<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
REPUBLIC GROUP INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 1-7120 75-1155922
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
811 EAST 30TH AVENUE
HUTCHINSON, KANSAS 67502
(316) 727-2700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DOYLE R. RAMSEY
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
REPUBLIC GROUP INCORPORATED
811 EAST 30TH AVENUE
HUTCHINSON, KANSAS 67502
(316) 727-2700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPY TO:
BRYAN E. BISHOP, ESQ.
LOCKE PURNELL RAIN HARRELL
(A PROFESSIONAL CORPORATION)
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201-6776
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If the only securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED NOTE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
9 1/2% Senior Subordinated
Notes due 2008.............. $100,000,000 100% $100,000,000 $29,500
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee pur-
suant to Rule 457.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRA-
TION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION
8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SEC-
TION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGIS- +
+TRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECU- +
+RITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD, NOR MAY OF- +
+FERS TO BUY BE ACCEPTED, PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES +
+EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICI- +
+TATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF, THESE SECURITIES +
+IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL +
+PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH +
+STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 11, 1998
PROSPECTUS
OFFER FOR ALL OUTSTANDING
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008 IN EXCHANGE FOR
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008, THE EXCHANGE
OF WHICH HAS BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OF
REPUBLIC GROUP INCORPORATED
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
Republic Group Incorporated, a Delaware corporation (the "Company"), hereby of-
fers, upon the terms and subject to the conditions set forth in this Prospectus
and the accompanying Letter of Transmittal (which together constitute the "Ex-
change Offer"), to exchange an aggregate principal amount of up to $100,000,000
of its 9 1/2% Senior Subordinated Notes due 2008 (the "New Notes"), the ex-
change of which has been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its issued and
outstanding 9 1/2% Senior Subordinated Notes due 2008 (the "Old Notes" and, to-
gether with the New Notes, the "Notes") from the holders (the "Holders") there-
of. The Old Notes were issued on July 15, 1998 pursuant to an offering exempt
from registration under the Securities Act and applicable state securities
laws. The New Notes are being offered hereunder in order to satisfy certain ob-
ligations of the Company contained in the Registration Rights Agreement (as de-
fined) entered into in connection with the sale of the Old Notes. The Exchange
Offer is designed to provide Holders (other than "affiliates" of the Company,
persons who are not acquiring New Notes in the ordinary course of business and
persons who intend to participate in the Exchange Offer for the purpose of dis-
tributing the New Notes) an opportunity to acquire Notes which may be offered
for resale, resold or otherwise transferred without further compliance with the
registration and, except in the case of broker-dealers, the prospectus delivery
procedures of the Securities Act.
The terms of the New Notes are identical in all material respects to the Old
Notes, except for certain transfer restrictions and registration rights relat-
ing to the Old Notes and except for certain provisions providing for an in-
crease in the interest rate on the Old Notes under certain circumstances relat-
ing to the timing of the Exchange Offer, which right and provisions will termi-
nate upon consummation of the Exchange Offer.
Interest on the Notes will be payable semi-annually in arrears on January 15
and July 15 of each year, commencing January 15, 1999. The Notes will mature on
July 15, 2008. The Notes are redeemable at the option of the Company, in whole
or in part, at any time on or after July 15, 2003, at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. The Notes are not subject to any sinking fund requirement. In addi-
tion, on or prior to July 15, 2001, the Company may redeem up to 35% of the
Notes with the net cash proceeds from one or more Public Equity Offerings (as
defined) by the Company at a price equal to 109.5% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of re-
demption. Upon a Change of Control (as defined), each Holder of the Notes will
have the right to require the Company to purchase all or a portion of such
Holder's Notes at 101% of the aggregate principal amount thereof, together with
accrued and unpaid interest, if any, to the date of purchase. See "Description
of Notes."
