<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
Form 10-K
------------------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 9134 (NO FEE REQUIRED)
For the transition period from ___________________ to __________________
COMMISSION FILE NUMBER 1-7210
REPUBLIC GROUP INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(State or other jurisdiction of incorporation or organization)
811 EAST 30TH AVENUE, HUTCHINSON, KANSAS 67502-4341
(Address of principal executive offices) (Zip Code)
POST OFFICE BOX 1307, HUTCHINSON, KANSAS 67504-1307
(Mailing Address) (Zip Code)
75-1155922
(I.R.S. Employer Identification No.)
Registrant's telephone number, including area code: (316) 727-2700
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
COMMON STOCK SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. [x] YES [ ] NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. [X]
ON AUGUST 30, 1996, THERE WERE 10,615,062 SHARES OF THE REGISTRANT'S COMMON
STOCK AND COMMON STOCK SHARE PURCHASE RIGHTS OUTSTANDING. THE AGGREGATE MARKET
VALUE OF THE REGISTRANT'S COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT
(BASED UPON THE CLOSING PRICE) ON AUGUST 30, 1996, WAS APPROXIMATELY
$145,957,102.
DOCUMENTS INCORPORATED BY REFERENCE:
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE 1996 ANNUAL
STOCKHOLDERS' MEETING ARE INCORPORATED BY REFERENCE INTO PARTS III AND IV.
================================================================================
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REPUBLIC GROUP INCORPORATED
FORM 10-K
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
PART I
ITEM 1. BUSINESS.
GENERAL
Republic Group Incorporated (the "Company") was incorporated in
Delaware in August of 1961, as Republic Gypsum Company. The stockholders of
the Company approved a change of corporate name on October 26, 1995. Regular
operations began at its gypsum wallboard manufacturing plant in Duke, Oklahoma
in January 1965. References to the Company herein, unless the context requires
otherwise, include Republic Group Incorporated and its subsidiaries.
The Company manufactures and sells 100% recycled paperboard, reclaimed
paper fiber, and gypsum wallboard. The Company sells recycled paperboard to
converter customers that manufacture composite cans, cores, tubes and other
consumer and industrial packaging products. The Company also uses its recycled
paperboard as a raw material in the production of its own gypsum wallboard, as
well as selling gypsum-grade paperboard to other gypsum wallboard
manufacturers. Reclaimed paper fiber is a raw material sold to and used by
other recycled paper and paperboard mills as well as the Company's mills. It is
the principal component used in the production of recycled paper and recycled
paperboard. Gypsum wallboard is a primary building material used by the
residential and commercial construction industries.
The strategic direction of the Company began shifting to the recycled
paperboard industry when, in December 1983, the Company purchased two recycled
paperboard mills to diversify and to ensure a supply of quality gypsum-grade
paperboard for its gypsum wallboard operations. During 1994, the Company
purchased two paper recycling centers in Kansas City, Missouri and Topeka,
Kansas. During fiscal 1996, the Company started a greenfield paper recycling
production operation in Denver, Colorado. These facilities ensure additional
supplies of paper fiber for its paperboard mills. On June 30, 1995, the Company
purchased from Old Dominion Box Company substantially all of the operating
assets of Halltown Paperboard Company, Halltown, West Virginia. The acquisition
of Halltown furthered the Company's strategic objective to add new operations
which will complement its current business. Because Halltown does not make
paperboard for the gypsum wallboard industry, the facility strengthens the
portion of the Company's recycled paperboard operations that targets
manufacturers of consumer and industrial packaging products as well as
providing geographical diversification. The Company is now a manufacturer of
recycled paperboard products with an integrated gypsum wallboard manufacturing
operation. By increasing the emphasis on its recycled paperboard business, the
Company has attempted to become less subject to the cyclical influences of the
construction and housing industries.
The Company has completed the fourth year of a five-year strategic
plan to expand and develop its recycled paperboard business, while maintaining
its presence in the gypsum industry and evaluating expansion opportunities into
other integrated manufacturing operations. The Company's initial plan included
spending $14,000,000 to $18,000,000 for capital improvements and expansion at
two of its recycled paperboard mills in Hutchinson, Kansas and Denver, Colorado
during the five fiscal years ending June 30, 1997. In the fiscal year ended
June 30, 1996, the Company spent approximately $3,883,000 pursuant to this
strategy. The improvements from the Company's five-year strategic capital
improvements and expansion plan are expected to increase the productive
capacity of the Hutchinson and Denver mills, in total, approximately one-third.
The Company is still on target to substantially achieve its goals, but business
conditions could influence the timetable in the future. See NOTE 2 OF NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS FOR INFORMATION CONCERNING THE COMPANY'S (i)
WALLBOARD AND (ii) RECYCLED PAPERBOARD BUSINESS SEGMENTS.
<PAGE> 3
RECYCLED PAPERBOARD OPERATIONS
Manufacturing. The Company's recycled paperboard manufacturing
operations are conducted at mills located near Hutchinson, Kansas, Commerce
City, Colorado, a suburb of Denver, and Halltown, West Virginia. The rated
productive capacity of the Company's paperboard mills is generally adjusted
yearly to reflect new equipment installations and modifications, current
operating procedures and product mix. All of the paperboard products
manufactured at the Company's mills are produced from 100% reclaimed secondary
paper fiber and are classified by the industry as recycled paperboard. These
recycled paperboard products include the facing paper used in the manufacture
of wallboard, and recycled paperboard utilized by manufacturers of consumer and
industrial paperboard products such as fiber cans, fiber tubes, fiber cores,
partitions, puzzles and games.
Recycled paperboard is manufactured in a continuous process during
which waste paper is mixed with water and pulped to separate the individual
fibers. The slurry is then applied to a series of rotating wire-covered
cylinders, not unlike making a sandwich, so that a multi-ply sheet of paper is
formed as excess water is drained through the rotating wire. The multi-ply
paper mat is then mechanically pressed, dried, trimmed to size and packaged.
The finished product can either be packaged in roll form or in sheets according
to customer specifications.
Sales, Marketing and Distribution. The recycled paperboard products
manufactured by the Company are sold to wallboard manufacturers and to
converters that manufacture composite cans, cores, tubes and other packaging
products. During fiscal 1996, approximately 16% of the paperboard manufactured
and shipped by the mills was consumed by the Company's wallboard manufacturing
operations, another 18% was shipped to other wallboard manufacturers, and the
balance was shipped to over 100 different converter customers. During fiscal
1996, Sonoco Products Company accounted for approximately 10% of consolidated
gross sales. The loss of this customer could have a materially adverse effect
on the Company. However, the Company sells several different products to over
25 different Sonoco locations in two operating divisions.
The Company has attempted to diversify its operations from the
construction industry by increasing paperboard sales to converters that
manufacture composite cans, cores, tubes and other consumer and industrial
packaging products. Additionally, the Company's primary acquisition focus has
been in the paperboard segment. This is evidenced by the acquisition of the
recycling centers in Kansas City, Missouri and Topeka, Kansas during 1994, the
startup of a recycling center in Denver, Colorado during fiscal 1996, and the
acquisition of the assets of Halltown Paperboard Company, Halltown, West
Virginia on June 30, 1995. The Halltown recycled paperboard mill does not
market products to the construction industry.
The Company's reclaimed paper fiber collection centers sell reclaimed
fiber to the Company's mills (approximately 40% of total shipments by the
centers) and to external customers. Most shipments are to customers located
within 600 miles of the center. The company's operations have capabilities to
sort and bale paper fiber purchased from generators and haulers. In addition,
the Company's reclaimed fiber operations act as a broker for certain generators
of reclaimed fiber by arranging for direct shipments from the generator to the
purchaser of the fiber.
Sales of paperboard and reclaimed paper fiber are typically made on
credit terms in accordance with normal industry practice. Paperboard production
normally occurs after an order is received. Paperboard is rarely produced for
general inventory purposes. The backlog of orders for paperboard is usually not
significant. Deliveries of paperboard and reclaimed paper fiber are made to
customers by common carriers, as well as by rail. Some customers pick up their
orders at the mills.
Raw Materials. The principal raw materials utilized by the Company's
paperboard mills are reclaimed paper fiber, water and chemicals. Reclaimed
paper fiber is currently purchased from several sources and from the Company's
own recycling centers. Management believes that adequate supplies of reclaimed
paper fiber will continue to be available from wholesalers located in cities
near the paperboard mills and from its own recycling centers. The demand and
pricing for this raw material during most of fiscal 1996 has been relatively
stable. This is in direct contrast to fiscal 1995, when unprecedented demand
and other factors caused sharp increases in the cost
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of this raw material. Since reclaimed paper fiber is a commodity, pricing for
the product is subject to quick pricing corrections due to supply and demand.
Chemicals, including size, retention aids and bactericides, used by
the paperboard operations, are also readily available from several
manufacturers at competitive prices. Size is used principally as a water
resisting agent or strength enhancer in the production of paperboard. Retention
aids are agents used to retain fiber and chemicals in the papermaking process
and not lose them into the waste stream. Bactericides are agents used to
control bacteria and other organisms in the papermaking process.
The manufacture of recycled paperboard involves the use of large
volumes of water for the production process and for cooling purposes. In the
areas of Kansas and Colorado, where two of the Company's paperboard mills are
located, the appropriation of water is regulated by state laws. The Hutchinson
paperboard mill uses large volumes of water pumped from wells located on owned
or controlled property near the Company's plant. The Company is authorized to
appropriate water from those wells for beneficial use, subject to vested rights
and prior appropriations, under state permits and orders. Paperboard production
at the Commerce City paperboard mill uses water pumped from wells located on,
or adjacent to, the Company's property. In connection with the purchase of the
Commerce City mill, the Company acquired an 80% interest in certain water wells
as tenant-in-common with Packaging Corporation of America and the right to use
up to 80% of the water produced by the wells. Most of these wells have been in
use by the mill for more than 20 years. The Company's water rights are subject,
however, to the legal rights of prior appropriators from the same water
resource and to limitations on the permitted uses for such water, as decreed by
the Colorado courts. The Company's West Virginia mill uses water from a stream
running through its property and has done so for over 100 years. The Company's
rights to use the water from the stream is subject to the riparian rights of
other property owners in the area. Although adequate sources of water have
historically been available to all of the Company's mills, an extended period
of general water shortages, legal curtailment of either mill's current water
sources or uses, or deterioration of the current quality of water sources could
affect that mill's operations and limit its productive capacity. See
"ENVIRONMENTAL REGULATION."
Electricity, natural gas and other utilities are available to the
plants at standard industrial rates in adequate supplies, subject to standard
industrial curtailment provisions. There are adequate supplies of coal
available to the Halltown mill on either a contracted or spot basis. The
Company's Hutchinson paperboard mill generates approximately one-half of the
electricity it uses, and the Company's West Virginia mill generates
approximately one- third of its total requirements. During periods of natural
gas curtailment, the Hutchinson and Denver mills are equipped to use fuel oil,
and the Halltown mill can use either coal or fuel oil.
The prevailing market price for natural gas was stable, if not
slightly lower during the Company's last fiscal year, compared to fiscal 1995.
It appears that adequate supplies of natural gas helped to stabilize fuel
prices. The price of coal increased slightly from year to year. All plants
periodically contract fuel supplies in advance for varying time limits to hedge
against fluctuations in the market. The Company has been successful at
contracting future supplies at favorable rates. However, there is always the
possibility of contracting future requirements at higher than actual spot
prices because natural gas and coal are commodities. After this past winter,
the Company and many industries as a whole, have seen natural gas prices rise
generally in relation to the natural gas futures market.
Competition. In selling the portion of its production not consumed by
its own wallboard manufacturing operations, the Company competes with
approximately nine other manufacturers of gypsum-grade paperboard, six of which
have wallboard manufacturing operations. Substantially all of these competitors
have greater financial resources than the Company. During periods of peak
demand for wallboard, the demand for paperboard typically matches or exceeds
the productive capacities of the gypsum-grade paperboard producers. During
periods of reduced demand for wallboard, the demand for gypsum-grade paperboard
falls, and selling prices may decrease. In selling paperboard to the packaging
industry, the Company competes with approximately 75 producers, many of whom
have substantially greater financial resources than the Company. Management of
the Company believes that its sales constitute less than 5% of total sales of
recycled paperboard nationally.
Price, quality and personal relationships are the principal methods of
competition among paperboard producers. The locations of the paperboard mills
allows the Company's paperboard operations to serve a variety of
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markets, including several gypsum wallboard plants in the central and
southwestern United States. The central location of two of the Company's mills
also make some of the Company's operations farther from packaging, fiber tube,
fiber can and fiber core customers located in or near the population centers of
the east and west coasts. However, the Halltown, West Virginia recycled
paperboard mill is within an hour and half from the metropolitan centers of
Baltimore, Maryland and Washington, D.C. Additionally, many competitors are
more vertically integrated than the Company and produce end-use products
utilizing paperboard manufactured from their own recycled paperboard mills. See
ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - RECYCLED PAPERBOARD."
GYPSUM WALLBOARD OPERATIONS
Manufacturing. The Company's wallboard manufacturing operations are
conducted at its plant located in Duke in southwest Oklahoma near the Company's
principal gypsum deposit. Based on the Company's historical product mix, the
Duke plant's current rated productive capacity is 529 million square feet of
wallboard per year, when operating three shifts per day and six and two-thirds
days per week. This is an increase from 511 million square feet of rated
capacity during fiscal 1995 due to upgrading and lengthening the gypsum
wallboard production line. The plant operated at near capacity during fiscal
1996. See "SALES, MARKETING AND DISTRIBUTION."
The Company manufactures gypsum wallboard by the method common to most
gypsum wallboard plants. Initially, crude gypsum is quarried by open-face
mining methods and crushed on site by an impact crusher. The raw gypsum is
hauled to the plant and pulverized. The powdered gypsum is then placed in
kettles for a continuous calcining process that converts it into plaster of
Paris. The plaster of Paris is cooked and then mixed with chemicals, other raw
materials and water to produce a slurry that is placed on the production line
between two continuous sheets of recycled paperboard and allowed to harden
while in motion. After the slurry hardens between the paperboard, the sheet is
cut into appropriate lengths, dried in kilns and packaged for sale. The Company
has historically produced wallboard in standard industry thicknesses and
varieties.
Sales, Marketing and Distribution. During the past fiscal year,
approximately 60% of the Company's shipments of wallboard products were to
customers located in its historical primary market in Texas, Oklahoma, Colorado
and Kansas. The remaining 40% were made in other states, with an emphasis on
the midwestern and southeastern regions of the United States. See
"COMPETITION."
Wallboard is sold directly to building materials dealers and, in areas
where custom of the trade dictates, to contractors and applicators. The
Company's largest gypsum wallboard customer accounted for less than 5% of the
Company's consolidated sales in fiscal 1996. Sales representatives, working in
separate territories, market wallboard for the Company. Most of these sales
representatives have significant experience in the building materials industry.
Sales are made on credit terms allowing a cash discount for prompt
payment in accordance with normal industry practice. Typically, orders are
filled upon receipt. The Company does produce to inventory, but does balance
inventories with orders. The backlog of orders for the Company's wallboard
generally is not significant.
The Company once operated a fleet of leased tractors and leased
trailers for making a significant percentage of deliveries to its customers.
This fleet was eliminated during 1993. Now, contract and common carriers have
dedicated tractors and trailers to meet the majority of the Company's trucking
delivery requirements. The Company supplements the services provided by these
dedicated carriers with other common carriers in the same manner that it
historically supplemented its own fleet with common carriers. The Company's
strategy has enabled the Company to ship economically without affecting the
timeliness of deliveries. Additionally, the Company ships approximately 30% of
its product by rail. This mode of shipment is enhanced by the Company's Hollis
& Eastern Railroad Company, a short-line railroad, which connects the Company's
wallboard plant with three major rail lines that are 15 miles from the plant.
This enables the Company to ship to distant markets economically. The Company
also owns 75 rail cars, which are operating in, and dispatched through, the
national rail system. The Company receives car hire revenues from these rail
cars.
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The Company also ships wallboard by rail to public warehouses located
in Birmingham, Alabama and Cincinnati, Ohio. The warehouses unload and store
the wallboard until the Company instructs them to arrange deliveries by truck
to customers located in the region surrounding the warehouses. Freight cost
savings can be achieved to many destinations in this manner because the
majority of the shipping distance is by rail which, at these distances, is
typically cheaper but slower than truck delivery.
Gypsum Supply. The Company owns in fee simple all surface rights and
mineral rights to gypsum, gypsite and anhydrite with respect to 1,457 acres of
land, located within six miles of its manufacturing plant. The Company
estimates that the reserves of these gypsum deposits should be sufficient to
supply the plant operating at capacity for approximately 15 years. The land on
which the deposits are located is adjacent either to paved or rock-surfaced
roads and near a paved state highway which can be used during inclement weather
for transporting the raw gypsum to the plant site. In the Company's opinion,
other gypsum deposits are located in the immediate area and may be obtained at
a reasonable cost. Ordinarily, a four to six-week supply of crushed raw gypsum
is maintained at the Duke plant. The Company also owns substantial
non-producing gypsum reserves in Nova Scotia.
Other Raw Materials, Utilities and Fuel. Other than gypsum, the
principal raw material used by the Company in manufacturing wallboard is
recycled paperboard, which is manufactured by the Company's paperboard mills in
Hutchinson, Kansas and Denver, Colorado. See "RECYCLED PAPERBOARD OPERATIONS."
Water, electricity and natural gas are also required for the Company's
manufacturing process. Water wells located on the site produce sufficient
quantities of water for current and anticipated plant requirements. A 125,000
gallon overhead water storage tank is situated adjacent to the plant. The plant
can also purchase water from the public water supply system at Duke, Oklahoma.
Electric power is supplied to the Company at standard industrial rates by an
electric cooperative.
Competition. Each of the products sold by the Company competes with
several different brands of the same product and with different products
designed for the same purposes. There is very little differentiation between
wallboard produced by the Company and its competitors. The Company believes
that price, personal relationships with customers, quality, and timely
deliveries are the principal methods of competition among wallboard producers.
There are approximately 12 manufacturers of gypsum wallboard in the
United States, many of which have significantly greater total financial
resources than the Company. Three of these companies, USG Corporation, National
Gypsum Company, and Georgia-Pacific Corporation, sell, in the aggregate, an
estimated 75% to 80% of the wallboard in the United States. The Company
believes that its sales represent approximately 2% nationally and approximately
10% of the total wallboard sold in its primary markets. (See "SALES, MARKETING
AND DISTRIBUTION" FOR PRIMARY MARKET INFORMATION.)
In many cases, the larger, multiple plant gypsum wallboard
manufacturers have a competitive advantage in markets outside the Company's
primary historical markets due to the strategic location of their plants, which
results in lower costs. In addition, the larger producers may have other cost
efficiencies available to them, such as spreading selling and administrative
overhead across several plants. See ITEM 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - GYPSUM WALLBOARD."
ENVIRONMENTAL REGULATION
The manufacture of paperboard involves the discharge of large volumes
of waste water and solid waste. In addition, the Company quarries gypsum by
open-face mining methods. The Company believes it is in compliance with
applicable federal, state and local environmental laws and regulations
governing the discharge of waste from its recycled paperboard mills and surface
quarrying and reclamation of quarried property near its gypsum plant.
Environmental laws, rules and policies are changing constantly and the
technology available to address matters of pollution control is developing
rapidly. Accordingly, it is difficult to estimate the costs of future capital
expenditures, if any, for environmental control facilities at the Company's
manufacturing plants. Management currently anticipates that it will have
adequate capital resources available to fund such capital expenditures.
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The effect of compliance with environmental laws, rules and policies
on the Company's operating results is also difficult to project. In general,
management believes that such ongoing compliance is a cost of manufacturing
which has widespread applicability to members of the industries in which the
Company is competing. Historically, the Company has not incurred material costs
or penalties with respect to the remediation of environmental problems;
however, changing laws and requirements, unknown practices by prior owners,
spills by neighboring facilities and numerous other factors can result in
material environmental problems. There can be no assurance that such matters
will not affect the Company's operating results or competitive position in the
future.
In connection with the Company's preparation for a warehouse addition
to its paperboard mill located in Commerce City, Colorado, a suburb of Denver,
the Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel, and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company has
conducted its own investigations, and the adjacent property owner has conducted
its own investigations. Additionally, the Company and the adjacent owner have
jointly sponsored investigations. Discussions between the parties continue. The
Company has completed the construction of the warehouse addition under approval
of the Colorado Department of Health.
At this time, the Company has not ascertained the future liability, if
any, of the above matter. Environmental expenditures directly related to this
matter were $3,000 in fiscal 1996, $32,000 in fiscal 1995, and $37,000 in
fiscal 1994. These costs are included in selling and administrative expenses.
Due to the complexity of the environmental laws, rules and policies currently
applicable to the Company and the uncertainty about future changes in such laws
and regulations, the Company maintains accounting reserves for future
unexpected expenses of the nature and magnitude incurred during the past three
years.
SEASON AND CYCLICAL NATURE OF BUSINESS
Inclement weather anytime during the year can have an effect on
construction activity in the Company's markets and, consequently, an effect on
revenues and results of the Company's wallboard and to a lesser degree, the
Company's recycled paperboard manufacturing operations.
