contracted, or incurred in reliance upon this
Guaranty and all dealings between Borrower and Lender shall likewise be
presumed to be in reliance upon this Guaranty. No delay or failure on the part
of Lender in the exercise of any right or remedy against either Borrower or
Guarantor, or any other party against whom Lender may have any right, and no
single or partial exercise by Lender of any right or remedy herein shall
preclude other or further exercise thereof or the exercise of any other right
or remedy whether contained herein or in the Term Note or any of the other Loan
Documents. The remedies provided herein and in any other Loan Document shall be
cumulative and not exclusive of any remedies provided by law. No action of
Lender permitted hereunder shall in any way impair or affect this Guaranty.
Guarantor further agrees that: (a) Guarantor has established adequate means of
obtaining from the Borrowers on a continuing basis financial and other
information pertaining to the Borrowers' affairs or business; and (b) Guarantor
is now and will be familiar with the affairs, business, operations and
condition of the Borrowers and their respective assets.
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<PAGE> 71
Guarantor hereby waives any duty on the part of Lender to disclose to Guarantor
any matter relating to the affairs, business, operations or conditions
(financial or other) of the Borrowers and their respective assets now or
hereafter known to Lender. With respect to the creation of any Liabilities, the
Lender need not inquire into the power or authority of either of the Borrowers
or any officer, director, partner or agent acting or purporting to act on
either Borrower's behalf, and any Liabilities created in reliance upon the
professed exercise of such power or authority shall be guaranteed hereunder.
Lender shall have no obligation to disclose or discuss with Guarantor its
assessment of the financial condition of Borrowers.
5. Guaranty of Payment; Independent Obligations. This Guaranty
shall be construed as an absolute, irrevocable and unconditional guaranty of
payment and performance, without regard to the validity, regularity or
enforceability of any obligation or purported obligation of Borrowers. The
obligations of Guarantor are independent of the obligations of Borrowers, and a
separate action or actions for payment, damages or performance may be brought
and prosecuted against Guarantor, whether or not an action is brought against
either or both Borrowers or any security for the Liabilities, and whether or
not either or both Borrowers is joined in any such action or actions.
6. Liabilities Guaranteed. This Guaranty is made and shall
continue as to any and all Liabilities without regard to collateral, security,
guarantees or other obligors, if any, or to the validity, effectiveness or
enforceability of any and all thereof or any and all of the Liabilities or Loan
Documents. Any and all such collateral, security, guarantees and other
obligors, if any, may, from time to time, without notice to or consent of
Guarantor, be granted, sold, released, surrendered, exchanged, settled,
compromised, waived, subordinated or modified, with or without consideration,
on such terms or conditions as may be acceptable to Lender, without in any
manner affecting or impairing the liability of Guarantor. Additionally, no
delay or failure on the part of Lender to take any collateral or security for
the Term Note or other Liabilities nor any delay or failure on the part of
Lender to obtain or have executed any or all of the Loan Documents shall in any
manner affect or impair the liability of the Guarantor. No set-off, claim,
reduction or diminution of any Liability or any defense of any kind or nature
which either Borrower or Guarantor has or may hereafter have against Lender
shall be available to Guarantor against Lender with respect to the Liabilities.
7. Subrogation. Guarantor will not exercise any rights which
Guarantor may have acquired by way of subrogation under this Guaranty, by any
payment made hereunder or otherwise, unless and until all of the Liabilities
shall have been fully paid and performance completed. If any payment shall be
made by any person to the undersigned on account of such subrogation rights
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<PAGE> 72
at any time when all of the Liabilities have not been paid in full, then any
amount so paid will be forthwith paid by Guarantor to Lender to be credited and
applied to any of the Liabilities, whether matured or unmatured, in such order
and according to such priority as Lender may in its sole discretion determine.
8. Payment. When any of the Liabilities become due and remain
due and unpaid Guarantor will, upon demand, pay to Lender the amount due
thereon. Guarantor agrees that the liability of Guarantor hereunder is
independent of any other guaranty at any time in effect with respect to all or
any part of the Liabilities. Lender also shall have the unconditional right to
demand and receive full payment from Guarantor of all of the Liabilities and
all interest then accrued thereon upon the occurrence of an Event of Default
(as defined in the Revolving and Term Credit Agreement). Any amounts received
by Lender from any sources and applied by Lender towards the payment of the
Liabilities shall be applied in such order of application as Lender may from
time to time elect in its sole discretion.
9. Lender's Collection Rights Against Guarantor; Collateral.
Guarantor agrees to pay Lender any and all costs, expenses and reasonable
attorneys' fees, to the extent not prohibited by applicable law, paid or
incurred by Lender in collecting or endeavoring to collect any Liabilities or
in enforcing or endeavoring to enforce this Guaranty whether or not suit be
brought. Guarantor hereby grants, conveys, transfers and delivers to Lender a
continuing security interest and lien as security for this Guaranty, as well as
security for any other obligations or liabilities (present or future, absolute
or contingent, due or not due) of Guarantor to Lender, upon all property of
Guarantor now or at any time hereafter in the possession or custody of Lender
for any purpose (including property left in safekeeping or custody), by or for
the account of Guarantor, and also upon any deposits with or any credit or
claim of Guarantor against Lender, existing from time to time. Lender is hereby
irrevocably and unconditionally authorized and empowered, upon the occurrence
of any Event of Default, to appropriate, seize and apply to the payment and
extinguishment of the Liabilities any and all monies, property, securities,
deposits, or credit balances held by Lender without demand, advertisement, or
notice, all of which are hereby expressly waived by Guarantor. Further,
Guarantor agrees that should Lender repay (either by reason of court order or
judgment or in settlement of a controversy) to either Borrower or the estate or
Trustee of either Borrower as a bankruptcy debtor-in-possession any sum because
of a claim of a preference or for any other reason whatsoever, this Guaranty
shall continue to be effective or shall (if previously deemed terminated) be
reinstated, as the case may be, as if such payment had not been made or
performance completed and Guarantor shall immediately reimburse Lender for any
sums so repaid plus (a) interest on such sums, from the date Lender makes such
payment until such payment is reimbursed in
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<PAGE> 73
full, at the rate last charged on any of the Liabilities, and (b) all expenses
incurred by Lender in enforcing such reimbursement and in resisting such
repayment.
10. Transfer of Liabilities. Subject to Section 10.4 of the
Revolving and Term Credit Agreement, Lender may, without notice or consent of
any kind, sell, assign or transfer all or any of the Liabilities, and in such
event each and every immediate and successive assignee, transferee, or holder
of all or any of the Liabilities shall enjoy all rights, power and benefits of
Lender hereunder and shall have the full right to enforce this Guaranty by suit
or otherwise, for the benefit of such assignee, transferee or holder, as fully
as if such assignee, transferee or holder were herein by name specifically
given such right, powers and benefits. Lender shall have an unimpaired right,
prior and superior to that of any such assignee, transferee or holder, to
enforce this Guaranty for the benefit of Lender, with regard to those
Liabilities which Lender has not sold, assigned or transferred.
11. Duration; Termination. This Guaranty shall be a continuing
guaranty and may be terminated by Guarantor only upon written notice by
registered mail signed by Guarantor and actually received by Lender and to be
effective as of the opening of business on the next business day following the
day of receipt. Such termination shall be effective only as to that portion of
the Liabilities incurred after such termination time, and this Guaranty shall
remain in full force and effect as to all Liabilities incurred before that time
and as to any interest and other charges subsequently accruing thereon and as
to any expenses subsequently incurred by Lender in endeavoring to collect any
such pre-termination Liabilities and in enforcing this Guaranty. Regardless of
when a renewal or extension of pre-termination Liabilities occurs (with or
without adjustment of the interest rate or payment or other terms), the renewed
or extended Liabilities are deemed to have been incurred prior to termination,
and shall continue to be fully covered by this Guaranty. Any notice of
termination by any Guarantor shall not affect the obligations hereunder of any
other Guarantor. This Guaranty also shall continue in full force and effect
whether or not the Liabilities are from time to time reduced to zero dollars.
Provided, however, notwithstanding the foregoing, no termination shall be
effective until the initial Loan amount, if any, set forth above and any
interest or other charges accruing thereon and any expenses incurred by Lender
in attempting to collect the same has been paid in full. When said conditions
have been fully met, Lender will, upon request, furnish to Guarantor at
Guarantor's expense a written cancellation of this Guaranty.
12. Jurisdiction. Guarantor irrevocably: (a) agrees that Lender
or any other holder or holders of the Liabilities may bring suit, action or
other legal proceedings arising out of this
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<PAGE> 74
Guaranty Agreement or the transactions contemplated hereby in the courts of the
State of Missouri in Jackson County, Missouri or the courts of the United
States for the Western District of Missouri, but shall not be restricted to
such courts; (b) consents to the jurisdiction of each such court in any such
suit, action or proceeding; and (c) waives venue of any such suit, action or
proceeding in any of such courts.
13. Claims in Bankruptcy. Guarantor will file all claims against
Borrowers in any bankruptcy or other proceeding in which the filing of claims
is required by law upon any indebtedness of Borrowers to Guarantor and will
assign to Lender all right of Guarantor thereunder. If Guarantor does not file
any such claim, Lender, as attorney-in-fact for Guarantor is hereby
irrevocably appointed and is hereby authorized to do so in the name of the
undersigned or, in Lender's discretion, to assign the claim and to cause proof
of claim to be filed in the name of Lender's nominee. In all such cases,
whether in administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to Lender the full amount thereof and,
to the full extent necessary for that purpose, Guarantor hereby assigns to
Lender all of Guarantors rights to any such payments or distributions to which
Guarantor would otherwise be entitled.
14. Guarantor's Representations and Warranties. Guarantor
represents, warrants and covenants to and with Lender that except as otherwise
disclosed in Schedules to the Revolving and Term Credit Agreement:
(a) There is no action or proceeding pending or to the
knowledge of Guarantor, threatened against Guarantor before any court
or administrative agency which might result in any material adverse
change in the business or financial condition of Guarantor or in the
property of Guarantor;
(b) Guarantor has filed all Federal and State income tax
returns which Guarantor has been required to file, and has paid all
taxes as shown on said returns and on all assessments received by
Guarantor to the extent that such taxes have become due;
(c) Neither the execution nor delivery of this Guaranty
Agreement nor fulfillment of nor compliance with the terms and
provisions hereof will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any
property or assets of Guarantor under any agreement or instrument to
which Guarantor is now a party or by which Guarantor may be bound;
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<PAGE> 75
(d) This Agreement is a valid and legally binding
agreement of Guarantor and is enforceable against Guarantor in
accordance with its terms;
(e) Guarantor has either examined the Term Loan Documents
or has had an opportunity to examine the Term Loan Documents and has
waived the right to examine them; and
(f) Guarantor has the full power, authority, and legal right
to execute and deliver this Agreement.
15. Notices, Etc. Any notice, demand or request by Lender to
Guarantor or by Guarantor to Lender shall be in writing and shall be delivered
by hand or overnight courier service, mailed or sent by telecopy or other
telegraphic communications equipment of the sending party as follows:
1. If to any Guarantor, to it at:
P.O. Box 1307
Hutchinson, Kansas 67504
Attention of Stephen L. Gagnon
(Telecopy No. (316) 727-2727)
[If by hand delivery or overnight courier service
then the post office box is eliminated, the address
811 E. 30th Avenue is added and the zip code is
67502]
2. If to Lender, to it at:
10th & Baltimore
P.O. Box 419038
Kansas City, Missouri 64183
Attention of Barry P. Sullivan
(Telecopy No. (816) 691-7426)
[If by hand delivery or overnight courier service
then the post office box is eliminated and the zip
code is 64105]
or to such other address or telecopy number as any party may direct by notice
given as provided in this paragraph. All notices and other communications given
to any party hereto in accordance with the provisions of the Guaranty shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telecopy or other telegraphic
communications equipment of the sender, if received on or before 5:00 p.m.,
local time of the recipient, on a business day, or on the next business day if
received after 5:00 p.m. on a business day or on a day that is not a business
day, or on the date five (5) business days after dispatched by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this paragraph
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<PAGE> 76
in accordance with the latest unrevoked direction from such party given in
accordance with this paragraph.
16. General Provisions. Guarantor agrees to perform any further
acts and deliver any additional documents that may be reasonably requested by
Lender to carry out the intent and provisions of this Guaranty. Should any
part, term or provision of this Guaranty be declared illegal or in conflict
with any law, rule, or regulation, the validity of the remaining portions,
terms or provisions shall not be affected thereby. The terms and conditions
contained herein constitute the entire agreement of the parties and supersede
all prior or contemporaneous written and oral agreements and understandings
relating to the subject matter of this Guaranty. The captions at the beginning
of Sections are used for convenience only and are not to be used in attempting
to construe any part of this guaranty. Unless the context indicates otherwise,
words importing the singular number shall include the plural and vice versa,
words importing persons shall include firms, associations, partnerships and
corporations, including public bodies and entities, as well as natural persons,
and words of masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders and vice versa. None of
the provisions of this Guaranty may be amended without the written consent of
Guarantor and the Bank. This Guaranty shall be binding upon and inure to the
benefit of and be enforceable by the legal representatives, successors and
assigns of Guarantor and Lender as the case may be. This Guaranty may be
executed at different times and in any number of originals or counterparts,
each of which shall be deemed an original, but all of which together shall
constitute only one instrument. THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MISSOURI.
IN WITNESS WHEREOF, the undersigned have hereunto set their hand as of
the day and year first above written.
[SEAL] REPUBLIC PAPERBOARD COMPANY, a
Kansas corporation
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
GUARANTOR
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<PAGE> 77
STATE OF_______________________ )
) ss.
COUNTY OF_______________________ )
On this day of June, 1995, before me, a Notary Public, appeared Phil
Simpson, to me personally known, who being by me duly sworn, did say that he is
the Chairman of the Board, President and Chief Executive Officer of REPUBLIC
PAPERBOARD COMPANY, a Kansas corporation, and that the seal affixed to the
foregoing instrument is the corporate seal of said corporation and that said
instrument was signed and sealed on behalf of said corporation by authority of
its Board of Directors, and said Phil Simpson acknowledged said instrument to
be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
notarial seal at my office in ____________________________, the day and year
last above written.
___________________________________
Notary Public in and for said
County and State
My Commission Expires:
_____________________________
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<PAGE> 78
EXHIBIT 3.5(a)
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is made as of the 30th day of
June, 1995, by and between REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA, a West
Virginia corporation, having its principal office at Old Route 340, Halltown,
Virginia 25423 ("Debtor"), and BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY, a
national banking association, having its principal office at 10th and
Baltimore, Kansas City, Missouri 64105 ("Secured Party").
WHEREAS, pursuant to that certain Revolving and Term Credit Agreement
of approximately even date herewith among Debtor, Secured Party and certain
other parties ("Credit Agreement"), Debtor is about to become or is indebted to
Secured Party as evidenced by that certain Term Loan Promissory Note in the
original principal amount of $28,000,000 ("Note"), and as further evidenced or
secured by certain other "Loan Documents," as such term is defined in the
Credit Agreement, including, without limitation, that certain Deed of Trust of
approximately even date herewith between Debtor and the Trustees named therein
("Deed of Trust"),
NOW, THEREFORE, in consideration of such credit extended by Secured
Party to Debtor, the Secured Party and Debtor agree as follows:
Section 1. Grant of Security Interest. Debtor, in consideration
of the indebtedness described in this Agreement, hereby grants, conveys and
assigns to Secured Party for security all of Debtor's existing and future
right, title and interest in, to and under the property listed in Section 2 of
this Agreement. This security interest is granted to the Secured Party to (a)
secure the payment of the indebtedness evidenced the Note, together with
interest thereon and collection costs thereof, and all renewals, extensions,
and modifications of the Note; (b) the payment, performance and observance of
all obligations, covenants and agreements to be paid, performed or observed by
Debtor under the Note and this Agreement; and (c) the payment of all other
sums, with interest thereon, advanced under the terms of this Agreement.
Section 2. Property. The property subject to the security
interest (the "Collateral") is as follows:
2.1 Equipment. All of Debtor's equipment, machinery, trade fixtures,
fixtures, tools, furniture, motor vehicles, and other tangible personal
property used in Debtor's business.
2.2 After-Acquired Property. All property of the types described in
Section 2.1 or similar thereto, that at any time
<PAGE> 79
hereafter may be acquired by Debtor, including but not limited to all
accessions thereto, and all parts, additions, subtractions and replacements
thereof.
2.3 Proceeds. All cash and non-cash proceeds of any of the Collateral
described or referred to in Sections 2.1. The claim to proceeds does not
authorize the sale or disposition of any part of the Collateral without the
prior written consent of the Secured Party.
2.4 Writings Relevant to Collateral. The furnishing of invoices,
schedules, lists, assignments or other writings relating to any part of the
Collateral shall not be construed to limit the security interests hereby
granted to the items on such invoices, schedules, lists, assignments or other
writings, All Collateral shall be subject to the security interest hereby
granted in accordance with the broad description herein contained.
Section 3. Covenants of Debtor. Debtor agrees and covenants as
follows:
3.1 Payment of Principal and Interest. Debtor shall promptly pay when due
the principal of and interest on the indebtedness evidenced by the Note, any
prepayment and late charges provided in the Note, and all other sums required
to be paid pursuant to the Credit Agreement and/or secured by this Agreement or
any of the other Loan Documents.
3.2 Corporate Existence. Debtor is a corporation duly organized and
existing under the laws of the State of West Virginia and is duly qualified in
every other state in which it is doing business.
3.3 Corporate Authority. The execution, delivery and performance of this
Agreement, and of any financing statements relating hereto, and of all other
Loan Documents, and the incurring of the obligations secured here, are within
Debtor's corporate powers, have been duly authorized, and are not in
contravention of law or the terms of Debtor's Articles of Incorporation and
Bylaws, or of any indenture, agreement or undertaking to which Debtor is a
party or by which it is bound.
3.4 Ownership of Collateral. Debtor is the sole owner of the Collateral
free and clear from any lien, security interest or encumbrances (other than
liens, security interests and encumbrances permitted under Section 8.2 of the
Credit Agreement) and will defend the Collateral against the claims and demands
of all other persons at any time claiming the same or any interest therein.
3.5 Location of Collateral. Debtor's chief place of business, chief
executive office, place where all the Collateral (other
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than motor vehicles in transit) is located, and place where its books and
records relating to the Collateral are kept is at the address set forth at the
beginning of this Agreement, and Debtor has no other places of business, except
as follows: None.
Section 4. Removal of Collateral Prohibited; Name, Address or
Ownership Changes. Debtor shall not remove the Collateral (except for motor
vehicles in transit and except for other Collateral replaced in the ordinary
course of business) from the location set forth in Section 3.5 hereof, nor move
its books and records, nor change the location of its chief executive offices
or chief place of business without the prior written consent of Secured Party.
Debtor shall notify Secured Party at least thirty (30) days before Debtor (i)
changes its name, trade name or name under which it does business, (ii) makes
use of any new or additional names, or (iii) opens any new or additional places
of business or closes any place of business.
Section 5. Perfection of Security Interest. Debtor agrees to
execute and file financing statements, and do whatever may be necessary under
the Uniform Commercial Code of West Virginia in to perfect and continue Secured
Party's interest in the Collateral, all at Debtor's expense.
Section 6. Taxes and Assessments. Debtor will pay or cause to be
paid when due all taxes, assessments and governmental charges and levies upon
it or its income, profits or property, except those which are being contested
in good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside.
Section 7. Insurance. Debtor shall have and maintain, or cause
to be maintained, insurance at all times with respect to all Collateral against
such risks as Secured Party may reasonably require, in such form, for such
periods, in such amounts and written by such companies as may be satisfactory
to Secured Party. All policies of insurance shall have a loss payable clause
acceptable to Secured Party and/or such other endorsements as Secured Party may
from time to time request, and Debtor will promptly provide Secured Party with
the original policies or certificates of such insurance. Debtor shall promptly
notify Secured Party of any loss or damage that may occur to the Collateral.
Secured Party is hereby authorized to file a proof of loss if it has not been
filed promptly by Debtor. All proceeds of any insurance on the Collateral
shall be held by Secured Party as a part of the Collateral. Unless an Event of
Default shall have occurred and be continuing, Debtor shall have the right, at
its option, either to promptly apply all or part of such proceeds to the
repair, reconstruction or replacement of the damaged, destroyed or lost
Collateral or apply all of such proceeds not so applied to the repair,
reconstruction or replacement of the Collateral to the payment of the
obligations secured hereby. In the event of failure to provide insurance as
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<PAGE> 81
herein provided. Secured Party may, at Secured Party's option, provide such
insurance at Debtor's expense. Under no circumstances shall Secured Party be
liable for any contribution to repair or restore damaged property if insurance
proceeds are insufficient for such purposes.
Section 8. Condition of Collateral. Debtor shall keep all the
Collateral in good repair, working order and condition, excepting any loss,
damage or destruction which is fully covered by proceeds of insurance, and
shall not use the Collateral in violation of any statute, regulation, rule,
ordinance or insurance policy.
Section 9. Protection of Secured Party's Security. if Debtor
fails to perform the covenants and agreements contained or incorporated in this
Agreement and/or any of the other Loan Documents and such failure becomes an
Event of Default, or if any action or proceeding is commenced which affects the
Collateral or title thereto or the interest of Secured Party therein,
including, but not limited to eminent domain, insolvency, code enforcement or
arrangements or proceedings involving a bankrupt or decedent, then Secured
Party, at Secured Party's option, may make such appearance, disburse such sums
and take such action as Secured Party deems necessary, in its sole discretion,
to protect Secured Party's interest, including but not limited to (i)
disbursement of attorneys' fees, (ii) entry upon Debtor's property to make
repairs to the Collateral, (iii) discharge of taxes or liens of any kind
against the Collateral and (iv) procurement of satisfactory insurance, Any
amounts disbursed by Secured Party pursuant to this Section, with interest
thereon, shall become additional indebtedness of Debtor secured by this
Agreement. Unless Debtor and Secured Party agree to other terms of payment,
such amounts shall be immediately due and payable and shall bear interest from
the date of disbursement at the default rate stated in the Note unless
collection from Debtor of interest at such rate would be contrary to applicable
law, in which event such amounts shall bear interest at the highest rate which
may be collected from Debtor under applicable law. Nothing contained in this
Section shall require Secured Party to incur any expense or take any action.