The Notes constitute general unsecured senior subordinated obligations of the
Company, subordinated in right of payment to all Senior Debt (as defined) of
the Company, including all of the obligations under the New Credit Facility (as
defined). As of August 31, 1998, the Company had no Senior Debt, but the Com-
pany expects to borrow a significant amount of the $85 million available to it
under the New Credit Facility, which would constitute Senior Debt and would
rank senior in right of payments to the Notes. In addition, the Notes effec-
tively are subordinated to all outstanding indebtedness and other liabilities
and commitments (including Trade Payables (as defined)) of the Company's sub-
sidiaries. As of August 31, 1998, the Company's subsidiaries had Trade Payables
and other liabilities aggregating approximately $32.9 million and no outstand-
ing indebtedness. However, the Company's material subsidiaries have each guar-
anteed all indebtedness incurred under the New Credit Facility. Subject to cer-
tain limitations, the Indenture (as defined) will permit the Company and its
subsidiaries to incur additional indebtedness. See "Description of Notes."
For each Old Note accepted for exchange, the Holder of such Old Note will re-
ceive a New Note having a principal amount equal to that of the surrendered Old
Note. The New Notes will bear interest from the most recent date to which in-
terest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from July 15, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment of accrued interest on such Old Notes.
Subject to certain conditions described under "The Exchange Offer," the Company
will accept for exchange any and all Old Notes properly tendered on or prior to
5:00 p.m., New York City time, on , 1998, unless extended by the Company in
its sole discretion (the "Expiration Date"). Tenders of Old Notes pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
In the event the Company terminates the Exchange Offer and does not accept for
exchange any Old Notes, the Company will promptly return the Old Notes to the
Holders thereof. The Company will not receive any proceeds from the Exchange
Offer. The Company will pay all the expenses incident to the Exchange Offer.
See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no as-
surance regarding the future development of a market for the New Notes, or the
ability of Holders of New Notes to sell their New Notes or the price at which
such Holders may be able to sell their New Notes. The Company believes that
J.P. Morgan Securities Inc., Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, and A.G. Edwards & Sons, Inc. (the "Initial Purchasers") cur-
rently intend to make a market in the New Notes. The Initial Purchasers are not
obligated to do so, however, and any market-making with respect to the New
Notes may be discontinued at any time without notice. The Company does not in-
tend to apply for listing or quotation of the New Notes on any securities ex-
change or stock market.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EX-
CHANGE OFFER OR THE ACCEPTANCE OF SUCH OLD NOTES WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is September , 1998.
<PAGE>
Based on existing interpretations by the staff of the SEC set forth in several
no-action letters to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by a Holder thereof without further compliance with the registra-
tion and prospectus delivery provisions of the Securities Act. Any purchaser of
New Notes, however, who is an "affiliate" of the Company, who is not acquiring
the New Notes in the ordinary course of its business, or who intends to partic-
ipate in the Exchange Offer for the purpose of distributing the New Notes (i)
will not be able to rely on the interpretations of the staff of the SEC, (ii)
will not be able to exchange its Old Notes in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery provisions of the Securi-
ties Act in connection with any sale or transfer of the Old Notes unless such
sale or transfer is made pursuant to an exemption from such requirements. How-
ever, the staff of the SEC has not rendered a no-action letter with respect to
the Exchange Offer, and there can be no assurance that the staff would make a
similar determination for the Exchange Offer as in such other circumstances.
Each Holder, other than a broker-dealer, must acknowledge that it is not en-
gaged in, and does not intend to engage in, a distribution of New Notes and has
no arrangement or understanding to participate in a distribution of New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that such Old Notes were acquired by such bro-
ker-dealer as a result of market making activities or other trading activities
and that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by deliv-
ering a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of up to 180 days after the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the SEC a registration statement on Form S-4 (to-
gether with all amendments, exhibits, and supplements thereto, the "Registra-
tion Statement") under the Securities Act with respect to the New Notes offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. For further information with respect to the Company and the New
Notes offered hereby, reference is made to the Registration Statement. Any
statements made in this Prospectus concerning the provisions of certain docu-
ments are not necessarily complete and, in each instance, reference is made to
the copy of such documents filed as an exhibit to the Registration Statement or
otherwise filed with the SEC.