EMPLOYEES AND EMPLOYEE RELATIONS
Republic Group Incorporated employs approximately 650 people,
approximately 465 of whom are covered by collective bargaining agreements with
four labor unions. The expirations of current collective bargaining agreements
range from 1996 to 1999. The Company believes that its relations with employees
are satisfactory.
ITEM 2. PROPERTIES.
The Company operates a gypsum wallboard manufacturing plant located
near Duke, Oklahoma, three recycled paperboard mills located near Commerce
City, Colorado, Hutchinson, Kansas, and Halltown, West Virginia, and three
reclaimed paper recycling centers located in Kansas City, Missouri, Topeka,
Kansas, and Denver, Colorado. In addition, the Company owns an office building
in Hutchinson, Kansas, in which its corporate offices are located. The Company
leases office space in Irving, Texas, for its Chairman. The table on Page 7
sets forth certain information with respect to such significant properties.
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PROPERTIES
The Company's principal properties are shown below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Annual
Nature of Date Company's Approx. Productive Type
Location Business Acquired Interest No. of Acres Capacity Construction
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
30th Avenue Corporate 1992 Owned 3 - Open span,
Hutchinson, Kansas Offices steel and concrete
- ------------------------------------------------------------------------------------------------------------------------
Greenway Drive Chairman's 1993 Leased - - Open span,
Irving, Texas Office steel and concrete
- ------------------------------------------------------------------------------------------------------------------------
Highway 62 Manufacture 1964 Owned 197 plant 529,000,000 (1) Open span,
Duke, Oklahoma gypsum site; 1,457 sq. ft. steel
wallboard gypsum
deposits
- ------------------------------------------------------------------------------------------------------------------------
Baddeck, Nova Scotia Gypsum 1971 Owned 492 N/A N/A
deposit
- ------------------------------------------------------------------------------------------------------------------------
Halstead and Sherman Manufacture 1983 Owned 29 plant site 91,000 (2) Open span,
Hutchinson, Kansas recycled 40 other sites tons steel and concrete
paperboard
- ------------------------------------------------------------------------------------------------------------------------
Brighton Boulevard Manufacture 1983 Owned 9 52,500 (2) Open span,
Commerce City, Colorado recycled tons steel and concrete
paperboard
- ------------------------------------------------------------------------------------------------------------------------
Main Street Recycle 1994 Owned 2 30,000 (3) Open span,
Kansas City, Missouri waste paper tons brick and concrete
- ------------------------------------------------------------------------------------------------------------------------
Adams Street Recycle 1994 Owned 1/2 15,000 (3) Open span,
Topeka, Kansas waste paper tons steel and concrete
- ------------------------------------------------------------------------------------------------------------------------
Ironton Street Recycle 1995 Owned 1.7 10,000 (3) Open span,
Denver, Colorado waste paper tons steel and concrete
- ------------------------------------------------------------------------------------------------------------------------
Old Route 340 Manufacture 1995 Owned 48 70,000 (2) Open span,
Halltown, West Virginia recycled tons steel, concrete,
paperboard and concrete block
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Based on the Company's historical normal product mix operating a single
production line 6-2/3 days per week, 24 hours per day. See Item 1.
Business - Gypsum Wallboard Operations -- Manufacturing.
(2) Estimated capacity during current fiscal year, based on 350 production
days, 24 hours per day.
(3) Based on a one or two shift operation, 6 days per week.
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ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings involving the Company
or any of its subsidiaries, other than ordinary routine litigation incidental
to the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of stockholders of the Company
during the fourth quarter of fiscal year 1996.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information concerning the
executive officers of the Company. All of the officers, except James M. Britz,
have been employed by the Company during the past five years. Each officer has
continually served as an officer of the Company from the time he or she first
became an officer. All officers were elected by the Board of Directors of the
Company to serve until the next annual meeting of the Board of Directors. No
family relationship exists between any of the officers.
<TABLE>
<CAPTION>
First
Position with Became an
Name the Company Age Officer
---- ------------ --- ---------
<S> <C> <C> <C>
Phil Simpson Chairman of the 61 1961
Board, President,
Chief Executive
Officer and Director
Stephen L. Gagnon Executive Vice 43 1990
President and Director
Doyle R. Ramsey Vice President and 45 1992
Chief Financial
Officer
Todd T. Brown Vice President 42 1992
Geary D. Cribbs Vice President 53 1992
Susan G. Hall Vice President 50 1993
James M. Britz Vice President 45 1994
John W. McCracken Controller and 35 1993
Principal Accounting
Officer
Janey L. Rife Treasurer and Secretary 51 1995
</TABLE>
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Mr. Simpson has been Chairman of the Board of Directors, President and
Chief Executive Officer for more than five years.
Mr. Gagnon was elected Executive Vice President in September 1992. In
October 1992, Mr. Gagnon became a Director of the Company. From January 1992 to
September 1992, he served as Senior Vice President and Chief Financial Officer
of the Company. Prior thereto, he served as Vice President - Administration and
Chief Financial Officer of the Company.
Mr. Ramsey was elected Vice President in September 1992 and was
appointed to the additional post of Chief Financial Officer in October 1992. He
served as Mill Manager of the Company's Hutchinson recycled paperboard mill
from October 1991 to January 1993. Prior thereto, he was office manager and
plant controller of the mill.
Mr. Brown was elected Vice President in September 1992. He is
responsible for recycled paperboard operations. Prior thereto, he served as
Mill Manager of the Company's Commerce City recycled paperboard mill.
Mr. Cribbs was elected Vice President in September 1992. He is
responsible for gypsum operations. Mr. Cribbs has served as General Manager of
the Company's Duke, Oklahoma complex, which includes gypsum wallboard
manufacturing, quarrying and calcining operations and short-line railroad
operations for more than five years.
Ms. Hall was elected Vice President in October 1993. She is
responsible for gypsum sales. She served as Gypsum Sales Manager from October
1991 to October 1993. Prior thereto, she held various positions in the sales
department since joining the Company in 1975.
Mr. Britz was elected Vice President in August 1994. He is responsible
for environmental compliance, safety and human resource functions of the
Company. He served as Director of Environmental, Safety and Health, and Human
Resources from February 1993 to August 1994. Prior thereto, he held similar
positions with the Genlyte Group, Inc.
Mr. McCracken was elected Controller and Principal Accounting Officer
in June 1993. He served as Accounting Manager from September 1991 until June
1993 and as Assistant Controller from September 1990 to September 1991.
Mrs. Rife was elected an executive officer of the Company in October
1995. She has served as Treasurer and Secretary since May 1993. Prior
thereto, she served as Credit Manager.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PER SHARE MARKET PRICE AND DIVIDENDS
FISCAL YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------
Price Range Dividends Price Range Dividends
High Low Paid High Low Paid
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First quarter $12.63 $ 9.50 $ 0.06 $10.38 $ 8.00 $ 0.05
- ------------------------------------------------------------------------------------------------------------------
Second quarter 14.13 10.75 0.075 10.38 7.25 0.06
- ------------------------------------------------------------------------------------------------------------------
Third quarter 15.13 12.63 0.075 11.75 9.88 0.06
- ------------------------------------------------------------------------------------------------------------------
Fourth quarter 14.38 12.88 0.075 10.50 9.50 0.06
- ------------------------------------------------------------------------------------------------------------------
$ 0.285 $ 0.23
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Republic Group Incorporated common stock is traded on the New York Stock
Exchange under the symbol "RGC". At August 27, 1996, the number of
stockholders of record was approximately 867.
9
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
FINANCIAL REVIEW
In thousands, except per share, ratio and percent data
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $117,902 $ 96,413 $ 63,200 $ 49,189 $ 42,064
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes 23,974 19,158 12,436 4,450 2,915
- ------------------------------------------------------------------------------------------------------------------
Net income 14,912 11,677 7,739 3,235 1,946
- ------------------------------------------------------------------------------------------------------------------
Total capital employed (1) 96,716 85,094 46,551 38,861 36,800
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity, at year-end 62,664 50,569 41,173 35,058 33,631
- ------------------------------------------------------------------------------------------------------------------
Total assets 106,124 95,442 53,796 44,097 41,296
- ------------------------------------------------------------------------------------------------------------------
Interest-bearing debt (including
current portion) 24,840 28,000 -- -- --
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
- ------------------------------------------------------------------------------------------------------------------
Income per common and
common equivalent share $ 1.40 $ 1.10 $ 0.73 $ 0.31 $ 0.18
- ------------------------------------------------------------------------------------------------------------------
Common dividends (2) 0.29 0.23 0.17 0.21 0.02
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity, at year end 5.87 4.77 3.88 3.32 3.19
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
RATIO AND PERCENT DATA
- ------------------------------------------------------------------------------------------------------------------
Net operating profit after-tax
as a percent of net sales (3) 13% 13% 13% 6% 3%
- ------------------------------------------------------------------------------------------------------------------
Return on average capital
employed (percent) (3) 19 25 19 8 4
- ------------------------------------------------------------------------------------------------------------------
Return on average stockholders'
equity (percent) (4) 26 26 20 9 6
- ------------------------------------------------------------------------------------------------------------------
Interest-bearing debt as a percent
of total capital employed 26 33 -- -- --
- ------------------------------------------------------------------------------------------------------------------
Ratio of current assets to
current liabilities 2.8 2.0 2.1 3.0 3.4
- ------------------------------------------------------------------------------------------------------------------
Ratio of year-end market value per
common share to income
per common and common
equivalent share 10.2 9.1 12.5 24.6 29.9
- ------------------------------------------------------------------------------------------------------------------
Ratio of average market value per share
to average book value per share 2.4 2.2 3.1 2.1 1.8
- ------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON AND
COMMON EQUIVALENT
SHARES 10,669 10,608 10,606 10,561 10,568
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Total capital employed is equivalent to total assets less
noninterest-bearing current liabilities.
(2) The Company paid a special dividend of $ .10 per share during fiscal 1993.
(3) Net operating profit after-tax is equivalent to operating profit reduced by
taxes computed using statutory tax rates. Return on average capital
employed relates net operating profit after-tax to average total capital
employed.
(4) Return on average stockholders' equity is net income divided by average
stockholders' equity employed during the year.
10
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General - Consolidated Results
During fiscal 1996, the Company achieved record results in
consolidated net sales, operating profits, and net income. Net sales increased
22% and net income 28% from 1995 to 1996. The Company has now enjoyed five
years of continuous improvement and solid growth in its results of operations.
These improvements are reflected in the following selected financial data:
<TABLE>
<CAPTION>
($ in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $117,902 $ 96,413 $ 63,200
Operating profit $ 25,405 $ 19,008 $ 11,961
Operating margin 22% 20% 19%
Net income $ 14,912 $ 11,677 $ 7,739
Income per share $ 1.40 $ 1.10 $ .73
Return on average
capital employed 19% 25% 19%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Recycled Paperboard Operations
The Company's recycled paperboard segment includes recycled paperboard
mills at Hutchinson, Kansas, Commerce City, Colorado and Halltown, West
Virginia. Additionally, the segment includes reclaimed paper fiber recycling
centers at Kansas City, Missouri, Topeka, Kansas and Denver, Colorado.
Total shipments of recycled paperboard from the Company's recycled
paperboard mills increased 44% from 1995 to 1996 and 2% from 1994 to 1995. The
increase in shipments from 1995 to 1996 was primarily due to the acquisition of
Halltown Paperboard Company, Halltown, West Virginia, on June 30, 1995. This
mill is currently operating at approximately 70% of capacity or about 50,000
tons per year. The facility has the capability to produce approximately 70,000
tons per year. The Company recently installed new production equipment at the
Halltown mill to enable it to produce recycled paperboard for a new product
market previously untapped by the mill. This market includes composite cans,
tubes, and cores as well as other consumer and industrial packaging products
similar to those produced by the Company's other recycled paperboard mills.
Shipments by the company's other recycled paperboard mills increased 4% from
1995 to 1996 due to greater shipments of gypsum linerboard to external and
intercompany customers. From 1994 to 1995, even though there was only a 2%
increase in total shipments, shipments to unaffiliated customers increased 10%.
Net sales of the entire recycled paperboard segment increased 36% from
1995 to 1996 and 53% from 1994 to 1995. The Halltown Paperboard Company
acquisition was, again, the primary factor influencing net sales from 1995 to
1996. The acquisition of two reclaimed paper recycling centers in Kansas City,
Missouri and Topeka, Kansas during 1994 resulted in a large portion of the
increase from 1994 to 1995. The recycled paperboard segment now accounts for
approximately 66% of net sales prior to eliminations. Net sales during fiscal
1996 were affected adversely by a reduction in the average net selling prices
of reclaimed paper fiber sold by the Company's paper recycling centers.
Conversely, the large increase in net sales of recycled paperboard from 1994 to
1995 was, in large part, the result of rising selling prices for the product in
response to sharp increases in the cost of reclaimed paper, the principal raw
material component utilized in the manufacture of recycled paperboard.
Operating profits for the segment were $17,668 in 1996, as compared to
$8,907 in 1995 and $8,141 in 1994. A significant improvement in operating
margins and the contribution of the Halltown mill were the major factors
affecting 1996. In 1995, it was operating profit at the reclaimed fiber centers
that accounted for the improvement from the prior year.
The relationship between average variable per unit manufacturing costs
and average net selling prices for recycled paperboard improved significantly
from fiscal 1995 to 1996. Raw material costs, principally reclaimed paper
fiber, increased approximately 45%, during fiscal 1995. Even though the Company
was able to raise selling
11
<PAGE> 13
prices during fiscal 1995, there was generally a one to three month delay
between rising material costs and subsequent selling price increases.
Conversely, during fiscal 1996, the Company enjoyed a significant reduction in
the cost of reclaimed fiber, approximately 29%. Overall, recycled paperboard
per unit variable production costs declined 14% from fiscal 1995 to 1996.
According to one industry publication, from June 1995 through June 1996, the
price for old corrugated containers (OCC) and double lined kraft (DLK), two
principal reclaimed fiber grades utilized by recycled paperboard mills,
decreased from $165 per ton and $240 per ton, respectively, to $35 per ton and
$60 per ton. This compares to $85 per ton for OCC and $110 per ton for DLK in
June 1994. As there was a lag in raising selling prices in fiscal 1995 to cover
the increases in raw material costs, there also was a lag in selling price
reduction as raw material costs declined. This resulted in operating margins of
21% for the recycled paperboard segment in fiscal 1996 versus 14% in fiscal
1995. Management anticipates that the relationship between average net selling
prices and average variable per unit manufacturing costs for recycled
paperboard will be less favorable in fiscal 1997 than it was during 1996.
As denoted earlier, the recycled paperboard operations segment
includes the results of three reclaimed paper recycling centers located in
Kansas City, Missouri, Topeka, Kansas and Denver, Colorado. The Denver facility
began operations early this year. These integrated operations ensure that
adequate supplies of raw materials are available to the recycled paperboard
mills. In fiscal 1996, the reclaimed paper recycling centers supplied
approximately 23% of the Company's reclaimed paper requirements for the
paperboard mills. This compares to 19% in 1995 and 2% in 1994. The recycling
centers in Kansas City, Missouri and Topeka, Kansas operated only one quarter
of fiscal 1994. The recycling operations shipped 87% of its total production to
outside customers in fiscal 1994, 74% in 1995, and 61% in 1996. The Company
will continue to sell a major portion of its reclaimed paper fiber to
unaffiliated customers. The Company believes that each paper recycling facility
should operate as a profit center and ship its products to the markets most
favorable to the center, while the Company's paperboard mills purchase a
significant portion of their raw material requirements from other nearby
suppliers at delivered costs which are equal to or less than is available from
internal sources of supply.
Uncertainties about reclaimed paper fiber costs and supply are two
primary factors which could affect the Company's results in the future. During
fiscal 1995, demand was strong throughout the entire paper industry for
reclaimed paper fiber. The Company, even during this period of extreme demand,
was able to procure adequate supplies for its operations. During fiscal 1996,
reclaimed paper supplies were again plentiful. During periods of short supply,
the recycling centers help to ensure the availability of adequate reclaimed
paper supplies for the Company's recycled paperboard mills.
According to statistics compiled by the American Forest and Paper
Association, an industry trade association, production of recycled paperboard
grew at an annual rate of 5.5% during calendar year 1995. This compares to an
overall growth rate of .1% for the entire paper industry. The demand for
recycled paperboard continues to rise, perhaps fueled by greater environmental
awareness by the public. This demand has spurred the construction of several
new recycled paperboard mills in the last few years. However, these mills were
designed and built to produce recycled containerboard. Historically, even
during periods of excess capacity in the container board segment of the
industry, there has not been much crossover competition by these mills for
shipments to the Company's traditional product markets. There can be no
assurance this will continue to be the case. Additionally, the construction of
these new recycled paperboard mills, coupled with the ever increasing use of
recycled paper fiber by traditional wood pulp mills, could further restrict the
supply of reclaimed paper fiber available to the Company. Substitution of
plastics and even virgin paperboard for recycled paperboard are additional
possibilities which could affect the Company's results in the future.
The cost of fuel, principally natural gas and coal, is also a
potential concern to the Company because of its relative importance as a
component of the variable cost of production. From fiscal 1994 to fiscal 1995,
variable utility costs per unit decreased slightly. From fiscal 1995 to fiscal
1996 utility costs again decreased, approximately 8%. The prevailing market
price for natural gas rose during the last half of fiscal 1996 and may continue
that upward trend. Some analysts have indicated the late 1996 increase was due
to a harsh winter in many areas of the country. However, the Company's
manufacturing facilities are located in areas of the country where natural gas
or coal is plentiful. The Company believes its fuel cost, on average, should at
least be comparable to its competitors.
12
<PAGE> 14
The Company began in fiscal 1993, a five-year plan for capital
expansion and upgrades at two of its recycled paperboard mills located in
Hutchinson, Kansas and Denver, Colorado. The plan included the necessary
equipment to increase productivity at the two mills by one-third or an increase
of approximately 40,000 tons per year. Additionally, the plan focused on
improved product quality expectations as well as efficiency improvements. This
capital upgrade program is scheduled to be completed by the end of fiscal 1997.
Gypsum Wallboard Operations
The Company's gypsum wallboard operations include a gypsum wallboard
manufacturing facility located in Duke, Oklahoma as well as remote public
warehouses located in Birmingham, Alabama and Cincinnati, Ohio. Additionally,
the Company operates a short-line railroad which connects to three major
carriers 15 miles from its plant, enabling the Company to ship economically to
distant markets.
The gypsum wallboard segment of the Company enjoyed a 7% increase in
total shipments from fiscal 1995 to 1996, a new record. Shipments grew from 494
MMSF in 1995 to 529 MMSF in 1996. The increase in shipments is attributable to
a capital expansion upgrade to the production line in fiscal 1995, with
additional fine tuning in 1996. Net selling prices for gypsum wallboard were
essentially unchanged from period to period. This compares to a 4% increase in
shipments and 19% increase in net selling prices from 1994 to 1995. The
following table indicates a strong housing construction industry which strongly
influences wallboard shipments.
<TABLE>
<CAPTION>
(in millions)
-----------------------------------------------------------------
Year Ended Housing
December 31 Starts
----------- ----------
<S> <C>
1993 1.29
1994 1.46
1995 1.35
</TABLE>
Although housing starts nationally decreased from 1994 to 1995, the
Company did not experience any reduction in shipments to its traditional
markets. Housing start estimates for 1996 and 1997 generally approximate the
1995 levels. Recently, interest rates have risen slightly. The construction
industry, and particularly the single/multi-family sector, is sensitive to
interest rate changes.
Strong demand continued to influence operating profits in 1996.
Operating margins averaged 32% during fiscal 1996 compared to 36% in 1995 and
25% in 1994. Operating profits in this segment decreased slightly from $14.9
million in fiscal 1995 to $14.3 million in 1996. This compares to an operating
profit of $7.8 million in fiscal 1994. Manufacturing costs per unit were
slightly higher in 1996 compared to 1995. Per unit variable costs rose 12% from
1994 to 1995 primarily caused by a sharp increase in the cost of recycled
gypsum paperboard, the largest single component in the variable per unit cost
of production.
There are items which could adversely affect the gypsum wallboard
segment. As with the recycled paperboard operations utility costs, principally
natural gas, are a significant cost factor in the production of gypsum
wallboard. Variable per unit utility costs decreased 9% from 1994 to 1995 and
4% from 1995 to 1996. The cost of natural gas, as previously stated under
Recycled Paperboard Operations has risen as of late. Additionally, mining costs
influence manufacturing costs. The Company believes it has sufficient gypsum
reserves but costs associated with removal and quality of ore may increase as
quarrying operations continue in the current quarry location. Other factors
which may influence future results include the possibility that new gypsum
wallboard manufacturing facilities may be constructed to take advantage of the
currently strong demand for wallboard. Two previously idled gypsum wallboard
plants have been re-opened in the last three years. The Company believes it
operates one of the most efficient gypsum manufacturing facilities in North
America due to line speed, mining and ore costs, and location. The Company will
continue striving to improve the quality and efficiencies of the facility, in
order to remain competitive under all construction market conditions.