Section 10. Inspection. Secured Party may make or cause to be
made reasonable entries upon and inspections of Debtor's premises to inspect
the Collateral and all records.
Section 11. Debtor and Lien Not Released. From time to time,
Secured Party may, at Secured Party's option, without giving notice to or
obtaining the consent of Debtor, Debtor's successors or assigns or of any other
lienholder or guarantors, without liability on Secured Party's part, and
notwithstanding Debtor's breach of any covenant or agreement of Debtor in this
Agreement and/or any of the other Loan Documents, extend the time for payment
of said indebtedness or any part thereof, reduce the
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<PAGE> 82
payments thereon, release anyone liable on any of said indebtedness, accept a
renewal note or notes therefor, modify the terms and the time of payment of
said indebtedness, release from the lien of this Agreement any part of the
Collateral, take or release other or additional security, reconvey any part of
the collateral, join in any extension or subordination agreement, and agree in
writing with Debtor to modify the rate of interest or period of amortization of
the Note or change the amount of any installments payable thereunder. Any
actions taken by Secured Party pursuant to the terms of this Section shall not
affect the obligation of Debtor or Debtor's successors or assigns to pay the
sums secured by this Agreement and/or any other Loan Document and to observe
the covenants of Debtor contained herein, shall not affect the guaranty of any
person, corporation, partnership or other entity for payment of the
indebtedness secured hereby and shall not affect the lien or priority of lien
hereof on the Collateral. Debtor shall pay Secured Party a reasonable service
charge, together with such title insurance premiums and attorneys fees as may
be incurred at Secured Party's option for any such action if taken at Debtor's
request.
Section 12. Forbearance by Secured Party Not a Waiver. Any
forbearance by Secured Party in exercising any right or remedy hereunder, or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of any right or remedy. The acceptance by Secured Party of payment of
any sum secured by this Agreement and/or any other Loan Document after the due
date of such payment shall not be a waiver of Secured Party's right to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment of such other sums not paid when
due. The procurement of insurance or the payment of taxes, rents or other liens
or charges by Secured Party shall not be a waiver of Secured Party's right to
accelerate the maturity of the indebtedness secured by this Agreement, nor
shall Secured Party's receipt of any awards, proceeds or damages as provided in
this Agreement operate to cure or waive Debtor's default in payment of sums
secured by this Agreement.
Section 13. Uniform Commercial Code Security Agreement. This
Agreement is intended to be a security agreement pursuant to the Uniform
Commercial Code for any of the items specified above as part of the Collateral
which, under applicable law, may be subject to a security interest pursuant to
the Uniform Commercial Code, and Debtor hereby grants Secured Party a security
interest in said items, Debtor agrees that Secured Party may file any
appropriate document in the appropriate index as a financing statement for any
of the items specified above as part of the Collateral. In addition, Debtor
agrees to execute and deliver to Secured Party, upon Secured Party's request,
any financing statements, as well as extensions, renewals and amendments
thereof, and reproductions of this Agreement and/or any other Loan Document in
such form as Secured Party may require to
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<PAGE> 83
perfect a security interest with respect to said items. Debtor shall pay all
costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all reasonable costs and
expenses of any record searches for financing statements Secured Party may
reasonably require. Without the prior written consent of Secured Party, Debtor
shall not create or suffer to be created pursuant to the Uniform Commercial
Code any other security interest in the Collateral, including replacements and
additions thereto. Upon the occurrence of an Event of Default (hereinafter
defined), Secured Party shall have the remedies of a secured party under the
Uniform Commercial Code and, at Secured Party's option, may also invoke the
other remedies provided in this Agreement and/or any of the other Loan
Documents as to such items. In exercising any of said remedies, Secured Party
may proceed against the items of real property and any items of personal
property specified above as part of the Collateral separately or together and
in any order whatsoever, without in any way affecting the availability of
Secured Party's remedies under the Uniform Commercial Code or of the other
remedies provided in this Agreement and/or any the other Loan Documents.
Section 14. Events of Default. Debtor shall be in default under
this Agreement upon the occurrence of any of the following events (sometimes
herein referred to as "Events of Default"): (i) default in the payments or
performance of any of Debtor's obligations secured hereby, and such default
remains uncured after applicable cure periods, if any; (ii) default in the
payment, performance or observance of any other obligation, term, covenant or
agreement contained or referred to herein, or in the Note, the Credit Agreement
or any other Loan Document, and such default remains uncured after applicable
cure periods, if any; or (iii) uninsured loss, thefts, damage, or destruction
(other than applicable deductibles, retentions, co-insurance and self
insurance), or sale or encumbrance to or of, any material amount of the
Collateral in violation of the Credit Agreement or the making of any levy,
seizure or attachment thereof or thereon, or the failure by Debtor to properly
care for or protect any material amount of the Collateral.
Section 15. Rights of Secured Party.
15.1 Upon the occurrence of any Event of Default, Secured Party may require
Debtor to assemble the Collateral and make it available to Secured Party or its
agents at the place to be designated by Secured Party or its agents which is
reasonably convenient to both parties. Secured Party may sell all or any part
of the Collateral in whole or in part either by public auction, private sale or
other method of disposition. Secured Party may bid at any public sale on all or
any portion of the Collateral. Unless the Collateral is perishable or threatens
to decline speedily in value or is of the type customarily sold on a recognized
market, Secured Party shall give Debtor reasonable
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<PAGE> 84
notice of the time and place of any public sale or of the time after which any
private sale or other disposition of the Collateral is to be made, and notice
given at least 10 days before the time of the sale or other disposition shall
be conclusively presumed to be reasonable. A public sale in the following
fashion shall be conclusively presumed to be reasonable:
15.1.1 Notice shall be given at least 10 days before the date of sale
by publication once in a newspaper of general circulation published in
Jefferson County, West Virginia;
15.1.2 Payment shall be in cash or by certified check immediately
following the close of the sale;
15.1.3 The sale shall be by auction, but it need not be by a
professional auctioneer; and
15.1.4 The Collateral may be sold as is and without any preparation
for sale.
15.2 Notwithstanding any provision of this Agreement, Secured Party shall
be under no obligation to offer to sell the Collateral. In the event Secured
Party offers to sell the Collateral, Secured Party will be under no obligation
to consummate a sale of the Collateral if, in its reasonable business judgment,
none of the offers received by it reasonably approximates the fair value of the
Collateral.
15.3 In the event Secured Party elects not to sell the Collateral, Secured
Party may elect to follow the procedures set forth in the Uniform Commercial
Code for retaining the Collateral in satisfaction of Debtor's obligation,
subject to Debtor's rights under such procedures.
15.4 In addition to the rights under this Agreement and/or any of the other
Loan Documents, in the event of an Event of Default by Debtor, Secured Party
shall be entitled to the appointment of a receiver for the Collateral as a
matter of right whether or not the apparent value of the Collateral exceeds the
outstanding principal amount of the Note and any receiver appointed may serve
without bond. Employment by Secured Party shall not disqualify a person from
serving as receiver.
Section 16. Waiver of Marshalling. Notwithstanding the existence
of any other security interest in the Collateral held by Secured Party or by
any other party, Secured Party shall have the right to determine the order in
which any or all of the Collateral shall be subjected to the remedies provided
by this Agreement and/or any of the other Loan Documents. Secured Party shall
have the right to determine the order in which any or all portions of the
indebtedness secured by this Agreement are satisfied from the proceeds realized
upon the exercise of the
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<PAGE> 85
remedies provided in this Agreement and/or any of the other Loan Documents.
Debtor, any party who consents to this Agreement, and any party who now or
hereafter acquires a security interest in the Collateral and who has actual or
constructive notice of this Agreement, hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the
remedies permitted by applicable law or by this Agreement and/or any of the
other Loan Documents.
Section 17. Provisions of Agreement. Debtor agrees to comply with
the covenants and conditions of the other Loan Documents which are hereby
incorporated by reference in and made a part of this Agreement. All advances
made by Secured Party pursuant to the Deed of Trust shall be indebtedness of
Debtor secured by this Agreement. All sums disbursed by Secured Party to
protect the security of this Agreement and/or the other Loan Documents up to
the principal amount of the Note shall be treated as disbursements pursuant to
such Agreements. All such sums shall bear interest from the date of
disbursement at the rate stated in the Note, unless collection from Debtor of
interest at such rate would be contrary to applicable law in which event such
amount shall bear interest at the highest rate which may be collected from
Debtor under applicable law. In case of a breach by Debtor of the covenants and
conditions of the Agreement, Secured Party at Secured Party's option (i) may
invoke any of the rights or remedies provided in this Agreement, (ii) may
accelerate the sums secured by this Agreement and invoke the remedies provided
in this Agreement or, (iii) may do both.
Section 18. Remedies Cumulative. Each remedy provided in this
Agreement and/or the other Loan Documents is distinct and cumulative to all
other rights or remedies under this Agreement and/or the other Loan Documents
or afforded by law or equity, and may be exercised concurrently, independently,
or successively, in any order whatsoever.
Section 19. Notices. Any notices permitted or required under
this Agreement shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telecopy or other telegraphic communications
equipment of the sending party, as follows:
(a) If to Debtor, to it at:
P.O. Box 1307
Hutchinson, Kansas 67504
Attention of Stephen L, Gagnon
(Telecopy No. (316) 727-2727)
[If by hand delivery or overnight courier service then the
post office box is eliminated, the address 811 E, 30th Avenue
is added and the zip code is 67502]
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<PAGE> 86
(b) If to Secured Party, to it at:
10th & Baltimore
P.O. Box 419038
Kansas City, Missouri 64183
Attention of Barry P. Sullivan
(Telecopy No. (816) 691-7426)
[If by hand delivery or overnight courier service then the
post office box is eliminated and the zip code is 64105]
or to such other address or telecopy number as any party may direct by notice
given as provided in this Section. All notices or other communications given
to any party herein in accordance with the provisions of this Agreement shall
be deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telecopy or other telegraphic
communications equipment of the sender, if received on or before 5:00 p.m.,
local time of the recipient, on a business day, or on the next business day if
received after 5:00 p.m. on a business day or on a day that is not a business
day, or on the date five (5) business days after dispatched by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in the Section or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section.
Section 20. Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of West Virginia. All
references to the Uniform Commercial Code shall be to such code as enacted in
the State of West Virginia.
Section 21. Titles and Captions. All section titles or captions
contained in this Agreement are for convenience only and shall not be deemed
part of the context nor effect the interpretation of this Agreement.
Section 22. Entire Agreement. This Agreement and the Note and
other agreements executed contemporaneously hereto contain the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
Section 23. Agreement Binding. This Agreement shall be binding
upon and inure to the benefit of each party and its successors, assigns, agents
and representatives. This Agreement, including but not limited to any rights
granted or duties imposed herein, may not be assigned, delegated, sublicensed,
conveyed, transferred or encumbered by Debtor or without the prior written
consent of Secured Party. Secured Party may assign this Agreement and its
security interest and rights hereunder, in whole or in part, to any transferee
of whole or any part of the obligations secured by this Agreement.
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<PAGE> 87
Section 24. Computation of Time. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday or legal holiday, in which
event the period shall run until the end of the next day thereafter which is
not a Saturday, Sunday or legal holiday.
Section 25. Pronouns and Plurals. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the person or persons may require.
Section 26. Presumption. This Agreement or any section thereof
shall not be construed against any party due to the fact that said Agreement or
any section thereof was drafted by said party.
Section 27. Further Action. The parties hereto shall execute and
deliver all documents, provide all information and take or forbear from all
such action as may be necessary or appropriate to achieve the purposes of this
Agreement and the other Loan Documents.
Section 28. Parties in Interest. Nothing herein shall be
construed to be to the benefit of any third party, nor is it intended that any
provision shall be for the benefit of any third party.
Section 29. Savings Clause. If any provision of this Agreement,
or the application of such provision to any person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid, shall not be affected thereby.
Section 30. Modification. This Agreement shall not be modified
in any manner, in whole or in part, except by a written instrument signed by
each party to be bound thereby.
Section 31. Original; Counterparts. This Agreement may be
executed in any number of originals or counterpart, each of which shall be
deemed an original, but all of which together shall constitute only one
instrument.
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<PAGE> 88
IN WITNESS WHEREOF, the parties have executed this Agreement, by their
duly authorized officers, as of the day and year first above written.
[SEAL] REPUBLIC PAPERBOARD COMPANY OF WEST
VIRGINIA
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board
President and Chief
Executive Officer
BOATMEN'S FIRST NATIONAL BANK OF
KANSAS CITY
By:
Barry P. Sullivan
Vice President
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<PAGE> 89
EXHIBIT 3.5(b)
DEED OF TRUST
THIS DEED OF TRUST, executed on the date set forth in the
acknowledgment to be effective as of the 30th day of June, 1995, by and between
REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia corporation,
hereafter called "Grantor," and TAMMY J. OWEN, a resident of Putnam County,
West Virginia, and WILLIAM K. BRAGG, JR., a resident of Kanawha County, West
Virginia, as Trustee, hereinafter together called "Trustee."
WITNESSETH: That for and in consideration of the indebtedness and
trust hereinafter set forth and of the sum of $10.00, cash in hand paid, the
receipt and sufficiency of which are hereby acknowledged, Grantor does hereby
GRANT and CONVEY unto Trustee, with power of sale, all of the following:
All of that certain lot or parcel of land, together with the
improvements thereon and appurtenances thereunto belonging, situate in the Town
of Halltown, Harpers Ferry District, Jefferson County, West Virginia, as shown
upon a map thereof made by P. C. DiMagno, Engineers-Surveyors, dated May 22,
1995, and being more particularly bounded and described as follows:
SEE EXHIBIT A
Together with all buildings, structures and improvements now or hereafter
situated thereon, and all fixtures, materials, supplies, equipment, machinery
and other property as is now or may hereafter be an accession thereto, be a
fixture thereto, or be otherwise treated or deemed to be a part of the land
described herein.
Being the same property conveyed unto Grantor by deed dated June _, 1995, from
Dillard Investment Corporation, recorded in the office of the Clerk of the
County Commission of Jefferson County, West Virginia immediately preceding the
recordation of this Deed of Trust, reference to which said map and deed is
hereby made for a more particular description of the property hereby conveyed
(all of the above-described property is hereinafter referred to as the
"Property").
TO HAVE AND TO HOLD the Property unto Trustee and their successors in
the trust and Grantor does hereby covenant to and with Trustee and with
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY, a national banking association,
having an address of 10th and Baltimore, P.O. Box 419038, Kansas City, Missouri
64183 (the beneficial owner and holder of the promissory note secured by this
Deed of Trust, and which, together with any other holder, is hereinafter
sometimes called "Lender") that Grantor will warrant generally the Property;
that Grantor has the right to convey the Property to Trustee; that the same is
free from any and all liens and encumbrances other than real estate taxes
assessed but not yet due and payable; that Trustee will have quiet possession
thereof
<PAGE> 90
and that Grantor will execute such further assurances of the Property as may be
requisite, including, but not limited to, the execution and delivery of
financing statements and such other instruments as Lender may require to impose
the lien hereof more specifically upon any item or items of property, or rights
or interests therein, covered by this Deed of Trust.
IN TRUST NEVERTHELESS to secure (a) the payment of that certain Term
Loan Promissory Note of approximate even date herewith, in the original
principal sum of $28,000,000.00, executed by Grantor and Republic Gypsum
Company, a Delaware corporation, and payable to the order of Lender, plus
interest thereon and collection costs thereof, and any and all extensions,
modifications and renewals of said note, or any part thereof, however changed
in form, manner or amount (collectively, the "Note"), (b) the payment and
performance of all of the covenants contained herein (all of which obligations
are sometimes hereinafter referred to as the "Secured Debt").
Grantor covenants, represents, warrants and agrees as follows:
1. Grantor will, so long as the Secured Debt, or any part
thereof, remains unpaid:
(a) Pay all installments of principal and interest as and
when due and payable pursuant to the terms of the Note and perform
fully and in a timely manner all other obligations of Grantor
contained herein or in the Note.
(b) Perform, comply with and abide each and every of the
agreements, conditions and covenants contained and set forth in that
certain Revolving and Term Credit Agreement among Grantor, Lender and
certain other parties, executed contemporaneously with the execution
of this Deed of Trust ("Credit Agreement"), and in the "Loan
Documents" as defined in such Credit Agreement.
(c) Pay when due all taxes, assessments and governmental
charges and levies that may be levied or assessed against the
Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves
have been set aside. Grantor shall promptly furnish Lender proof of
payment of all such taxes, assessments and other items, from time to
time, upon request.
(d) Have and keep the building and improvements now
situate on the Property or that may hereafter be erected thereon, and
all other insurable property covered by this Deed of Trust, insured
against loss or damage by fire and other casualties, in one or more
responsible and solvent insurance companies authorized to transact
business in the State of West Virginia, with extended coverage and any
other insurance as Lender may require, in form and amount and with an
insurer satisfactory to Lender. All insurance policies shall provide
that all proceeds shall be payable to Lender under a standard
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noncontributory mortgagee clause in favor of and acceptable to Lender,
and such policies shall provide for at least thirty (30) days prior
written notice of cancellation to Lender. Grantor shall pay the
premiums for such insurance as the same become due and payable and
shall deliver to Lender receipts for payment of premiums and
Certificate(s) of Insurance as evidence of the placement of such
insurance satisfactory to Lender. Insurance proceeds are hereby
assigned to and shall be paid to Lender, except as otherwise provided
in the following sentence. Unless an Event of Default shall have
occurred and be continuing, Grantor shall have the right, at its
option, either to promptly apply all or part of such proceeds to the
repair, reconstruction or replacement of the damaged, destroyed or
lost Property or apply all of such proceeds not so applied to the
repair, reconstruction or replacement of the Property to the payment
of the Secured Debt. If an Event of Default shall have occurred and be
continuing, Lender shall be entitled to adjust and compromise any
claim under any insurance and Lender is appointed Grantor's attorney
in fact for such purpose.
(e) If an Event of Default shall have occurred and be
continuing, upon the request of Lender, Grantor will deposit with
Lender or its designee, in addition to the payments provided for under
the Note, at the time each payment of an installment of interest or
principal under the Note is due, an additional amount sufficient to
pay, as they become due, taxes, assessments and similar charges upon
the Property and premiums for insurance required by Grantor. The
determination of the amount payable and the fractional share thereof
to be deposited with Lender shall be made by Lender in its sole
discretion. Said amounts shall be held by Lender or its designee for
payment of taxes, assessments, similar charges and insurance premiums
when due. If the amount so deposited shall be insufficient for the
payment of such obligation in full, Grantor shall on notice from
Lender, deposit the amount of the deficiency with Lender.
(f) Keep and maintain the Property in good condition and
repair and not abandon the same, or any part thereof, nor commit or
permit the commission of waste on or in the Property, and complete or
restore and repair promptly and in a good and workmanlike manner any
and all improvement which may be constructed, damaged and destroyed on
the Property, free of liens.
(g) Permit Trustee or Lender, or any of them, or their
agents, to enter and inspect the Property at all reasonable times.
(h) Not sell or transfer or further encumber (except as
permitted under Section 8.2 of the Credit Agreement) the Property or
any part thereof, either directly or indirectly.
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<PAGE> 92
by operation of law or otherwise, to any person or entity without the
prior written consent of Lender.
(i) Cause the operation of the Property to comply with
all applicable laws.
(j) To pay for a mortgagee title insurance policy issued
by a title insurance company and in such form and amount as is
reasonably acceptable to Lender.
(k) To notify Lender immediately upon obtaining knowledge
of any pending or threatened institution of any proceeding for the
condemnation of any part of the Property or the exercise of any right
of eminent domain over any part of the Property. Lender may
participate in any such proceeding and Grantor shall execute and
deliver to Lender all documents reasonably requested by Lender to
permit such participation. No settlement of any such proceedings
shall be made by Grantor without Lender's consent. Grantor shall, at
its own expense, diligently prosecute any such proceedings, deliver to
Lender copies of all papers served in connection therewith and consult
and cooperate with Lender, its attorneys and agents, in the conduct
and defense of such proceedings. Grantor assigns and transfers to
Lender all awards of compensation for injury or damage the Property
which may be made at any time to any owner or such Property in the
course of taking in condemnation thereof by exercise of the power of
eminent domain, or acquired for public use, and Lender shall be and
hereby is empowered and authorized to receive and collect such
compensation and, if an Event of Default has occurred and is
continuing, to apply the same upon the indebtedness and interest
thereby secured, but Lender shall be under no obligation to exercise
the option to collect and apply such money on the secured
indebtedness. If no Event of Default has occurred and is continuing,
the Lender also shall permit the application of all or any part of
such condemnation proceeds to the repairing, restoration or rebuilding
of improvements on any portion of said Property not so taken and
condemned, and in such event this Deed of Trust shall constitute a
lien on the Property as fully as if such improvements had remained in
the condition in which they were when the lien first attached thereto.
(l) Pay to Trustee, or to Lender, upon demand, any and
all sums of money, including all costs, expenses and reasonable
attorneys' fees, which Trustee or Lender, or any of them may
reasonably incur or expend in any action or proceeding that may
concern the Property.