The Company is also subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports and other information with
the SEC. The Registration Statement and all such reports and other information
may be inspected and copied at the offices of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as the following regional offices: 7
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-
2511. Copies of such material can be obtained from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a web site at http://www.sec.gov that contains regis-
tration statements, reports, proxy and information statements and other infor-
mation regarding issuers that file electronically with the SEC. In addition,
the Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "RGC." Registration statements, reports, proxy state-
ments and other information filed by the Company may be inspected at the of-
fices of the NYSE at 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC are incorporated by
reference in this Prospectus: (1) the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 (the "1997 Form 10-K"); (2) the Company's
Quarterly Reports on Form 10-Q for the periods ending March 31, 1998, December
31, 1997 and September 30, 1997; (3) the portions of the Proxy Statement for
the Company's 1997 Annual Meeting held on October 23, 1997 that have been in-
corporated by reference into the 1997 Form 10-K; (4) the Company's Current Re-
ports on Form 8-K filed on September 11, 1998, July 20, 1998, July 17, 1998,
June 26, 1998 and May 28, 1998; and (5) all documents filed by the Company pur-
suant to sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the later of the termination of the
Exchange Offer made hereby or, if this Prospectus is used by any broker-dealer
in connection with the reoffer or resale of New Notes acquired pursuant to the
Exchange Offer where the subject Old Notes were acquired by such broker-dealer
as a result of market making activities or other trading activities, the date
such reoffering is terminated (which in any event shall not be more than 180
days after the Expiration Date).
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document which is incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all the foregoing documents incorporated by reference herein,
including exhibits specifically incorporated by reference in such documents but
excluding all other exhibits to such documents. Requests should be made to the
Vice President, Treasurer and Secretary of the Company at P.O. Box 1307, Hutch-
inson, Kansas 67504-1307, telephone number: (316) 727-2711.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements, in-
cluding the footnotes thereto, incorporated by reference in this Prospectus.
Unless the context otherwise requires, (i) references in this Prospectus to the
"Company" or "Republic" refer to Republic Group Incorporated and its subsidiar-
ies and (ii) all references to a fiscal year refer to the Company's fiscal year
ended on June 30 in that calendar year. Certain market data used in this Pro-
spectus were obtained through internal research, surveys or studies or from in-
dustry publications or other industry sources, which the Company believes to be
reliable but has not independently verified.
THE COMPANY
Founded in 1961, Republic Group Incorporated is an integrated manufacturer and
distributor of recycled paperboard and gypsum wallboard. Management believes
that the Company is one of the leading producers of certain grades of recycled
paperboard sold to manufacturers of consumer and industrial paperboard products
such as tubes, cans, cores, spools, drums, partitions, puzzles and games as
well as one of the leading suppliers of gypsum-grade recycled paperboard to in-
dependent gypsum wallboard producers. In addition, the Company sells reclaimed
paper fiber for use in its recycled paperboard business as well as for sale to
third parties. Republic sells its products to customers located in 43 states.
In addition to its gypsum wallboard plant located in Duke, Oklahoma (the "Duke
Plant"), the Company has recycled paperboard mills in Colorado, Kansas and West
Virginia and paper fiber recycling centers in Colorado, Kansas and Missouri.
The Company had net sales and EBITDA (as defined) of approximately $123.7 mil-
lion and $39.7 million, respectively, in fiscal 1997 and $96.2 million and
$25.8 million, respectively, for the first nine months of fiscal 1998. Before
inter-company eliminations, the Company's recycled paperboard (which includes
reclaimed paper fiber) and gypsum wallboard businesses accounted for approxi-
mately 59% and 41%, respectively, of Republic's total net sales during fiscal
1997.
Management has recently undertaken a number of important strategic initiatives
designed to increase Republic's production capabilities. On June 29, 1998, the
Company commenced the construction of a mill in Lawton, Oklahoma (the "Lawton
Mill") that will be used primarily for the production of gypsum-grade recycled
paperboard with weight and surface characteristics superior to that currently
available in the United States. Management believes that the operation of the
Lawton Mill will position Republic as the largest third-party supplier of gyp-
sum-grade recycled paperboard in the United States. The Lawton Mill is expected
to have a production capacity of approximately 220,000 tons per annum, which
will approximately double Republic's recycled paperboard capacity. The Company
intends to sell approximately 50% of the Lawton Mill's output pursuant to a re-
cently executed long-term supply agreement with James Hardie Gypsum, Inc. (the
"Hardie Agreement") and to use approximately 25% of the Lawton Mill's output to
source its own gypsum wallboard operations. Management estimates that the Law-
ton Mill will cost approximately $160-170 million, inclusive of related working
capital requirements and capitalized interest, and will achieve commercial pro-
duction by the first quarter of 2000. The Company estimates that construction
of the project will be completed approximately 13 to 15 months after the date
of this Prospectus. Substantially all of the net proceeds to the Company from
the sale of the Old Notes (approximately $97 million) are being and will con-
tinue to be used to finance, and were used in part to repay indebtedness used
to finance, the construction of the Lawton Mill. Most of the proceeds of
borrowings under the New Credit Facility will also be used to finance the con-
struction of the Lawton Mill.