13
<PAGE> 15
Other
During fiscal 1996, selling and administrative expenses as a percent
of net sales were 12% as compared to 10% in 1995 and 12% in 1994. Increased
costs associated with the acquisition of Halltown Paperboard Company, Halltown,
West Virginia in June of 1995 and the start-up of a reclaimed paper fiber
production facility in Denver, Colorado in early fiscal 1996 contributed
significantly to the overhead burden of the Company. Additionally, a 22%
increase in net sales from fiscal 1995 to fiscal 1996 added certain costs such
as sales commissions and incentives.
A substantial increase in interest expense totalling $1,937,000 in
1996 is associated with a $28,000,000 loan for the purchase of substantially
all the assets of Halltown Paperboard Company, Halltown, West Virginia on June
30, 1995. The Company's effective tax rate was 38% in fiscal 1994, 39% in 1995
and 38% in 1996. The Company anticipates an effective income tax rate during
fiscal 1997 near the range experienced the prior three years.
Environmental Matters
In connection with the Company's preparation for a warehouse addition
to its paperboard mill located in Commerce City, Colorado, a suburb of Denver,
the Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company has
conducted its own investigations, and the adjacent property owner has conducted
its own investigations. Additionally, the Company and the adjacent owner have
jointly sponsored investigations. Discussions between the parties continue. The
Company has completed the construction of the warehouse addition under approval
of the Colorado Department of Health.
At this time, the Company has not ascertained the future liability, if
any, of the above matter. Environmental expenditures directly related to this
matter were $3,000 in fiscal 1996, $32,000 in fiscal 1995, and $37,000 in
fiscal 1994. These costs were included in selling and administrative expenses.
Due to the complexity of the environmental laws, rules and policies currently
applicable to the Company and the uncertainty about future changes in such laws
and regulations, the Company maintains accounting reserves for future
unexpected expenses of the nature and magnitude incurred during the past three
years.
Effect of Inflation
Management believes that general inflation has not had a material
impact on the Company's net sales or operating income the last three fiscal
years. The cost of reclaimed paper fiber, which is the principle raw material
component utilized in the manufacture of recycled paperboard rose significantly
during fiscal years 1994 and 1995. Conversely, the cost of reclaimed fiber
decreased substantially during fiscal 1996. The Company believes these shifts
were caused by changes in supply and demand and not general inflation or
deflation.
14
<PAGE> 16
Liquidity and Capital Resources
The following is a summary of certain financial statistics related to
the liquidity and financial condition of the Company for the three fiscal years
ended June 30, 1996.
<TABLE>
<CAPTION>
($ in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Working capital $ 22,485 $ 13,520 $ 8,170
- -------------------------------------------------------------------------------------------------------------------
Current ratio 2.8:1 2.0:1 2.1:1
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
plus investments & marketable
securities $ 14,568 $ 6,131 $ 1,410
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities $ 23,252 $ 14,038 $ 9,981
- -------------------------------------------------------------------------------------------------------------------
Additions to property,
plant and equipment $ 9,062 $ 33,553 $ 13,318
- -------------------------------------------------------------------------------------------------------------------
Dividends paid $ 3,018 $ 2,426 $ 1,791
- -------------------------------------------------------------------------------------------------------------------
Long-term debt (including
current portion) $ 24,840 $ 28,000 $ --
- -------------------------------------------------------------------------------------------------------------------
Total capital employed $ 96,716 $ 85,094 $ 46,551
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's working capital increased $9.0 million from fiscal 1995
to fiscal 1996. Cash, cash equivalents, investments and marketable securities
increased $8.4 million from 1995 to 1996. Net cash provided by operations
increased from $14.0 million in 1995 to $23.3 million in 1996. Additions to
plant, property and equipment, excluding the acquisitions of the Kansas City,
Missouri and Topeka, Kansas recycling centers in fiscal 1994 and Halltown
Paperboard Company, Halltown, West Virginia in fiscal 1995, were $11.8 million
in 1994, $8.8 million in 1995 and $9.1 million in fiscal 1996.
On June 30, 1995, the Company purchased substantially all the assets
of Halltown Paperboard Company, Halltown, West Virginia and financed the
acquisition by securing $28.0 million in long-term bank financing, which is to
be repaid in semiannual installments over the next six years. At the same time,
the Company entered into a $7.0 million revolving credit facility. To date, no
amounts have been borrowed against the credit facility which expires June 30,
1998. Management believes that cash and investments, internally generated
funds, supplemented as needed by advances under the working capital line of
credit, will be sufficient to meet the Company's short-term working capital
requirements.
Cash dividends paid to common stockholders were $3.0 million in fiscal
1996, $2.4 million in fiscal 1995, and $1.8 million in fiscal 1994. Quarterly
dividends have historically been paid in the months of September, December,
March, and June, but are, in each case, subject to Board approval.
The Board of Directors of the Company has approved new budgeted
capital expenditures of $8.6 million for fiscal 1997. Cash provided by
operations and existing cash balances should be sufficient to fund these
expenditures.
15
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial Statements, along with the Financial Statement Schedule
filed herewith, are listed in the Index below.
<TABLE>
<CAPTION>
Page Reference
--------------
<S> <C>
Consolidated Statements of Income for the years ended 17
June 30, 1996, 1995 and 1994
Consolidated Balance Sheets at June 30, 1996 and 1995 18
Consolidated Statements of Cash Flows for the years 19
ended June 30, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the 20
years ended June 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements 21-30
Report of Independent Public Accountants - Consolidated 31
Financial Statements
Report of Management 32
Report of Independent Public Accountants - Report on S-1
Form 10-K
Schedule II - Valuation and Qualifying Accounts and Reserves S-2
</TABLE>
16
<PAGE> 18
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
==================================================================================================================
<S> <C> <C> <C>
Gross sales $135,626,000 $112,400,000 $ 77,131,000
Less freight and discounts 17,724,000 15,987,000 13,931,000
- ------------------------------------------------------------------------------------------------------------------
Net sales 117,902,000 96,413,000 63,200,000
Costs and expenses:
Cost of sales 78,665,000 67,966,000 43,603,000
Selling and administrative expenses 13,832,000 9,439,000 7,636,000
- ------------------------------------------------------------------------------------------------------------------
92,497,000 77,405,000 51,239,000
- ------------------------------------------------------------------------------------------------------------------
Operating profit 25,405,000 19,008,000 11,961,000
Other income (expense):
Interest expense (1,937,000) (7,000) (22,000)
Interest income 506,000 131,000 271,000
Miscellaneous, net -- 26,000 226,000
- ------------------------------------------------------------------------------------------------------------------
(1,431,000) 150,000 475,000
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes 23,974,000 19,158,000 12,436,000
Provision for income taxes 9,062,000 7,481,000 4,697,000
- ------------------------------------------------------------------------------------------------------------------
Net income $ 14,912,000 $ 11,677,000 $ 7,739,000
==================================================================================================================
Income per common and common
equivalent share $ 1.40 $ 1.10 $ 0.73
- ------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 10,669,000 10,608,000 10,606,000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
17
<PAGE> 19
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 2,243,000 $ 3,631,000
Investments and marketable securities, at market 12,325,000 2,500,000
Accounts receivable, less allowance for doubtful
accounts of $633,000 in 1996 and $614,000 in 1995 11,727,000 11,223,000
Income tax refunds receivable 902,000 177,000
Inventories:
Finished goods 2,095,000 2,752,000
Raw materials and supplies 4,638,000 5,505,000
- ------------------------------------------------------------------------------------------------------------------
6,733,000 8,257,000
Prepaid expenses 557,000 491,000
Net assets held for sale 26,000 --
Deferred income taxes 790,000 749,000
- ------------------------------------------------------------------------------------------------------------------
Total current assets 35,303,000 27,028,000
Property, plant and equipment, at cost:
Land, land improvements and mineral deposits 4,218,000 3,958,000
Buildings and leasehold improvements 12,574,000 11,540,000
Equipment 90,570,000 84,124,000
Construction in progress 2,881,000 3,010,000
- ------------------------------------------------------------------------------------------------------------------
110,243,000 102,632,000
Less accumulated depreciation, amortization and depletion 40,134,000 35,020,000
- ------------------------------------------------------------------------------------------------------------------
70,109,000 67,612,000
Other assets 712,000 802,000
- ------------------------------------------------------------------------------------------------------------------
Total assets $106,124,000 $ 95,442,000
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 5,114,000 $ 7,441,000
Accrued payroll and employee benefits 2,666,000 1,810,000
Other current liabilities 1,628,000 1,097,000
Current portion of long-term debt 3,410,000 3,160,000
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 12,818,000 13,508,000
Long-term debt due after one year 21,430,000 24,840,000
Deferred income taxes 8,592,000 5,765,000
Other long-term liabilities 620,000 760,000
Contingent liabilities and commitments
Stockholders' equity:
No par preferred stock issuable in series; 487,000 shares authorized;
none issued and outstanding -- --
Common stock, $1 par value; 25,000,000 shares authorized;
issued 10,607,000 in 1996 and 10,560,000 in 1995 10,607,000 10,560,000
Additional paid-in capital 12,462,000 12,308,000
Retained earnings 39,595,000 27,701,000
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 62,664,000 50,569,000
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $106,124,000 $ 95,442,000
==================================================================================================================
</TABLE>
See accompanying notes.
18
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
==================================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,912,000 $ 11,677,000 $ 7,739,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, amortization and depletion 6,203,000 3,633,000 2,809,000
Write down of property, plant and equipment -- -- 45,000
Deferred income taxes 2,786,000 1,301,000 456,000
(Gain) loss on sale of assets 138,000 38,000 (120,000)
Gain on sale of investments -- -- (41,000)
Changes in current assets and liabilities
net of effects from acquisition:
Accounts receivable (504,000) (3,237,000) (2,457,000)
Income tax refunds receivable (725,000) 42,000 (204,000)
Inventories 1,524,000 (2,609,000) (474,000)
Prepaid expenses (66,000) 26,000 (97,000)
Accounts payable and accrued liabilities (940,000) 3,103,000 2,009,000
Other assets and liabilities (76,000) 64,000 316,000
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 23,252,000 14,038,000 9,981,000
- ------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of Halltown Paperboard Company:
Working capital -- (1,271,000) --
Property, plant and equipment -- (24,753,000) --
Other assets -- (215,000) --
- ------------------------------------------------------------------------------------------------------------------
-- (26,239,000) --
Additions to property, plant and equipment (9,062,000) (8,800,000) (13,318,000)
Proceeds from sale of property, plant
and equipment 224,000 3,000 737,000
Purchases of investments (17,750,000) (2,500,000) (500,000)
Proceeds from sales of investments 7,925,000 500,000 3,162,000
Other -- -- (2,000)
- ------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (18,663,000) (37,036,000) (9,921,000)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (3,018,000) (2,426,000) (1,791,000)
Proceeds from issuance of debt -- 28,000,000 --
Pension liability adjustment -- 26,000 (26,000)
Payment on long-term debt (3,160,000) -- --
Unearned compensation -- -- 186,000
Proceeds from exercised stock options 201,000 119,000 7,000
- ------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (5,977,000) 25,719,000 (1,624,000)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (1,388,000) 2,721,000 (1,564,000)
Cash and cash equivalents at beginning of year 3,631,000 910,000 2,474,000
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 2,243,000 $ 3,631,000 $ 910,000
==================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes, net of refunds $ 7,077,000 $ 6,032,000 $ 4,473,000
Interest $ 1,654,000 $ 10,000 $ 22,000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
19
<PAGE> 21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Common Additional Pension Common
stock, $1 paid-in Retained Unearned liability shares in
In Thousands of Dollars par value capital earnings compensation adjustment treasury Total
======================================================================================f============================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 $10,816 $14,002 $12,502 $ (186) $ -- $ (2,076) $35,058
Net income -- -- 7,739 -- -- -- 7,739
Cash dividends on common
stock, $.17 per share -- -- (1,791) -- -- -- (1,791)
Exercise of stock options 3 4 -- -- -- -- 7
Retirement of debt -- -- -- 186 -- -- 186
Pension liability
adjustment -- -- -- -- (26) -- (26)
Retirement of treasury stock (281) (1,795) -- -- -- 2,076 --
- -------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1994 10,538 12,211 18,450 -- (26) -- 41,173
Net income -- -- 11,677 -- -- -- 11,677
Cash dividends on common
stock, $.23 per share -- -- (2,426) -- -- -- (2,426)
Exercise of stock options 22 97 -- -- -- -- 119
Pension liability adjustment -- -- -- -- 26 -- 26
- -------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 10,560 12,308 27,701 -- -- -- 50,569
Net income -- -- 14,912 -- -- -- 14,912
Cash dividends on common
stock, $.29 per share -- -- (3,018) -- -- -- (3,018)
Exercise of stock options 47 154 -- -- -- -- 201
- -------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 $10,607 $12,462 $39,595 $ -- $ -- $ -- $62,664
===================================================================================================================
</TABLE>
See accompanying notes
20
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1995, AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Republic
Group Incorporated and its subsidiaries (the "Company"). All intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during
the period. Actual results could differ from these estimates.
CASH EQUIVALENTS
Short-term investments that are highly liquid and have original maturity
dates of three months or less are considered cash equivalents for the purpose
of the Consolidated Statements of Cash Flows. These investments are carried at
market.
CONCENTRATION OF CREDIT RISK
The majority of the Company's sales are to retailers, manufacturers and
wholesalers. The Company conducts ongoing credit evaluations of its customers'
financial conditions and limits the amount of trade credit extended when
necessary. The Company maintains allowances for expected credit losses.
INVENTORIES
Inventories are stated at the lower of cost (average or first-in,
first-out) or market and include the appropriate elements of materials, labor
and manufacturing overhead expenses.
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment assets are recorded at cost and depreciated generally
by the straight-line method over the estimated useful lives of the assets.
Expenditures for additions and improvements are capitalized, and costs for
repairs and maintenance are charged to operations as incurred.
REVENUE RECOGNITION
Revenue is recognized at the time products are shipped to the customer or,
in the case of rail services, at the time service is rendered.
INCOME TAXES
The provision for income taxes includes federal and state taxes currently
payable (receivable) and deferred taxes arising from temporary differences in
determining income for financial statement and tax purposes. The Company files
a consolidated federal return which includes the results for all of its
subsidiaries. Deferred tax assets, liabilities and related expense accounts are
adjusted annually for any changes in statutory tax rates.
PER SHARE COMPUTATIONS
Per share computations are based on the weighted average number of common
shares outstanding during the year, adjusted for the effect of dilutive common
share equivalents (i.e., common stock options). Earnings per common share on a
fully diluted basis are substantially the same as earnings per share as
presented.
RECLASSIFICATION
Certain prior year balances have been reclassified to conform with the
current year presentation.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE
Environmental expenditures are expensed or capitalized, as appropriate.
Liabilities are recorded when assessments and/or remedial efforts are probable
and the cost can be reasonably estimated.
21
<PAGE> 23
NAME CHANGE
In October 1995, the Company changed its name from Republic Gypsum Company
to Republic Group Incorporated. The Company's trading symbol on the New York
Stock Exchange remains "RGC".
2. INDUSTRY SEGMENTS
Certain information with regard to industry segments, within which the
Company operates, is as follows (in thousands):
<TABLE>
<CAPTION>
Recycled Eliminations
Gypsum Paperboard and other Consolidated
====================================================================================================================
<S> <C> <C> <C> <C>
1996
Sales to unaffiliated customers $ 58,439 $ 77,179 $ 8 $135,626
Intersegment sales -- 12,285 (12,285) --
- ----------------------------------------------------------------------------------------------------------------------
58,439 89,464 (12,277) 135,626
Less freight and discounts 13,779 3,945 -- 17,724
- ----------------------------------------------------------------------------------------------------------------------
Net sales $ 44,660 $ 85,519 $ (12,277) $117,902
======================================================================================================================
Operating profit $ 14,345 $ 17,668 $ (6,608) $ 25,405
Identifiable assets 23,328 60,785 22,011 106,124
Capital expenditures 733 7,478 851 9,062
Depreciation, depletion and amortization 1,370 4,243 590 6,203
======================================================================================================================
1995
Sales to unaffiliated customers $ 54,748 $ 57,642 $ 10 $112,400
Intersegment sales -- 8,738 (8,738) --
- ----------------------------------------------------------------------------------------------------------------------
54,748 66,380 (8,728) 112,400
Less freight and discounts 12,683 3,304 -- 15,987
- ----------------------------------------------------------------------------------------------------------------------
Net sales $ 42,065 $ 63,076 $ (8,728) $ 96,413
======================================================================================================================
Operating profit $ 14,939 $ 8,907 $ (4,838) $ 19,008
Identifiable assets 23,747 59,823 11,872 95,442
Capital expenditures 2,364 29,810 1,379 33,553
Depreciation, depletion and amortization 1,274 1,994 365 3,633
======================================================================================================================
1994
Sales to unaffiliated customers $ 42,643 $ 34,481 $ 7 $ 77,131
Intersegment sales -- 9,169 (9,169) --
- ----------------------------------------------------------------------------------------------------------------------
42,643 43,650 (9,162) 77,131
Less freight and discounts 11,497 2,434 -- 13,931
- ----------------------------------------------------------------------------------------------------------------------
Net sales $ 31,146 $ 41,216 $ (9,162) $ 63,200
======================================================================================================================
Operating profit $ 7,829 $ 8,141 $ (4,009) $ 11,961
Identifiable assets 22,152 25,781 5,863 53,796
Capital expenditures 2,556 9,328 1,434 13,318
Depreciation, depletion and amortization 1,183 1,427 199 2,809
======================================================================================================================
</TABLE>
Operations within the gypsum industry consist of the manufacture and
sale of gypsum wallboard. Operations within the paperboard industry consist of
(i) the manufacture and sale of recycled paperboard to the gypsum industry and
other paperboard converters which manufacture composite cans, cores, tubes and
other packaging products, and (ii) the collection and sale of recovered paper
fiber. The Company's gypsum wallboard operations are located in Duke, Oklahoma.
The Company's primary markets for gypsum wallboard are Texas, Oklahoma,
Colorado and Kansas with additional secondary emphasis in the midwestern and
southeastern regions of the United States. The Company operates recycled
paperboard mills in Hutchinson, Kansas, Commerce City, Colorado, and Halltown,
West Virginia. The Company's primary markets for recycled paperboard are
generally
22
<PAGE> 24
within a 600 mile radius of the facilities. The Company operates reclaimed
paper fiber recycling centers in Kansas City, Missouri, Topeka, Kansas, and
Denver, Colorado with the corresponding markets within a 600 mile radius of the
facilities.
During fiscal 1996, approximately 16% of the recycled paperboard
shipped by the mills was consumed by the Company's wallboard operations.
Another 18% was shipped to other unaffiliated gypsum wallboard manufacturers.
An adverse change in the construction industry could have a material effect on
the earnings of the Company. Sonoco Products Company accounted for
approximately 10% of consolidated gross sales. The loss of this customer could
have a materially adverse effect on the Company. However, the Company sells
several different products to over 25 different Sonoco locations in two
operating divisions.
Republic Group Incorporated employs approximately 650 people,
approximately 465 of whom are covered by collective bargaining units with four
labor unions. The expirations of current bargaining agreements range from 1996
to 1999. The Company believes its relations with employees are satisfactory.
Operating profit is net sales less operating expenses. Sales between
segments are made at approximately market price. Identifiable assets by
industry segment are those used in each segment at year-end. Eliminations and
other include general corporate assets, principally cash, securities, property
and equipment and expenses.
3. EMPLOYEE STOCK OWNERSHIP PLAN
In February 1986, the Company guaranteed a $2,996,000 bank note on
behalf of its Employee Stock Ownership Plan (the "ESOP"), in which salaried
employees participate. The ESOP used the proceeds to purchase the Company's
common stock. In February 1991, the Company purchased the note for the
outstanding principal balance. Because the Company was the payee of the note,
such contributions did not require cash outlays. Compensation expense was
recognized as the note principal was retired. The note was retired during
fiscal 1994. During 1996 and 1995, the board of directors of the Company
approved ESOP contributions of $360,000 and $187,000, respectively, and the
compensation expense was recognized in the financial statements.
The following table presents the ESOP contributions for the years
ended June 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Compensation expense - loan repayment $ -- $ -- $ 186,000
Compensation expense 360,000 187,000 --
Other 21,000 10,000 49,000
Trustee's fees 37,000 29,000 38,000
- ------------------------------------------------------------------------------------------------------------------
Company contributions $ 418,000 $ 226,000 $ 273,000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
4. ACQUISITION - HALLTOWN PAPERBOARD COMPANY
On June 30, 1995, the Company acquired substantially all of the assets
of Halltown Paperboard Company of Halltown, West Virginia for $26.2 million.
Halltown Paperboard Company manufactures products of 100% recycled paperboard
made from reclaimed paper fiber which are similar to the Company's other
recycled paperboard mills. The following table presents the 1996 operating
results of the Company compared to proforma operating results for 1995. The
unaudited proforma information shows consolidated operating results for 1995
presented as though the Company's Halltown acquisition occurred at the
beginning of the period. No goodwill was recorded in this transaction.