2. In the event Grantor fails (i) to make any payment required or
fails to comply with, perform or carry out any of the provisions of paragraph 1
hereof, or (ii) to perform any of the terms, covenants or agreements by
Grantor to be performed under this Deed of Trust, then, and in any such event,
Lender shall have
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the right, at its option, to make any such payment, take any such action or do
any such thing as, in the exercise of Lender's discretion, may be determined to
be reasonably necessary to protect the lien and security hereof as fully and
completely as if Grantor made each and every such payment when due, and kept,
complied with, performed and carried out the provisions of said paragraph 1 and
all money so paid by Lender, with interest thereon from date of such payment at
the highest rate provided for in the Note, shall be additional debt secured
hereby and shall be repaid by owner upon demand. Nothing herein contained,
however, shall require Lender to defend the Property or advance any money.
3. The Lender may declare default hereunder upon the occurrence
of any of the following:
(a) default in the payment or performance of any of the
Secured Debt, and such default remains uncured after applicable cure
periods, if any; (b) default in the payment, performance or observance
of any other obligation, term, covenant or agreement contained or
referred to herein, or in the Note, the Credit Agreement or any other
Loan Document, and such default remains uncured after applicable cure
periods, if any; or (c) uninsured loss, theft, damage or destruction
(other than applicable deductibles, retensions, co-insurance and
self-insurance), or sale or encumbrance, to or of, any material amount
of the Property in violation of the Credit Agreement, or the making of
any levy, seizure or attachment thereof or thereon, or the failure by
Grantor to properly care for or protect any material amount of the
Property. Upon such a declaration of default, the Secured Debt shall,
at the option of the Lender, immediately become due and payable for
all purposes without notice, and Lender may then proceed to notify
Trustee with instructions to execute the trust granted hereby by
selling the Property at public auction on the front steps of the
courthouse for Jefferson County, West Virginia. Any such sale shall be
conducted pursuant and subject to the laws of the State of West
Virginia governing the sale of property by a deed of trust.
4. Either Trustee may act alone in the execution of this trust;
and Trustee is hereby authorized to act by agent or attorney in the execution
of this trust. It shall not be necessary for Trustee to be present in person at
any foreclosure sale hereunder.
5. It is hereby expressly covenanted and agreed by all parties
hereto that Lender may, at any time and from time to time hereafter, without
notice, appoint and substitute another trustee or trustees, corporations or
persons, in place of the Trustee herein named to execute the trust herein
created. Upon such appointment, either with or without a conveyance to said
substituted trustee or trustees by the Trustee herein named, or by any
substituted trustee in case the said right of appointment is exercised more
than once, the new and substituted trustee or trustees in each instance shall
be vested with all the rights,
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<PAGE> 94
titles, interests, powers, duties and trusts in the premises which are vested
in and conferred upon the Trustee herein named; and such new and substituted
trustee or trustees shall be considered the successors and assigns of the
Trustee who is named herein within the meaning of this instrument, and
substituted in his place and stead. Each such appointment and substitution
shall be evidenced by an instrument in writing which shall recite the parties
to, and the book and page of record of, this Deed of Trust, and the description
of the real property herein described, which instrument, executed and
acknowledged by Lender and recorded in the Office of the Clerk of the County
Commission of Jefferson County, West Virginia, shall be conclusive proof of the
proper substitution and appointment of such successor trustee or trustees, and
notice of such proper substitution and appointment to all parties in interest.
6. A copy of any notice of trustee's sale under this Deed of
Trust shall be served on Grantor by certified mail, return receipt requested,
directed to Grantor at the address stated below or such other address given to
Lender in writing by Grantor, subsequent to the execution and delivery of this
Deed of Trust. Any other notices permitted or required under this Deed of Trust
shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telecopy or other telegraphic communications
equipment of the sending party as follows:
To Grantor:
Republic Paperboard Company of West Virginia
P.O. Box 1307
Hutchinson, Kansas 67504
Attention: Stephen L. Gagnon
(Telecopy No. (316) 727-2727) [If by hand delivery or
overnight courier service then the post office box is
eliminated, the address 811 E. 30th Avenue is added and the
zip code is 67502]
To Lender:
Boatmen's First National Bank of Kansas City
10th & Baltimore
P.O. Box 419038
Kansas City, Missouri 64183
Attention of Barry P. Sullivan
(Telecopy No. (816) 691-7426)
[If by hand delivery or overnight courier service then the
post office box is eliminated and the zip code is 64105]
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<PAGE> 95
To Trustee:
Tammy J. Owen
William K. Bragg, Jr.
Goodwin & Goodwin
P.O. BOX 2107
Charleston, WV 25328
or to such other address or telecopy number as any party may direct by notice
given as provided in this paragraph. Any notice of other liens which may be
given to Lender pursuant to W.Va. Code Section 38-1-4 shall be sent to the
Lender's address set forth above. All notices or other communications given to
any party herein in accordance with the provisions of this Deed of Trust shall
be deemed to have been given on the day of receipt if delivered by hand or
overnight courier service or sent by telecopy or other telegraphic
communications equipment of the sender, if received on or before 5:00 p.m.,
local time of the recipient, on a business day, or on the next business day if
received after 5:00 p.m. on a business day or on a day that is not a business
day, or on the date five (5) business days after dispatched by certified or
registered mail if mail, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this paragraph or in accordance with
latest unrevoked directions from such party given in accordance with this
paragraph.
7. No failure of Lender or Trustee to exercise any option herein
contained shall constitute a waiver of any right or privilege herein given or
granted to Lender or Trustee, and a waiver by Lender or Trustee of the right to
exercise any option as to any breach or default shall not constitute a waiver
of the right to exercise the same option, or any other option herein contained,
as to another or any continuing or subsequent breach or default.
8. It is further understood and agreed between the parties hereto
that if any term or provision of this Deed of Trust or of the Note shall
contravene or be in conflict with any law of the State of West Virginia or any
other applicable law or regulation, such term or provision is amended and
modified to conform with such law.
9. It is further understood and agreed by and between the parties
hereto that all covenants, agreements, representations and warranties are made
and given jointly and severally by each party signing as Grantor and shall
extend to and bind their heirs, devisees, personal representatives, successors
and assigns, and shall inure to the benefit of Lender and Trustee and their
successors and assigns.
10. This Deed of Trust, to the extent it relates to personal
property, is a security agreement and the Grantor hereby grants a continuing
security interest in such property and the proceeds thereof. Lender shall have
all rights, remedies and powers of a
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<PAGE> 96
secured party under the Uniform Commercial Code as enacted in West Virginia.
11. Grantor covenants and warrants as follows:
(a) Except as provided in Exhibit B attached hereto and
incorporated herein by reference, Grantor has no knowledge that any
release, generation, disclosure, manufacture, storage, treatment,
transportation or disposal of hazardous substances (as hereinafter
defined) has occurred or is occurring from, on, in and/or under
(including the underlying groundwater) the Property, or any parcel(s)
of real estate adjacent thereto in a quantity or manner that violates
Environmental Laws except to the extent that any violation will not
have a Material Adverse Effect.
(b) Except as provided in Exhibit B, to Grantor's
knowledge, no hazardous substances in a reportable or threshold
planning quantity, where such quantity has been established by
statute, ordinance or rule, regulation or order, are currently
present or have previously been present on, in or under (including the
underlying groundwater) the Property. Except as provided in Exhibit B
to Grantor's knowledge, (i) no urea formaldehyde is or has been
present on the Property; (ii) no polychlorinated biphenyls (PCBs) are
or have been present on the Property; (iii) no asbestos is or has been
present on the Property; (iv) no storage tanks for petroleum products
or other hazardous substances (either aboveground or underground) are
or have been present on the Property; (v) no portion of the Property
is or has been filled ground; (vi) no barrels, cans, trash, debris,
containers, articles or any other items which were dumped, abandoned,
discarded or stored on the Property currently exist on the Property.
(c) Except as provided in Exhibit B, to Grantor's
knowledge, the Property (including the underlying groundwater and
areas leased to tenants, if any) and any previous or current operation
concerning the Property are not in violation of any applicable
federal, state or local statute, ordinance, law or regulation, consent
decree or administrative orders, guidance documents and remediation
directives, including common law relating to the public health and
safety and protection of the environment (hereinafter "Environmental
Laws") except to the extent that any violation will not have a
Material Adverse Effect. To Grantor's knowledge, all government
permits relating to the use and/or operation of the Property required
by applicable Environmental Laws are and will remain in effect, and
Grantor shall comply therewith except to the extent that the failure
to have such permits or the failure to comply with such permits will
not have a Material Adverse Effect. To Grantor's knowledge, the
business and all operations conducted on the Property have disposed
and will continue to dispose of their hazardous substances in
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<PAGE> 97
compliance with all applicable Environmental Laws except to the extent
that any non-compliance will not have a Material Adverse Effect.
(d) Except as set forth on Exhibit B, no written notice,
notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has
been proposed or assessed and no investigation or review is pending,
or to knowledge of the Grantor, threatened in writing by any
governmental or other entity (i) with respect to any alleged violation
of any Environmental Law in connection with the Property, or (ii) with
respect to any alleged failure to have any permit, certificate,
license, approval, registration or authorization required in
connection with the conduct of the business conducted by the Grantor
at the Property, or (iii) with respect to any generation, treatment,
storage, recycling, transportation or disposal of any hazardous
substances in connection with the Property, whether or not regulated
under any Environmental Law, including any Environmental Condition,
except to the extent that any violation, failure, or other matter will
not have a Material Adverse Effect.
(e) Grantor has received no written notice that there are
any environmental liens on the Property. To Grantor's knowledge, no
government actions have been taken or are in process which could
subject any of such properties to such liens. To Grantor's knowledge,
no notice or restriction relating to the presence of hazardous
substances on the Property is currently required to be placed in any
deed to such Property. Grantor shall keep the Property free of any
lien imposed pursuant to Environmental Laws.
(f) Grantor shall immediately notify Lender and provide
copies upon receipt of all written complaints, claims, citations,
demands, inquiries, reports or notices relating to the Environmental
Condition of the Property or compliance with Environmental Laws or any
information concerning hazardous substances on or near the Property.
(g) The use which Grantor intends to make of the Property
will not constitute activities which could result in a release of
hazardous substances into the environment in a quantity or manner that
violates Environmental Laws. Further, no hazardous substances are to
be located on or used on the Property in a quantity or manner that
violates Environmental Laws.
(h) To the extent permissible by contract or law, Grantor
fully assigns to Lender as further security for the Secured Debt all
of its rights with respect to any and all representations, warranties
and indemnifications regarding hazardous substances or matters and
other environmental matters which have been or may be made to Grantor
by any
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<PAGE> 98
former owner of the Property or owner of any adjacent or surrounding
property, or environmental consultant; provided, however, that such
rights shall be mutually enforceable by Grantor and Lender.
(i) Lender shall have the right at all reasonable times
and from time to time hereafter to conduct environmental audits of the
Property, and Grantor shall cooperate in the conduct of each such
audit. Such right shall include, but not be limited to, the right of
Lender or its agents to enter the Property and sample and test the
Property. The audits shall be conducted by a consultant of Lender's
choosing and if any hazardous substances are detected in a quantity or
manner that violates Environmental Laws and has a Material Adverse
Effect, or if a violation of any of the warranties, representations or
covenants contained in this paragraph is discovered and the violation
will have a Material Adverse Effect, the fees and expenses of such
consultant shall be borne by Grantor and shall be paid by Grantor to
Lender on demand. Such fees shall be a part of the obligations
secured hereby and shall bear interest at the highest interest rate
contained in the Note or any other document evidencing the debt due
Lender. Notwithstanding any provision of this or any other document
related to this Loan or the Note (collectively referred to as the
"Loan Documents") to the contrary: (i) Lender shall maintain the
confidentiality of all information generated by the Lender in the
performance of any inspection, audit, survey, test, sampling, or
boring performed at the Property by or on behalf of Lender; and (ii)
except in emergency situations, or in the event that an event of
default has occurred, Lender shall not perform any subsurface, or
invasive testing unless such testing has been expressly required by an
environmental agency, is required by Environmental Laws, or is
reasonably recommended by an environmental consultant that has
concluded that, based on an investigation of the Property conducted in
a manner consistent with commercially acceptable standards for a Phase
I Environmental Site Assessment, a subsurface or invasive
investigation is needed to investigate evidence of a potential
condition at the Property that, if it is present, would require
removal or remediation under applicable Environmental Laws.
(j) Grantor shall cause the following actions to be taken:
(1) Remediation to levels required by
Environmental Laws of contaminated soil in the area of the dry
well located southeast of the Vehicle Maintenance Shop as
identified by Dames & Moore in the Environmental Assessment
dated June 2, 1995, shall be completed not later than July 31,
1995.
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<PAGE> 99
(2) Implementation of a Stormwater Pollution
Prevention Plan (SWPP), which complies with federal and state
requirements by no later than July 31, 1995.
(3) Appropriate action shall be taken to bring
the Property into compliance with the State of West Virginia
Consent Order number 3575, by December 31, 1995.
(4) Implementation of an Operation and
Maintenance Plan, including required employee training, for
any asbestos containing materials at the Property which meets
all federal and state requirements by not later than December
31, 1995.
(5) Implementation of a Spill Prevention Control
and Countermeasures (SPCC) plan which complies with all Clean
Water Act Oil Pollution Prevention requirements by not later
than August 31, 1995.
(k) In addition to any other rights or remedies herein or
otherwise provided by law, Grantor agrees to indemnify, defend (with
counsel reasonably acceptable to Lender and at Grantor's sole cost),
and hold Lender and Lender's affiliates, shareholders, directors,
officers, employees, and agents, free and harmless from and against
all losses, liabilities, obligations, penalties, claims, litigation,
demands, defenses, costs, judgments, suits, proceedings, damages
(including consequential damages suffered by third parties),
disbursements or expenses of any kind or nature whatsoever (including
attorneys' and experts' fees and expenses and fees and expenses
incurred in investigating, defending against or prosecuting any
litigation, claim or proceeding) (collectively referred to as
"Losses") which may at any time be imposed upon, incurred by or
asserted or awarded against Lender or any of them in connection with
or arising from or out of:
(1) any hazardous substance on, in, under or
affecting all or any portion of the Property, the underlying
groundwater, or, to the extent such hazardous substance is
present by reason of the acts or omissions to act of Grantor
and/or the operation of the Property (whether prior to or
after the date hereof), any adjacent or surrounding areas;
(2) any misrepresentation, inaccuracy or breach
of any warranty, covenant or agreement contained or referred
to in this paragraph;
(3) any violation or claim of violation by
Grantor of any Environmental Law; or
(4) the imposition of any lien for the recovery
of any costs for environmental cleanup and/or other response
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<PAGE> 100
costs (as such term is defined in "CERCLA") relating to the
release or threatened release of hazardous substance.
The foregoing indemnification is the personal obligation of
Grantor, and its respective successors and assigns, and shall survive
repayment of the Note or any other document evidencing the debt due
Lender, any sale or transfer of title or any transfer of the Property
by foreclosure or by a deed in lieu of foreclosure, Grantor, for
itself and its successors and assigns, hereby waives, releases and
agrees not to make any claim or bring any cost recovery action against
Lender under "CERCLA" (hereinafter defined) or any state equivalent,
or any similar law now existing or hereafter enacted except to the
extent that such claim or cost recovery action is based on acts or
omissions of Lender or any of its representatives, employees, agents,
invitees, permitees or licensees occurring while any of them are in
actual possession, occupancy or control of the Property following an
Event of Default hereunder, Grantor's obligation to Lender under this
indemnity shall be without regard to fault on the part of Grantor with
respect to the violation or condition which results in liability to
Lender, including any liability imposed on Lender as a result of
strict liability under any law (including common law), regulation,
ordinance or requirement. Notwithstanding any provision of this Deed
of Trust or any other Loan Document to the contrary: (i) the scope of
this indemnity shall not include any Losses of any and every kind
whatsoever which are paid incurred or suffered by, or asserted
against, the Lender by any person or entity or governmental agency
for, with respect to, or as a direct or indirect result of: (A) any
acts, omissions, conditions or events occurring after the "Termination
Date" as defined below, or (B) acts or omissions of the Lender, or its
employees, agents, or representatives, whether before or after the
Termination Date; (ii) the scope of this indemnification shall not
include any consequential damages suffered by Lender; (iii) all of the
obligations of the Grantor under this indemnity shall expire on the
third anniversary of the Termination Date except for matters that
Grantor has acknowledged prior to such anniversary are subject to this
indemnity or matters that Grantor has refused to acknowledge prior to
such anniversary as being subject to this indemnity, but which are
adjudicated to be subject to this indemnity pursuant to litigation or
similar proceedings commenced prior to such anniversary. The term
"Termination Date" shall mean the earlier of the date on which any and
all liquidated monetary obligations under the Loan Documents are paid
in full, the Lender or an agent of Lender take possession of the
Property, or Grantor no longer holds title to the Property as a result
of a foreclosure or deed in lieu of foreclosure or a transfer to a
third party which is approved by Lender and which assumes all of the
obligations of the Grantor under this indemnity.
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<PAGE> 101
(l) If Grantor fails to comply with any of the foregoing
warranties, representations and covenants, in addition to the other
rights and remedies available to it, Lender may, at its option, cause
the removal (and/or other cleanup acceptable to Lender) of any
hazardous substance from the Property. The costs of hazardous
substance removal and/or other cleanup (including transportation and
storage costs) shall be added to the obligations, whether or not the
costs exceed the amount of the Note or any other document evidencing
the debt due Lender and whether or not a court has ordered the
cleanup, and such costs shall become due and payable on demand by
Lender, with interest thereon at the highest interest rate contained
in the Note or any other document evidencing the debt due Lender.
Grantor shall give Lender, its agents and employees access to the
Property to remove and/or otherwise clean up any hazardous substance.
Lender, however, has no affirmative obligation to remove or otherwise
cleanup any hazardous substance, and this provision and any provision
in any of the other loan documents, shall not be construed as creating
any such obligation. Notwithstanding any provision of this Deed of
Trust or any other Loan Document to the contrary: (i) neither the
Lender nor any other person or entity shall remediate, encapsulate,
treat, remove or otherwise respond (collectively referred to as
"Remedial Action") to any hazardous substances on or released from the
Property unless the Remedial Action is required by Environmental Laws
and Grantor has failed to commence such required Remedial Action
within sixty (60) days after it has received a written demand from
Lender that the Remedial Action is required or, having timely
commenced the Remedial Action, fails to pursue consistently to
completion such Remedial Action; (ii) if Lender or any other person or
entity performs any Remedial Action in breach of this notice
requirement, then the obligations of Grantor under Sections 11(j) and
11(k) shall not extend to the costs or other liabilities associated
with such Remedial Action; (iii) the obligations of Sections 11(j) and
(k) shall not extend to any costs or other liabilities associated with
the costs of Remedial Action except those incurred in connection with
a written remediation action plan approved by a governmental agency,
if such approval is required, and which is consistent with industry
practices for the type of contamination remediated and the current use
of the Property and which provides for the highest concentrations of
hazardous substances allowable by applicable Environmental Law to
remain at the Property.
(m) For purposes of this loan, the term "Environmental
Condition" means the presence or release of any hazardous substance
into the environment on, in or from the premises. The term "release"
means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into
the environment. The term "environment" means any surface or
groundwater, drinking water supply, land, surface or subsurface
strata or
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the ambient air. "Hazardous substance" means any substance or
material defined or designated as hazardous or toxic waste, hazardous
or toxic material, or hazardous or toxic substance, or infectious
material, substance or waste or other similar term, by any federal
(including, without limitation, The Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA"), as
amended by the Superfund Amendment and Reauthorization Act of 1986
codified at 42 U.S.C, 9601, et seq. state or local environmental
statute, regulation, ordinance, internal governmental agency guidance
document or decree presently in effect or that may be promulgated in
the future, and as such statutes, regulations, and ordinances may be
amended from time to time, including without limitation, asbestos in
any form or condition, petroleum products, petroleum derivatives,
petroleum by-products, other hydrocarbons, urea formaldehyde,
polychlorinated biphenyls, mining wastes, fly ash, and agricultural
chemical products. Further, to the extent the laws of the state in
which the Property is located establish a meaning for the terms
"release", "environment" or "hazardous substance" which is broader
than that as defined above in federal law, such broader meaning shall
apply. For the purposes of this loan, the term "Material Adverse
Effect" means a matter that materially, adversely impacts the
financial condition of the Grantor or the operation of the Property by
the Grantor or materially diminishes the fair market value of the
Property, "To the best of Grantor's knowledge" or any reference to the
knowledge of Grantor shall mean, and be limited to the actual, and
not constructive, knowledge of the executive officers of the Grantor
and such actual knowledge is based exclusively on the information
expressly contained in the environmental reports described on Exhibit
B.
(n) Notwithstanding any provision of this or any other
Loan Document to the contrary, a breach of any covenant, term,
provision, representation or warranty in this Section 11 shall not
constitute an event of default under this or any other Loan Document
unless the Grantor has failed to commence the process of correcting
the matter within sixty (60) days after it has received a written
demand from the Lender that the matter constitutes a breach of this
Section 11 or, having timely commenced its corrective actions, fails
to pursue the matter consistently to completion.
[The rest of this page intentionally left blank.]
- 14 -
<PAGE> 103
WITNESS the following signatures:
REPUBLIC PAPERBOARD COMPANY OF WEST
VIRGINIA
Attest:
(Corporate Seal) By:
Stephen L. Gagnon
Executive Vice President
ATTEST:
/s/ JANEY L. SOWELL
Janey L. Sowell, Secretary
STATE OF _________________,
COUNTY OF ________________,to-wit:
The foregoing instrument was acknowledged before me this ____ day of
June, 1995, by Stephen L. Gagnon, as Executive Vice President of Republic
Paperboard Company of West Virginia, a West Virginia corporation, to be the act
and deed of said corporation.