The Company is also currently completing the second phase of a two-phase expan-
sion of the Duke Plant that will increase its capacity from 570 million to 1.2
billion square feet per year by the end of 1998. Management believes that, af-
ter its expansion, the Duke Plant will be one of the largest, most-efficient
gypsum wallboard manufacturing plants in the world. In addition, the Company
has just completed an expansion of the capacity of its recycled paperboard
mills in Commerce City, Colorado (the "Commerce City Mill") and Hutchinson,
Kansas (the "Hutchinson Mill") by approximately 25% in the aggregate. Manage-
ment believes that these initiatives, together with the construction of the
Lawton Mill and the continued expansion and incremental upgrading of its facil-
ities, will significantly increase Republic's overall production capabilities
and enhance its competitive position in both the recycled paperboard and gypsum
wallboard business.
COMPETITIVE STRENGTHS
The Company believes that it has the following competitive strengths:
Low Cost Production. The Company believes that its production costs are among
the lowest in the industry and continually seeks to improve efficiency and al-
locate production in order to maximize capacity utilization. Management be-
lieves
1
<PAGE>
that the use of high-speed manufacturing equipment in particular has enabled
the Company to significantly reduce labor costs, waste and production time. In
addition, management believes that the strategic locations of the Company's fa-
cilities provide it with cost advantages, including reduced transportation and
warehousing costs.
Product Line and Geographic Diversification. The Company's growth in the recy-
cled paperboard business has reduced its dependence on the construction and
housing industry in which gypsum wallboard is used. Management believes that
such diversification has lessened the effect of cyclical housing and construc-
tion markets on the Company's overall operations. In addition, the Company pro-
duces a number of specialty grades of recycled paperboard that are sold to man-
ufacturers of consumer and industrial paperboard products and used for packag-
ing and other products, thereby reducing its dependence on sales of any one
grade. Management also believes that the various locations of the Company's fa-
cilities reduce its dependence on any single geographic market.
Well-Integrated Operations. Management believes that the Company's well-inte-
grated operations reduce its dependence on third-parties and its overall pro-
duction costs. The Duke Plant obtains substantially all of its requirements for
raw gypsum from quarries owned and operated by the Company and purchases sub-
stantially all of its requirements for recycled paperboard from the Commerce
City Mill and the Hutchinson Mill. The Company's recycled paperboard mills, in
turn, purchase approximately 33% of their reclaimed paper fiber needs from the
Company's own reclaimed paper fiber operations. The Company also owns and oper-
ates a short-line railroad that it uses to transport approximately one-third of
its gypsum wallboard to major carriers located 15 miles from the Duke Plant for
distribution throughout the United States.
High-Quality Products and Services; Strong Customer Relationships. The Company
has adopted strict quality control standards and procedures, which it regularly
reviews and updates. The Company believes that its ability to consistently man-
ufacture high quality products and to provide timely delivery and superior cus-
tomer service is an important element of the Company's success. As a result of
its focus on quality and customer service, the Company believes that it has
earned a reputation in the industry as a dependable supplier of products, en-
abling the Company to develop long-standing customer relationships.
Management Experience. The Company, which was founded by its current president
and chief executive officer in 1961, has assembled a management team with a
strong track record and an average of approximately 16 years of service per ex-
ecutive officer. The Company's current management team has successfully diver-
sified product lines, increased sales, strengthened customer and supplier rela-
tionships, improved manufacturing efficiencies and productivity and selected
and integrated strategic acquisitions, all of which have enhanced the competi-
tive strength of the Company.