23
<PAGE> 25
<TABLE>
<CAPTION>
Years Ended June 30, 1996 and 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $117,902,000 $121,052,000
Net income 14,912,000 12,781,000
Net income per share $1.40 $1.20
</TABLE>
5. MISCELLANEOUS OTHER INCOME (EXPENSE)
The components of miscellaneous other income (expense) for the years
ended June 30, 1996, 1995, and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gain on sale of net assets held for sale $ -- $ -- $ 101,000
Gain on sale of investments -- -- 41,000
Gross rental income 118,000 99,000 69,000
Other (118,000) (73,000) 15,000
- ---------------------------------------------------------------------------------------------------------------------
$ -- $ 26,000 $ 226,000
=====================================================================================================================
</TABLE>
6. LONG-TERM DEBT AND REVOLVING CREDIT FACILITY
The Company's long-term debt and revolving credit facility consists of
the following:
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Term loan $24,840,000 $28,000,000
Revolving credit facility -- --
- ---------------------------------------------------------------------------------------------------------------------
Total long-term debt 24,840,000 28,000,000
- ---------------------------------------------------------------------------------------------------------------------
Less: current maturities 3,410,000 3,160,000
Long-term debt, net of current maturities $21,430,000 $24,840,000
=====================================================================================================================
</TABLE>
Amounts of long-term maturities for each of the next six fiscal years
1997 through 2002, respectively, are: $3,410,000, $3,670,000, $3,955,000,
$4,260,000, $4,595,000, and $4,950,000.
The Company obtained a $28,000,000 term loan from a commercial bank
for the purchase of Halltown Paperboard Company pursuant to a loan agreement
dated June 30, 1995. The term loan matures in June 2002. The Halltown facility
was used as collateral for the loan. The net book value of the assets
collateralized was $25,552,000 at year-end. The effective interest rate for the
year averaged 7.01%.
The Company also obtained a $ 7,000,000 line of credit from a
commercial bank pursuant to a loan agreement dated June 30, 1995. The revolving
credit facility is for two years, renewable every year for an additional year.
To date, no amounts have been borrowed against the revolving credit facility.
Outstanding principal amounts on both the term loan and revolving
credit facility bear interest at a variable rate equal to (i) the London
Interbank Offered Rate, plus an agreed margin (ranging from 75 to 175 basis
points for the term loan and 50 to 150 points for the revolving credit
facility), which is to be established annually based upon the Company's
coverage of fixed charges or (ii) the bank's corporate prime rate, less 0.5%
for the term loan and less 0.75% for the revolving credit facility. Under the
term loan and revolving credit facility, the Company is required to adhere to
several financial covenants some of which involve working capital, current
ratio, net worth and fixed charge coverage minimums. The revolving credit
facility expires June 30, 1998.
24
<PAGE> 26
7. PENSION AND OTHER BENEFIT PLANS
The Company maintains pension plans (the "Plans") for its hourly
employees at its paperboard mills. Normal monthly retirement benefits are based
on negotiated benefit levels and the employee's years of credited service.
Contributions to the Plans are based on actuarial calculations of amounts
necessary to cover normal costs and to amortize prior service costs.
<TABLE>
<CAPTION>
Years Ended June 30
- ------------------------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested Portion $ (1,369,000) $ (1,417,000)
Non-vested portion (87,000) (78,000)
- ------------------------------------------------------------------------------------------------------------------------
Total (1,456,000) (1,495,000)
Effect of future compensation -- --
- ------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (1,456,000) (1,495,000)
Fair value of plan assets 1,569,000 1,417,000
- ------------------------------------------------------------------------------------------------------------------------
Excess (deficiency) of projected benefit obligation
over fair value of plan assets 113,000 (78,000)
Unrecognized obligation at transition 56,000 64,000
Unrecognized prior service costs 224,000 245,000
Unrecognized net gain (314,000) (178,000)
Minimum liability -- (131,000)
- ------------------------------------------------------------------------------------------------------------------------
Net accrued pension cost $ 79,000 $ (78,000)
========================================================================================================================
</TABLE>
Pension expense included the following components:
<TABLE>
<CAPTION>
Years Ended June 30
========================================================================================================================
1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Benefits earned by employees $ 46,000 $ 63,000
Interest cost on projected benefit obligation 106,000 101,000
Actual return on plan assets (86,000) (107,000)
Net amortization and deferral 29,000 69,000
- ------------------------------------------------------------------------------------------------------------------------
Net pension cost $ 95,000 $ 126,000
========================================================================================================================
</TABLE>
The actuarial assumptions used to determine pension expense and the
funded status of the Plans were a settlement rate on benefit obligations of
7.75% for 1996 and 7.25% for 1995 and an expected long-term rate of return on
plan assets of 6.0% for 1996 and 1995. The unrecognized prior service costs and
unrecognized net gain are being amortized over approximately 15 years. The
assets of the Plans at June 30, 1996, consist mostly of bonds, both corporate
and government, and also stocks and cash or cash equivalents.
Effective December 31, 1994, Republic Group Incorporated changed the
retirement benefits at its Commerce City, Colorado paperboard mill, resulting
in the freezing of benefits under the defined pension plan. The Duke Oklahoma
facility employee savings plan was also discontinued on December 31, 1994 and
benefits were frozen. Such benefits will be paid in accordance with the terms
of each plan. These plans were replaced with a voluntary 401(k) Plan (the
"401(k) Plan"). Additionally, the same 401(k) Plan was installed at the
Company's
25
<PAGE> 27
Topeka, Kansas, and Kansas City, Missouri facility locations on January 1, 1995
and the Halltown, West Virginia facility on April 1, 1996. The participants in
the 401(k) Plan include eligible employees at the above locations, as well as
all salaried employees company-wide. Although there is one 401(k) Plan for all
Company locations, there are various employee and employer contribution limits,
employer matching percentages, and employer vesting schedules for each
location.
Contributions to the 401(k) and employee savings plan were:
<TABLE>
<CAPTION>
Years Ended June 30
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee savings plan $ -- $ 15,000 $ 28,000
401(k) Plan contributions 422,000 354,000 225,000
- ------------------------------------------------------------------------------------------------------------------------
Total contributions $ 422,000 $ 369,000 $ 253,000
========================================================================================================================
</TABLE>
Other employee benefit plans include a Key Employee Continuation Plan
to encourage the continued attention and dedication of key employees. A
description of the plan is available in the Company's Proxy Statement.
8. OTHER COMMITMENTS AND CONTINGENT LIABILITIES
In connection with the Company's preparation for a warehouse addition
to its paperboard mill located in Commerce City, Colorado, a suburb of Denver,
the Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company has
conducted its own investigations, and the adjacent property owner has conducted
its own investigations. Additionally, the Company and the adjacent owner have
jointly sponsored investigations. Discussions between the parties continue. The
Company has completed the construction of the warehouse addition under approval
of the Colorado Department of Health.
At this time, the Company has not ascertained the future liability, if
any, of the above matter. Environmental expenditures directly related to this
matter were $3,000 in fiscal 1996, $32,000 in fiscal 1995, and $37,000 in
fiscal 1994. These costs were included in selling and administrative expenses.
Due to the complexity of the environmental laws, rules and policies currently
applicable to the Company and the uncertainty about future changes in such laws
and regulations, the Company maintains accounting reserves for future
unexpected expenses of the nature and magnitude incurred during the past three
years.
9. STOCK OPTIONS
Options have been granted to key employees at prices which represent
fair market value at dates of grant, have terms ranging from five to ten years
and are exercisable at 20% to 25% per year on a cumulative basis beginning one
year from date of grant. In addition, some grants are only exercisable if
certain Company performance targets are attained. The Company is authorized to
grant 420,000 shares of common stock to key employees in the 1989 Plan, and
105,000 shares to directors in the Non-Employee Director Plan. A summary of
transactions for the years ended June 30, 1996, 1995 and 1994 is set forth in
the following table:
26
<PAGE> 28
<TABLE>
<CAPTION>
Shares Rounded to Thousands 1989 Plan Director Plan
- ------------------------------------------------------------------------------------------------------------------------
Number Option Number Option
of price of price
shares range shares range
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Options:
Outstanding at
June 30, 1993 54,000 $ 4.75 - 5.50 63,000 $ 3.75 - 5.11
Granted 102,000 9.00 11,000 13.88
Cancelled (3,000) 4.88 - 5.50 -- --
Expired -- -- -- --
Exercised (3,000) 4.76 - 5.50 -- --
- ------------------------------------------------------------------------------------------------------------------------
Outstanding at
June 30, 1994 150,000 $ 4.75 - 9.00 74,000 $ 3.75 - 13.88
- ------------------------------------------------------------------------------------------------------------------------
Granted 65,000 8.88 -- --
Cancelled (5,000) 5.50 - 9.00 -- --
Expired -- -- -- --
Exercised (19,000) 4.88 - 9.00 (3,000) 5.12
- ------------------------------------------------------------------------------------------------------------------------
Outstanding at
June 30, 1995 191,000 $ 4.76 - 9.00 71,000 $ 3.75 - 13.88
- ------------------------------------------------------------------------------------------------------------------------
Granted 75,000 12.00 -- --
Cancelled -- -- -- --
Expired -- -- -- --
Exercised (34,000) $ 4.76 - 9.00 (13,000) 5.12
- ------------------------------------------------------------------------------------------------------------------------
Outstanding at
June 30, 1996 232,000 $ 4.88 - 12.00 58,000 $ 3.75 - 13.88
- ------------------------------------------------------------------------------------------------------------------------
Exercisable at
June 30, 1996 51,000 58,000
========================================================================================================================
</TABLE>
The 1979 Stock Option Plan terminated June 30, 1989. All remaining
options expired in October 1993 with the remaining 2,000 shares exercised in
fiscal 1994.
The 1989 Long-Term Incentive Plan (the "Incentive Plan") was approved
by stockholders at the Company's Annual Meeting held October 26, 1989. The
Incentive Plan is unlimited in duration and, unless it is modified or
terminated, will remain in effect as long as any options, restricted stock
awards, or performance unit awards remain outstanding. The Incentive Plan is
administered by the Board of Directors.
On August 7, 1989, the Board of Directors approved the Non-Employee
Director Stock Option Plan (the "Director Plan"). Each non-employee member of
the Board of Directors was granted an option to purchase 10,500 shares of
Common Stock. The options do not have fixed terms but will automatically
terminate 12 months after the director ceases to be a director by reason of his
death or permanent disability or 6 months after he ceases to be a director for
any other reason. On the date any new non-employee director becomes a member of
the Board of Directors, such director will be granted an option (exercisable
after completion of three calendar years of service on the Board of Directors)
to purchase 10,500 shares of Common Stock at a price equal to the fair market
value on the date of grant. The Director Plan is administered by a committee of
the Board of Directors composed of all employee directors.
27
<PAGE> 29
On May 16, 1996, the Board of Directors of the Company declared a
dividend distribution of one Common Stock Share Purchase Right (the "Right") on
each outstanding share of its common stock. The Rights replace existing common
stock share purchase rights that expired on May 16, 1996. The Rights will be
exercisable only if a person or group acquires 15% or more of the Company's
common stock or announces a tender offer the consummation of which would result
in ownership by a person or group of 15% or more of the common stock. Each
Right will entitle stockholders to buy one share of common stock of the Company
at an exercise price of $45.00. If the Company is acquired in a merger or other
business combination transaction after a person has acquired 15% or more of the
Company's outstanding common stock, each Right will entitle its holder to
purchase, at the Right's then-current exercise price, a number of the acquiring
company's common shares having a market value of twice such price. In addition,
if a person or group acquires 15% or more of the Company's outstanding common
stock, each Right will entitle its holder (other than such person or members of
such group) to purchase at the Right's then-current exercise price, a number of
the Company's common shares having a market value of twice such price. The
Rights exempt from the 15% threshold the current ownership, which exceeds such
threshold, by Phil Simpson, members of his family, family trusts and entities
controlled by them. Following the acquisition by a person or group of
beneficial ownership of 15% or more of the Company's common stock and prior to
an acquisition of 50% or more of the common stock, the Board of Directors may
exchange the Rights (other than Rights owned by such person or group), in whole
or in part, for shares of common stock at an exchange ratio of one share of
common stock per Right. Prior to the acquisition by a person or group of
beneficial ownership of 15% or more of the Company's common stock, the Rights
are redeemable for $.01 per Right at the option of the Board of Directors. The
Board of Directors is also authorized to reduce the 15% threshold referred to
above to not less than 10%. The Rights will expire on May 16, 2006. The Rights
distribution is not taxable to stockholders.
10. INCOME TAXES
The components of the provision for income taxes are:
<TABLE>
<CAPTION>
1996 1995 1994
==========================================================================================================================
<S> <C> <C> <C>
Current:
Federal $ 5,329,000 $ 5,631,000 $ 3,651,000
State 947,000 549,000 398,000
- --------------------------------------------------------------------------------------------------------------------------
6,276,000 6,180,000 4,049,000
- --------------------------------------------------------------------------------------------------------------------------
Deferred - federal 2,786,000 1,301,000 648,000
- --------------------------------------------------------------------------------------------------------------------------
Total Provision $ 9,062,000 $ 7,481,000 $ 4,697,000
==========================================================================================================================
</TABLE>
The differences between income taxes computed using the statutory
federal income tax rate and that shown in the Consolidated Statements of
Income are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
==========================================================================================================================
<S> <C> <C> <C>
Computed federal tax at statutory rate $ 8,390,000 $ 6,705,000 $ 4,229,000
Tax credits realized -- -- --
State taxes, net of federal tax benefit 616,000 356,000 263,000
Other 56,000 420,000 205,000
- --------------------------------------------------------------------------------------------------------------------------
$ 9,062,000 $ 7,481,000 $ 4,697,000
==========================================================================================================================
</TABLE>
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and their
financial reporting basis.
28
<PAGE> 30
As of June 30, 1996 and 1995, deferred tax assets (liabilities) as
determined under the provisions of SFAS 109, were comprised of the following:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
==========================================================================================================================
<S> <C> <C>
Gross deferred tax liability:
Depreciation/amortization $ (8,592,000) $ (5,765,000)
Gross deferred tax assets:
Employee benefit accruals 122,000 125,000
Accounts receivable reserves 214,000 209,000
Other accrued reserves 454,000 411,000
Other -- 4,000
- --------------------------------------------------------------------------------------------------------------------------
Gross deferred assets 790,000 749,000
- --------------------------------------------------------------------------------------------------------------------------
Deferred tax assets valuation reserve -- --
- --------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ (7,802,000) $ (5,016,000)
==========================================================================================================================
</TABLE>
The Company does not provide for a valuation reserve on deferred tax
assets based on the assumption of future taxable income.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table summarizes the carrying amounts and estimated fair
values of the Company's financial instruments as of June 30, 1996.
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
==========================================================================================================================
<S> <C> <C>
Cash and cash equivalents $ 2,243,000 $ 2,243,000
- --------------------------------------------------------------------------------------------------------------------------
Current investments and marketable securities 12,325,000 12,325,000
- --------------------------------------------------------------------------------------------------------------------------
Long-term investments 122,000 122,000
- --------------------------------------------------------------------------------------------------------------------------
Notes receivable 119,000 129,000
- --------------------------------------------------------------------------------------------------------------------------
Long-term debt 24,840,000 24,840,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:
CASH AND CASH EQUIVALENTS
The carrying amount is assumed to approximate fair value because of
the short maturities of those instruments.
CURRENT INVESTMENTS AND MARKETABLE SECURITIES
The estimated fair value of current investments and marketable
securities is based on quoted market prices for those or similar investments.
Costs approximate market value.
29
<PAGE> 31
LONG-TERM INVESTMENTS
The estimated fair value of long-term investments is based on quoted
market prices for those or similar investments.
NOTES RECEIVABLE
The estimated fair value of notes receivable is based on discounting
future cash flows using current interest rates at which similar loans would be
made to borrowers with similar credit ratings for the same remaining
maturities.
LONG-TERM DEBT
All the Company's long-term debt is at a short-term variable rate;
therefore the carrying value approximates market prices.
12. SELECTED QUARTERLY FINANCIAL DATA
The following tabulation presents selected unaudited results of
operations for the years ended June 30, 1996 and 1995 (in thousands, except for
per share data):
<TABLE>
<CAPTION>
Quarters ended
==========================================================================================================================
Sept. 30 Dec. 31 Mar. 31 June 30
==========================================================================================================================
<S> <C> <C> <C> <C>
1996
Gross Sales $ 36,623 $ 33,955 $ 33,860 $ 31,188
Less freight and discounts 4,351 4,227 4,674 4,472
- --------------------------------------------------------------------------------------------------------------------------
Net sales $ 32,272 $ 29,728 $ 29,186 $ 26,716
==========================================================================================================================
Operating profit $ 5,515 $ 7,234 $ 7,275 $ 5,381
Net income 3,168 4,130 4,158 3,456
Income per common and common
equivalent share 0.30 0.39 0.39 0.32
- --------------------------------------------------------------------------------------------------------------------------
1995
Gross Sales $ 24,781 $ 26,297 $ 30,881 $ 30,441
Less freight and discounts 3,928 3,951 4,350 3,758
- --------------------------------------------------------------------------------------------------------------------------
Net sales $ 20,853 $ 22,346 $ 26,531 $ 26,683
==========================================================================================================================
Operating profit $ 4,364 $ 4,823 $ 5,264 $ 4,557
Net income 2,676 2,846 3,232 2,923
Income per common and common
equivalent share 0.25 0.27 0.30 0.27
==========================================================================================================================
</TABLE>
13. NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation." As a result of this
statement, the Company will begin to provide additional disclosures related to
its stock based compensation plans in its fiscal 1997 financial statements.
Adoption of SFAS No. 123 will not have a material effect on the Company's
financial position or results of operations. The Company has adopted the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-lived
Assets," which did not have a material effect on the Company's financial
position or results of operations.
30
<PAGE> 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Republic Group
Incorporated:
We have audited the accompanying consolidated balance sheets of
Republic Group Incorporated (a Delaware corporation) and subsidiaries as of
June 30, 1996 and 1995, and the related consolidated statements of income, cash
flows and stockholders' equity for each of the three years in the period ended
June 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Republic Group
Incorporated and subsidiaries as of June 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
August 2, 1996
31
<PAGE> 33
REPORT OF MANAGEMENT
The management of Republic Group Incorporated is responsible for
preparing the consolidated financial statements and other information contained
in this annual report. Management believes that the consolidated financial
statements fairly reflect, in all material respects, the form and substance of
events and transactions and that the consolidated financial statements present
the Company's financial position and results of operations in conformity with
generally accepted accounting principles. Management has included in the
Company's consolidated financial statements amounts that are based on informed
judgments and estimates which it believes are reasonable under the
circumstances.
Republic Group Incorporated maintains a system of internal accounting
policies, procedures and controls intended to provide reasonable assurance, at
appropriate cost, that transactions are processed in accordance with Company
authorization and are properly recorded and reported in the consolidated
financial statements, and that assets are adequately safeguarded.
Arthur Andersen LLP, the Company's independent public accountants,
audits the Company's consolidated financial statements in accordance with
generally accepted auditing standards, which provide the basis of its report on
the consolidated financial statements.
The Board of Directors of the Company has an Audit Committee composed
of outside directors. The Committee meets with financial management and the
independent public accountants to review internal accounting controls and
accounting, auditing and financial reporting matters. In addition, Arthur
Andersen LLP has full and free access to the Audit Committee, without
management present, to discuss the results of its audits, the adequacy of the
Company's internal accounting controls and the quality of its financial
reporting.
Phil Simpson
Chairman of the Board
and President
August 26, 1996
Doyle R. Ramsey
Vice President-Finance and
Chief Financial Officer
August 26, 1996
32
<PAGE> 34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The sections entitled "Nominees for Directors" and "Compliance with
Section 16(a) of the Exchange Act" appearing in the Registrant's proxy
statement for the annual meeting of the stockholders to be held on October 24,
1996 sets forth certain information with respect to the directors of the
Registrant and is incorporated herein by reference. Certain information with
respect to persons who are or may be deemed to be executive officers of the
Registrant is set forth under the caption "Executive Officers of the
Registrant" in Item 4A of Part I of this report and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The sections entitled "Executive Compensation" and "Compensation of
Directors" appearing in the Registrant's proxy statement for the annual meeting
of stockholders to be held on October 24, 1996 sets forth certain information
with respect to the compensation of management of the Registrant and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
There is incorporated herein by reference the information in the
Company's 1996 Proxy Statement regarding beneficial ownership of shares of the
Company's Common Stock as of August 31, 1996 by each person known by the
Company to own beneficially more than 5% of the outstanding shares of such
Common Stock, by each director of the Company, and by certain executive
officers of the Company and by all directors and executive officers as a group
under the caption "Security Ownership".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the captions "Nominees for Directors" in the
Company's 1996 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
See Index to Financial Statements and Schedules of Registrant contained in Item
8, page 16.
2. Financial Statement Schedules
See Index to Financial Statements and Schedules of Registrant contained in Item
8, page 16.