My commission expires __________________________________.
__________________________________
(Notary Seal) Notary Public
This Deed of Trust was prepared by: Tammy J. Owen, Goodwin & Goodwin, P.O.
Box 2107, Charleston, West Virginia 25328
- 15 -
<PAGE> 104
EXHIBIT B
All matters described in the following environmental reports prepared
by Dames & Moore, Inc. for Locke Purnell Rain Harrell:
1 . Final Report: Process Wastewater Treatment Evaluation,
Halltown Paperboard Company, Halltown, West Virginia, dated April 13, 1995
(Job. No. 29107-002-146)
2. Environmental Assessment, Halltown Paperboard Company, Old
Highway Route 340, Halltown, West Virginia 25423, dated June 2, 1995 (Job No.
29107-002-146) (Two volumes)
<PAGE> 105
EXHIBIT 5.3
[OPINION OF LOCKE PURNELL RAIN HARRELL]
June 30, 1995
Boatmen's First National Bank
of Kansas City
10th & Baltimore
Kansas City, Missouri 64105
Gentlemen:
We have acted as counsel to Republic Gypsum Company, a Delaware
corporation ("RGC"), Republic Paperboard Company, a Kansas corporation ("RPC"),
and Republic Paperboard Company of West Virginia ("RPCWV"), in connection with
the execution and delivery of (i) the Revolving and Term Credit Agreement dated
as of June 30, 1995 (the "Credit Agreement") between RGC, RPC, RPCWV and
Boatmen's First National Bank of Kansas City (the "Bank"); (ii) the Revolving
Credit Promissory Note, of even date with the Credit Agreement, made by RGC to
the order of the Bank in the principal amount of $7,000,000 (the "Revolving
Credit Note"); (iii) the Term Loan Promissory Note, of even date with the
Credit Agreement, made by RGC and RPCWV to the order of the Bank in the
principal amount of $28,000,000 (the "Term Loan Note"); (iv) the Revolving Loan
Guaranty Agreement, of even date with the Credit Agreement, made by RPC and
RPCWV in favor of the Bank ("Revolving Loan Guaranty"); and (v) the Term Loan
Guaranty Agreement, of even date with the Credit Agreement, made by RPC in
favor of the Bank ("Term Loan Guaranty").
The Credit Agreement, the Revolving Credit Note, Term Loan Note,
Revolving Loan Guaranty and Tern Loan Guaranty are sometimes hereinafter
referred to collectively as the "Loan Documents."
This opinion is provided to you at the request of RGC, RPC and RPCWV
pursuant to Section 5.3 of the Credit Agreement. Except as otherwise defined
herein, capitalized terms used herein and defined in the Credit Agreement or
the Accord (as defined below) shall have the meanings ascribed to them in the
Credit Agreement or the Accord. In the
<PAGE> 106
Boatmen's First National Bank
of Kansas City
June 30, 1995
Page 2
event any such term is defined in both the Credit Agreement and the Accord, the
definition contained in the Accord shall control.
Except as otherwise provided below, this Opinion Letter is governed
by, and shall be interpreted in accordance with, the Legal Opinion Accord (the
"Accord") of the ABA Section of Business Law (1991). As a consequence, it is
subject to a number of qualifications, exceptions, definitions, limitations on
coverage and other limitations, all as more particularly described in the
Accord, and this Opinion Letter should be read in conjunction therewith. The
law covered by the opinions expressed herein is limited to the Law of the State
of Texas, the corporate Law of the State of Delaware and the Federal Law of the
United States. With your permission, we have assumed that the corporate Law of
the State of Kansas is identical to the corporate Law of the State of Delaware.
In opining herein as to issues governed by the Law of the State of West
Virginia we are relying solely an the opinion of Jackson & Kelly, addressed to
you and of even date herewith.
Based upon and subject to the foregoing and to the qualifications
hereinafter set forth or referred to, we are of the opinion that:
1. Each of RGTC, RPC and RPCWV is a corporation duly organized
and validly existing and in good standing under the laws of the state of its
incorporation indicated in the first paragraph of this letter.
2. The Loan Documents to which RGC, RPC and RPCWV are parties
are enforceable against such parties.
3. The execution and delivery by each of RGC, RPC and RPCWV of,
and the performance of its agreements in, the Loan Documents to which it is a
party do not (a) violate any provision of the Constituent Documents, (b)
breach, or result in a default under, any existing obligation of such party
under any of the Other Agreements disclosed in the Loan Documents (including
any schedules and exhibits thereto), or (c) breach or otherwise violate any
existing obligation of such party under any of the Court Orders disclosed in
the Loan Documents (including any schedules and exhibits thereto).
4. The execution and delivery by each of RGC, RPC and RPCWV, and
performance by each of RGC, RPC and RPCWV of its agreements in, the Loan
Documents do not violate applicable provisions of statutory law or regulation.
<PAGE> 107
Boatmen's First National Bank
of Kansas City
June 30, 1995
Page 3
Our opinions in paragraphs 2 and 4 are qualified to the extent that we
express no opinion as to the effect thereon, if any, of any applicable federal
or state banking laws or regulations or any usury laws of the State of Texas.
Without limiting the generality of the General Qualifications, we
advise you that certain provisions contained in the Loan Documents may be
unenforceable but such unenforceability will not render the Loan Documents
invalid as a whole, and there exist in the Loan Documents or pursuant to
applicable law legally adequate remedies for the realization of the principal
benefits and security intended to be provided by the Loan Documents.
This opinion may be relied upon by you and any person or entity to
whom you sell or assign an interest in the Loan Documents, but may not
otherwise be relied upon or used by anyone except to the extent authorized by
the Accord, without our express written consent.
Very truly yours,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By:
Bryan E. Bishop, for the Firm
<PAGE> 108
JACKSON & KELLY
[LETTERHEAD]
June 30, 1995
Boatmen's First National Bank
of Kansas City
10th & Baltimore
Kansas City, Missouri 64105
Gentlemen:
We have acted as local counsel to Republic Paperboard Company of West
Virginia ("RPCWV"), in connection with the execution and delivery of (i) the
Revolving and Term Credit Agreement dated as of June 3, 1995 (the "Credit
Agreement") among Republic Gypsum Company, a Delaware corporation ("RGC"),
Republic Paperboard Company, a Kansas corporation ("RPC"), RPCWV and Boatmen's
First National Bank of Kansas City, a national banking association (the
"Bank"); (ii) the Term Loan Promissory Note, of even date with the Credit
Agreement, made by RGC and RPCWV to the order of the Bank in the principal
amount of $28,000,000 (the "Term Loan Note") (iii) the Revolving Loan Guaranty
Agreement, of even date with the Credit Agreement, made by RPC and RPCWV in
favor of the Bank (the "Revolving Loan Guaranty") ; (iv) the Deed of Trust, of
even date with the Credit Agreement, made by RPCWV to certain trustees for the
benefit of the Bank (the "Deed of Trust"); (v) the Security agreement, of even
date with the Credit Agreement, made by RPCWV and the Bank (the "Security
Agreement"); and (vi) two UCC-1 Financing Statements, made by RPCWV in favor of
the Bank (the "Financing Statements").
The Credit Agreement, Term Loan Note, Revolving Loan Guaranty, the
Deed of Trust, Security Agreement and Financing Statements are sometimes
hereinafter referred to collectively as the "Loan Documents."
This opinion is provided to you at the request of the Company pursuant
to Section 5.3 of the Credit Agreement. Except as otherwise defined herein,
capitalized terms used herein and defined
<PAGE> 109
Boatmen's First National Bank
of Kansas city
June 30, 1995
Page 2
in the Credit Agreement shall have the meanings ascribed to them in the Credit
Agreement.
In addition, we have also examined originals or copies certified to
our satisfaction of such other agreements, documents, certificates and other
statements of government and public officials and corporate officers
(collectively the "Supporting Information") and we have made such
investigations of law, as we have deemed necessary as a basis for our opinion.
As to any facts material to our opinion, we have relied, to the extent that we
deem such reliance proper, upon the Supporting Information and upon the
representations and warranties made in the Loan Documents. In rendering such
opinion, we have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity to authentic
original documents of all documents submitted to us as certified, conformed or
photostatic copies.
In rendering the opinions set forth below, with your permission, we
have also made the following assumptions without independent investigation:
(a) The execution, delivery and performance by
the Bank of the Credit Agreement and any and all Documents executed or to be
executed by Bank in connection therewith, are the legal, valid and binding
obligations of Bank, enforceable against Bank in accordance with their terms.
(b) The Loan Documents submitted to us as
certified, conformed or photostatic copies, conform with the authentic original
documents which have been executed by the parties thereto.
(c) The Loan Documents have not been amended
from the forms submitted to us, by oral or written agreements not revealed to
us, or by conduct of the parties thereto or otherwise.
(d) The factual matters contained in the Loan
Documents and in the Supporting Information are true, correct and complete.
(e) All of the personal property identified in
the Deed of Trust and the Security Agreement is located in Jefferson County,
West Virginia.
<PAGE> 110
Boatmen's First National Bank
of Kansas City
June 30, 1995
Page 3
(f) The Deed of Trust does not and is not
intended to secure future advances.
(g) The Borrower has rights in the Collateral.
(h) None of the Collateral located in West
Virginia (the "West Virginia Collateral") consists or will consist of non-
negotiable documents, uncertificated securities, consumer goods, rolling stock,
farm products, livestock, crops, grain, timber, minerals (including oil and
gas) or accounts or general intangibles resulting from the sale thereof,
beneficial interests in a trust or decedent's estate, letters of credit or items
which are subject to a national or international registration or a national or
international certificate of title for the perfection of a security interest
therein or which specifies a place of filing different from that specified in
the Uniform Commercial Code of West Virginia (the "UCC") for filing to perfect
a security interest.
Based upon and subject to the foregoing and to the qualifications and
limitations hereinafter set forth or referred to, we are of the opinion that:
1. RPCWV is a corporation duly organized and validly existing and
in good standing under the laws of the state of its incorporation.
2. The Loan Documents constitute the legal, valid and binding
obligations of RPCWV, enforceable against RPCWV in accordance with their
respective terms.
3. The execution and delivery by RPCWV of, and the performance
of its agreements in, the Loan Documents do not (a) violate any provision of
the articles of incorporation or bylaws of RCWV (the "Constituent Documents"),
or (b) to our knowledge, and based solely upon a review of the civil docket of
the Circuit Court of Jefferson County, West Virginia, breach or otherwise
violate any existing obligation of RPCW under any court or administrative
orders, writs, judgments or decrees that name RPCWV and are disclosed in the
Loan Documents (including any schedules and exhibits thereto).
4. The execution and delivery by RPCWV, and performance by RPCWV
of its agreements in, the Loan Documents do not violate applicable provisions
of West Virginia statutory law or regulation.
<PAGE> 111
Boatmen's First National Bank
of Kansas city
June 30, 1995
Page 4
5. The Deed of Trust creates in favor of the Bank a valid lien on
the property described in the Deed of Trust and upon the proper recording of
the Deed of Trust with the Clerk of the County Commission of Jefferson County,
West Virginia (the "Clerk's Office"), the Bank will have a perfected lien on
the property described in the Deed of Trust and no further filing or recording
of any document or instrument, and no further action, will be required to
perfect the Bank's lien on such property.
6. The Security Agreement creates in favor of the Bank a valid
security interest under the Uniform Commercial Code of the State of West
Virginia in so much of the personal property included in the collateral
described therein as constitutes personal property in which a security interest
may be created under the Uniform Commercial Code of the State of West Virginia
(the "Collateral"). Upon filing with the Office of the West Virginia Secretary
of State and the Clerk's Office, the Bank will have a perfected security
interest in the Collateral, or in that part thereof in which a security
interest may be perfected solely by the filing of a financing statement, and no
further filing or recording of any document or instrument, and no further
action, will be required to perfect the Bank's security interest in the
Collateral or such part thereof except for the filing of continuation
statements at appropriate intervals as discussed below.
Be advised that the filing of a financing statement is not necessary
or effective to perfect a security interest in property subject to Chapter 17A
of the West Virginia Code. Under the provisions of W.Va. Code Section 17A-4-
A-2, liens and incumbrances placed on vehicles by the voluntary act of the
owner, after the original issue of title, must be shown on a certificate of
title to be properly recorded. In such cases, the owner or lienholder must file
application with the West Virginia Department of Motor Vehicles (the
"Department") on the form furnished for that purpose by the Department. The
certificate is to be delivered to the person holding the first lien and is
retained by said person until the entire amount of the lien is fully paid.
Thereupon, the certificate of title is to be delivered to the next lienholder,
or if none, to the owner of the vehicle. It is the responsibility of each
lienor upon satisfaction or his lien to deliver the certificate of title to the
lienor next entitled to possession, and if none, to the owner. W.Va. Code
Section 17-A4-A6.
Our opinions set forth herein are subject to the following general
qualifications and limitations:
<PAGE> 112
Boatmen's First National Bank
of Kansas city
June 30, 1995
Page 5
(a) The opinions expressed herein are limited to the laws
of the State of West Virginia and we express no opinion herein with regard to
any matter which may be governed by the laws of any other jurisdiction. No
opinion is expressed as to the effect that the law of any other jurisdiction
might have upon the subject matter of the opinions expressed herein under
conflicts of law principles or otherwise.
(b) Our opinions as to enforceability are subject to the
qualification that enforcement may be limited by principles of equity which
may limit the availability of certain remedies, and by applicable bankruptcy,
insolvency, reorganization, rehabilitation, conservation, dissolution,
fraudulent conveyance, moratorium, and similar laws applicable to creditors'
rights or the collection of debtors' obligations generally.
(c) Our opinion as to enforceability is further subject
to the qualification that the enforceability of certain of the remedy and
waiver provisions of the Loan Documents is further limited by applicable laws
in addition to those described in paragraph (b) immediately preceding; however,
such additional laws do not, in our opinion, substantially interfere with the
practical realization of the benefits or security intended to be provided in
the Loan Documents except for the economic consequences of any procedural delay
which may result from such laws.
(d) We express no opinion with respect to the effect of
the failure of the Bank to enforce its rights under any of the Loan Documents
in good faith and in a commercially reasonable manner.
(e) We have not made any examination of title or any
public records relating to the title to the real estate or personal property
described in the Loan Documents or the priority of the security interests or
liens purported to be created thereby. We express no opinion as to (i) the
priority of any security interest or lien created or purported to be created by
any of the Loan Documents or (ii) any matters relating to the title to any
property covered by or which is the subject of the Loan Documents.
(f) Our opinions contained in paragraph 6 above are
further subject to the assumption that the Financing Statements are properly
filed as stated in paragraph 6 and that the continued perfection of the Bank's
security interest will require the filing of continuation statements complying
with the Uniform Commercial
<PAGE> 113
Boatmen's First National Bank
of Kansas City
June 30, 1995
Page 6
Code of the State of West Virginia (the "UCC") with respect to each Financing
Statement not more than six months prior to, and not after, the expiration of
the five-year period dated from the date of the filing of each Financing
Statement, and not more than six months prior to, and not after, the expiration
of each subsequent five-year period after the date of the initial filing.
(g) We have not independently examined the physical
condition or actual use made of any property described in the Deed of Trust
(the "Mortgaged Property") and express no opinion as to whether any Mortgaged
Property is in compliance with any laws and regulations relating to the
construction, occupancy or use thereof (including, without limitation, zoning
laws, building codes and environmental laws and regulations).
(h) Our opinions set forth herein are limited to the
matters expressly set forth in this opinion letter, and no opinion is implied
or may be inferred beyond the matters expressly so stated. This opinion has
been furnished to the addressee hereof for the sole purpose set forth in the
third paragraph hereof, and we consider it to be a confidential communication
which may not be furnished, reproduced, used, relied upon by, distributed or
disclosed to anyone other than any participants in or subsequent holder or
permitted assignee of the Notes for any purpose whatsoever without our prior
express written consent, provided that we hereby consent to inclusion of a copy
of this opinion in the transcript of closing documents to be provided to the
parties involved with the Loans transaction and their counsel.
(i) We express no opinion as to (i) any security interest
in any of the non-real property collateral which is excluded from the coverage
of Article 9 of the UCC, or the perfection provisions thereof, such as deposit
accounts, patents, trademarks and motor vehicles; (ii) the applicability or
effect of 11 U.S.C. Section 548, the West Virginia Fraudulent Transfer Act or
any other fraudulent transfer or similar laws on the Documents or any
transaction contemplated thereby; (iii) the enforceability of any provision
which purports to grant a security interest or otherwise assign an interest in
any permits, certificates, approvals or authorizations, issued in the name of
RPCWV or furnished to RPCWV, or (iv) the enforceability of any provision
whereby a party attempts to contractually avoid liability for its own
negligence.
(j) We express no opinion as to the validity, binding
effect or enforceability of any provision in the Loan
<PAGE> 114
Boatmen's First National Bank
of Kansas City
June 30, 1995
Page 7
Documents which purports (i) to permit the Bank or any other person to sell or
otherwise dispose of any Collateral subject thereto except in compliance with
the UCC, applicable laws of the United States of America, and other applicable
state and local laws, (ii) to provide for a security interest in the proceeds
of any Collateral subject thereto other than pursuant to section 9-306 of the
UCC, or (iii) to impose on the Bank standards for the care of Collateral in the
Bank's possession other than as provided in section 9-207 of the UCC.
Furthermore, we express no opinion as to the validity, binding effect,
enforceability or perfection of the security interests insofar as they relate
to an interest in or claim to proceeds payable by reason of loss or damage
under insurance policies maintained by RPCWV, with respect to equipment as
described in the Security Agreement, as required by and in compliance with the
Security Agreement.
We call to your attention the fact that the security interest
of the Bank will cease to be perfected (i) as to any Collateral acquired by
RPCWV more than four months after RPCWV changes its name, identity or
corporate structure so as to make the then filed Financing Statements seriously
misleading, unless new appropriate financing statements indicating the new
name, identity or structure of RPCWV are properly filed before the expiration
of such four-month period; and (ii) as to Collateral otherwise disposed of by
RPCWV if such disposition is authorized by the Bank.
(k) We express no opinion as to the validity, binding
effect or enforceability of any waiver under any Loan Document or any consent
thereunder, relating to the rights of RPCWV, or duties owing to it, existing as
a matter of law except to the extent RPCWV may so waive or consent as a matter
of law.
(l) The opinions expressed in this letter are qualified
to the extent that the validity, binding nature, and enforceability of any of
the terms of the Loan Documents or any other opinions rendered herein may be
limited or otherwise affected by:
(i) judicial discretion and limitations on the
availability of specific enforcement and other equitable remedies (regardless
of whether enforcement is considered in proceedings in law or in equity);
<PAGE> 115
Boatmen's First National Bank
of Kansas City
June 30, 1995
Page 8
(ii) compliance with, and limitations imposed by,
procedural requirements of West Virginia law relating to the exercise of
remedies by a lender;
(iii) limitations on the right of a lender to
exercise rights and remedies under the Loan Documents or impose charges for
late payments or other defaults by RPCWV, as applicable, if it is determined
that (a) the defaults are not material, the late payment charges bear no
reasonable relation to the damage suffered by the Bank as a result of the
delinquencies or defaults, or it cannot be demonstrated that the enforcement of
the restrictions or burdens is reasonably necessary for the protection of the
creditor, or (b) the Bank's enforcement of the covenants or provisions under
the circumstances would violate the Bank's implied covenant of good faith and
fair dealing, or would be commercially unreasonable; limitations on the
effectiveness of the grant of powers of attorney in favor of the Bank for the
exercise of certain remedies; the unenforceability under certain circumstances
of provisions to the effect that failure to exercise or delay in exercising
rights or remedies will not operate as a waiver of the right or remedy;
limitations on the enforceability of provisions purporting to waive notice
prior to the enforcement of certain remedies by a Bank; but the foregoing do
not, in our opinion, impair the validity of the debt obligation or security
interest arising under the Loan Documents;
(iv) the effect, if any, of federal and state laws
specifically applicable to banking institutions (as opposed to creditors
generally) and of federal and state securities laws.
(m) With respect to the opinions set forth above, we
express no opinion as to the validity or enforceability of any provision in any
of the Loan Documents purporting to (i) preclude the modification of any such
Loan Documents through conduct, custom or course of performance, action or
dealing, (ii) waive equitable, constitutional or statutory rights or remedies,
(iii) permit modification or alteration of any of the Loan Documents that
materially affects the obligations of any party to any other Loan Document
without the consent of such party.
(n) We express no opinion as to the enforceability of the
Dead of Trust with respect to the obligations secured thereby in excess of the
sum of (i) the total of the Term Note, plus interest and late fees thereon;
plus (ii) advances to preserve
<PAGE> 116
Boatmen's First National Bank
of Kansas City
June 30, 1995
Page 9
the Collateral described in the Deed of Trust such as taxes and insurance.
(o) we express no opinion as to the enforceability of any
provision which requires RPCWV to pay Bank's attorney fees, purports to grant a
security interest in after-acquired real property, or waives the right to trial
by jury.
The opinions given herein are as of the date hereof. We assume no
obligation to update or supplement this letter to reflect any facts or
circumstances which may hereafter change or come to our attention or any
changes in law which may hereafter occur.
Very truly yours,
JACKSON & KELLY
By:
Mary Clare Eros, Partner
<PAGE> 117
EXHIBIT 5.4 (a)
CERTIFICATE
The undersigned corporation does hereby certify to Boatmen's First
National Bank of Kansas City (the "Bank"), pursuant to Section 5.4 of that
certain Revolving and Term Credit Agreement dated June 30, 1995, between
Republic Gypsum Company, a Delaware corporation ("RGC"), Republic Paperboard
Company, a Kansas corporation ("RPC"), Republic Paperboard Company of West
Virginia, a West Virginia corporation ("RPCWV"), and the Bank (the
"Agreement"), that:
1. The representations and warranties contained in Article 6 of
the Agreement are true and correct in all material respects
with the same force as though made on and as of the date
hereof; and
2. No Default or Event of Default (as defined in the Agreement
and Exhibit 1 thereto) has occurred and is continuing on the
date hereof.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate this 30th day of June, 1995.