3. The following documents are filed or incorporated by
reference as exhibits to this Report as required by Item 601 of Regulation S-K:
3(a) Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3(a) to the Company's
Quarterly Report on Form 10-Q for the period year ended
September 30, 1995, SEC File Number 1-7210).
3(b) Bylaws of the Company, as amended.
4(a) Revolving and Term Credit Agreements (with related Promissory
Notes, Security Agreement, Mortgage, Deed of Trust, Guaranties
attached as Exhibits hereto) dated as of June 30, 1995, among
Republic Gypsum Company, Republic Paperboard Company, and
Republic Paperboard Company of West Virginia and Boatmen's
First National Bank of Kansas City (incorporated by reference
to Exhibit 4(i) of the Company's current report on Form 8-K
filed July 17, 1995, SEC File Number 1-7210).
33
<PAGE> 35
4(b) Amendments One, Two and Three to Revolving and Term Credit
Agreements, in reference to the Agreements and Exhibits in
4(a) above, relating to the Company's name change from
Republic Gypsum Company to Republic Group Incorporated and to
extend the Revolving Credit Agreement one year.
10(a) The 1989 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10(b) to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1989, SEC File Number
1-7210), which is a "management contract or compensatory plan
or arrangement."
10(b) Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit 10(c) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1989, SEC File
Number 1-7210), which is a "management contract or
compensatory plan or arrangement."
10(c) Non-Employee Directors' Retirement Compensation Arrangement
(incorporated by reference to the description set forth under
the caption "Executive Compensation - Director Retirement
Compensation Arrangement" in the Company's Proxy Statement for
the Annual Meeting of Stockholders held October 26, 1989, SEC
File Number 1-7210), which is a "management contract or
compensatory plan or arrangement."
10(d) Tenancy in Common Agreement dated December 29, 1983, between
Packaging Corporation of America and Republic Paperboard
Company (incorporated by reference to Exhibit 10(d) to the
Company's Annual Report on 10-K for the year ended June 30,
1994, SEC File Number 1-7210).
10(e) Shared Facilities and Shared Service Agreement dated December
28, 1983, between Packaging Corporation of America and
Republic Paperboard Company (incorporated by reference to
Exhibit 10(e) to the Company's Annual Report on 10-K for the
year ended June 30, 1994, SEC File Number 1-7210).
10(f) Key Employee Continuation Plan (incorporated by reference to
Exhibit 10(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1992, SEC File Number 1-7210),
which is a "management contract or compensatory plan or
arrangement".
10(g) Asset Purchase Agreement, dated as of June 30, 1995, between
Old Dominion Box Company, Inc., Halltown Paperboard Company,
Dillard Investment Corporation, and Republic Gypsum Company
and Republic Paperboard Company of West Virginia (incorporated
by reference to Exhibit 2(i) and 2(ii) to the Company's
Current Report on Form 8-K, dated July 17, 1995, SEC File
Number 1-7210).
21 Significant Subsidiaries of the Registrant.
23 Consent of Independent Public Accountants.
24 Power of Attorney on Page 35 of this Report.
27 Article 5 of Regulation S-X.
(b) Reports on Form 8-K. The Company filed a form 8-K, dated May
16, 1996 (date of earliest event reported), and filed May 21, 1996, stating
that on April 30, 1996, the Board of Directors of the Company declared a
dividend distribution of one common stock purchase right (a "Right") for each
outstanding share of common stock $1.00 per value (the "Common Stock"), of the
Company. The distribution was paid on May 16, 1996 to the stockholders of
record on that date. The form 8-K includes Item 5, Other Events, and Item 7,
Financial Statements and Exhibits in support of Item 5.
34
<PAGE> 36
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors
and officers of Republic Group Incorporated hereby constitutes Phil Simpson,
Stephen L. Gagnon and Doyle R. Ramsey his true and lawful attorneys-in- fact
and agents, for his and in his name, place and stead, in any and all
capacities, with full power to act alone, to sign any and all amendments to
this Annual Report on Form 10-K, and to file each such amendment to the Report,
with all exhibits thereto, and any and all other documents in connection
therewith, with the Securities and Exchange Commission, hereby granting unto
said attorneys-in-fact and agents full power and authority to do and perform
any and all acts and things requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has fully caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: September 9, 1996
REPUBLIC GROUP INCORPORATED
By: /s/ Phil Simpson
----------------------------------
Phil Simpson, Chairman of the
Board and President
35
<PAGE> 37
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Phil Simpson Chairman of the Board, September 6, 1996
- ---------------------------- President and Director
(principal executive
officer)
/s/ Stephen L. Gagnon Executive Vice September 6, 1996
- ---------------------------- President and
Director
/s/ Doyle R. Ramsey Vice President and September 6, 1996
- ---------------------------- Chief Financial
Officer (principal
financial officer)
/s/ John W. McCracken Controller (principal September 6, 1996
- ---------------------------- accounting officer)
/s/ Bert A. Nelson Director September 9, 1996
- ----------------------------
/s/ Talbot Rain Director September 9, 1996
- ----------------------------
/s/ Gerald L. Ray Director September 9, 1996
- ----------------------------
/s/ Robert F. Sexton Director September 9, 1996
- ----------------------------
/s/ David P. Simpson Director September 9, 1996
- ----------------------------
/s/ L. L. Wallace Director September 9, 1996
- ----------------------------
/s/ David B. Yarbrough Director September 9, 1996
- ----------------------------
</TABLE>
36
<PAGE> 38
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: The Stockholders and Board of Directors of
Republic Group Incorporated
We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of Republic Group Incorporated and
subsidiaries included in this Form 10-K and have issued our report thereon
dated August 2, 1996. Our audits were made for the purpose of forming an
opinion on the basic consolidated financial statements taken as a whole.
Schedule II, Valuation and Qualifying Accounts and Reserves, is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas
August 2, 1996
S-1
<PAGE> 39
REPUBLIC GROUP INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended June 30, 1994, 1995, and 1996
<TABLE>
<CAPTION>
Additions Charged to
Balance at ----------------------------- Balance
beginning Cost and Other at end
of year expenses accounts Deductions (A) of year
---------- ---------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C>
1994:
Allowance for
doubtful
accounts $377,000 $ 159,000 $ -- $ 281,000 $ 255,000
======== ========== =========== =========== ==========
1995:
Allowance for
doubtful
accounts $255,000 $ 428,000 $ -- $ 69,000 $ 614,000
======== ========== ============ ========== ==========
1996:
Allowance for
doubtful
accounts $614,000 $ 1,000 $ -- $ (18,000) $ 633,000
======== ========== ============ ========== ==========
</TABLE>
(A) Uncollectible accounts charged off, net of recoveries.
S-2
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
3(b) Amended and Restated Bylaws of the Company
4(b) Amendments One, Two and Three to Revolving and Term Credit
Agreements
21 Significant Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
27 Article 5 of Regulation S-X.
</TABLE>
<PAGE> 1
EXHIBIT 3(b)
REPUBLIC GROUP INCORPORATED
AMENDED AND RESTATED BYLAWS
I
OFFICES
1. Registered Office. The registered office in the State of
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware.
2. Other Offices. The corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation
may require.
II
MEETINGS OF STOCKHOLDERS
1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place
either within or without the State of Delaware as the Board of Directors may
from time to time designate as stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
2. Advance Notice Requirements for Directors Nominations.
(a) Subject to Article III, Section 2 of these Bylaws,
only persons who are nominated in accordance with the procedures set
forth in these Bylaws shall be eligible to serve as directors.
Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders (1) by or at the
direction of the Board of Directors or by any nominating committee or
person appointed by the Board of Directors and (2) by any stockholder
of the corporation entitled to vote for the election of directors at
the meeting, who is a stockholder of record at the time of giving the
notice provided for in these Bylaws and who complies with the notice
procedures set forth in these Bylaws.
(b) In addition to any other applicable requirements, and
subject to any limitations on business which may be proposed or
transacted at such meeting, including, without limitation, Article II,
Section 5 of these Bylaws, nominations for directors, other than
nominations made by or at the direction of the Board of Directors or
by any nominating committee or person appointed by the Board of
Directors, shall be made pursuant to timely notice in writing to the
Secretary of the corporation. To be timely with respect to an annual
meeting of stockholders, a stockholder's notice must be received at
the principal executive offices of the corporation not less than sixty
(60) days nor more than one hundred twenty days (120) prior to the
date of the annual meeting of stockholders; provided, however, that in
the event that the first public disclosure (whether by mailing of a
notice to stockholders or the exchange on which the common stock of
the corporation is listed or to the Nasdaq National Market, by press
release or otherwise) of the date of the annual meeting of the
stockholders is made less than sixty-five (65) days prior to the date
of such meeting, notice by a stockholder
<PAGE> 2
will be timely if received at the principal executive offices of the
corporation not later than the close of business on the tenth (10) day
following the day on which such public disclosure is first made. To
be timely with respect to a special meeting of stockholders at which
directors are to be elected, a stockholder's notice must be received
at the principal executive offices of the corporation not later than
the close of business on the tenth (10th) day following the day on
which the first public disclosure (whether by mailing of a notice to
stockholders or the exchange on which the common stock of the
corporation is listed or to the Nasdaq National Market, by press
release or otherwise) of the date of the special meeting is made.
(c) A stockholder's notice of a director nominee shall
set forth (1) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (a) the name, age,
business address and residence address of the person; (b) the
principal occupation or employment of the person; (c) the class and
number of shares of capital stock of the corporation which are
beneficially owned by the person; and (d) such other information
relating to the person, as would be required under the rules of the
Securities and Exchange Commission in a proxy statement soliciting
proxies for the election of such person whether or not such proxies
are in fact solicited for the election of such person; and (2) as to
the stockholder giving the notice (a) the name and address, as they
appear on the corporation's stock register, of the stockholder; (b)
the class and number of shares of capital stock of the corporation
which are beneficially owned by the stockholder; and (c) such other
information relating to the stockholder or the nomination as is
required to be disclosed under the rules of the Securities and
Exchange Commission governing the solicitation of proxies whether or
not such proxies are in fact solicited by the stockholder. Such
notice must also include a signed consent of each such nominee to
serve as a director of the corporation, if elected or re-elected.
The corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to
determine the eligibility for election of such nominee as a director
of the corporation. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a director
nomination was not made in accordance with the foregoing procedure,
and if he should so determine, the defective nomination shall be
disregarded.
(d) Notwithstanding the foregoing provisions of these
Bylaws, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set
forth in this Article II, Section 2.
3. Annual Meeting. Annual meetings of stockholders shall be
held on the fourth Thursday in October of each year if not a legal holiday
under laws of the state where such meeting is to be held, and if a legal
holiday under the laws of said state, then on the succeeding business day not a
legal holiday under the laws of said state, or at such other date and at such
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which the stockholders shall elect by a
plurality vote a Board of Directors and transact such other business as may
properly be brought before the meeting.
4. Advance Notice Requirements for Business Conducted at
Stockholder Meetings.
-2-
<PAGE> 3
(a) At an annual or special meeting of the stockholders,
only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual
or special meeting of stockholders, business must be (1) specified in
the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (2) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or
(3) otherwise properly brought before the meeting by any stockholder
of the corporation who is entitled to vote at such meeting, who is a
stockholder of record at the time of giving of the notice provided for
in these Bylaws and who complies with the notice procedures set forth
in these Bylaws.
(b) In addition to any other applicable requirements, and
subject to any limitations on business which may be proposed or
transacted at such meeting, including, without limitation, Article II,
Section 5 of these Bylaws, for business to be properly brought before
an annual or special meeting by a stockholder pursuant to clause (3)
of paragraph (a) above, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely
with respect to an annual meeting of stockholders, a stockholder's
notice must be received at the principal executive offices of the
corporation not less than sixty (60) days nor more than one hundred
twenty days (120) prior to the date of the annual meeting; provided,
however, that in the event that the first public disclosure (whether
by mailing of a notice to stockholders or the exchange on which the
common stock of the corporation is listed or to the Nasdaq National
Market, by press release or otherwise) of the date of the annual
meeting is made less than sixty-five (65) days prior to the date of
the meeting, notice by a stockholder will be timely if received not
later than the close of business on the tenth (10) day following the
day on which such public disclosure is first made. To be timely with
respect to a special meeting of stockholders, a stockholder's notice
must be received at the principal executive offices of the corporation
not later than the close of business on the tenth (10th) day following
the day on which the first public disclosure (whether by mailing of a
notice to stockholders or the exchange on which the stock of the
corporation is listed or to the Nasdaq National Market, by press
release or otherwise), of the date of the special meeting is made.
(c) A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the
meeting (1) a reasonably detailed description of the business desired
to be brought before the meeting and the reasons for conducting such
business at the meeting, (2) the name and address, as they appear on
the corporation's books, of the stockholder proposing such business,
and the name and address of the beneficial owner, if any, on whose
behalf the proposal is made, (3) the class and number of shares of the
corporation which are owned beneficially and of record by such
stockholder of record and by the beneficial owner, if any, on whose
behalf the proposal is made, (4) any material interest of such
stockholder of record and the beneficial owner, if any, on whose
behalf the proposal is made in such business, and (5) such other
information relating to the stockholder or the business proposed to be
brought before the meeting as is required to be disclosed under the
rules of the Securities and Exchange Commission governing the
solicitation of proxies whether or not such proxies are in fact
solicited by the stockholder. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at an annual or
special meeting of stockholders
-3-
<PAGE> 4
except in accordance with the procedures set forth in this Article II,
Section 4 (or to the extent applicable, Article II, Section 2);
provided, however, that nothing in this Article II, Section 4 shall be
deemed to preclude discussion by any stockholder of any business
properly bought before the annual or special meeting of stockholders
in accordance with said procedures.
(d) The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the procedures
prescribed by these Bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. Notwithstanding the
foregoing provisions of these Bylaws, a stockholder shall also comply
with all applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Article II, Section 4.
(e) Notwithstanding anything in this Section 4, or these
Bylaws, should an annual or special meeting be convened and
subsequently adjourned, no business may be brought before any
reconvened annual or special meeting that was not, pursuant to these
Bylaws, properly brought before the annual or special meeting that was
previously adjourned.
5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chairman of the Board, or,
in the event of his absence or unavailability, the President, and shall be
called by the President or Secretary at the request in writing of a majority of
the Board of Directors, or at the request in writing of stockholders owning at
least sixty percent (60%) of the common stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Notice of Meetings. Except as otherwise expressly
required by statute, written notice of each annual meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
given to each stockholder of record entitled to vote at such meeting not less
than ten nor more than sixty days before the date of the meeting. Notice shall
be given personally or by mail and, if by mail, shall be sent in a postage
prepaid envelope, addressed to the stockholder at the address appearing on the
records of the corporation. Notice by mail shall be deemed given at the time
when the same shall be deposited in the United States mail, postage prepaid.
Notice of any meeting shall not be required to be given to any person who
attends such meeting, except when such person attends the meeting by person or
by proxy for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened, or who, either before or after the meeting, shall submit a signed
written waiver of notice, in person or by proxy. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of stockholders
need be specified in any written waiver of notice.
Section 7. Business Transacted at Special Meetings. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
-4-
<PAGE> 5
Section 8. List of Stockholders. The officer who has charge of
the stock ledger of the corporation shall prepare and make, at least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, showing the
address of, and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city, town or village where the meeting is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where the meeting is to be held. The list shall be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 9. Quorum; Adjournments. The holders of a majority of
shares entitled to vote at a meeting of stockholders, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation, as amended from time to time.
A quorum, once established, shall not be broken by the withdrawal of enough
votes to leave less than a quorum, and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. If the adjournment is for more than thirty days, or,
if after adjournment a new record date is set, then a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 10. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
Section 11. Voting. Except as otherwise provided by statute or the
corporation's certificate of incorporation, each stockholder of the corporation
shall be entitled at each meeting of stockholders to one vote for each share of
capital stock of the corporation standing in his or her name on the record of
the stockholders of the corporation:
(a) on the date fixed pursuant to the provisions of
Section 5 of Article 5 of these Bylaws as the record date for the
determination of the stockholders who shall be entitled to notice of
and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then
at the close of business on the day next preceding the day on which
notice thereof shall be given, or, if notice is waived, at the close
of business on the date next preceding the day on which the meeting is
held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him or her by a proxy signed by such
stockholder or the stockholder's attorney-in-fact, but no proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
Any such proxy shall be delivered to the secretary of the meeting at or prior
to the time designated in the order of business for so delivering such proxies.
When a quorum is present at any
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meeting, the vote of the holders of a majority of the voting power of the
issued and outstanding stock of the corporation entitled to vote thereon,
present in person or represented by proxy, shall decide any matter brought
before such meeting, unless the matter is one upon which by express provision
of statute or of the certificate of incorporation or of these bylaws, a
different vote is required, in which case such express provision shall govern
and control the decision of such matter. Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
matter need not be by written ballot. On a vote by written ballot, each
written ballot shall be signed by the stockholder voting, or by his or her
proxy, and shall state the number of shares voted.
Section 12. Inspectors. The Board of Directors shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof and make a written report thereof. If any
of the inspectors so appointed shall fail to appear or shall be unable to act,
the chairman of the meeting shall appoint one or more inspectors. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his or her ability. The
inspectors shall ascertain the numbers of shares of capital stock of the
corporation outstanding and the voting power of each, determine the number of
shares represented at the meeting and the validity of proxies and ballots,
count all votes and ballots, determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors and certify their determination of the number of shares represented
at the meeting and their count of all votes and ballots. The inspectors may
appoint or retain other persons or entities to assist the inspectors in the
performance of their duties. No director or candidate for the office of
director shall act as an inspector of an election of directors. Inspectors
need not be stockholders or employees of the corporation.
III
DIRECTORS
1. Number. The number of directors which shall constitute the
whole Board of Directors shall be determined from time to time by resolution of
the Board of Directors. The directors shall be elected at the annual meeting
of stockholders, except as provided in Section 2 of this article; and each
director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
2. Vacancies. Vacancies and newly-created directorships
resulting from any increase in the authorized number of directors, and
vacancies whether because of death, resignation, disqualification, or any other
cause, may be filled by a majority of the directors then in office, though less
than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify, unless sooner displaced.
3. Authority of Board. The business of the corporation shall be
managed by its Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
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4. Meetings. The Board of Directors of the corporation shall
hold meetings, both regular and special, at such place or places, either within
or without the State of Delaware, as the Board of Directors may determine from
time to time or as shall be specified in the notice of any such meeting.
5. Annual Meetings. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. If such annual meeting is not so
held, then the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware) as shall be
specified in a notice thereof (or written waiver thereof) given as hereinafter
provided in Section 8 of this Article 3.
6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board.
7. Special Meetings. Special meetings of the board may be called
by the Chairman of the Board, or, in the event of his absence or
unavailability, the President, on twenty-four hours' notice to each director in
the manner provided pursuant to Section 8 of this Article 3; special meetings
shall be called by the President or Secretary in like manner and on like notice
on the written request of two directors.
8. Notice of Meetings. Notice of each special meeting of the
board (and of each regular or annual meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 8, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these bylaws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be sent to each
director, addressed to such director at his or her residence or usual place of
business, by telegraph, cable, telex, telecopier or other similar means, or
delivered to him or her personally or given to him or her by telephone or other
similar means, at least twenty-four hours before the time at which such meeting
is to be held. Notice of any such meeting need not be given to any director
who shall, either before or after the meeting, submit a signed wavier of notice
or who shall attend such meeting, except when he or she shall attend for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
9. Quorum; Adjournments. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute, the certificate of incorporation or these bylaws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. A quorum, once established, shall
not be broken by the withdrawal of enough directors to leave less than a
quorum, and the directors present may continue to transact business until
adjournment. In the absence of a quorum at any meeting of the Board of
Directors, a majority of the directors present at such meeting may adjourn such
meeting to another time and place. Notice of the time and place of any such
adjourned meeting shall be given to all of the directors unless such time and
place were announced at the meeting at which the adjournment was taken, in
which case such notice shall only be given to the directors who were not
present at such meeting. At any adjourned meeting at
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which a quorum is present, any business may be transacted that might have been
transacted at the meeting as originally called.
10. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if prior to such action a written
consent thereto is signed by all members of the board or of such committee, as
the case may be, and such written consent is filed with the minutes of the
proceedings of the board or committee.
11. Telephonic Meetings. Unless restricted by the certificate of
incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation by such means shall constitute presence in person at
a meeting.
12. Committees. The Board of Directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which,
to the extent provided in the resolution, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the corporation and may authorize the seal of the corporation to be affixed
to all papers which may require it. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors.
13. Record of Committee Meetings. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
14. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
15. Resignation. Any director of the corporation may resign at
any time by giving written notice of his or her resignation to the corporation.
Any such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon its receipt by the corporation. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
IV
OFFICERS
1. Number of Officers. The officers of the corporation shall be
chosen by the Board of Directors and shall be a Chairman of the Board, a
President, a Vice President, a Secretary, a Treasurer and a Controller. The
Board of Directors may also choose additional Vice Presidents, and one or more
Assistant Secretaries and Assistant Treasurers. Two or more offices may be
held by the same person.
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2. Annual Appointment of Officers. The Board of Directors, at
its first meeting after each annual meeting of stockholders shall choose a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer.
3. Regular Appointment of Officers. The Board of Directors may
appoint such other officers (including a Chief Executive Officer) and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the board.
4. Compensation of Officers. The salaries of all officers and
agents of the corporation shall be fixed by the Board of Directors.
5. Removal; Vacancies. The officers of the corporation shall
hold office until their successors are chosen and qualify. Any officer elected
or appointed by the Board of Directors may be removed, either with or without
cause, at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
6. Resignation. Any officer of the corporation may resign at any
time by giving written notice of his resignation to the corporation. Any such
resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
receipt by the corporation. Unless otherwise specified therein, the acceptance
of any such resignation shall not be necessary to make it effective.
7. Chairman of the Board. The Chairman of the Board shall be
elected from among the members of the Board of Directors and shall preside at
all meetings of the stockholders and the Board of Directors unless he shall, at
his option, designate the President to preside in his stead at some particular
meeting and shall perform such other duties and have such other powers as the
Board of Directors shall from time to time prescribe.
8. President. The President shall preside at the meetings of the
Board of Directors and stockholders in the absence of the Chairman of the
Board. Subject to the supervision, approval and review of his action by the
Board of Directors, the President shall have the authority to execute bonds,
mortgages, instruments, contracts, agreements and stock certificates in the
name of and on behalf of the corporation, except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the corporation. The President shall put into
operation the business policies of the corporation as determined by the Board
of Directors and as communicated to him by such body. In carrying out such
business policies, the President shall, subject to the supervision of the Board
of Directors, have general management and control of the day to day business
operations of the corporation. The President shall be subject only to the
authority of the Chairman of the Board and the Board of Directors in carrying
out his duties. He shall make recommendations to the Chairman of the Board on
all matters which would normally be reserved for the final executive
responsibility of the Chairman of the Board. In the absence or disability of
the President, his duties shall be performed and his powers may be exercised by
the Executive Vice Presidents in order of their seniority (or if there should
be no Executive Vice Presidents then by the
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Vice Presidents in the order if their seniority), unless otherwise determined
by the President, the Chairman of the Board or the Board of Directors.
9. Executive Vice Presidents. The Executive Vice Presidents
shall generally assist the Chairman of the Board and the President and, subject
to the supervision, approval and review of their actions by the Chairman of the
Board, the President and the Board of Directors, shall have authority to
execute bonds, mortgages, instruments, contracts, agreements and stock
certificates in the name of and on behalf of the corporation, except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation. The Executive
Vice Presidents shall have and exercise such powers and have and perform such
duties as shall be assigned to them from time to time by the President, the
Chairman of the Board and the Board of Directors.
10. Vice Presidents. The Vice Presidents (who shall have such
descriptive titles, if any, as the Board of Directors shall deem appropriate)
shall generally assist the Chairman of the Board, the President, and the
Executive Vice Presidents and, subject to supervision, approval and review of
their actions by the Chairman of the Board, the President, the Executive Vice
Presidents and the Board of Directors, shall have authority to execute bonds,
mortgages, instruments, contracts, agreements and stock certificates in the
name of and on behalf of the corporation, except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the corporation. The Vice Presidents shall have
and exercise such powers and have and perform such duties as shall be assigned
to each of them from time to time by the Executive Vice Presidents, the
President, the Chairman of the Board and the Board of Directors.
11. Assistant Vice Presidents. The Assistant Vice Presidents
shall generally assist the Chairman of the Board, the President, the Executive
Vice Presidents and the Vice Presidents and shall have and exercise such power
and have and perform such duties as shall be assigned to each of them from time
to time by the Vice Presidents, the Executive Vice Presidents, the President
and the Chairman of the Board.
12. Secretary. The Secretary shall attend all meetings of the
Board of Directors when required and all meetings of the stockholders and
record all the proceedings of the meeting of the corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. The Secretary shall give, or
cause to be given, all notices required by the provisions of these bylaws or as
required by law, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision the Secretary
shall be. The Secretary shall keep in safe custody the records and the seal of
the corporation and, when authorized by the Board of Directors, affix the seal
to any instrument requiring it and when so affixed it shall be attested by the
Secretary's signature or by the signature of an assistant secretary. The
Secretary shall see that the books, reports, statements, and certificates
required by statutes or laws applicable to the corporation are properly kept,
made and filed according to law.
13. Assistant Secretary. The Assistant Secretary, or, if there be
more than one, the Assistant Secretaries in the order determined by the Board
of Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall
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perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
14. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities, shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
15. Disbursement of Funds; Corporate Accounting. The Treasurer
shall disburse the funds of the corporation as may be ordered by the Board of
Directors, taking proper voucher for such disbursements, shall receive and give
receipts for monies due and payable to the corporation from any source
whatsoever and shall render to the President and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
transactions as Treasurer and of the financial condition of the corporation.
16. Treasurer's Bond. If required by the Board of Directors, the
Treasurer shall give the corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of such
office and for the restoration to the corporation, in case of the death,
resignation, retirement or removal of the Treasurer from office, of all books,
papers, vouchers, money and other property belonging to the corporation of
whatever kind in the possession or under the control of the Treasurer.
17. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
V
CERTIFICATES OF STOCK
1. Stock Certificates. Every holder of stock in the corporation
shall be entitled to have a certificate signed by, or in the name of the
corporation by, the Chairman of the Board, the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares owned by him or
her in the corporation. If the corporation shall be authorized to issue more
than one class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise provided in Section 202 of the General Corporation Law of the State
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions or such preferences and/or rights.
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2. Facsimile Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall cease to be such officer, transfer agent or registrar whether
because of death, resignation or otherwise, before such certificate has been
issued by the corporation, such certificate may nevertheless be adopted by the
corporation and issued with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
4. Transfers of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction its books; provided, however, that the corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of transfer if, when the
certificates are presented to the corporation for transfer, both the transferor
and the transferee request the corporation to do so.
5. Fixing the Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may, in its discretion,
fix a new record date for the adjourned meeting. Only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, as the case may be, notwithstanding
any transfer of any stock on the books of the corporation after any such record
date fixed as aforesaid.
6. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share
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or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
VI
INDEMNIFICATION
1. Actions, Suits, or Proceedings Other Than by or in the Right
of the Corporation.
(a) The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, arbitrate or investigative (other than an
action by or in the right of the corporation) by reason of the fact
that he is or was or has or had agreed to become a director or officer
of the corporation, or (while a director or officer of the
corporation) is or was serving or has or had agreed to serve at the
request of the corporation as an employee or agent of the corporation,
or as a director, officer, partner, venturer, proprietor, trustee,
committee member, administrator, employee or agent of another
corporation, partnership, joint venture, sole proprietorship, trust or
other enterprise, or by reason of any action alleged to have been
taken or omitted in any such capacity against costs, charges, expenses
(including attorneys' fees), judgments, fines, penalties and amounts
paid in settlement incurred by him or on his behalf in connection with
such action, suit, or proceeding and any appeal therefrom, if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to be his
conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order settlement, conviction, or upon a plea
of NOLO CONTENDERE or its equivalent, shall not create a presumption
that the person did not act in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative (other than an
action by or in the right of the corporation) by reason of the fact
that he is or was or has or had agreed to become an employee or agent
of the corporation, or (while an employee or agent of the corporation)
is or was serving or has or had agreed to serve at the request of the
corporation as a director, officer, partner, venturer, proprietor,
trustee, committee member, administrator, employee or agent of another
corporation, partnership, joint venture, sole proprietorship, trust or
other enterprise, or by reason of any action alleged to have been
taken or omitted in any such capacity against costs, charges, expenses
(including attorneys' fees), judgments, fines, penalties and amounts
paid in settlement incurred by him or on his behalf in connection with
such action, suit, or proceeding and any appeal therefrom, if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order settlement, citation, or upon a plea of
NOLO CONTENDERE or its equivalent, shall
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not create a presumption that the person did not act in good faith and
in a manner that he really believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
2. Actions or Suits by or in the Right of the Corporation.
(a) The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact
that he is or was or has or had agreed to be a director or officer of
the corporation, or (while a director or officer of the corporation)
is or was serving or has or had agreed to serve at the request of the
corporation as an employee or agent of the corporation or as a
director, officer, partner, venturer, proprietor, trustee, committee
member, administrator, employee or agent of another corporation,
partnership, joint venture, sole proprietorship, trust or other
enterprise, or by reason of any action alleged to have been taken or
omitted in any such capacity, against costs, charges, and expenses
(including attorneys' fees) incurred by him or on his behalf in
connection with such action or suit, and any appeal therefrom, if he
acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue, or
matter as to which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity
for such costs, charges, and expenses that the Court of Chancery or
such other court shall deem proper.
(b) The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact
that he is or was or has or had agreed to become an employee or agent
of the corporation, or (while an employee or agent of the corporation)
is or was serving or has had agreed to serve at the request of the
corporation as a director, officer, partner, venturer, proprietor,
trustee, committee member, administrator, employee or agent of another
corporation, partnership, joint venture, sole proprietorship, trust or
other enterprise, or by reason of any action alleged to have been
taken or omitted in any such capacity, against costs, charges, and
expenses (including attorneys' fees) incurred by him or on his behalf
in connection with such action or suit, and any appeal therefrom, if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that
no indemnification shall be made in respect of any claim, issue, or
matter as to which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity
for such costs, charges, and expenses that the Court of Chancery or
such other court shall deem proper.
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3. Indemnification for Costs, Charges, and Expenses of Successful
Party. Notwithstanding the other provisions of this Article, to the extent
that a director, officer, employee or agent of the corporation has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit, or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of
any claim, issue, or matter therein, he shall be indemnified against any and
all costs, charges, and expenses (including attorneys' fees) incurred by him or
on his behalf in connection therewith.
4. Determination of Right to Indemnification.
(a) Any indemnification under Sections 1(a) or 2(a) of
this Article (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is
proper in the circumstances because he has met the applicable standard
of conduct set forth in Section 1(a) or 2(a) of this Article. Such
determination shall be made (i) by a majority vote of the directors
who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) if there are no such directors, or if such
directors so direct, by independent legal counsel (which may be
outside counsel regularly employed by the corporation) in a written
opinion, or (iii) by the stockholders; provided, however, that the
manner in which (and, if applicable, the counsel by which) the right
to indemnification is to be determined shall be approved in advance in
writing by both the corporation and the director or officer seeking
indemnification. In the event that the parties are unable to agree on
the manner in which the determination of the right to indemnity is to
be made, such determination hall be made by independent legal counsel
retained by the corporation especially for such purpose; provided,
however, that such counsel be approved in advance in writing by both
the Board of Directors and the director or officer seeking
indemnification, such approval not to be unreasonably withheld by
either; and provided, further, that such counsel shall not be the
outside counsel regularly employed by the corporation. The fees and
expenses of counsel in connection with making the determinations
contemplated by this Section 4(a) shall be paid by the corporation,
and, if requested by such counsel, the corporation shall give such
counsel appropriate written agreement with respect to the payment of
their fees and expenses and such other matters as may be reasonably
requested by counsel. Notwithstanding the foregoing, any director or
officer seeking indemnification by the corporation pursuant to this
Section 4(a) may, either before or after a determination has been made
as provided above, petition the Delaware Court of Chancery to
determine whether the standard of Section 4(a) or 2(a) above has been
satisfied, which court shall have the exclusive authority to make such
determination unless and until such court dismisses or otherwise
terminates such action without having made such determination. The
court shall make an independent determination of whether the standard
of Section 1(a) or 2(a) above has been met, irrespective of any prior
determination made by the Board of Directors, the stockholders or
counsel. In such proceeding the burden of proof that the applicable
standard of conduct has not been met shall be upon the corporation.
Neither the failure by the corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the person is proper in the circumstances because
such person has met the standard of conduct set forth in Section 1(a)
or 2(a) of this Article, nor the fact that there has been an actual
determination by the corporation (including its Board of Directors,
its
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independent legal counsel and its stockholders) that such person has
not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that such person has not met the
applicable standard of conduct. If the court shall determine that the
standard of conduct of Section 1(a) or 2(a) above has been met as to
any claim, issue or matter involved in the action, suit or proceeding
with respect to which there has been no prior determination pursuant
to this Section 4(a) or with respect to which there has been a prior
determination pursuant to the Section 4(a) that the standard of
conduct in Section 1(a) or Section 2(a) has not been met, the
corporation shall pay all expenses (including attorneys' fees)
actually incurred by such director in connection with such judicial
determination.
(b) Any indemnification under Sections 1(b) or 2(b) of
this Article (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the person specified in such
Section is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1(b) or 2(b) of
this Article. Such determination shall be made (i) by a majority vote
of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (ii) if there are no
such directors, or if such directors so direct, by independent legal
counsel (which may be outside counsel regularly employed by the
corporation) in a written opinion, or (iii) by the stockholders. The
Board of Directors shall have the sole power to determine the manner
in which such determination shall be made.
5. Advancement of Costs, Charges, and Expenses.
(a) Costs, charges, and expenses (including attorneys'
fees) incurred by a person referred to in Sections 1(a) or 2(a) of
this Article in defending, investigating or appealing a civil,
criminal, administrative, arbitrative or investigative action, suit,
or proceeding shall be paid by the corporation in advance of the final
disposition of such action, suit, or proceeding upon receipt of an
undertaking by or on behalf of such person to repay all amounts so
advanced if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
Article. Such undertaking shall not be required to be secured and
shall be accepted by the corporation, without reference to financial
ability to make repayment.
(b) Costs, charges, and expenses (including attorneys'
fees) incurred by a person referred to in Sections 1(b) or 2(b) of
this Article in defending, investigating or appealing a civil,
criminal, administrative, arbitrative or investigative action, suit,
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit, or proceeding upon receipt of an
undertaking by or on behalf of such person to repay all amounts so
advanced if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
Article. Such undertaking shall not be required to be secured and
shall be accepted by the corporation, without reference to financial
ability to make repayment.
(c) A person whose costs, charges and expenses have been
paid in advance of the final disposition of an action, suit or
proceeding pursuant to this Section 5 shall be required to
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repay the amounts so advanced only if it shall ultimately be
determined that such person is not entitled to be indemnified by the
corporation as authorized in this Article.
6. Witness Expenses. The corporation shall reimburse any person
who was or is or has or had agreed to become a director or officer of the
corporation, and may indemnify any person who was or is or has or had agreed to
become an agent or employee of the corporation for all costs, charges and
expenses (including attorneys' fees) incurred by such person in connection with
(i) such person's having been called or subpoenaed to become a witness, or to
produce materials pursuant to discovery, in any civil, criminal,
administrative, arbitrative or investigative action, suit or proceeding to
which the corporation or any corporation, partnership, joint venture, sole
proprietorship, trust or other enterprise, in which such person or any other
director, officer, employee or agent of the corporation is or was serving as a
director, officer, partner, venturer, proprietor, trustee, committee member,
administrator, employee or agent at the request of the corporation, or in which
the corporation holds an equity interest, is or was or is threatened to be made
a party, or (ii) such person's serving as a witness in, or producing materials
in connection with, any such action, suit or proceeding. The reimbursement of
such costs, charges and expenses shall be governed by this Section 6 unless
(and then only for the period that) such person becomes, is made or remains a
party to any such action, suit or proceeding to which Section 1 or 2 of this
Article applies.
7. Procedure for Indemnification. Any indemnification under
Sections 1(a), 2(a), and 3, or advancement or reimbursement of costs, charges,
and expenses under Sections 5(a) and 6 of this Article, shall be made promptly
upon the written request of the director or officer, and in any event within
ninety (90) days after delivery of such written request to the corporation in
the case of a request pursuant to Sections 1(a) or 2(a) of this Article, and
within ten (10) days after delivery of such written request in the case of a
request pursuant to Section 5(a) or 6 of this Article. The costs, charges and
expenses which a person entitled to indemnification or advancement or
reimbursement of expenses under Sections 1(a), 2(a), 5(a) or 6 of this Article
shall be entitled to receive shall be deemed to include interest calculated on
a daily basis at a rate per annum equal to the lesser of (i) a rate which is
two (2) percentage points above the rate of interest per annum publicly
announced by Citibank, N.A. from time to time in New York as its "prime rate"
(or similar reference rate) or (ii) the maximum rate of interest per annum
permitted by applicable law, from the date such written request is made through
the date the same is paid in full. Such interest shall be compounded
quarterly. The rights to indemnification under Sections 1(a), 2(a) and 3, and
advancement or reimbursement of costs, charges and expenses under Sections 5(a)
and 6 of this Article shall be enforceable by the director, officer, employee
or agent, as applicable, in the Delaware Chancery Court if the corporation
denies such request, in whole or in part, or if no disposition thereof is made
within such (90) day period or ten (10) day period, as applicable. The costs,
charges and expenses incurred by a person in connection with successfully
establishing his right to indemnification under Sections 1(a), 2(a) and 3 or
advancement or reimbursement of costs, charges and expenses under Section 5(a)
and 6 of this Article and in collecting the same shall be promptly paid by the
corporation, though in any event within thirty (30) days of such person's
request therefor.
8. Notice of Claims; Selection of Counsel, Conduct of
Proceedings; Approval of Settlements, Subrogation. Any person entitled to
indemnification or advancement or reimbursement of expenses under Sections 1,
2, 5 or 6 of this Article with respect to any action, suit or proceeding shall
give the corporation written notice of such action, suit or proceeding promptly
after having become a
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party thereto or having been called as a witness or subpoenaed to produce
materials in connection therewith; provided, however, that the failure to give
such notice shall not excuse the corporation from its obligations hereunder
except to the extent it is actually harmed by the failure to receive such
notice. In connection with any civil or criminal action, suit, or proceeding
referred to in Sections 1, 2, 5 and 6 of this Article, a person referred to in
such Sections shall have the right to select counsel with respect to his
defense thereof; but, in any action, suit or proceeding other than one to which
Section 2(a) or 2(b) hereof is applicable, the corporation shall have the right
to select counsel with respect to his defense thereof; but, in any action, suit
or proceeding other than one to which Section 2(a) or 2(e) hereof is
applicable, the corporation shall have the right to approve such counsel, such
approval not to be unreasonable withheld. The Board of Directors may, with the
written approval of such person, authorize the outside counsel regularly
employed by the corporation, to represent such person in any action, suit or
proceeding, whether or not the corporation is a party to such action, suit, or
proceeding. The corporation shall have the right to participate in such
action, suit or proceeding and be represented therein by its own counsel, but
counsel for the person entitled to indemnification or advancement or
reimbursement of expenses hereunder shall have the right to control the defense
of such action, suit or proceeding to which Sections 1, 2 or 5 hereof are
applicable. Any settlement of such action, suit, or proceeding to which
Sections 1, 2 or 5 hereof are applicable must be approved by such person and
the corporation; provided, however, that the corporation's approval thereof
shall not be unreasonably withheld, and such approval by the corporation shall
be assumed if the corporation has not provided written notice to such person to
the contrary during the thirty (30) day period commencing upon delivery to the
corporation of written notice of such proposed settlement. The corporation and
the person seeking indemnification or advancement or reimbursement of expenses
hereunder shall cooperate in the defense of such action, suit or proceeding and
shall furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested by the corporation or such person. If the corporation
indemnifies a person hereunder, the corporation shall be subrogated to the
rights of such person to the extent of such indemnification.
9. Partial Indemnification and Advancement.
(a) If any action, suit or proceeding involves both (i)
claims by or in the right of the corporation and (ii) claims other
than claims by or in the right of the corporation, then
indemnification with respect to each type of claim shall be determined
separately, with the former claims being determined on the basis of
the standard of conduct set forth in Section 2 above and the latter
claims being determined on the basis of the standard of conduct set
forth in Section 1 above.
(b) If the person (including the Board of Directors,
independent legal counsel, the stockholders or a court) making the
determination under Section 4(a) shall determine that a person seeking
indemnification under Sections 1 or 2 hereof has met the applicable
standard of conduct as to some claims, issues or matters involved in
the action, suit or proceeding but not as to others, such person
making the determination shall reasonably pro rate the amounts (costs,
charges, expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement) with respect to which
indemnification is sought by such person among such claims, issues or
matters. This Section 9(b) is intended to provide for proration not
only pursuant to Section 9(a) above, but also as between claims,
issues and matters that are involved
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in any particular action, suit or proceeding (or portion thereof) by
or in the right of the corporation or in any particular action, suit
or proceeding (or portion thereof) other than by or in the right of
the corporation.
(c) In the event that it should be determined that an
officer or director of the corporation is entitled to partial, but not
full, indemnification under Sections 1, 2, and 3 of this Article, the
corporation shall make such indemnification to the fullest extent
permitted by such determination.
10. Other Rights; Continuation of Right to Indemnification;
Funding; Certain Limitations.
(a) The indemnification and advancement and reimbursement
of expenses provided by this Article shall not be deemed exclusive of
any other rights to which a person seeking indemnification or
advancement or reimbursement of expenses may be entitled under any law
(common or statutory), bylaw, agreement, vote of stockholders or
directors, determination of a court, or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office, shall apply to claims, issues, matters or states
of facts occurring, accruing or existing prior to the adoption of this
Article, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the estate, heirs, executors, and administrators of such person.