[SEAL] REPUBLIC GYPSUM COMPANY, a Delaware
corporation
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 118
EXHIBIT 5.4(b)
CERTIFICATE
The undersigned hereby certify to Boatmen's First National Bank of
Kansas City (the "Bank"), pursuant to Section 5.4 of that certain Revolving and
Term Credit Agreement dated June 30, 1995, between Republic Gypsum Company, a
Delaware corporation ("RGC"), Republic Paperboard Company, a Kansas corporation
("RPC"), Republic Paperboard Company of West Virginia, a West Virginia
corporation ("RPCWV"), and the Bank (the "Agreement"), that:
1. The representations and warranties contained in Article 6 of
the Agreement are true and correct in all material respects
with the same force as though made on and as of the date
hereof; and
2. No Default or Event of Default (as defined in the Agreement
and Exhibit 1 thereto) has occurred and is continuing on the
date hereof.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate this 30th day of June, 1995.
[SEAL] REPUBLIC PAPERBOARD COMPANY, a
Kansas corporation
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 119
EXHIBIT 5.4(c)
CERTIFICATE
The undersigned hereby certify to Boatmen's First National Bank of
Kansas City (the "Bank"), pursuant to Section 5.4 of that certain Revolving and
Term Credit Agreement dated June 30, 1995, between Republic Gypsum Company, a
Delaware corporation ("RGC"), Republic Paperboard Company, a Kansas corporation
("RPC"), Republic Paperboard Company of West Virginia, a West Virginia
corporation ("RPCWV"), and the Bank (the "Agreement"), that:
1. The representations and warranties contained in Article 6 of
the Agreement are true and correct in all material respects
with the same force as though made on and as of the date
hereof; and
2. No Default or Event of Default (as defined in the Agreement
and Exhibit 1 thereto) has occurred and is continuing on the
date hereof.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate this 30th day of June, 1995.
[SEAL] REPUBLIC PAPERBOARD COMPANY OF WEST
VIRGINIA
ATTEST:
By: By:
Janey L. Sowell Phil Simpson
Secretary Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 120
EXHIBIT 5.5(a)
CERTIFIED COPY OF RESOLUTIONS OF THE BOARD OF
DIRECTORS OF REPUBLIC GYPSUM COMPANY
I, the undersigned, hereby certify to Boatmen's First National Bank of
Kansas City, pursuant to that certain Revolving and Term Credit Agreement dated
as of June 30, 1995, that I am the duly elected, qualified and acting secretary
of Republic Gypsum Company, a corporation duly organized and existing under the
laws of the State of Delaware (the "Company"), and that the following is a true
copy of resolutions duly adopted by the board of directors of the Company on
__________, 1995, in accordance with the articles of incorporation and bylaws of
the Company and applicable law:
RESOLVED, that the Company enter into a Revolving and Term Credit
Agreement among Boatmen's First National Bank of Kansas City (the
"Bank"), the Company, Republic Paperboard Company ("RPC") and Republic
Paperboard Company of West Virginia, ("RPCWV"), establishing (i) a
$7,000,000 two-year unsecured revolving line of credit in favor of the
Company which shall be guaranteed by RPC and RPCWV, and (ii) a
$28,000,000 term loan maturing April 30, 2002 in favor of the Company
and RPCWV, which shall be secured by certain equipment, real property
and other property of RPCWV, and which shall be guaranteed by RPC; and
FURTHER RESOLVED, that the form of Revolving and Term Credit Agreement
(including the exhibits attached thereto) presented to the board is
hereby approved; and
FURTHER RESOLVED, that the President, Executive Vice President or any
Vice President be and each hereby is authorized and directed to
execute and deliver to the Bank, in the name and on behalf of the
Company, (i) a Revolving and Term Credit Agreement among the Company,
RPC, RPCWV and the Bank substantially in the form which has been
presented to this board of directors, (ii) a Revolving Credit
Promissory Note substantially in the form appended to said Revolving
and Term Credit Agreement as Exhibit 2.2, in the principal amount of
Seven Million Dollars ($7,000,000), and (iii) a Term Loan Promissory
Note substantially in the form appended to said Revolving and Term
Credit Agreement as Exhibit 3.2, in the principal amount of
Twenty-Eight Million Dollars ($28,000,000), with such changes in such
forms of Revolving and Term Credit Agreement and promissory notes as
any such officer may approve as being in the best interests of the
Company, such approval to be evidenced conclusively
<PAGE> 121
by such officer's execution and delivery thereof, together with all
such other agreements, documents and instruments as the Bank may
require and such officer may deem desirable or appropriate in order to
consummate the transactions contemplated by the Revolving and Term
Credit Agreement, all in such form and containing such provisions as
such officer shall approve, such approval to be evidence conclusively
by such officer's execution and delivery thereof;
FURTHER RESOLVED, that the Secretary or any Assistant Secretary of the
Company be, and each hereby is, authorized to attest to the signature
of any officer on any of the documents such officer is authorized to
sign by the immediately-preceding resolution and to affix the
corporate seal of the Company to any such document, and that such
attestation and affixation shall constitute conclusive evidence that
any such document is substantially in the form which has been
presented to this board of directors and that the execution on behalf
of the Company has been approved by the board of directors; and
FURTHER RESOLVED, that any one of the aforementioned officers of the
Company be and each hereby is authorized to execute and deliver, in
the name and on behalf of the Company, any and all requests for loans,
maker elections and other agreements, instruments and documents which
the Company shall be obligated or permitted to cause to be executed in
its name and on its behalf and delivered to the Bank pursuant to the
aforementioned Revolving and Term Credit Agreement and promissory
notes, and to communicate by telephone to the Bank and to authorize
the communication to the Bank by telex, telegraph, facsimile
transmission or any electronic means of, any and all requests for
loans, maker elections and other communications which the Company
shall be obligated or permitted to make to the Bank pursuant to said
Revolving and Term Credit Agreement and promissory notes;
FURTHER RESOLVED, that the authority herein granted shall continue
until the same has been revoked by the board of directors of the
Company and written notice of such revocation has been actually
received by the Bank; and
FURTHER RESOLVED, that the Secretary or any Assistant Secretary of the
Company be, and each hereby is, further authorized to certify a copy
of this and the foregoing resolutions to the Bank.
I further certify that the foregoing resolutions do not conflict with
any of the provisions of the articles of
- 2 -
<PAGE> 122
incorporation or bylaws of the Company and that said resolutions have not been
rescinded, modified or amended and remain in full force and effect.
I further certify that each of the persons named below holds the
offices of the Company set forth below such person's name and that the
signature appearing above such officer's name is the true signature of such
officer.
Phil Simpson
Chairman of the Board, President and
Chief Executive Officer
Stephen L. Gagnon
Executive Vice President
IN WITNESS WHEREOF, I have set my hand and affixed the seal of the
Company as of this 30th day of June, 1995.
Janey L. Sowell
(CORPORATE SEAL)
- 3 -
<PAGE> 123
EXHIBIT 5.5(b)
CERTIFIED COPY OF RESOLUTIONS OF THE BOARD OF
DIRECTORS OF REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA
I, the undersigned, hereby certify to Boatmen's First National Bank of
Kansas City, pursuant to that certain Revolving and Term Credit Agreement dated
as of June 30, 1995, that I am the duly elected, qualified and acting secretary
of Republic Paperboard Company of West Virginia, a corporation duly organized
and existing under the laws of the State of West Virginia (the "Company"), and
that the following is a true copy of resolutions duly adopted by the board of
directors of the Company on ______________, 1995, in accordance with the
articles of incorporation and bylaws of the Company and applicable law:
RESOLVED, that the Company enter into a Revolving and Term Credit
Agreement among Boatmen's First National Bank of Kansas City (the
"Bank"), the Company, Republic Gypsum Company ("RGC") and Republic
Paperboard Company ("RPC"), establishing (i) a $7,000,000 two-year
unsecured revolving line of credit in favor of RGC which shall be
guaranteed by RPC and the Company, and (ii) a $28,000,000 term loan
maturing April 30, 2002 in favor of the Company and RGC, which shall
be secured by certain equipment, real property and other property of
the Company, and which shall be guaranteed by RPC; and
FURTHER RESOLVED, that the form of Revolving and Term Credit Agreement
(including the exhibits attached thereto) presented to the board is
hereby approved; and
FURTHER RESOLVED, that the President, Executive Vice President or any
Vice President be and each hereby is authorized and directed to
execute and deliver to the Bank, in the name and on behalf of the
Company, (i) a Revolving and Term Credit Agreement among the Company,
RGC, RPC and the Bank substantially in the form which has been
presented to this board of directors, (ii) a Term Loan Promissory Note
substantially in the form appended to said Revolving and Term Credit
Agreement as Exhibit 3.2, in the principal amount of Twenty-Eight
Million Dollars ($28,000,000), (iii) a Security Agreement
substantially in the form appended to said Revolving and Term Credit
Agreement as Exhibit 3.5(a), (iv) a Deed of Trust substantially in the
form appended to said Revolving and Term Credit Agreement as Exhibit
3.5(b), and (v) a Revolving Loan Guaranty Agreement substantially in
the form appended to said Revolving and Term Credit Agreement as
Exhibit 2.4, all of such documents with such
<PAGE> 124
changes as any such officer may approve as being in the best interests
of the Company, such approval to be evidenced conclusively by such
officer's execution and delivery thereof, together with all such other
agreements, documents and instruments as the Bank may require and such
officer may deem desirable or appropriate in order to consummate the
transactions contemplated by the Revolving and Term Credit Agreement,
all in such form and containing such provisions as such officer shall
approve, such approval to be evidence conclusively by such officer's
execution and delivery thereof;
FURTHER RESOLVED, that the Secretary or any Assistant Secretary of the
Company be, and each hereby is, authorized to attest to the signature
of any officer on any of the documents such officer is authorized to
sign by the immediately-preceding resolution and to affix the
corporate seal of the Company to any such document, and that such
attestation and affixation shall constitute conclusive evidence that
any such document is substantially in the form which has been
presented to this board of directors and that the execution on behalf
of the Company has been approved by the board of directors; and
FURTHER RESOLVED, that any one of the aforementioned officers of the
Company be and each hereby is authorized to execute and deliver, in
the name and on behalf of the Company, any and all requests for loans,
maker elections and other agreements, instruments and documents which
the Company shall be obligated or permitted to cause to be executed in
its name and on its behalf and delivered to the Bank pursuant to the
aforementioned Revolving and Term Credit Agreement and promissory
notes, and to communicate by telephone to the Bank and to authorize
the communication to the Bank by telex, telegraph, facsimile
transmission or any electronic means of, any and all requests for
loans, maker elections and other communications which the Company
shall be obligated or permitted to make to the Bank pursuant to said
Revolving and Term Credit Agreement and promissory notes;
FURTHER RESOLVED, that the authority herein granted shall continue
until the same has been revoked by the board of directors of the
Company and written notice of such revocation has been actually
received by the Bank; and
FURTHER RESOLVED, that the Secretary or any Assistant Secretary of the
Company be, and each hereby is, further authorized to certify a copy
of this and the foregoing resolutions to the Bank.
- 2 -
<PAGE> 125
I further certify that the foregoing resolutions do not conflict with
any of the provisions of the articles of incorporation or bylaws of the Company
and that said resolutions have not been rescinded, modified or amended and
remain in full force and effect.
I further certify that each of the persons named below holds the
offices of the Company set forth below such person's name and that the
signature appearing above such officer's name is the true signature of such
officer.
Phil Simpson
Chairman of the Board, President and
Chief Executive Officer
Stephen L. Gagnon
Executive Vice President
IN WITNESS WHEREOF, I have set my hand and affixed the seal of the
Company as of this 30th day of June, 1995.
Janey L. Sowell
(CORPORATE SEAL)
- 3 -
<PAGE> 126
EXHIBIT 5.5(c)
CERTIFIED COPY OF RESOLUTIONS OF THE BOARD OF
DIRECTORS OF REPUBLIC PAPERBOARD COMPANY
I, the undersigned, hereby certify to Boatmen's First National Bank of
Kansas City, pursuant to that certain Revolving and Term Credit Agreement dated
as of June 30, 1995, that I am the duly elected, qualified and acting secretary
of Republic Paperboard Company, a corporation duly organized and existing under
the laws of the State of Kansas (the "Company"), and that the following is a
true copy of resolutions duly adopted by the board of directors of the Company
on __________ 1995, in accordance with the articles of incorporation and bylaws
of the Company and applicable law:
RESOLVED, that the Company enter into a Revolving and Term Credit
Agreement among Boatmen's First National Bank of Kansas City (the
"Bank"), the Company, Republic Gypsum Company ("RGC") and Republic
Paperboard Company of West Virginia ("RPCWV"), establishing a (i)
$7,000,000 two-year unsecured revolving line of credit in favor of RGC
which shall be guaranteed by RPCWV and the Company, and (ii) a
$28,000,000 term loan maturing April 30, 2002 in favor of RPCWV and
RGC, which shall be secured by certain equipment, real property and
other property of RPCWV and which shall be guaranteed by the Company;
and
FURTHER RESOLVED, that the form of Revolving and Term Credit Agreement
(including the exhibits attached thereto) presented to the board is
hereby approved; and
FURTHER RESOLVED, that the President, Executive Vice President or any
Vice President be and each hereby is authorized and directed to
execute and deliver to the Bank, in the name and on behalf of the
Company, (i) a Revolving and Term Credit Agreement among the Company,
RGC, RPCWV and the Bank substantially in the form which has been
presented to this board of directors, (ii) a Revolving Loan Guaranty
Agreement substantially in the form appended to said Revolving and
Term Credit Agreement as Exhibit 2.4, and (iii) a Term Loan Guaranty
Agreement substantially in the form appended to said Revolving and
Term Credit Agreement as Exhibit 3.4, all of such documents with such
changes as any such officer may approve as being in the best interests
of the Company, such approval to be evidenced conclusively by such
officer's execution and delivery thereof, together with all such other
agreements documents and instruments as the Bank may require and such
officer may deem desirable or
<PAGE> 127
appropriate in order to consummate the transactions contemplated by
the Revolving and Term Credit Agreement, all in such form and
containing such provisions as such officer shall approve, such
approval to be evidence conclusively by such officer's execution and
delivery thereof;
FURTHER RESOLVED, that the Secretary or any Assistant Secretary of the
Company be, and each hereby is, authorized to attest to the signature
of any officer on any of the documents such officer is authorized to
sign by the immediately-preceding resolution and to affix the
corporate seal of the Company to any such document, and that such
attestation and affixation shall constitute conclusive evidence that
any such document is substantially in the form which has been
presented to this board of directors and that the execution on behalf
of the Company has been approved by the board of directors; and
FURTHER RESOLVED, that any one of the aforementioned officers of the
Company be and each hereby is authorized to execute and deliver, in
the name and on behalf of the Company, any other agreements,
instruments and documents which the Company shall be obligated or
permitted to cause to be executed in its name and on its behalf and
delivered to the Bank pursuant to the aforementioned Revolving and
Term Credit Agreement;
FURTHER RESOLVED, that the authority herein granted shall continue
until the same has been revoked by the board of directors of the
Company and written notice of such revocation has been actually
received by the Bank; and
FURTHER RESOLVED, that the Secretary or any Assistant Secretary of the
Company be, and each hereby is, further authorized to certify a copy
of this and the foregoing resolutions to the Bank.
I further certify that the foregoing resolutions do not conflict with
any of the provisions of the articles of incorporation or bylaws of the Company
and that said resolutions have not been rescinded, modified or amended and
remain in full force and effect.
- 2 -
<PAGE> 128
I further certify that each of the persons named below holds the
offices of the Company set forth below such person's name and that the
signature appearing above such officer's name is the true signature of such
officer.
Phil Simpson
Chairman of the Board, President and
Chief Executive Officer
Stephen L. Gagnon
Executive Vice President
IN WITNESS WHEREOF, I have set my hand and affixed the seal of the
Company as of this 30th day of June, 1995.
Janey L. Sowell
(CORPORATE SEAL)
- 3 -
<PAGE> 129
EXHIBIT 7.4(c)
COMPLIANCE CERTIFICATE
To: Boatmen's First National Bank of Kansas City
This Compliance Certificate is furnished pursuant to Section 7.4(c) of
the Revolving and Term Credit Agreement dated as of June 30, 1995 (the
"Agreement"), among Republic Gypsum Company ("RGC"), Republic Paperboard
Company ("RPC"), Republic Paperboard Company of West Virginia ("RPCWV") and
Boatmen's First National Bank of Kansas City. Unless otherwise defined herein,
the terms used in this Compliance Certificate have the meanings assigned to
them in the Agreement.
THE UNDERSIGNED CORPORATION HEREBY CERTIFIES THAT:
1. _______________________ is the duly elected _________________
of RGC.
2. It has reviewed the terms of the Agreement and has made, or
has caused to be made, a detailed review of the transactions and conditions of
RGC and the Subsidiaries during the accounting period covered by the enclosed
financial statements.
3. The following computation demonstrates RGC's compliance with
the financial covenants contained in the Agreement as of the date of the
enclosed balance sheet, and all of the data included in such computation are
true, complete and correct:
<TABLE>
<S> <C> <C>
A. Net Worth
1. Required Net Worth:
(a) Cumulative positive Net Income of RGC and its
Subsidiaries for each Fiscal Quarter beginning
after March 31, 1995 $____________________
(b) 0.50 times (a) $____________________
(c) $42,616,000 plus (a) $____________________
2. Actual Net Worth - Consolidated Stockholder's Equity $___________________
</TABLE>
<PAGE> 130
<TABLE>
<S> <C> <C>
B. Leverage Ratio
1. Maximum Total Leverage Ratio: 1.20 to 1.0
2. Actual Leverage Ratio:
(a) Consolidated Total Liabilities of
RGC and its Subsidiaries $___________________
(b) Consolidated Stockholders Equity of RGC $___________________
(c) Aggregate goodwill of RGC and its Subsidiaries $___________________
(d) Consolidated Tangible Stockholders Equity (b) minus (c) $___________________
(e) Ratio of (a) to (d) _____________ to 1.0
C. Current Ratio - Working Capital
1. Minimum Current Ratio: 1.50 TO 1.0
2. Actual Current Ratio:
(a) Consolidated Current Assets of RGC and its Subsidiaries $___________________
(b) Consolidated Current Liabilities of RGC and its
Subsidiaries $___________________
(c) Ratio of (a) to (b) _____________ to 1.0
D. Working Capital
1. Minimum Working Capital: $6,500,000
2. Actual Working Capital:
(a) Consolidated Current Assets of RGC and its Subsidiaries $___________________
(b) Consolidated current Liabilities of RGC and its
Subsidiaries $___________________
(c) Working Capital (a) minus (b) $___________________
</TABLE>
- 2 -
<PAGE> 131
<TABLE>
<S> <C> <C>
E. Fixed Charge Coverage Ratio
1. Minimum Fixed Charge Coverage Ratio: 2.0 to 1.0
2. Actual Fixed Charge Coverage Ratio:
(a) Consolidated Earnings before Interest, Taxes
Depreciation and Amortization of RGC and its Subsidiaries $___________________
(b) Total Interest Expense of RGC and its Subsidiaries $___________________
(c) Required principal payments and other repayments of
Indebtedness required by to be made by RGC and its
Subsidiaries within one year $___________________
(d) Aggregate Payments Leases and Rents due within one year
of RGC and its Subsidiaries $___________________
(e) Sum of (b), (c) and (d) $___________________
(f) Ratio of (a) to (e) _____________ to 1.0
</TABLE>
4. The examinations described in paragraph 2 did not disclose,
and it has no knowledge of, the existence of any condition or event which
constitutes a Default or an Event of Default during or at the end of the
accounting period covered by the attached financial statements or as of the
date of this Compliance Certificate, except as set forth below:
[Describe the exceptions by listing, in detail, the nature of
the condition or event, the period during which it has existed
and the action which RGC or any of its Subsidiaries has taken,
is taking, or proposes to take with respect to each such
condition or event.]
- 3 -
<PAGE> 132
The foregoing certifications and the financial statements delivered
with this compliance Certificate in support hereof, are made and delivered this
__________ day of __________, 19__.
Republic Gypsum Company
By:________________________________
Name:______________________________
Title:_____________________________
- 4 -
<PAGE> 133
SCHEDULE 6.14
EMPLOYEE BENEFIT PLAN DISCLOSURES
1. Effective December 31, 1994, the Company's Board of Directors approved
the termination of the Republic Gypsum Company Employees' Savings
Plan, a money purchase pension plan covering certain hourly employees.
The Plan assets have not yet been distributed pending IRS approval of
the termination.
2. Effective December 31, 1994, the Republic Paperboard Company Board of
Directors amended the Republic Paperboard Company Pension Plan and
Trust for Denver Hourly Employees to freeze future benefit accruals,
and all benefits under the Plan became 100% vested. The Board further
authorized the officers of Republic Paperboard Company to proceed with
termination of the Plan upon whatever future date might be deemed
appropriate given the liabilities of the Plan upon termination and the
applicable PBGC interest rates then in effect. Because of the
enactment of the GATT legislation and the change in the interest rates
used in determination of lump sum distributions, the Plan's actuaries
continue to study the appropriate timing for a termination of the
Plan.
<PAGE> 134
SCHEDULE 6.3
CONFLICTS
NONE
<PAGE> 135
SCHEDULE 6.4(b)
ENVIRONMENTAL DISCLOSURES
Commerce City, Colorado
1. The Company is adjacent to a large refinery owned by Conoco,
Inc, ("Conoco"). The Company has identified the presence of
substances in the subsurface of its facility that it believes
are attributable to Conoco. The issue has been reported to the
Colorado Department of Health ("CDH") and the Company is
conducting a joint investigation of this issue with Conoco.
2. Four underground storage tanks were removed or abandoned in
place in 1988 and closure was not obtained from CDH. The
potential for residual contamination associated with these
tanks is being investigated as part of the investigation
described in Item #1 above.
3. A Spill Prevention Control and Countermeasures Plan, a
Stormwater Pollution Prevention Plan, and an Emergency
Response Plan need to be adopted, implemented or updated.
Hutchinson, Kansas
1. A Spill Prevention Control and Countermeasures Plan, a
Stormwater Pollution Prevention Plan, and an Emergency
Response Plan need to be adopted, implemented or updated.
Duke, Oklahoma
1. A Spill Prevention Control and Countermeasures Plan, a
Stormwater Pollution Prevention Plan, and an Emergency
Response Plan need to be adopted, implemented or updated.
2. A Notice of Violation for failure to submit information for
the determination of air permitting status was issued in March
of 1994 by the State of Oklahoma. The information has been
submitted, and no significant enforcement actions or penalties
are anticipated.
<PAGE> 136
SCHEDULE 6.8
SUBSIDIARIES
<TABLE>
<CAPTION>
State of Date of % Owned By
Corporation Incorporation Incorporation RGC(1) RPC(2)
---------------------------------- ------------------- -------------------- ---------- ---------
<S> <C> <C> <C> <C>
Hollis & Eastern Oklahoma 8/01/59 99%
Railroad Company
75-6004941
LaPorte Minerals Indiana 4/15/68 100%
Corporation
75-1316151
Delta Roofing Mills, Louisiana 1/18/79 100%
Inc.
75-0500290
Republic Paperboard Kansas 12/27/83 100%
Company
75-1922818
Republic Recycling Kansas 5/24/94 100%
Company
No Federal ID
Republic Paperboard West Virginia 4/06/95 100%
Company of W.V,
55-0741775
</TABLE>
______________________
(1) Republic Gypsum Company
(2) Republic Paperboard Company
<PAGE> 137
SCHEDULE 6.9
LITIGATION; CONTINGENT OBLIGATIONS
Litigation:
NONE
Contingent Obligations:
The matters referenced on Schedule 6.4(b) are incorporated
herein by reference.
<PAGE> 138
SCHEDULE 8.1
EXISTING INDEBTEDNESS
NONE
<PAGE> 139
SCHEDULE 8.2
EXISTING LIENS
NONE
<PAGE> 140
SCHEDULE 8.6
LIMITATIONS ON DIVIDENDS
NONE
<PAGE> 1
EXHIBIT 99(i)
HALLTOWN PAPERBOARD COMPANY
WHOLLY-OWNED SUBSIDIARY OF
THE OLD DOMINION BOX COMPANY, INCORPORATED
HALLTOWN, WEST VIRGINIA
FINANCIAL STATEMENTS
AND
ACCOMPANYING INFORMATION
FOR THE THREE PERIODS
ENDED MARCH 26, 1995 AND MARCH 27, 1994 (UNAUDITED)
AND THE YEARS ENDED
DECEMBER 30, 1994, DECEMBER 31, 1993 AND JANUARY 1, 1993
Paperboard Manufacturer
Incorporated in West Virginia on March 11, 1963
<PAGE> 2
HALLTOWN PAPERBOARD COMPANY
OFFICERS
F. H. Buhler Chairman of the Board
C. C. Hammann President
Theodore Foster, II Vice President, Marketing
R. L. Francis Secretary-Treasurer
T. W. Lankford Assistant Secretary-Treasurer
DIRECTORS
F. H. Buhler, Chairman*
B. C. Baldwin, III R. L. Francis*
M. O. Buhler C. C. Hammann*
* Members of the Executive Committee
<PAGE> 3
HALLTOWN PAPERBOARD COMPANY
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors 1
Balance Sheets 2
Statements of Retained Earnings 3
Statements of Income 4
Statements of Cash Flows 5
Notes to Financial Statements 7
Accompanying Information
Report of Independent Auditors on Accompanying Information 17
Schedule 1 - Delivery Expenses 18
Schedule 2 - Manufacturing and Building Expenses 19
Schedule 3 - Selling and Administrative Expenses 20
Schedule 4 - Other Income 21
</TABLE>
<PAGE> 4
-1-
[CHERRY BEKAERT & HOLLAND LOGO]
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
and Stockholder
Halltown Paperboard Company
Halltown, West Virginia
We have audited the accompanying balance sheets of Halltown Paperboard Company
as of December 30, 1994, December 31, 1993 and January 1, 1993, and the related
statements of income, retained earnings, and cash flows for each of the three
years then ended. 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Halltown Paperboard Company as
of December 30, 1994, December 31, 1993 and January 1, 1993 and the results of
its operations and its cash flows for each of the three years then ended in
conformity with generally accepted accounting principles.
/s/ CHERRY BEKAERT & HOLLAND
Lynchburg, Virginia
March 8, 1995
<PAGE> 5
HALLTOWN PAPERBOARD COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 9,089 $ 56,899 $ 9,000 $ 45,437 $ 45,502
Accounts receivable, trade 2,715,822 1,753,819 2,239,789 1,249,662 1,546,777
Accounts receivable, inter-corporate 76,314 8,633 90,518 48,311 24,093
Employees' accounts receivable 3,003 2,141 2,841 9,222 6,906
Deposits on machinery - - 18,575 98,533 76,072
Inventories 898,408 830,237 967,843 920,872 827,925
Prepaid expenses 19,574 18,432 22,158 19,610 17,421
Refundable income taxes 12,504 10,350 12,504 10,350 -
------------- ------------ -------------- -------------- ------------
TOTAL CURRENT ASSETS 3,734,714 2,680,511 3,363,228 2,401,997 2,544,696
------------- ------------ -------------- -------------- ------------
OTHER ASSETS
Notes receivable, related company 2,625,700 2,306,000 2,825,278 2,497,000 1,947,000
Cash value of life insurance, less
loans payable 47,987 46,674 47,987 46,674 41,652
Prepaid pension expense 156,471 162,853 168,313 167,134 130,204
------------- ------------ -------------- -------------- ------------
TOTAL OTHER ASSETS 2,830,158 2,515,527 3,041,578 2,710,808 2,118,856
------------- ------------ -------------- -------------- ------------
PROPERTY AND EQUIPMENT
Buildings, building improvements,
and roadways 902,729 643,503 844,781 584,014 484,682
Machinery and equipment 3,691,470 3,135,108 3,608,943 3,009,875 2,282,776
Vehicles 174,628 130,367 165,706 159,090 137,156
Furniture and fixtures 24,820 21,566 24,057 20,436 13,276
------------- ------------ -------------- -------------- ------------
4,793,647 3,930,544 4,643,487 3,773,415 2,917,890
Less accumulated depreciation 1,421,235 1,074,693 1,326,920 1,022,370 776,699
------------- ------------ -------------- -------------- ------------
TOTAL PROPERTY AND
EQUIPMENT 3,372,412 2,855,851 3,316,567 2,751,045 2,141,191
------------- ------------ -------------- -------------- ------------
$ 9,937,284 $ 8,051,889 $ 9,721,373 $ 7,863,850 $ 6,804,743
============= ============= ============== =============== =============
</TABLE>
See notes to financial statements.
<PAGE> 6
-2-
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- -------------- --------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 2,055,969 $ 936,933 $ 1,959,936 $ 822,369 $ 760,644
Accounts payable,
inter-corporate 81,919 215,449 580,641 650,261 536,919
Notes payable, related companies 7,295 6,672 7,134 6,525 5,968
Income taxes payable 83,990 70,110 - - 72,959
Accrued salaries, wages and
commissions payable 144,444 121,857 182,341 160,881 152,981
Accrued interest payable 876 596 - 3,748 3,748
Accrued group insurance 17,484 8,337 17,484 8,337 -
------------- ------------- -------------- -------------- ------------
TOTAL CURRENT LIABILITIES 2,391,977 1,359,954 2,747,536 1,652,121 1,533,219
------------- ------------- -------------- -------------- ------------
LONG-TERM LIABILITIES
Notes payable, related company 28,639 35,934 30,524 37,658 44,183
Deferred income taxes 419,804 327,171 419,804 327,171 251,840
------------- ------------- -------------- -------------- ------------
TOTAL LONG-TERM
LIABILITIES 448,443 363,105 450,328 364,829 296,023
------------- ------------- -------------- -------------- ------------
STOCKHOLDER'S EQUITY
Capital stock, $1 par value;
authorized, 400,000 shares,
outstanding 400,000 shares 400,000 400,000 400,000 400,000 400,000
Retained earnings 6,696,864 5,928,830 6,123,509 5,446,900 4,575,501
------------- ------------- -------------- -------------- ------------
TOTAL STOCKHOLDER'S
EQUITY 7,096,864 6,328,830 6,523,509 5,846,900 4,975,501
------------- ------------- -------------- -------------- ------------
$ 9,937,284 $ 8,051,889 $ 9,721,373 $ 7,863,850 $ 6,804,743
============= ============= ============== ============== ============
</TABLE>
<PAGE> 7
-3-
HALLTOWN PAPERBOARD COMPANY
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
----------------------------- ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 6,123,509 $ 5,446,900 $ 5,446,900 $ 4,575,501 $ 2,983,062
Net income for the period 573,355 481,930 1,276,609 1,471,399 1,692,439
Less dividends paid ($1.50 per
share for 1994 and 1993, $.25
per share for 1992) - - ( 600,000) ( 600,000) ( 100,000)
------------- ------------ ------------- ------------- -----------
BALANCE AT END OF PERIOD $ 6,696,864 $ 5,928,830 $ 6,123,509 $ 5,446,900 $ 4,575,501
============= ============ ============= ============= ===========
</TABLE>
See notes to financial statements.
<PAGE> 8
-4-
HALLTOWN PAPERBOARD COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
----------------------------- -----------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
INCOME FROM SALES
Customers $ 6,439,235 $ 3,967,661 $ 19,112,793 $ 15,236,585 $ 12,915,200
Inter-corporate 379,605 465,966 2,297,946 1,812,138 2,475,850
------------ ----------- ------------- ------------- -------------
6,818,840 4,433,627 21,410,739 17,048,723 15,391,050
Less delivery expense 474,991 422,579 1,758,703 1,548,244 1,407,787
------------ ----------- ------------- ------------- -------------
NET SALES 6,343,849 4,011,048 19,652,036 15,500,479 13,983,263
------------ ----------- ------------- ------------- -------------
COST OF GOODS SOLD
Inventories, beginning of period 967,843 920,872 920,872 827,925 827,812
Purchases 2,427,015 710,402 5,365,633 2,664,475 2,406,355
Less inventories, end of period 898,408 830,237 967,843 920,872 827,925
------------ ----------- ------------- ------------- -------------
COST OF MATERIALS USED 2,496,450 801,037 5,318,662 2,571,528 2,406,242
DIRECT LABOR 422,857 317,460 1,577,026 1,272,159 1,215,437
MANUFACTURING AND BUILDING
EXPENSE 2,352,937 1,996,898 8,983,485 7,767,498 6,959,830
------------ ----------- ------------- ------------- -------------
COST OF GOODS SOLD 5,272,244 3,115,395 15,879,173 11,611,185 10,581,509
------------ ----------- ------------- ------------- -------------
GROSS PROFIT 1,071,605 895,653 3,772,863 3,889,294 3,401,754
SELLING AND ADMINISTRATIVE EXPENSES 396,919 331,931 2,257,354 2,221,363 1,545,103
------------ ----------- ------------- ------------- -------------
OPERATING PROFIT 674,686 563,722 1,515,509 1,667,931 1,856,651
OTHER INCOME 14,552 4,827 54,962 30,808 40,327
INTEREST EXPENSE ( 31,893) ( 16,509) ( 107,811) ( 80,984) ( 68,152)
------------ ----------- ------------- ------------- -------------
INCOME BEFORE INCOME
TAXES 657,345 552,040 1,462,660 1,617,755 1,828,826
PROVISION FOR INCOME TAXES 83,990 70,110 186,051 146,356 136,387
------------ ----------- ------------- ------------- -------------
NET INCOME $ 573,355 $ 481,930 $ 1,276,609 $ 1,471,399 $ 1,692,439
============ ============ ============= ============= =============
</TABLE>
See notes to financial statements.
<PAGE> 9
-5-
HALLTOWN PAPERBOARD COMPANY
STATEMENTS OF CASH FLOWS
Page 1
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
----------------------------- ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 573,355 $ 481,930 $ 1,276,609 $ 1,471,399 $ 1,692,439
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and
amortization 94,315 76,186 364,368 291,002 230,701
Gain on sale of property and
equipment - 6,286 5,797 7,275 -
Increase in notes and
accounts receivable ( 243,838) ( 167,865) ( 1,274,273) ( 301,880) (1,657,349)
(Increase) decrease in
inventory 69,435 90,635 ( 46,971) ( 92,947) ( 113)
(Increase) decrease in
prepaid expenses 14,426 5,459 ( 3,727) ( 39,119) ( 47,787)
(Increase) decrease in
refundable income taxes - - ( 2,154) ( 10,350) 15,963
Increase (decrease) in
accounts payable ( 402,689) ( 320,248) 1,067,947 175,067 332,371
Increase (decrease) in taxes
payable 83,990 70,110 - ( 72,959) 87,494
Increase (decrease) in accrued
liabilities ( 37,021) ( 42,176) 26,859 16,236 63,258
Increase in deferred income
taxes - - 92,633 75,331 48,893
------------- ----------- ------------- ------------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 151,973 200,317 1,507,088 1,519,055 765,870
------------- ----------- ------------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and
equipment - 7,650 18,707 - -
Additions to property and
equipment ( 150,160) ( 194,928) ( 954,394) ( 908,131) ( 658,800)
Increase in cash value of life
insurance - - ( 1,313) ( 5,022) ( 4,819)
------------- ----------- ------------- ------------- -----------
NET CASH USED IN INVESTING
ACTIVITIES $( 150,160) $( 187,278) $( 937,000) $( 913,153) $( 663,619)
------------- ----------- ------------- ------------- -----------
</TABLE>
(continued)
<PAGE> 10
-6-
HALLTOWN PAPERBOARD COMPANY
STATEMENTS OF CASH FLOWS
Page 2
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
----------------------------- ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term debt, net $ 161 $ 147 $ 609 $ 557 $ 5,968
Proceeds from inter-corporate
borrowings - - - - 44,182
Payments on long-term debt ( 1,885) ( 1,724) ( 7,134) ( 6,524) ( 59,423)
Dividends paid to parent company - - ( 600,000) ( 600,000) ( 100,000)
------------- ------------- -------------- --------------- -------------
NET CASH USED IN FINANCING
ACTIVITIES ( 1,724) ( 1,577) ( 606,525) ( 605,967) ( 109,273)
------------- ------------- -------------- --------------- -------------
NET INCREASE (DECREASE) IN
CASH 89 11,462 ( 36,437) ( 65) ( 7,022)
CASH AT BEGINNING OF PERIOD 9,000 45,437 45,437 45,502 52,524
------------- ------------- -------------- --------------- -------------
CASH AT END OF PERIOD $ 9,089 $ 56,899 $ 9,000 $ 45,437 $ 45,502
============= ============= ============== =============== =============
</TABLE>
See notes to financial statements.
<PAGE> 11
-7-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The Company is incorporated under West Virginia state laws and is primarily
engaged in the manufacturing and sales of recycled paperboard products.
ACCOUNTS RECEIVABLE
Customer accounts receivable are reviewed by management, and any that are
considered to be uncollectible are charged to expense. Recoveries of accounts
previously charged off are taken into income in the year received.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
The various classes of property and equipment are carried at cost and include
expenditures for new property and major improvements and renewals.
Maintenance, repairs and minor renewals are expensed as incurred. Depreciation
of property and equipment is computed by use of the straight-line and
accelerated methods at rates estimated to recover the cost of the assets over
their estimated useful lives. The estimated useful lives of the various
classes of assets are as follows:
<TABLE>
<CAPTION>
Asset Estimated Useful Life
----------------------------------------------------- ---------------------------
<S> <C>
Buildings, building improvements, and roadways 5 - 40 years
Machinery and equipment 3 - 10 years
Vehicles 3 - 7 years
Furniture and fixtures 5 - 10 years
</TABLE>
The costs of property retired, sold, or traded and the related accumulated
depreciation are removed from the accounts, and the resulting gain or loss is
included in income currently.
INCOME TAXES
Provisions for income taxes include deferred taxes arising principally from
timing differences of the items listed in Note 6.
FISCAL YEAR
The Company operates on thirteen 4-week periods with its fiscal year ending on
the Friday that is closest to December 31.
<PAGE> 12
-8-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Finished goods $ 439,510 $ 316,425 $ 454,293 $ 450,640 $ 386,301
Raw materials 191,441 257,808 238,160 225,955 199,911
Supplies 267,457 256,004 275,390 244,277 241,713
-------------- -------------- --------------- ---------------- --------------
Total inventory $ 898,408 $ 830,237 $ 967,843 $ 920,872 $ 827,925
============== ============== =============== ================ ==============
</TABLE>
NOTE 3 - ACCUMULATED DEPRECIATION AND DEPRECIATION EXPENSE
Accumulated depreciation by class of property was as follows:
<TABLE>
<CAPTION>
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Buildings, building improvements,
and roadways $ 168,443 $ 134,417 $ 158,934 $ 128,311 $ 104,883
Machinery and equipment 1,185,233 868,691 1,107,601 806,160 607,706
Vehicles 58,131 64,312 51,465 81,059 58,844
Furniture and fixtures 9,428 7,273 8,920 6,840 5,266
-------------- -------------- --------------- ---------------- --------------
Total accumulated depreciation $ 1,421,235 $ 1,074,693 $ 1,326,920 $ 1,022,370 $ 776,699
============== ============== =============== ================ ==============
</TABLE>
Total depreciation for the three periods ended March 26, 1995 and March 27,
1994, and for the years ended 1994, 1993 and 1992 amounted to $94,315, $76,186,
$364,368, $291,002 and $230,701, respectively.
NOTE 4 - NOTE PAYABLE
Following is a summary of the Company's long-term note payable at the end of
each period:
<TABLE>
<CAPTION>
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Shared portion of parent company's
term loan, payable $852 monthly
including interest at 8.96% through
July 1999, collateralized by
equipment $ 35,934 $ 42,606 $ 37,658 $ 44,183 $ 50,151
Amount due within one year 7,295 6,672 7,134 6,525 5,968
-------------- -------------- --------------- ---------------- --------------
Amount due after one year $ 28,639 $ 35,934 $ 30,524 $ 37,658 $ 44,183
============== ============== =============== ================ ==============
</TABLE>
<PAGE> 13
-9-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 4 - NOTE PAYABLE (CONTINUED)
Approximate maturities of the long-term note payable as of December 30, 1994
are as follows:
<TABLE>
<CAPTION>
Year Ending Amount
---------------- -------------
<S> <C>
1995 $ 7,134
1996 7,800
1997 8,528
1998 9,324
1999 4,872
-------------
$ 37,658
=============
</TABLE>
NOTE 5 - RELATED PARTY TRANSACTIONS AND ACCOUNT BALANCES
The Company, Dillard Investment Corporation and Dacam Corporation are wholly
owned subsidiaries of The Old Dominion Box Company, Incorporated.
Intercompany transactions involving these related companies were as follows:
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
----------------------------- ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Sales to Old Dominion $ 379,605 $ 465,966 $ 2,297,946 $ 1,812,138 $ 2,475,850
============= ============= ============== =============== =============
Purchases from Old Dominion $ - $ - $ - $ 300 $ -
============= ============= ============== =============== =============
Rent paid to Dillard $ 300,939 $ 307,069 $ 1,296,836 $ 1,249,601 $ 1,176,065
============= ============= ============== =============== =============
Corporate overhead interest appor-
tionment paid to Old Dominion $ 80,623 $ 47,021 $ 230,666 $ 207,493 $ 133,745
Interest income paid by Old
Dominion to Halltown ( 53,676) ( 31,439) ( 149,138) ( 130,528) ( 72,442)
------------- ------------- -------------- --------------- -------------
Net interest expense to
Old Dominion 26,947 15,582 81,528 76,965 61,303
Corporate apportionment paid to
Old Dominion 67,030 62,988 1,126,938 1,122,514 621,903
------------- ------------- -------------- --------------- -------------
Total net expenses to Old
Dominion $ 93,977 $ 78,570 $ 1,208,466 $ 1,199,479 $ 683,206
============= ============= ============== =============== =============
</TABLE>
<PAGE> 14
-10-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 5 - RELATED PARTY TRANSACTIONS AND ACCOUNT BALANCES (CONTINUED)
Intercompany balances with these related companies were as follows:
<TABLE>
<CAPTION>
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Accounts receivable, Old Dominion $ 76,314 $ 8,633 $ 80,212 $ 48,311 $ 22,443
Accounts receivable, Dillard - - 10,306 - 1,650
Note receivable, Old Dominion, 8.5% 2,625,700 2,306,000 2,825,278 2,497,000 1,947,000
Accounts payable, Dillard 20,022 9,212 537 65,282 86,751
Accounts payable, Old Dominion 61,897 206,237 580,104 584,979 450,168
Note payable, Old Dominion 35,934 42,606 37,658 44,183 50,151
</TABLE>
NOTE 6 - INCOME TAXES
For 1994, 1993 and 1992 federal income tax purposes, consolidated income tax
returns were filed by the parent company which included all taxable income and
losses of the parent company and its 100% owned subsidiaries which included
Halltown Paperboard Company.