(b) In consideration of the continued service by each
director, officer, employee and agent of the corporation and other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the corporation, the corporation agrees
that the rights to indemnification and advancement and reimbursement
of expenses provided in these Bylaws and the right to indemnification
and advancement and reimbursement of expenses provided in the
corporation's Certificate of Incorporation shall constitute a contract
between the corporation and each such director, officer, employee and
agent; provided, however, that nothing contained herein shall prevent
or restrict the corporation's amending, altering or repealing these
Bylaws or the Certificate of Incorporation so as to change the
provisions thereof dealing with indemnification and advancement and
reimbursement of expenses or any other provisions thereof without the
consent of the directors, officers, employees and agents of the
corporation. Notwithstanding the foregoing, any such amendment shall
have only prospective effect, and each director, officer, employee or
agent entitled to indemnification or advancement or reimbursement of
expenses under these Bylaws or under the Certificate of Incorporation
shall have a fully vested right to indemnification and advancement or
reimbursement of expenses under the provisions of these Bylaws and the
Certificate of Incorporation as then in effect as to any claim, issue,
matter or state of facts occurring, accruing or existing while such
provisions are in effect or prior thereto (even if an action, suit or
proceeding based on such claim, issue or matter is brought after the
amendment, alteration or repeal of any such provision), irrespective
of any subsequent amendment, alteration or repeal thereof.
(c) Notwithstanding any other provision of this Article,
the corporation shall indemnify the directors and officers of the
corporation to the fullest extent permitted by law, notwithstanding
that such indemnification may not be specifically authorized by the
provisions
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of this Article, by the corporation's Certificate of Incorporation, or
by statute. In the event of any changes, after the date of adoption
of this Article, in any applicable law, statute, or rule that expand
the right of a Delaware corporation to indemnify its directors and/or
officers, such changes shall be, ipso facto, within the purview of the
rights of the corporation's directors and officers, and the
obligations of the corporation, under the preceding sentence.
(d) The Board of Directors may also elect, by a majority
vote of a quorum of the Board of Directors, to fund its obligations
hereunder to provide indemnification or advancement or reimbursement
of expenses by any means, including, without limitation, maintenance
of a letter of credit or surety bond with respect thereto, assignment
of corporate assets for such purpose, establishment of a trust or
escrow therefor.
(e) Notwithstanding Section 1(a), Section 2(a) or Section
5(a) hereof, the corporation shall not be required to, but may in its
discretion, indemnify or advance or reimburse any expenses to, any
person under this Article in respect of any action, suit or proceeding
(i) brought, instituted or initiated by such person as plaintiff or
claimant, or (ii) brought, instituted or initiated against such person
in his or her capacity as a director or officer of the corporation or
a Subsidiary by any other person who is a director of the corporation
or a Subsidiary and in which the corporation or a Subsidiary is not a
party plaintiff. This provision shall not apply to (i) the filing of
an answer, response, counterclaim, cross-claim or similar pleading by
a person who would be entitled to indemnification or advancement or
reimbursement of expenses under this Article but for the preceding
sentence, in any action, suit or proceeding brought, instituted or
initiated by or on behalf of the corporation or a Subsidiary or (ii)
an action, suit or proceeding to enforce a person's rights under this
Article.
11. Insurance. The corporation may purchase and/or maintain
insurance on behalf of any person who is or was or has or had agreed to become
a director or officer of the corporation, or (while a director or officer of
the corporation) is or was serving or has or had agreed to serve at the request
of the corporation as an employee or agent of the corporation or as a director,
officer, partner, venturer, proprietor, trustee, committee, administrator,
employee or agent of another corporation, partnership, joint venture, sole
proprietorship, trust or other enterprise, against any and all liability
asserted against him an incurred by him or on his behalf in any such capacity,
or arising out of his status as such, or otherwise, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article, the Certificate of Incorporation or under any
statute, law or rule. Any such insurance to be maintained may provide
different terms with respect to the protection afforded thereunder to the class
of directors of the corporation and the class of officers of the corporation.
12. Meaning of Terms. For purposes of this Article references to
"the corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger that, if its separate existence had continued,
would have had power and authority to indemnify its directors and/or officers,
so that any person who is or was a director of such constituent corporation, or
(while a director or officer of the corporation) is or was serving at the
request of such constituent corporation as an employee or agent of the
corporation or as a director, officer, partner, venturer, proprietor, trustee,
committee member, administrator, employee or agent of another corporation,
partnership, joint venture, sole proprietorship,
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trust or other enterprise, shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued. For purposes of this Article, references
to "other enterprises" shall include employee benefit plans, reference to
"fines" shall include any excise taxes assessed to a person with respect to an
employee benefit plan, and references to "serving at the request of the
corporation" shall include any service by a director, officer, employee or
agent of the corporation that imposes duties upon, or involves services by,
such director, officer, employee or agent with respect to any employee benefit
plan maintained in whole or in part for employees of the corporation and/or its
subsidiaries, its participants, or beneficiaries. For purposes of this
Article, a person who acted in good faith in a manner he reasonably believed to
be in the best interests of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Article.
13. Savings Clause. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, the
corporation shall nevertheless indemnify each director or officer of the
corporation as to costs, charges, and expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement with respect to any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
including an action by or in the right of the corporation, to the fullest
extent permitted by any applicable portion of this Article that shall not have
been so invalidated, and to the fullest extent permitted by applicable law. If
any provision hereof should be held, by a court of competent jurisdiction, to
be invalid, such provision shall be limited only to the extent necessary to
make such provision enforceable, it being the intent of the Bylaws to indemnify
each individual who serves or has served or who has or had agreed to serve as a
director or officer of the corporation to the maximum extent permitted by law.
VIII
GENERAL PROVISIONS
1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions, if any, of statute and the certificate
of incorporation may be declared by the Board of Directors at any regular or
special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of statute and the certificate of
incorporation.
2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest
of the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
3. Annual Statement. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
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4. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
5. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
6. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the word "Seal". The
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
VIIII
AMENDMENTS
1. These bylaws may be altered or repealed at any regular meeting
of the stockholders or of the Board of Directors or any special meeting of the
stockholders or of the Board of Directors if notice of such alteration or
repeal be contained in the notice of such special meeting.
* * * * *
The foregoing Amended and Restated Bylaws were adopted by the Board of
Directors as of June 18, 1996.
/s/ JANEY D. RIFE
------------------------------
Janey D. Rife
Secretary
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Exhibit 4(b)
FIRST AMENDMENT TO LOAN DOCUMENTS
THIS FIRST AMENDMENT TO LOAN DOCUMENTS (this "Agreement") is made as of
the 1st day of December, 1995, by and among REPUBLIC GROUP INCORPORATED, a
Delaware corporation formerly known as Republic Gypsum Company ("Parent"),
REPUBLIC PAPERBOARD COMPANY, a Kansas corporation ("KS Subsidiary"), REPUBLIC
PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia corporation ("W.VA
Subsidiary"), REPUBLIC GYPSUM COMPANY, an Oklahoma corporation ("OK
Subsidiary") (all of the foregoing parties are sometimes hereinafter
collectively referred to as the "Borrowing Group") and BOATMEN'S FIRST NATIONAL
BANK OF KANSAS CITY, a national banking association (the "Bank");
RECITALS
A. Parent recently changed its name from "Republic Gypsum
Company" to "Republic Group Incorporated."
B. OK Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and is a
wholly-owned subsidiary of Parent.
C. Bank has extended credit to Parent ("Revolving Loans") as
evidenced by a Revolving Credit Promissory Note in the principal amount of
Seven Million Dollars ($7,000,000.00) dated June 30, 1995 (the "Revolving
Note").
D. KS Subsidiary and W.VA Subsidiary executed and delivered to
the Bank a Revolving Loan Guaranty Agreement ("Revolving Loan Guaranty") dated
as of June 30, 1995 wherein KS Subsidiary and W.VA Subsidiary agreed to
unconditionally guarantee to the Bank the payment of certain obligations of
Parent to Bank, including, without limitation, repayment of the Revolving Note.
E. Bank has made a loan to Parent and W.VA Subsidiary ("Term
Loan") as evidenced by a Term Loan Promissory Note in the principal amount of
Twenty-Eight Million Dollars ($28,000,000.00) dated June 30, 1995 (the "Term
Note").
F. KS Subsidiary executed and delivered to the Bank a Term Loan
Guaranty Agreement ("Term Loan Guaranty") dated as of June 30, 1995 wherein KS
Subsidiary agreed to unconditionally guarantee to the Bank the payment of
certain obligations of Parent and W.VA Subsidiary to Bank, including, without
limitation, repayment of the Term Note.
G. As security for the Term Loan, W.VA Subsidiary granted to the
Bank liens and security interests in certain collateral as more fully set forth
in that certain Security Agreement ("Security Agreement") dated as of June 30,
1995, between W.VA
<PAGE> 2
Subsidiary and the Bank, and that certain Deed of Trust ("Deed of Trust") dated
as of June 30, 1995, executed by W.VA Subsidiary and recorded on June 30, 1995,
in the Office of the County Commission of Jefferson County, West Virginia, as
Document No. 4304, in Book 808, beginning at Page 493, encumbering certain real
property situate in the Town of Halltown, Harpers Ferry District, Jefferson
County, West Virginia, and more particularly described on Exhibit A attached
hereto and incorporated herein by reference.
H. The credit relationship between the Bank and the Borrowing
Group is controlled and governed by the terms of a Revolving and Term Credit
Agreement dated June 30, 1995 (the "Credit Agreement"), as well as various
other "Loan Documents" as defined in the Credit Agreement.
I. Parent desires to transfer to OK Subsidiary the assets of the
Duke, Oklahoma gypsum plant which are currently owned by Parent and, as Parent
is required to do pursuant to the Credit Agreement, Parent has requested that
the Bank consent to such transfer.
J. The Bank is willing to consent to such transfer provided that
OK Subsidiary unconditionally guarantees the Revolving Loans and the Term Loan,
joins in the Revolving Loan Guaranty and the Term Loan Guaranty, and is made a
party to the Credit Agreement, and provided further that the Loan Documents are
expressly ratified and confirmed by the Borrowing Group.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and the mutual agreements contained herein, the parties
hereto agree as follows:
1. Consent to Transfer and Amendments to Loan Documents. The Bank
hereby consents to the transfer by Parent to OK Subsidiary of the assets
relating to the Duke, Oklahoma gypsum plant. In consideration for such consent
and to induce the Bank to give such consent, without which inducement the Bank
would be unwilling to so consent, OK Subsidiary hereby unconditionally
guarantees the Term Loan and the Revolving Loans and joins in both the Term
Loan Guaranty and the Revolving Loan Guaranty as if OK Subsidiary were an
original party to each such agreement. OK Subsidiary's obligations under each
of the Term Loan Guaranty and the Revolving Loan Guaranty shall be joint and
several with the obligations of the other parties to such agreements. OK
Subsidiary is hereby made a party to the Credit Agreement as a "Guarantor," as
such term is defined in the Credit Agreement, and hereby makes all of the
representations and warranties set forth in the Credit Agreement and agrees to
be bound by all of the terms and provisions of the Credit Agreement.
2. Acknowledgment of Name Change. The parties hereto acknowledge
that since the time that the Loan Documents were
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<PAGE> 3
originally executed, Parent has changed its name from "Republic Gypsum Company"
to "Republic Group Incorporated." Parent represents and warrants that it has
taken or will promptly hereafter take all proper corporate action, obtained all
necessary consents, approvals and authorizations, and filed or recorded in all
appropriate jurisdictions all necessary documentation with respect to such name
change. The parties acknowledge and agree that from and since the effective
date of such name change, all references in the Loan Documents to "Republic
Gypsum Company" shall be deemed to be references to "Republic Group
Incorporated."
3. Conditions Precedent. On or prior to the date hereof, the Bank
shall have received the following, each of which shall be in form and substance
satisfactory to the Bank:
(a) Evidence of the authority of the Borrowing Group to
enter into the transactions contemplated hereby; and
(b) All other documents, opinions and items as the Bank
may request.
4. No Events of Default. The Borrowing Group represents and
warrants that, except as expressly disclosed to the Bank in writing or except
as expressly contemplated hereby, all of the representations, warranties and
covenants in the Credit Agreement remain true and correct as of the date hereof
and that no Event of Default under the Credit Agreement or any other Loan
Document currently exists.
5. Ratification; Estoppel. Except as expressly set forth herein,
or as necessary to incorporate the modifications and amendments herein, all of
the terms and conditions of the Loan Documents shall remain unmodified and in
full force and effect and are hereby ratified and confirmed by the Borrowing
Group in all respects as of the date hereof.
6. No Impairment. Nothing in this Agreement shall be deemed to or
shall in any manner prejudice or impair the Loan Documents held by the Bank
with respect to the indebtedness evidenced by the Notes arising under the
Credit Agreement, or the original priority of the liens granted to secure such
indebtedness, including, without limitation, the liens granted pursuant to the
Deed of Trust and the Security Agreement. This Agreement shall not be deemed to
be nor shall it constitute any alteration, waiver, annulment or variation of
any of the terms, covenants and provisions of or any rights, powers or remedies
under any Loan Document, except as expressly set forth herein.
7. Law. This Agreement shall be a contract made under, governed
by and construed in accordance with, the internal laws of the State of
Missouri.
- 3 -
<PAGE> 4
8. Survival of Representations. All covenants, representations
and warranties made by the Borrowing Group herein and in the Credit Agreement
and any other Loan Document shall survive the delivery of this Agreement and
the effective date hereof and shall continue in effect until the Notes are
fully repaid and all obligations thereunder completely performed.
9. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Borrowing Group shall not assign this Agreement,
the Credit Agreement or any of the other Loan Documents, or any of their rights
or duties hereunder or thereunder, without the prior written consent of the
Bank.
10. Captions. The section headings and captions in this Amendment
are for convenience only and shall not affect the construction thereof.
11. Terms and Definitions. Terms capitalized herein which are not
defined are to be accorded the meaning such terms possess in the Credit
Agreement.
12. Waiver of Claims and Defenses. The Borrowing Group
acknowledges, as of the date hereof, their obligation for full payment of
amounts outstanding under the Notes and hereby waive any and all claims or
defenses, known or unknown, existing as of the date hereof, which would
diminish their obligation of repayment under the Notes, the Term Loan Guaranty,
or the Revolving Loan Guaranty or which in any manner arise out of or relate to
any Loan Document.
13. NO ORAL AGREEMENT. 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(S)) 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.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Loan Documents as of the day and year first above written.
<TABLE>
<CAPTION>
BORROWING GROUP:
ATTEST: REPUBLIC GROUP INCORPORATED
<S> <C>
/s/ JANEY L. SOWEll By: /s/ DOYLE R. RAMSEY
- ---------------------- -----------------------------------------
Secretary Name: Doyle R. Ramsey
(Corporate Seal) ---------------------------------------
Title: Vice President Finance & CFO
--------------------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY
/s/ JANEY L. SOWEll By: /s/ DOYLE R. RAMSEY
- ---------------------- -----------------------------------------
Secretary Name: Doyle R. Ramsey
(Corporate Seal) ---------------------------------------
Title: Vice President Finance & CFO
--------------------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY OF WEST VIRGINIA
/s/ JANEY L. SOWEll By: /s/ DOYLE R. RAMSEY
- ---------------------- -----------------------------------------
Secretary Name: Doyle R. Ramsey
(Corporate Seal) ---------------------------------------
Title: Vice President Finance & CFO
--------------------------------------
ATTEST: REPUBLIC GYPSUM COMPANY
/s/ JANEY L. SOWEll By: /s/ DOYLE R. RAMSEY
- ---------------------- -----------------------------------------
Secretary Name: Doyle R. Ramsey
(Corporate Seal) ---------------------------------------
Title: Vice President Finance & CFO
--------------------------------------
BANK:
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY
By: /s/ BARRY P. SULLIVAN
-----------------------------------------
Barry P. Sullivan
Vice President
</TABLE>
- 5 -
<PAGE> 6
STATE OF KANSAS )
) SS
COUNTY OF RENO )
On this 1st day of December, 1995, before me, personally appeared Doyle
R. Ramsey, who, being first duly sworn and known by me to be the person who
executed this First Amendment to Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Group
Incorporated and is doing so with the full knowledge and consent of the Board
of Directors of said Corporation and that the execution of said instrument is
his own free act and deed on behalf of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
My Commission Expires:
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt Exp. Sept.10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 1st day of December, 1995, before me, personally appeared Doyle
R. Ramsey, who, being first duly sworn and known by me to be the person who
executed this First Amendment to Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Group
Incorporated and is doing so with the full knowledge and consent of the Board
of Directors of said Corporation and that the execution of said instrument is
his own free act and deed on behalf of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
My Commission Expires:
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt Exp. Sept.10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
- 6 -
<PAGE> 7
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 1st day of December, 1995, before me, personally appeared Doyle
R. Ramsey, who, being first duly sworn and known by me to be the person who
executed this First Amendment to Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Paperboard
Company of West Virginia and is doing so with the full knowledge and consent of
the Board of Directors of said Corporation and that the execution of said
instrument is his own free act and deed on behalf of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
My Commission Expires:
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt Exp. Sept. 10, 1998
/s/ Shere L. Munsey
----------------------------
Notary Public
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 1st day of December, 1995, before me, personally appeared Doyle
R. Ramsey, who, being first duly sworn and known by me to be the person who
executed this First Amendment to Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Gypsum Company
and is doing so with the full knowledge and consent of the Board of Directors
of said Corporation and that the execution of said instrument is his own free
act and deed on behalf of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
My Commission Expires:
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt Exp. Sept. 10, 1998
/s/ Shere L. Munsey
----------------------------
Notary Public
- 7 -
<PAGE> 8
STATE OF MISSOURI )
) SS.
COUNTY OF JACKSON )
On this 16th day of November, 1995, before me, personally appeared Barry
P. Sullivan, a Vice President of Boatmen's First National Bank of Kansas City,
who, being first duly sworn and known by me to be person who executed this
First Amendment to Loan Documents, did say that he has full power and authority
to execute this instrument in the name of Boatmen's First National Bank of
Kansas City and is doing so as his own free act and deed on behalf of said
Bank.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
ANGELA K. CARTER /s/ ANGELA K. CARTER
Notary Public - Notary Seal --------------------------------
STATE OF MISSOURI Notary Public
Platte County
My Commission Expires: June 14, 1998
My Commission Expires:
06-14-98
- 8 -
<PAGE> 9
SECOND AMENDMENT TO LOAN DOCUMENTS
THIS SECOND AMENDMENT TO LOAN DOCUMENTS (this "Agreement") is made as
of the 23rd day of January, 1996, by and between REPUBLIC GROUP INCORPORATED, a
Delaware corporation formerly known as Republic Gypsum Company ("Parent"),
REPUBLIC PAPERBOARD COMPANY, a Kansas corporation ("KS. Subsidiary"), REPUBLIC
PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia Corporation ("W. VA.
Subsidiary"), REPUBLIC GYPSUM COMPANY, an Oklahoma corporation ("OK
Subsidiary"), (all of the foregoing parties are sometimes collectively referred
to as the "Borrowing Group") and BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY,
a national banking association (the "Bank");
RECITALS
A. Bank has extended credit to Parent ("Revolving Loans")
evidenced by a Revolving Credit Promissory Note in the principal amount of
Seven Million Dollars ($7,000,000.00) dated June 30, 1995 (the "Revolving
Note").
B. KS. Subsidiary and W. VA. Subsidiary executed and delivered to
the Bank the Revolving Loan Guaranty Agreement dated June 30, 1995 wherein KS.
Subsidiary and W. VA. Subsidiary agreed to unconditionally guarantee to the
Bank repayment of the Revolving Loans.
C. Bank has made a Loan to Parent and W. VA. Subsidiary ("Term
Loan") evidenced by a Term Loan Promissory Note in the principal amount of
Twenty-Eight Million Dollars ($28,000,000.00) dated June 30, 1995 (the "Term
Note").
D. KS. Subsidiary executed and delivered to the Bank the Term
Loan Guaranty dated June 30, 1995 wherein KS. Subsidiary agreed to
unconditionally guarantee to the Bank the payment of certain obligations of
Parent and W. Va. Subsidiary, including without limitation, repayment of the
Term Loan.
E. As security for the Term Loan, W. VA. Subsidiary granted to
the Bank liens and security interests in certain collateral as set forth in
that certain Security Agreement ("Security Agreement") dated June 30, 1995 and
that certain Deed of Trust dated June 30, 1995 and recorded June 30, 1995 with
the Clerk of the County Commission of Jefferson County, West Virginia in Book
808, at Page 493, as Document No. 4304 (the "Deed of Trust") which encumbers
certain property located in Jefferson County, West Virginia more particularly
described on the attached Exhibit A.
F. The credit relationship between the Bank and the Borrowing
Group is controlled and governed by the terms of the Revolving and Term Credit
Agreement
<PAGE> 10
dated June 30, 1995 and the First Amendment To Loan Documents ("First
Amendment") dated December 1, 1995 (collectively the "Credit Agreement").