Income taxes through the fiscal year 1992 were provided in accordance with
Accounting Principles Board Opinion No. 11.
Effective January 2, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the differences between the
financial and tax bases using enacted tax rates in effect for the year in which
the differences are expected to reverse.
The deferred tax liability computed under SFAS 109 as of December 30, 1994,
December 31, 1993 and January 1, 1993 was comprised of depreciation.
Therefore, there were no deferred tax assets.
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------
December 30 December 31 January 1
1994 1993 1993
--------------- ---------------- --------------
<S> <C> <C> <C>
State $ 93,418 $ 71,025 $ 48,893
Deferred 92,633 75,331 87,494
--------------- ---------------- --------------
Total taxes $ 186,051 $ 146,356 $ 136,387
=============== ================ ==============
</TABLE>
<PAGE> 15
-11-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company is lessee under a noncancelable lease through June 30, 1995 with
Dillard Investment Corporation for its operating plant and machinery located at
Halltown, West Virginia. The annual rentals under the lease are $475,000 plus
101% of the principal and interest payments that Dillard Investment Corporation
is required to pay for the $4,500,000 Industrial Development Bond consummated
in December, 1984 for renovations of the Halltown plant. The principal balance
on the bond at March 26, 1995, March 27, 1994, December 30, 1994, December 31,
1993 and January 1, 1993 was $2,133,858, $2,411,532, $2,200,563, $2,486,347 and
$2,775,271, respectively. Under the terms of the lease, the Company must pay
Dillard Investment Corporation all property and ad valorem tax assessed against
the property in excess of $45,000. The basic lease has been amended to include
the following adjustments to the rental payments due under the lease.
Effective September 1, 1988 the rental was increased to include 101% of
principal and interest payments due on the note to finance the PC 500 process
control system or $29,900 per annum. Effective June 29, 1993, the rental was
increased to include 101% of principal and interest payments the Company is
required to pay to Dillard Investment Corporation for the waste water treatment
system, or $104,344 per annum.
The Company is also lessee under several 3-year leases with Dillard Investment
Corporation for motor vehicles. In addition, the Company is under a long-term
lease with Dillard Investment Corporation for its telephone system. Rentals
under this lease were $1,610 for the three periods ended March 26, 1995 and
March 27, 1994 and $6,975 for each of the years ended December 30, 1994,
December 31, 1993 and January 1, 1993. Rentals for motor vehicles under these
leases were $23,842 and $28,108 for the three periods ended March 26, 1995 and
March 27, 1994 and $112,107, $117,043 and $95,680 for the years ended December
30, 1994, December 31, 1993 and January 1, 1993, respectively. The Company is
paying all necessary insurance, taxes and licenses in addition to the annual
rentals.
Total rentals under the lease for the plant and machinery charged to operations
amounted to $300,939 and $307,069 for the three periods ended March 26, 1995
and March 27, 1994 and $1,296,836, $1,249,601 and $1,176,065 for the years
ended December 30, 1994, December 31, 1993 and January 1, 1993, respectively.
The total rents paid for these leases with Dillard Investment Corporation are
summarized in Note 5.
The Company has annual minimum operating lease commitments outstanding
(exclusive of the payments representing the reimbursement of the 101% of the
principal and interest payments on the Industrial Development Bond) to Dillard
Investment Corporation as of December 30, 1994 as follows:
<TABLE>
<CAPTION>
Year Ending Amount
----------------- -------------
<S> <C>
1995 $ 317,972
1996 1,588
-------------
$ 319,560
=============
</TABLE>
The Company, together with the other subsidiaries of The Old Dominion Box
Company, Incorporated, signed a guaranty agreement with its major lending bank
guaranteeing the indebtedness of the parent company to the bank. The sale of
the Company's property and equipment (see Note 12) would cause the balance of
the Industrial Development Bond discussed in this Note to become payable in
full.
<PAGE> 16
-12-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 8 - RETIREMENT PLAN FOR NON-BARGAINING EMPLOYEES
The retirement plan for the non-bargaining employees of the Company is provided
by the Pension Plan of Old Dominion Box Company, Incorporated, the parent
company. The plan is a noncontributory, defined benefit plan. The plan is
considered a single plan with a controlled group, covering substantially all
eligible employees. The assets of the plan are available to provide benefits
for any plan participant. The benefits of the plan are based on years of
service and average compensation. The bargaining employees of Halltown
Paperboard Company maintain a separate noncontributory defined benefit plan
with similar provisions to the plan of the parent company (see Note 9).
The parent company and each participating subsidiary contributes to the plan
annually based on actuarial funding guidelines. Contributions are intended to
provide for the benefits attributed to service to date and also for those
expected to be earned in the future.
The Company's portion of the net periodic pension cost for the years ended
1994, 1993 and 1992 includes the following components:
<TABLE>
<CAPTION>
December 30 December 31 January 1
1994 1993 1993
--------------- ---------------- --------------
<S> <C> <C> <C>
Service cost benefits earned during the period $ 42,838 $ 46,071 $ 41,189
Interest cost on projected benefit obligation 90,874 91,901 72,975
Actual return on plan assets ( 28,667) 68,266 43,580
Net amortization and deferral ( 130,281) ( 43,096) ( 53,300)
-------------- --------------- -------------
Net period pension cost $ 32,098 $ 26,610 $ 17,284
============== =============== =============
</TABLE>
Assumptions used in accounting for net periodic pension cost at December 30,
1994 were:
<TABLE>
<S> <C>
Discount rates 8.0%
Rates of increase in compensation levels 6.0%
Expected long-term rate of return on assets 9.0%
</TABLE>
The following table sets forth the Company's portion of the plan's funded
status and amounts recognized in the Company's balance sheet at the end of each
year:
<PAGE> 17
-13-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 8 - RETIREMENT PLAN FOR NON-BARGAINING EMPLOYEES (CONTINUED)
<TABLE>
<CAPTION>
December 30 December 31 January 1
1994 1993 1993
--------------- ---------------- --------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations
Accumulated benefit obligation, including vested benefits
of $1,429,115, $1,396,999 and $1,229,036, respectively $ 1,472,234 $ 1,434,607 $ 1,264,920
Effect of projected future compensation levels 187,640 103,567 98,583
------------- ------------- -------------
Projected benefit obligation 1,659,874 1,538,174 1,363,503
Plan assets at fair value 1,603,694 1,635,911 1,559,041
------------- ------------- -------------
Funded status of plan, plan assets in excess
(deficiency) of projected benefit obligation ( 56,180) 97,737 195,538
Unrecognized prior service cost 125,432 80,657 94,176
Unrecognized net (gain) loss from past experience 83,098 2,070 ( 112,626)
Unrecognized net (asset) being recognized over 30 years ( 72,647) ( 82,925) ( 95,364)
Additional liability recognized ( 2,212) - -
Other 1,707 - -
-------------- ------------- -------------
Prepaid pension cost $ 79,198 $ 97,539 $ 81,724
============= ============= =============
</TABLE>
NOTE 9 - RETIREMENT PLAN FOR BARGAINING EMPLOYEES
The Company has a non-contributory defined benefit pension plan covering
substantially all of its bargaining employees. The benefits are based on years
of service and the employee's average compensation. The Company contributes to
the plan annually based on actuarial funding guidelines. Contributions are
intended to provide not only for benefits attributed to service to date, but
also for those expected to be earned in the future.
The net periodic pension cost for the years ended 1994, 1993 and 1992 includes
the following components:
<TABLE>
<CAPTION>
December 30 December 31 January 1
1994 1993 1993
--------------- ---------------- --------------
<S> <C> <C> <C>
Service cost benefits earned during the period $ 23,455 $ 20,347 $ 17,753
Interest cost on projected benefit obligation 37,051 33,992 27,991
Actual return on plan assets ( 10,660) 29,714 23,493
Net amortization and deferral ( 61,666) ( 20,521) ( 32,053)
-------------- --------------- -------------
Net period pension cost $ 9,500 $ 4,104 $( 9,802)
============== =============== =============
</TABLE>
<PAGE> 18
-14-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 9 - RETIREMENT PLAN FOR BARGAINING EMPLOYEES (CONTINUED)
The following table sets forth the plan's funded status and amounts recognized
in the Company's balance sheet at the end of each year:
<TABLE>
<CAPTION>
December 30 December 31 January 1
1994 1993 1993
--------------- ---------------- --------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations
Accumulated benefit obligation, including vested benefits
of $484,141, $503,788 and $417,812, respectively $ 505,442 $ 532,483 $ 437,103
Effect of projected future compensation levels 786 - -
-------------- -------------- ------------
Projected benefit obligation 506,228 532,483 437,103
Plan assets at fair value 600,683 616,486 581,917
-------------- -------------- ------------
Funded status of the plan, plan assets in excess of
projected benefit obligation 94,455 84,003 144,814
Unrecognized prior service cost 89,430 97,752 36,728
Unrecognized net gain from past experience ( 78,515) ( 83,804) ( 101,556)
Unrecognized net asset being recognized over 30 years ( 25,206) ( 28,356) ( 31,506)
Other 8,951 - -
-------------- -------------- ------------
Prepaid pension cost $ 89,115 $ 69,595 $ 48,480
============== ============== ============
</TABLE>
Assumptions used in accounting for net periodic pension cost at December 30,
1994 were:
<TABLE>
<S> <C>
Discount rates 8.0%
Expected long-term rate of return on assets 9.0%
</TABLE>
NOTE 10 - MAJOR CUSTOMER
In addition to revenue from the parent company (see Note 5) the Company's
revenues included one other customer which accounted for more than 10% of the
total revenue. Revenues from this customer for the periods ended March 26,
1995 and March 27, 1994 totaled $1,447,909 and $866,291 and for the years ended
December 30, 1994 and December 31, 1993 totaled $3,343,204 and $2,272,605,
respectively. There was no other customer that accounted for more than 10% of
revenue for the year ended January 1, 1993.
<PAGE> 19
-15-
HALLTOWN PAPERBOARD COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 26, 1995 AND MARCH 27, 1994 IS UNAUDITED)
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
------------------------------ ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Interest paid $ 31,017 $ 19,661 $ 111,559 $ 80,984 $ 68,152
============== ============= ============== =============== =============
Income taxes paid $ - $ - $ 97,034 $ 149,533 $ 243
============== ============= ============== =============== =============
</TABLE>
NOTE 12 - SUBSEQUENT EVENT
On January 20, 1995, the parent company, Dillard Investment Corporation and
Halltown Paperboard Company signed a letter of intent to sell substantially all
of the property and equipment of Dillard Investment Corporation and Halltown
Paperboard Company to Republic Gypsum Company for approximately $24,500,000.
The inventory will also be sold at a price to be agreed on. The sale is
subject to the execution of a definitive agreement, corporate and regulatory
approval, and other customary conditions. The Company expects the sale to
result in a significant nonrecurring gain.
<PAGE> 20
A C C O M P A N Y I N G
I N F O R M A T I O N
<PAGE> 21
-17-
[CHERRY BEKAERT & HOLLAND LOGO]
REPORT OF INDEPENDENT AUDITORS
ON ACCOMPANYING INFORMATION
The Board of Directors
and Stockholder
Halltown Paperboard Company
Halltown, West Virginia
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying information on the
following pages is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information, except for
the stub-periods data, which is unaudited, has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ CHERRY BEKAERT & HOLLAND
Lynchburg, Virginia
March 8, 1995
<PAGE> 22
-18-
HALLTOWN PAPERBOARD COMPANY
DELIVERY EXPENSES
Schedule 1
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
------------------------------ ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Shipping and trucking wages $ 91,567 $ 84,443 $ 383,218 $ 341,758 $ 338,668
Freight allowed 260,629 212,610 888,905 678,961 561,237
Gasoline, oil and drivers' expenses 52,078 57,804 211,954 224,078 229,997
Payroll taxes 6,759 6,088 29,069 27,011 27,643
Group insurance 6,074 6,506 15,682 30,278 24,093
Pension plan 876 855 3,286 2,488 658
Taxes, trucks and autos 12,060 5,657 8,127 28,430 35,528
Insurance, trucks 5,762 5,328 23,386 19,888 21,804
Maintenance and repairs 4,119 9,260 45,544 34,257 35,690
Travel, general 5,190 3,403 15,279 18,210 18,523
Travel, meals and entertainment - - 22 - -
Leased trucks 19,673 23,855 96,378 99,901 81,086
Depreciation of trucks and trailers 6,666 4,644 27,752 26,057 21,561
Miscellaneous shipping and trucking,
net 3,538 2,126 10,101 16,927 11,299
-------------- -------------- --------------- ---------------- --------------
TOTAL DELIVERY EXPENSES $ 474,991 $ 422,579 $ 1,758,703 $ 1,548,244 $ 1,407,787
============== ============== =============== ================ ==============
</TABLE>
See auditors' report on accompanying information.
<PAGE> 23
-19-
HALLTOWN PAPERBOARD COMPANY
MANUFACTURING AND BUILDING EXPENSES
Schedule 2
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
----------------------------- ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Indirect factory payroll
Supervision salaries $ 152,283 $ 117,450 $ 527,682 $ 526,267 $ 485,356
Indirect labor 191,262 137,159 737,772 587,631 467,587
Vacation and holiday pay 22,560 21,600 97,772 92,741 81,324
-------------- -------------- --------------- ---------------- --------------
366,105 276,209 1,363,226 1,206,639 1,034,267
Shipping and receiving wages 30,070 26,044 121,029 99,272 77,938
Payroll taxes 75,904 66,249 300,630 270,451 253,500
Real and personal property taxes 13,170 12,000 59,410 51,370 70,673
Fire insurance 5,217 4,766 21,102 18,942 18,441
Workers' compensation insurance 52,590 54,000 227,952 223,642 204,545
Group insurance 68,204 70,791 162,175 303,158 220,946
Pension plan 9,841 9,304 33,986 24,909 6,038
Rent 275,487 277,351 1,177,755 1,125,583 1,073,411
Machinery repairs and parts 240,653 258,321 1,151,499 1,066,926 1,060,919
Operating supplies 164,125 100,972 493,932 217,737 169,373
Depreciation of building and building
equipment 7,403 4,796 24,412 19,264 17,331
Depreciation of machinery and
equipment 79,737 66,313 310,124 244,107 191,026
General factory expense 16,971 3,013 12,597 3,624 741
Felts 24,706 18,442 112,428 134,202 129,465
Skids 218,484 168,170 765,443 579,105 440,893
Water waste treatment and solid
waste disposal 74,600 70,414 320,517 276,938 234,567
Power and steam
Labor 98,326 84,761 377,789 343,959 320,319
Coal 272,945 191,787 898,201 676,523 578,954
Fuel oil chemicals 3,401 21,093 36,910 10,528 8,964
Power 233,784 195,467 934,815 803,045 790,796
Supplies 21,214 16,635 77,553 67,574 56,723
-------------- -------------- --------------- ---------------- --------------
TOTAL MANUFACTURING AND
BUILDING EXPENSES $ 2,352,937 $ 1,996,898 $ 8,983,485 $ 7,767,498 $ 6,959,830
============== ============== =============== ================ ==============
</TABLE>
See auditor's report on accompanying information.
<PAGE> 24
-20-
HALLTOWN PAPERBOARD COMPANY
SELLING AND ADMINISTRATIVE EXPENSES
Schedule 3
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
----------------------------- ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Salaries, general $ 35,610 $ 31,431 $ 149,587 $ 123,414 $ 101,867
Salaries and commissions, salesmen 110,484 95,480 468,008 434,632 384,968
Salaries, officers 38,538 20,769 100,000 90,000 81,825
Payroll taxes 8,677 7,770 38,269 36,016 32,983
Pension plan 1,125 1,091 4,326 3,317 786
Group insurance 7,797 8,303 20,644 40,371 28,748
Taxes, other than income 3,090 3,080 10,392 15,559 12,756
Insurance 4,781 3,838 21,618 14,107 8,507
Sales promotion 1,376 2,594 13,499 11,245 6,950
Depreciation of furniture and
fixtures 509 433 2,080 1,574 782
Office supplies 15,890 12,809 60,297 54,391 58,788
Telephone 5,657 7,028 29,328 23,997 23,465
Postage 2,034 1,576 6,443 6,499 6,010
Leased cars 7,499 7,914 33,780 36,850 30,743
Travel, general 6,993 4,380 17,545 21,048 16,689
Travel, meals and entertainment 13,542 10,247 51,618 55,629 44,515
Professional fees 10,860 14,800 45,823 62,551 40,781
Contributions - 250 350 650 50
Dues and subscriptions 6,843 7,649 31,970 33,231 28,495
General, net 14,234 6,354 26,169 10,869 8,890
Uncollectible accounts 34,350 21,147 ( 1,330) 22,899 4,602
Apportioned selling and
administrative expenses 67,030 62,988 1,126,938 1,122,514 621,903
-------------- -------------- -------------- ---------------- --------------
TOTAL SELLING AND
ADMINISTRATIVE
EXPENSES $ 396,919 $ 331,931 $ 2,257,354 $ 2,221,363 $ 1,545,103
============== ============== ============== ================ ==============
</TABLE>
See auditors' report on accompanying information.
<PAGE> 25
-21-
HALLTOWN PAPERBOARD COMPANY
OTHER INCOME
Schedule 4
<TABLE>
<CAPTION>
Three Periods Ended Year Ended
------------------------------ ------------------------------------------------
March 26 March 27 December 30 December 31 January 1
1995 1994 1994 1993 1993
-------------- -------------- --------------- ---------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
OTHER INCOME
Rent $ 1,485 $ 1,485 $ 5,940 $ 5,830 $ 4,620
Gain (loss) on property and
equipment sold and scrapped,
net - ( 6,286) ( 5,797) ( 7,275) -
Increase in cash value of life
insurance, less premiums - - 5,061 5,022 4,819
Miscellaneous 13,067 9,628 49,758 27,231 30,888
-------------- ------------- -------------- --------------- --------------
TOTAL OTHER INCOME $ 14,552 $ 4,827 $ 54,962 $ 30,808 $ 40,327
============== ============= ============== =============== ==============
</TABLE>
See auditors' report on accompanying information.
<PAGE> 1
EXHIBIT 99(ii)
DILLARD INVESTMENT CORPORATION
WHOLLY-OWNED SUBSIDIARY OF
THE OLD DOMINION BOX COMPANY, INCORPORATED
LYNCHBURG, VIRGINIA
FINANCIAL STATEMENTS
FOR THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
AND THE YEARS ENDED
DECEMBER 31, 1994, 1993 AND 1992
Lessors of Real Estate and Machinery
Incorporated in Virginia on April 21, 1955
<PAGE> 2
DILLARD INVESTMENT CORPORATION
OFFICERS
F. H. Buhler Chairman of the Board
M. O. Buhler President
R. L. Francis Secretary-Treasurer
T. W. Lankford Assistant Secretary-Treasurer
DIRECTORS
F. H. Buhler* R. L. Francis*
M. O. Buhler* T. W. Lankford
* Members of the Executive Committee
<PAGE> 3
DILLARD INVESTMENT CORPORATION
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors 1
Balance Sheets 2
Statements of Retained Earnings 3
Statements of Income 4
Statements of Cash Flows 5
Notes to Financial Statements 6
</TABLE>
<PAGE> 4
-1-
[CHERRY BEKAERT & HOLLAND LOGO]
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
and Stockholder
Dillard Investment Corporation
Lynchburg, Virginia
We have audited the accompanying balance sheets of Dillard Investment
Corporation as of December 31, 1994, 1993 and 1992, and the related statements
of income, retained earnings, and cash flows for each of the three years ended
December 31, 1994. These financial statements are the responsibility of the
Corporation'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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dillard Investment Corporation
as of December 31, 1994, 1993 and 1992, and the results of its operations and
its cash flows for each of the three years ended December 31, 1994 in
conformity with generally accepted accounting principles.
/s/ CHERRY BEKAERT & HOLLAND
Lynchburg, Virginia
March 8, 1995
<PAGE> 5
DILLARD INVESTMENT CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31 December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 924 $ 5,544 $ 1,000 $ 5,966 $ 5,497
Accounts receivable, related
companies 33,298 35,735 537 76,383 86,751
Prepaid expenses 9,309 8,697 14,118 12,951 12,878
Refundable income taxes 8,047 3,408 7,884 - -
-------------- -------------- -------------- -------------- --------------
TOTAL CURRENT ASSETS 51,578 53,384 23,539 95,300 105,126
-------------- -------------- -------------- -------------- --------------
OTHER ASSETS
Notes receivable, related companies 1,491,900 1,547,000 1,649,529 1,473,000 1,309,000
Unamortized financing costs 29,792 36,176 31,388 37,772 44,156
-------------- -------------- -------------- -------------- --------------
TOTAL OTHER ASSETS 1,521,692 1,583,176 1,680,917 1,510,772 1,353,156
-------------- -------------- -------------- -------------- --------------
PROPERTY AND EQUIPMENT
Land 92,219 92,219 92,219 92,219 92,219
Buildings, building improvements,
and roadways 1,711,791 1,710,208 1,711,791 1,710,207 1,562,132
Machinery and equipment 3,989,142 3,989,142 3,989,142 3,989,142 3,989,142
Vehicles 1,185,636 1,250,755 1,255,470 1,236,088 1,380,970
Furniture and fixtures 43,194 43,194 43,194 43,194 43,194
-------------- -------------- -------------- -------------- --------------
7,021,982 7,085,518 7,091,816 7,070,850 7,067,657
Less accumulated depreciation 3,911,869 3,540,912 3,870,810 3,438,475 3,733,122
-------------- -------------- -------------- -------------- --------------
TOTAL PROPERTY AND EQUIPMENT 3,110,113 3,544,606 3,221,006 3,632,375 3,334,535
-------------- -------------- -------------- -------------- --------------
$ 4,683,383 $ 5,181,166 $ 4,925,462 $ 5,238,447 $ 4,792,817
============== ============== ============== ============== ==============
</TABLE>
See notes to financial statements.