G. Pursuant to the First Amendment, OK Subsidiary agreed to
unconditionally guarantee the payment of the Term Loan and the Revolving Loans
and to become a party to the Term Loan Guaranty and the Revolving Loan
Guaranty.
H. The Borrowing Group and the Bank enter into this Agreement for
the purpose of redefining the term "Obligations" as defined in the Credit
Agreement and amending the Credit Agreement and the Deed of Trust in order that
the Deed of Trust shall also secure certain letter of credit obligations of the
Borrowing Group to the Bank.
I. The Bank requires that the Loan Documents be expressly
ratified and confirmed by Borrowing Group.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and the mutual agreements contained herein, the Bank
and Borrowing Group agree as follows:
1. No Events of Default. The Borrowing Group represents and
warrants that all of the representations, warranties and covenants in the
Credit Agreement remain true and correct and that no Event of Default under the
Credit Agreement or any Loan Document currently exists.
2. Amendments to Credit Agreement. The Credit Agreement is
amended as follows:
(a) The definition of the term "Letter of Credit" shall be added
to the Exhibit 1 of the Credit Agreement as follows:
""Letter of Credit" shall mean a letter of credit issued for the
account of the Borrower and for the benefit of The Boatmen's National
Bank of St. Louis to secure the Borrower's obligations under an
interest rate swap agreement."
(b) The definition of the term "Loan Documents" in Exhibit 1 to
the Credit Agreement is deleted and the following shall be inserted in lieu
thereof:
""Loan Documents" shall mean, collectively, the Agreement, the Notes,
the Security Agreements, the Deed of Trust, the Guaranties, the Letter
of Credit, 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."
2
<PAGE> 11
(c) The definition of the term "Obligations" in Exhibit 1 to the
Credit Agreement is deleted and the following shall be inserted in lieu
thereof:
""Obligations" shall mean all unpaid principal of and accrued
and unpaid interest on the Notes, all accrued unpaid Fees, all
obligations under the Letter of Credit, and all other
obligations of Borrowers to the Bank arising under the Loan
Documents."
(d) Section 3.5 of the Credit Agreement is amended such that the
Collateral shall secure, in addition to the Term Loan, the Letter of Credit.
Accordingly, references within Section 3.5 to "obligations with respect to the
Term Loan" shall also include the Letter of Credit.
3. Amendment to the Deed of Trust. Page 2, paragraph 2 of the
Deed of Trust is hereby amended to insert, immediately prior to the
parenthetical provision within that paragraph concerning the "Secured Debt", as
subsection (c) the following:
(c) the payment of any obligation under any letter of credit
issued by the Lender for the account of Grantor or Republic Group Incorporated
and for the benefit of The Boatmen's National Bank of St. Louis to secure
certain obligations under an interest rate swap agreement.
4. Guarantors' Affirmation Regarding the Letter of Credit. The
Guarantors of the Borrowing Group hereby confirm that the "Liabilities" as
defined in the Revolving Loan Guaranty Agreement and the Term Loan Guaranty
Agreement include the obligations of the Borrowing Group under the Letter of
Credit.
5. Cross-Referenced Terms. Each reference in the Loan Documents
to the Credit Agreement or the Deed of Trust shall henceforth refer to the
Credit Agreement or the Deed of Trust as amended hereby.
6. Conditions Precedent. On or prior to the date hereof, the Bank
shall have received the following, each of which shall be in form and substance
satisfactory to the Bank:
(a) evidence of the authority of the Borrowing Group to enter into
the transactions contemplated hereby; and
(b) all other documents, opinions and items as the Bank may
request.
7. Ratification; Estoppel. The terms, conditions, covenants and
provisions of the Credit Agreement, the Deed of Trust, the Term Loan Guaranty,
the Revolving
3
<PAGE> 12
Loan Guaranty and the Loan Documents, as amended hereby, are ratified and
confirmed by the Borrowing Group in all respects as of the date hereof.
8. No Impairment. Nothing in this Agreement shall be deemed to or
shall in any manner prejudice or impair the Loan Documents held by the Bank for
the indebtedness evidenced by the Notes arising under the Credit Agreement.
This Agreement shall not be deemed to be nor shall it constitute any
alteration, waiver, annulment or variation of any of the terms, covenants and
provisions of or any rights, powers or remedies under any Loan Document, except
as expressly set forth herein.
9. Law. This Agreement shall be a contract made under, governed
by and construed in accordance with, the internal laws of the State of
Missouri.
10. Survival of Representations. All covenants, representations
and warranties made by Borrowing Group herein and in the Credit Agreement and
any Loan Document shall survive the delivery of this Agreement and the
effective date hereof and shall continue in effect until the Notes are fully
repaid and all obligations thereunder completely performed.
11. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Borrowing Group shall not assign this Agreement or
the Credit Agreement or any of their rights or duties hereunder or thereunder,
without the prior written consent of the Bank.
12. Captions. The section headings and captions in this Amendment
are for convenience only and shall not affect the construction thereof.
13. Terms and Definitions. Terms capitalized herein which are not
defined are to be accorded the meaning such terms possess in the Credit
Agreement.
14. Waiver of Claims and Defenses. The Borrowing Group
acknowledges, as of the date hereof, their obligation for full payment of
amounts outstanding under the Notes and hereby waive any and all claims or
defenses, known or unknown, existing as of the date hereof, which would
diminish their obligation of repayment under the Notes, the Term Loan Guaranty,
or the Revolving Loan Guaranty or which in any manner arise out of or relate to
any Loan Document.
15. NO ORAL CREDIT AGREEMENT. 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(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT,
ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
4
<PAGE> 13
WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
IN WITNESS WHEREOF, the Borrowing Group and the Bank have executed this
Agreement as of the day and year first above written.
<TABLE>
<CAPTION>
BORROWING GROUP:
<S> <C>
ATTEST: REPUBLIC GROUP INCORPORATED
/s/ JANEY L. SOWEll By: /s/ PHIL SIMPSON
- ----------------------------- -------------------------------
Secretary Name: Phil Simpson
(Corporate Seal) -----------------------------
Title: President
----------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY
/s/ JANEY L. SOWEll By: /s/ PHIL SIMPSON
- ----------------------------- -------------------------------
Secretary Name: Phil Simpson
(Corporate Seal) -----------------------------
Title: President
----------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY
OF WEST VIRGINIA
/s/ JANEY L. SOWEll By: /s/ PHIL SIMPSON
- ----------------------------- -------------------------------
Secretary Name: Phil Simpson
(Corporate Seal) -----------------------------
Title: President
----------------------------
ATTEST: REPUBLIC GYPSUM COMPANY
/s/ JANEY L. SOWEll By: /s/ PHIL SIMPSON
- ----------------------------- -------------------------------
Secretary Name: Phil Simpson
(Corporate Seal) -----------------------------
Title: President
----------------------------
BANK:
BOATMEN'S FIRST NATIONAL BANK
OF KANSAS CITY
By: /s/ BARRY SULLIVAN
-------------------------------
Barry Sullivan
Vice President
</TABLE>
- 5 -
<PAGE> 14
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 23rd day of January, 1996, before me, personally appeared Phil
Simpson, who being first duly sworn and known by me to be the person who
executed this Second Amendment to Loan documents, did say that he has full
power and authority to execute this instrument in the name of Republic Group
Incorporated and is doing so with the full knowledge and consent of the Board
of Directors of said Corporation and that the execution of said instrument is
his own free act and deed on behalf of said Corporation.
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt. Exp. Sept. 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 23rd day of January, 1996, before me, personally appeared Phil
Simpson, who, being first duly sworn and known by me to be the person who
executed this Second Amendment to Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Paperboard
Company and is doing so with the full knowledge and consent of the Board of
Directors of said Corporation and that the execution of said instrument is his
own free act and deed on behalf of said Corporation.
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt. Exp. Sept. 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
6
<PAGE> 15
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this day of 23rd day of January, 1996, before me, personally
appeared Phil Simpson, who, being first duly sworn and known by me to be the
person who executed this Second Amendment To Loan Documents, did say that he
has full power and authority to execute this instrument in the name of Republic
Paperboard Company of West Virginia and is doing so with the full knowledge and
consent of the Board of Directors of said Corporation and that the execution of
said instrument is his own free act and deed on behalf of said Corporation.
NOTARY PUBLIC - STATE of KANSAS
SHERE L. MUNSEY
MY APPT EXP. SEPT 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 23rd day of January, 1996, before me, personally appeared Phil
Simpson, who, being first duly sworn and known by me to be the person who
executed this Second Amendment To Loan Documents, did say that he has full
power and authority to execute this instrument in the name of Republic Gypsum
Company and is doing so with the full knowledge and consent of the Board of
Directors of said Corporation and that the execution of said instrument is his
own free act and deed on behalf of said Corporation.
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt. Exp. Sept. 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
7
<PAGE> 16
STATE OF MISSOURI )
) SS.
COUNTY OF JACKSON )
On this 2nd day of February, 1996 before me personally appeared Barry
Sullivan, who being first duly sworn and known by me to be the person who
executed this Second Amendment To Loan Documents, did say that he has full
power and authority to execute this instrument in the name of Boatmen's First
National Bank of Kansas City and is doing so as his own free act and deed on
behalf of said Bank.
In Witness Whereof, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
/s/ PATRICIA A. LEACH
--------------------------------
Notary Public
PATRICIA A. LEACH
NOTARY-PUBLIC STATE OF MISSOURI
COMMISSIONED IN JACKSON COUNTY
MY COMMISSION ENDS 11-22-96
8
<PAGE> 17
THIRD AMENDMENT TO LOAN DOCUMENTS
THIS THIRD AMENDMENT TO LOAN DOCUMENTS (this "Agreement") is made as of
the 5th day of September, 1996, by and between REPUBLIC GROUP INCORPORATED, a
Delaware corporation formerly known as Republic Gypsum Company ("Parent"),
REPUBLIC PAPERBOARD COMPANY, a Kansas corporation ("KS. Subsidiary"), REPUBLIC
PAPERBOARD COMPANY OF WEST VIRGINIA, a West Virginia Corporation ("W. VA.
Subsidiary"), REPUBLIC GYPSUM COMPANY, an Oklahoma corporation ("OK
Subsidiary"), (all of the foregoing parties are sometimes collectively referred
to as the "Borrowing Group") and BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY,
a national banking association (the "Bank");
RECITALS
A. Bank has extended credit to Parent ("Revolving Loans")
evidenced by a Revolving Credit Promissory Note in the principal amount of
Seven Million Dollars ($7,000,000.00) dated June 30, 1995 (the "Revolving
Note").
B. KS. Subsidiary and W. VA. Subsidiary executed and delivered to
the Bank the Revolving Loan Guaranty Agreement dated June 30, 1995 wherein KS.
Subsidiary and W. VA. Subsidiary agreed to unconditionally guarantee to the
Bank repayment of the Revolving Loans.
C. Bank has made a Loan to Parent and W. VA. Subsidiary ("Term
Loan") evidenced by a Term Loan Promissory Note in the principal amount of
Twenty-Eight Million Dollars ($28,000,000.00) dated June 30, 1995 (the "Term
Note").
D. KS. Subsidiary executed and delivered to the Bank the Term
Loan Guaranty dated June 30, 1995 wherein KS. Subsidiary agreed to
unconditionally guarantee to the Bank the payment of certain obligations of
Parent and W. Va. Subsidiary, including without limitation, repayment of the
Term Loan.
E. As security for the Term Loan, W. VA. Subsidiary granted to
the Bank liens and security interests in certain collateral as set forth in
that certain Security Agreement ("Security Agreement") dated June 30, 1995 and
that certain Deed of Trust dated June 30, 1995 and recorded June 30, 1995
with the Clerk of the County Commission of Jefferson County, West Virginia in
Book 808, at Page 493, as Document No. 4304 (the "Deed of Trust") which
encumbers certain property located in Jefferson County, West Virginia.
F. The credit relationship between the Bank and the Borrowing
Group is controlled and governed by the terms of the Revolving and Term Credit
Agreement dated June 30, 1995, the First Amendment To Loan Documents ("First
Amendment") dated December 1, 1995 and the Second Amendment To Loan
<PAGE> 18
Documents ("Second Amendment") dated January 23, 1996 (collectively the "Credit
Agreement").
G. Pursuant to the First Amendment, OK Subsidiary agreed to
unconditionally guarantee the payment of the Term Loan and the Revolving Loans
and to become a party to the Term Loan Guaranty and the Revolving Loan
Guaranty.
H. The Borrowing Group and the Bank enter into this Agreement for
the purpose of amending the maturity of the Revolving Note.
I. The Bank requires that the Loan Documents be expressly
ratified and confirmed by Borrowing Group.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and the mutual agreements contained herein, the Bank
and Borrowing Group agree as follows:
1. No Events of Default. The Borrowing Group represents and
warrants that all of the representations, warranties and covenants in the
Credit Agreement remain true and correct and that no Event of Default under the
Credit Agreement or any Loan Document currently exists.
2. Amendments to Credit Agreement. The Credit Agreement is
amended to delete subparagraph 2.1 and to insert in lieu thereof the following
provision:
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
June 30, 1998 (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 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
<PAGE> 19
3. Amendment To Revolving Note. The Revolving Note is amended to
delete the definition of "Maturity" as contained in paragraph 1 on page 3 and
to insert in lieu thereof the following provision:
(l) "Maturity" means June 30, 1998.
4. Cross-Referenced Terms. Each reference in the Loan Documents
to the Credit Agreement or the Revolving Note shall henceforth refer to the
Credit Agreement or the Revolving Note as amended hereby.
5. Conditions Precedent. On or prior to the date hereof, the Bank
shall have received the following, each of which shall be in form and substance
satisfactory to the Bank:
(a) evidence of the authority of the Borrowing Group to enter into
the transactions contemplated hereby; and
(b) all other documents, opinions and items as the Bank may
request.
6. Ratification; Estoppel. The terms, conditions, covenants and
provisions of the Credit Agreement, the Revolving Note, the Term Loan Guaranty,
the Revolving Loan Guaranty and the Loan Documents, as amended hereby, are
ratified and confirmed by the Borrowing Group in all respects as of the date
hereof.
7. No Impairment. Nothing in this Agreement shall be deemed to or
shall in any manner prejudice or impair the Loan Documents held by the Bank for
the indebtedness evidenced by the Notes arising under the Credit Agreement.
This Agreement shall not be deemed to be nor shall it constitute any
alteration, waiver, annulment or variation of any of the terms, covenants and
provisions of or any rights, powers or remedies under any Loan Document, except
as expressly set forth herein.
8. Law. This Agreement shall be a contract made under, governed
by and construed in accordance with, the internal laws of the State of
Missouri.
9. Survival of Representations. All covenants, representations
and warranties made by Borrowing Group herein and in the Credit Agreement and
any Loan Document shall survive the delivery of this Agreement and the
effective date hereof and shall continue in effect until the Notes are fully
repaid and all obligations thereunder completely performed.
10. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Borrowing Group shall not assign this Agreement or
the Credit
3
<PAGE> 20
Agreement or any of their rights or duties hereunder or thereunder, without the
prior written consent of the Bank.
11. Captions. The section headings and captions in this Agreement
are for convenience only and shall not affect the construction thereof.
12. Terms and Definitions. Terms capitalized herein which are not
defined are to be accorded the meaning such terms possess in the Credit
Agreement.
13. Waiver of Claims and Defenses. The Borrowing Group
acknowledges, as of the date hereof, their obligation for full payment of
amounts outstanding under the Notes and hereby waive any and all claims or
defenses, known or unknown, existing as of the date hereof, which would
diminish their obligation of repayment under the Notes, the Term Loan Guaranty,
or the Revolving Loan Guaranty or which in any manner arise out of or relate to
any Loan Document.
14. NO ORAL CREDIT AGREEMENT. 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(S)) 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.
IN WITNESS WHEREOF, the Borrowing Group and the Bank have executed this
Agreement as of the day and year first above written.
BORROWING GROUP:
ATTEST: REPUBLIC GROUP INCORPORATED
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
Secretary ------------------------------------
(Corporate Seal) Name: Doyle R. Ramsey
-----------------------------------
Title: Vice President Finance & CFO
----------------------------------
4
<PAGE> 21
ATTEST: REPUBLIC PAPERBOARD COMPANY
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
Secretary --------------------------------------
(Corporate Seal) Name: Doyle R. Ramsey
------------------------------------
Title: Vice President Finance & CFO
-----------------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY
OF WEST VIRGINIA
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
Secretary --------------------------------------
(Corporate Seal) Name: Doyle R. Ramsey
------------------------------------
Title: Vice President Finance & CFO
-----------------------------------
ATTEST: REPUBLIC GYPSUM COMPANY
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
Secretary --------------------------------------
(Corporate Seal) Name: Doyle R. Ramsey
------------------------------------
Title: Vice President Finance & CFO
-----------------------------------
BANK:
BOATMEN'S FIRST NATIONAL BANK
OF KANSAS CITY
By: /s/ BARRY SULLIVAN
--------------------------------------
Barry Sullivan
Vice President
5
<PAGE> 22
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 5th day of Sept., 1996, before me, personally appeared Doyle R.
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Third Amendment To Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Group
Incorporated and is doing so with the full knowledge and consent of the Board
of Directors of said Corporation and that the execution of said instrument is
his own free act and deed on behalf of said Corporation.
Notary Public - State of Kansas
SHERE L. MUNSEY
My Appt. Exp. Sept. 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 5th day of Sept., 1996, before me, personally appeared Doyle R.
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Third Amendment To Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Paperboard
Company and is doing so with the full knowledge and consent of the Board of
Directors of said Corporation and that the execution of said instrument is his
own free act and deed on behalf of said Corporation.
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt. Exp. Sept. 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
6
<PAGE> 23
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 5th day of Sept., 1996, before me, personally appeared Doyle R.
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Third Amendment To Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Paperboard
Company of West Virginia and is doing so with the full knowledge and consent of
the Board of Directors of said Corporation and that the execution of said
instrument is his own free act and deed on behalf of said Corporation.
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt. Exp. Sept. 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 5th day of Sept., 1996, before me, personally appeared Doyle R.
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Third Amendment To Loan Documents, did say that he has full power
and authority to execute this instrument in the name of Republic Gypsum Company
and is doing so with the full knowledge and consent of the Board of Directors
of said Corporation and that the execution of said instrument is his own free
act and deed on behalf of said Corporation.
NOTARY PUBLIC - State of Kansas
SHERE L. MUNSEY
My Appt. Exp. Sept. 10, 1998
/s/ SHERE L. MUNSEY
----------------------------
Notary Public
7
<PAGE> 24
STATE OF MISSOURI )
) SS.
COUNTY OF JACKSON )
On this __________day of________________, 1996 before me personally
appeared_____________________________, who being first duly sworn and known by
me to be the person who executed this Third Amendment To Loan Documents, did
say that he has full power and authority to execute this instrument in the name
of Boatmen's First National Bank of Kansas City and is doing so as his own free
act and deed on behalf of said Bank.
In Witness Whereof, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
---------------------------------------
Notary Public
8
<PAGE> 1
Exhibit 21
SIGNIFICANT SUBSIDIARIES OF REGISTRANT
The following list indicates each subsidiary of the Company; all are
wholly-owned by the Company, except for the Hollis & Eastern Railroad Company,
of which the Company owns 99.3% of the Common Stock. Republic Paperboard
Company of West Virginia is a subsidiary of Republic Paperboard Company.
Republic Paperboard Company of West Virginia does business under the name
Halltown Paperboard Company. Each other subsidiary does business under its
corporate name. The Consolidated financial statements filed herewith include
the accounts of each of such subsidiaries.
<TABLE>
<CAPTION>
Subsidiaries State of Incorporation
------------ ----------------------
<S> <C>
Republic Gypsum Company Oklahoma
Republic Paperboard Company Kansas
Republic Paperboard Company of West Virginia West Virginia
Hollis & Eastern Railroad Company Oklahoma
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
Post-Effective Amendment No. 5 to the Form S-8 Registration Statement File No.
2- 69991, into the Company's previously filed Post-Effective Amendment No. 3 to
the Form S-8 Registration Statement File No. 2-66025, into the Company's
previously filed Form S-8 Registration Statement File No. 33-37366 and into the
Company's previously filed Form S-8 Registration Statement File No. 33-37367.
ARTHUR ANDERSEN LLP
Dallas, Texas,
September 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,243,000
<SECURITIES> 12,325,000
<RECEIVABLES> 12,360,000
<ALLOWANCES> 633,000
<INVENTORY> 6,733,000
<CURRENT-ASSETS> 35,303,000
<PP&E> 110,243,000
<DEPRECIATION> 40,134,000
<TOTAL-ASSETS> 106,124,000
<CURRENT-LIABILITIES> 12,818,000
<BONDS> 0
<COMMON> 10,607,000
0
0
<OTHER-SE> 52,057,000
<TOTAL-LIABILITY-AND-EQUITY> 106,124,000
<SALES> 135,626,000
<TOTAL-REVENUES> 135,626,000
<CGS> 78,665,000
<TOTAL-COSTS> 78,665,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23,974,000
<INCOME-TAX> 9,062,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,912,000
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
</TABLE>