<PAGE> 6
-2-
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
March 31 December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 19,879 $ 19,821 $ 33,425 $ 34,300 $ 33,100
Accounts payable, inter-corporate 86,665 57,874 275,299 72,263 45,377
Notes payable, related companies 136,854 127,275 125,268 124,782 54,355
Portion of long-term notes payable
due within one year 370,252 386,678 355,219 383,989 298,935
Income taxes payable - - - 20,851 9,210
Income taxes payable, related
companies - - - - 3,083
Accrued interest payable 9,763 10,399 13,191 10,560 11,471
-------------- -------------- -------------- -------------- --------------
TOTAL CURRENT LIABILITIES 623,413 602,047 802,402 646,745 455,531
-------------- -------------- -------------- -------------- --------------
LONG-TERM LIABILITIES
Notes payable, banks 108,919 184,685 119,121 181,441 24,792
Notes payable, related companies 635,827 762,137 672,663 795,954 403,501
Notes payable, other 1,839,372 2,112,272 1,932,762 2,181,636 2,484,836
Deferred income taxes 667,806 725,079 667,806 725,079 840,891
-------------- -------------- -------------- -------------- --------------
TOTAL LONG-TERM LIABILITIES 3,251,924 3,784,173 3,392,352 3,884,110 3,754,020
-------------- -------------- -------------- -------------- --------------
STOCKHOLDER'S EQUITY
Capital stock, 290,000 shares of
$1 par value stock authorized,
20,997 shares outstanding 20,997 20,997 20,997 20,997 20,997
Retained earnings 787,049 773,949 709,711 686,595 562,269
-------------- -------------- -------------- -------------- --------------
TOTAL STOCKHOLDER'S EQUITY 808,046 794,946 730,708 707,592 583,266
-------------- -------------- -------------- -------------- --------------
$ 4,683,383 $ 5,181,166 $ 4,925,462 $ 5,238,447 $ 4,792,817
============== ============== ============== ============== ==============
</TABLE>
<PAGE> 7
-3-
DILLARD INVESTMENT CORPORATION
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31 Year Ended December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 709,711 $ 686,595 $ 686,595 $ 562,269 $ 424,547
Net income for the period 77,338 87,354 123,271 224,482 237,878
Less dividends paid ($4.77 per
share for 1994, 1993 and 1992) - - ( 100,155) ( 100,156) ( 100,156)
-------------- -------------- ------------- ------------- -------------
BALANCE AT END OF PERIOD $ 787,049 $ 773,949 $ 709,711 $ 686,595 $ 562,269
============== ============== ============= ============= =============
</TABLE>
See notes to financial statements.
<PAGE> 8
-4-
DILLARD INVESTMENT CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31 Year Ended December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
INCOME
Rent, related companies $ 356,947 $ 363,895 $ 1,437,983 $ 1,400,997 $ 1,351,659
Gain on sale of property and
equipment 8,631 999 9,692 21,942 4,762
-------------- -------------- ------------- ------------- --------------
TOTAL INCOME 365,578 364,894 1,447,675 1,422,939 1,356,421
-------------- -------------- ------------- ------------- --------------
EXPENSES
Amortization of financing cost 1,596 1,596 6,384 6,384 6,384
Corporate apportionment 72,267 68,230 476,938 422,514 221,903
Depreciation 110,892 120,435 486,432 502,240 496,699
Insurance 5,050 4,555 18,799 18,186 17,782
Interest, apportioned 41,927 34,725 155,540 134,449 96,657
Interest, bank and others 42,627 33,769 153,282 134,443 153,915
Professional fees 1,218 1,245 4,200 5,370 4,835
Real estate taxes 11,250 11,250 45,000 45,000 45,000
Taxes other than income 1,413 1,735 5,826 8,037 7,405
-------------- -------------- ------------- ------------- --------------
TOTAL EXPENSES 288,240 277,540 1,352,401 1,276,623 1,050,580
-------------- -------------- ------------- ------------- --------------
INCOME BEFORE INCOME TAXES 77,338 87,354 95,274 146,316 305,841
-------------- -------------- ------------- ------------- --------------
PROVISION (CREDIT) FOR INCOME TAXES - - ( 27,997) ( 78,166) 67,963
-------------- -------------- ------------- ------------- --------------
NET INCOME $ 77,338 $ 87,354 $ 123,271 $ 224,482 $ 237,878
============== ============== ============= ============= ==============
</TABLE>
See notes to financial statements.
<PAGE> 9
-5-
DILLARD INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31 Year Ended December 31
------------------------------ ----------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 77,338 $ 87,354 $ 123,271 $ 224,482 $ 237,878
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 112,488 122,031 492,816 508,624 503,083
Gain on sale of property and
equipment ( 8,631) ( 999) ( 9,692) ( 21,942) ( 4,762)
(Increase) decrease in notes and
accounts receivable 124,868 ( 33,352) ( 100,682) 10,368 16,891
(Increase) decrease in prepaid
expenses 4,809 4,254 ( 1,167) ( 73) 436
Increase in refundable income taxes ( 163) ( 3,408) ( 7,884) - -
Increase (decrease) in accounts
payable ( 202,180) ( 28,868) 202,161 28,086 ( 55,124)
Increase (decrease) in taxes payable - ( 20,851) ( 20,851) 8,558 ( 8,080)
Increase (decrease) in accrued
liabilities ( 3,428) ( 161) 2,631 ( 911) ( 5,870)
Increase (decrease) in deferred
income taxes - - ( 57,273) ( 115,812) 51,670
------------- ------------- ----------- ----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 105,101 126,000 623,330 641,380 736,122
------------- ------------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and
equipment 8,632 1,000 19,747 59,584 17,175
Additions to property and equipment - ( 32,667) ( 85,118) ( 287,722) ( 63,316)
------------- ------------- ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 8,632 ( 31,667) ( 65,371) ( 228,138) ( 46,141)
------------- ------------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term debt ( 14,819) ( 16,960) ( 63,374) ( 251,120) ( 121,891)
Proceeds from long-term bank
borrowings - 32,560 32,560 259,520 34,000
Payments on long-term debt ( 98,990) ( 110,355) ( 431,955) ( 321,017) ( 500,426)
Dividends paid - - ( 100,156) ( 100,156) ( 100,156)
------------- ------------- ----------- ----------- -----------
NET CASH USED IN FINANCING
ACTIVITIES ( 113,809) ( 94,755) ( 562,925) ( 412,773) ( 688,473)
------------- ------------- ----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH ( 76) ( 422) ( 4,966) 469 1,058
CASH AT BEGINNING OF PERIOD 1,000 5,966 5,966 5,497 3,989
------------- ------------- ----------- ----------- -----------
CASH AT END OF PERIOD $ 924 $ 5,544 $ 1,000 $ 5,966 $ 5,497
============= ============= =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 10
-6-
DILLARD INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1994 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The Corporation is incorporated under Virginia state laws and is a lessor of
real estate, machinery and equipment, and vehicles.
PROPERTY AND EQUIPMENT
The various classes of property and equipment are carried at cost and include
expenditures for new property and major improvements and renewals.
Maintenance, repairs and minor renewals are paid by the lessee. Depreciation
of property and equipment is computed by use of the straight-line and
accelerated methods at rates estimated to recover the cost of the assets over
their estimated useful lives. The estimated useful lives of the various
classes of assets are as follows:
<TABLE>
<CAPTION>
Asset Estimated Useful Life
------------------------------------------------------- ---------------------------
<S> <C>
Buildings, building improvements, and roadways 5 - 40 years
Machinery and equipment 3 - 10 years
Vehicles 3 - 7 years
Furniture and fixtures 5 - 10 years
</TABLE>
The costs of property retired, sold, or traded and the related accumulated
depreciation are removed from the accounts, and the resulting gain or loss is
included in income currently.
INCOME TAXES
Provisions for income taxes include deferred taxes arising principally from
timing differences of the items listed in Note 5.
DEFERRED CHARGES
The costs of obtaining financing are being amortized using the straight-line
method over the lives of the obligations to which they apply.
NOTE 2 - ACCUMULATED DEPRECIATION AND DEPRECIATION EXPENSE
Accumulated depreciation by class of property was as follows:
<TABLE>
<CAPTION>
March 31 December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Buildings, building improvements,
and roadways $ 769,059 $ 708,115 $ 756,191 $ 693,276 $ 1,035,017
Machinery and equipment 2,239,573 1,965,297 2,171,004 1,896,728 1,622,452
Vehicles 873,442 840,298 914,272 821,984 1,053,486
Furniture and fixtures 29,795 27,202 29,343 26,487 22,167
-------------- -------------- -------------- -------------- --------------
Total accumulated depreciation $ 3,911,869 $ 3,540,912 $ 3,870,810 $ 3,438,475 $ 3,733,122
============== ============== ============== ============== ==============
</TABLE>
<PAGE> 11
-7-
DILLARD INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1994 IS UNAUDITED)
NOTE 2 - ACCUMULATED DEPRECIATION AND DEPRECIATION EXPENSE (CONTINUED)
Depreciation on the property and equipment was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31 Year Ended December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Buildings, building improvements,
and roadways $ 12,868 $ 14,838 $ 62,914 $ 60,185 $ 62,711
Machinery and equipment 68,569 68,569 274,276 274,276 274,276
Vehicles 29,003 36,314 146,386 163,460 156,574
Furniture and fixtures 452 714 2,856 4,319 3,138
-------------- -------------- -------------- -------------- --------------
Total depreciation $ 110,892 $ 120,435 $ 486,432 $ 502,240 $ 496,699
============== ============== ============== ============== ==============
</TABLE>
NOTE 3 - NOTES PAYABLE
Following is a summary of the Corporation's long-term liabilities at the end of
each period:
<TABLE>
<CAPTION>
March 31 December 31
Bank Notes Classification, Rate at ------------------------------ ----------------------------------------
Terms and Security 12-31-94 1995 1994 1994 1993 1992
- - ----------------------------- ------------- -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Industrial Development Bond
financing, County Commission
of Jefferson County, WV,
collateralized by the Project,
with monthly principal and
interest payments until April
2001, as detailed on the 80.69%
following page prime $ 2,133,858 $ 2,411,532 $ 2,200,563 $ 2,486,347 $ 2,775,271
Term loan, payable $5,898
monthly plus interest through
April 1997 collateralized by 3/4% above
vehicles prime 147,455 218,233 165,149 235,927 -
Shared portion of parent
company's term loan,
payable $7,765 monthly
including interest through
July 1999, collateralized by
equipment 8.96% 333,639 389,137 344,070 403,501 457,856
Term loan, payable $708
monthly plus interest through
November 1996, collateralized 3/4% above
by vehicles prime 14,167 22,667 16,292 24,792 33,292
</TABLE>
<PAGE> 12
-8-
DILLARD INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1994 IS UNAUDITED)
NOTE 3 - NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
March 31 December 31
Bank Notes Classification, Rate at ------------------------------ ----------------------------------------
Terms and Security 12-31-94 1995 1994 1994 1993 1992
- - ----------------------------- ------------- -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Term loan, payable $678
monthly plus interest through
January 1998, collateralized 3/4% above
by vehicles prime $ 23,063 $ 31,203 $ 25,098 $ - $ -
Term loan, payable $8,609
monthly including interest
through July 2000 collateralized
by mortgage on real estate 1% above
and equipment prime 439,042 500,275 453,861 517,235 -
-------------- -------------- ------------ ------------ ------------
3,091,224 3,573,047 3,205,033 3,667,802 3,266,419
Amount due within one year 507,106 513,953 480,487 508,771 353,290
-------------- -------------- ------------ ------------ ------------
Amount due after one year $ 2,584,118 $ 3,059,094 $ 2,724,546 $ 3,159,031 $ 2,913,129
============== ============== ============ ============ ============
</TABLE>
During the year ended December 1984, Dillard Investment Corporation, arranged
for the financing of major renovations and improvements to the Halltown, West
Virginia papermill.
The financing of the renovations and improvements was consummated by a loan
agreement and note between Dillard Investment Corporation and the County
Commission of Jefferson County, West Virginia (the Issuer), dated December 1,
1984. The Issuer sold an Industrial Development Bond in the amount of
$4,500,000 and loaned the proceeds to Dillard Investment Corporation for a
collateralized note. Collateral for the $4,500,000 note includes a first
mortgage on the real estate and a security interest in all equipment, building,
improvements and fixtures now owned or hereafter acquired by the Corporation
that are located in Jefferson County, West Virginia. To secure the payment of
the bond, the rights and interest of the Issuer under the loan agreement and
the deed of trust and security agreement were assigned to a bank trustee.
Monthly payments of principal on the note are to be made as follows:
<TABLE>
<CAPTION>
From To Payment determined by
--------------- --------------- ----------------------------------
<S> <C> <C>
May 1, 1986 April 1, 1989 15 year amortization schedule
May 1, 1989 April 1, 1992 12 year amortization schedule
May 1, 1992 April 1, 1995 9 year amortization schedule
May 1, 1995 April 1, 1998 6 year amortization schedule
May 1, 1998 April 1, 2001 3 year amortization schedule
April 1, 2001 Remaining balance due
</TABLE>
<PAGE> 13
-9-
DILLARD INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1994 IS UNAUDITED)
NOTE 3 - NOTES PAYABLE (CONTINUED)
Approximate maturities of all long-term notes payable as of December 31, 1994
are as follows:
<TABLE>
<CAPTION>
Year Ending Amount
---------------- ----------------
<S> <C>
1995 $ 480,487
1996 512,533
1997 488,669
1998 497,700
1999 490,899
Thereafter 734,745
----------------
$ 3,205,033
================
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS AND ACCOUNT BALANCES
The Corporation, Halltown Paperboard Company, and Dacam Corporation are wholly
owned subsidiaries of The Old Dominion Box Company, Incorporated.
The Corporation is the lessor under a 10-year lease, which began July 1, 1985,
with Halltown Paperboard Company, Halltown, West Virginia, under which
substantially all of Dillard Investment Corporation's property and equipment,
except motor vehicles, are rented to Halltown Paperboard Company. The annual
rentals under the lease are $475,000 plus 101% of principal and interest
payments due on the Industrial Revenue Bond described in Note 3. Under the
terms of the lease, the lessee pays property taxes on the property in excess of
$45,000. The basic lease has been amended to include the following
adjustments to the rental payments due under the lease. Effective September 1,
1988, the rental was increased to include 101% of principal and interest
payments due on the note to finance the PC 500 process control system or
$29,000 per annum. Effective June 29, 1993, the rental was increased to
include 101% of principal and interest payments Dillard Investment Corporation
is required to pay for the parent company loan to finance the waste water
treatment system, or $104,344 per annum.
The Corporation is also the lessor under a 7-year lease which began January 1,
1985 with Halltown Paperboard Company for a telephone system. At the end of
the lease period, the lease is automatically renewable from year to year. The
annual rentals under this lease are $6,975.
The Corporation is also lessor under various leases for vehicle rentals with
the parent company, Halltown Paperboard Company, and Dacam Corporation. Under
the terms of the leases, the lessee pays all necessary insurance, taxes and
licenses. The leases provide for rentals that will vary according to the
bank's "Prime Borrowing Rate" plus 1.50%.
<PAGE> 14
-10-
DILLARD INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1994 IS UNAUDITED)
NOTE 4 - RELATED PARTY TRANSACTIONS AND ACCOUNTS BALANCES (CONTINUED)
Intercompany transactions involving these related companies were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31 Year Ended December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Rental income from these related
companies:
Halltown, building and equipment $ 273,313 $ 275,274 $ 1,177,755 $ 1,125,583 $ 1,073,411
Halltown, vehicle 27,626 31,795 119,081 124,018 102,654
Old Dominion, vehicle 55,411 56,228 138,756 148,273 172,513
Dacam, vehicle 597 598 2,391 3,123 3,081
------------- ------------- ------------- ------------- -------------
Totals rents $ 356,947 $ 363,895 $ 1,437,983 $ 1,400,997 $ 1,351,659
============= ============= ============= ============= =============
Expenses with the parent company:
Corporate overhead interest appor-
tionment paid to Old Dominion $ 73,465 $ 55,948 $ 268,524 $ 215,945 $ 171,129
Interest income paid by Old
Dominion to Dillard ( 31,538) ( 21,223) ( 112,984) ( 81,496) ( 74,472)
------------- ------------- ------------- ------------- -------------
Net interest expense to Old
Dominion 41,927 34,725 155,540 134,449 96,657
Corporate apportionment 72,267 68,230 476,938 422,514 221,903
------------ ------------ ------------ ------------ ------------
Total net expenses $ 114,194 $ 102,955 $ 632,478 $ 556,963 $ 318,560
============= ============= ============= ============= =============
</TABLE>
Intercompany balances with these related companies were as follows:
<TABLE>
<CAPTION>
March 31 December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Intercompany rent receivable balances
with these related companies:
Halltown $ 20,022 $ 21,819 $ 537 $ 65,282 $ 86,751
Old Dominion 13,077 13,716 - 11,101 -
Dacam 199 200 - - -
-------------- -------------- -------------- -------------- --------------
Total rent receivable $ 33,298 $ 35,735 $ 537 $ 76,383 $ 86,751
============== ============== ============== ============== ==============
Notes receivable, Old Dominion, 8.5% $ 1,491,900 $ 1,547,000 $ 1,649,529 $ 1,473,000 $ 1,309,000
============== ============== ============== ============== ==============
</TABLE>
<PAGE> 15
-11-
DILLARD INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1994 IS UNAUDITED)
NOTE 4 - RELATED PARTY TRANSACTIONS AND ACCOUNTS BALANCES (CONTINUED)
<TABLE>
<CAPTION>
March 31 December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Intercompany accounts payable balances
with these related companies:
Halltown $ - $ - $ 10,306 $ - $ 1,650
Old Dominion 86,665 57,874 264,993 72,263 43,727
-------------- -------------- -------------- -------------- --------------
Total accounts payable $ 86,665 $ 57,874 $ 275,299 $ 72,263 $ 45,377
============== ============== ============== ============== ==============
Income taxes payable, Old Dominion $ - $ - $ - $ - $ 3,083
============== ============== ============== ============== ==============
Notes payable, Old Dominion $ - $ 889,412 $ 797,931 $ 920,736 $ 457,856
============== ============== ============== ============== ==============
</TABLE>
NOTE 5 - INCOME TAXES
For 1994, 1993 and 1992 federal income tax purposes, consolidated income tax
returns were filed by the parent company which included all taxable income and
losses of the parent company and its 100% owned subsidiaries which included
Dillard Investment Corporation.
Income taxes through 1992 were provided in accordance with Accounting
Principles Board Opinion No. 11.
Effective January 1, 1993, the Corporation adopted the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). SFAS 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the differences between the
financial and tax bases using enacted tax rates in effect for the year in which
the differences are expected to reverse.
The deferred tax liability computed under SFAS 109 as of December 31 was
comprised of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---------------- ---------------- ---------------
<S> <C> <C> <C>
Depreciation $ 837,071 $ 894,344 $ 1,010,156
Tax operating loss carryforward ( 68,580) ( 68,580) ( 68,580)
Investment tax credits ( 100,685) ( 100,685) ( 100,685)
--------------- --------------- --------------
$ 667,806 $ 725,079 $ 840,891
=============== =============== ==============
</TABLE>
There was no valuation reserve relative to the deferred tax assets upon
adoption of SFAS 109 at the beginning of 1993 or at December 31, 1994 and 1993,
based on an assumption of future taxable income.
<PAGE> 16
-12-
DILLARD INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1994 IS UNAUDITED)
NOTE 5 - INCOME TAXES (CONTINUED)
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------
1994 1993 1992
---------------- ---------------- ---------------
<S> <C> <C> <C>
Federal $ - $ - $ 3,083
State 29,276 37,647 51,670
Deferred ( 57,273) ( 115,813) 13,210
--------------- --------------- ---------------
Total taxes $( 27,997) $ 78,166 $ 67,963
=============== =============== ===============
</TABLE>
The Corporation has investment tax credit carryovers of $100,685 available to
offset federal income taxes through December 31, 2001. The original investment
tax credit of $154,900 was reduced to $100,685 due to provisions in the Tax
Reform Act of 1986 that reduced by 35% the investment tax credits carried
forward to offset the income tax liability for years after 1987.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Corporation, together with the other subsidiaries of The Old Dominion Box
Company, Incorporated, signed a guaranty agreement with its major lending bank
guaranteeing the indebtedness of the parent company to the bank. The sale of
the Corportion's property and equipment (see Note 8) would cause the balance of
the Industrial Development Bond discussed in Note 3 to become payable in full.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31 Year Ended December 31
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Interest paid $ 58,340 $ 51,729 $ 224,339 $ 193,072 $ 193,441
============== ============== ============== ============== ==============
Income taxes paid $ 163 $ 30,908 $ 58,011 $ 26,005 $ 186
============== ============== ============== ============== ==============
</TABLE>
NOTE 8 - SUBSEQUENT EVENT
On January 20, 1995, the parent company, Dillard Investment Corporation and
Halltown Paperboard Company signed a letter of intent to sell substantially all
of the property and equipment of Dillard Investment Corporation and Halltown
Paperboard Company to Republic Gypsum Company for approximately $24,500,000.
The inventory of Halltown Paperboard Company will also be sold at a price to be
agreed on. The sale is subject to the execution of a definitive agreement,
corporate and regulatory approval, and other customary conditions. The
Corporation expects the sale to result in a significant nonrecurring gain.
<PAGE> 1
Exhibit (99)(iii)
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
dated March 8, 1995, included in or made a part of this Form 8-K.
/s/ CHERRY, BEKAERT & HOLLAND, L.L.P.
Lynchburg, Virginia
July 12, 1995