BUSINESS STRATEGY
The Company intends to take advantage of its competitive strengths by pursuing
the following business strategy:
Expand Productive Capabilities. Management believes that the operation of the
Lawton Mill will position Republic as the largest third-party producer of gyp-
sum-grade recycled paperboard in the United States. The Company expects the
Lawton Mill to produce gypsum-grade recycled paperboard that is 20-30% lighter,
superior in quality and equal in strength characteristics to the gypsum-grade
recycled paperboard that is otherwise currently available in the United States.
Management believes that being the first producer to bring a technologically-
improved gypsum-grade recycled paperboard to market will provide Republic with
a distinct competitive advantage and increase the ability of the Company to
sell its product in new markets. The Company intends to sell approximately 50%
of the Lawton Mill's output pursuant to the Hardie Agreement and expects to use
an additional 25% of output to support its gypsum wallboard business. Manage-
ment also expects the operation of the Lawton Mill to allow Republic to rede-
ploy some of its existing gypsum-grade paperboard capacity for non-wallboard
use, thereby allowing the Company to continue to grow and diversify its recy-
cled paperboard business. The Lawton Mill will also be capable of producing
tube stock and other consumer and industrial paperboard products, which manage-
ment believes will help mitigate the impact of any future downturns in the
housing and construction industry.
Management also believes that the ongoing upgrades and expansions to its exist-
ing facilities will further enhance and increase the Company's overall produc-
tive capacity. The improvements to the existing production line, together with
the addition of a second production line at the Duke Plant, will provide the
Company with the capability of producing both specialty products, such as the
Company's recently introduced 54-inch wallboard, and increased volumes of its
core products, which management believes will allow Republic to increase its
sales to existing customers as well as obtain new customers. The Company ex-
pects to begin transitioning the Hutchinson Mill to tube stock and other con-
sumer and indus-
2
<PAGE>
trial paperboard products before the Lawton Mill comes on line. In addition,
management believes that the improvements made at the Commerce City Mill will
produce a higher quality gypsum-grade paperboard that can be used in conjunc-
tion with the output from the Lawton Mill.
Continue to Operate as Low Cost Producer. In order to maintain and improve its
cost position, Republic expects to continue to identify opportunities for ongo-
ing cost reductions. The Lawton Mill is expected to be an efficient high-speed
mill with lower than average operating costs as a result of its design specifi-
cations. In addition, management expects the production of lighter gypsum-grade
paperboard at the Lawton Mill to result in freight cost savings as well as re-
duced drying and delivery costs to gypsum wallboard producers. The expansions
and improvements at the Duke Plant, the Commerce City Mill and the Hutchinson
Mill should also provide increased economies of scale. The Company continuously
scrutinizes its manufacturing processes and overhead infrastructure to conserve
material and energy, reduce set-up time and lower overhead expenses. To this
end, the Company has identified additional cost-saving opportunities it expects
to implement in fiscal year 1999, including incremental process equipment up-
grades at the Company's existing recycled paperboard mills.
Pursue Strategic Acquisitions. The Company may from time to time pursue small
to medium-sized strategic acquisitions, particularly in the recycled paperboard
business. Management believes that such acquisitions may provide opportunities
to further diversify its product lines as well as consolidate operations and
lower per unit costs.
RECENT FINANCIAL RESULTS
On August 7, 1998, the Company reported fiscal year-end financial results. For
the quarter ended June 30, 1998, the Company reported net sales of $32.1 mil-
lion and net income of $5.3 million, or diluted earnings per share of $0.45.
For the fiscal year ended June 30, 1998, the Company reported net sales of
$128.3 million and net income of $17.8 million, or diluted earnings per share
of $1.51. The results for the quarter and the fiscal year were augmented by $1
million of non-taxable life insurance income from a policy owned by the Company
on an executive officer.
3
<PAGE>
THE EXCHANGE OFFER
SECURITIES OFFERED...... Up to $100,000,000 aggregate principal amount of 9
1/2% Senior Subordinated Notes due 2008, the
exchange of which has been registered under the
Securities Act. The terms of the New Notes and the
Old Notes are identical in all material respects,
except for certain transfer restrictions and
registration rights relating to the Old Notes and
except for certain interest provisions relating to
the Old Notes described below under "--Summary
Description of the New Notes."
THE EXCHANGE OFFER...... The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance of
the New Notes is intended to satisfy obligations of
the Company contained in the Registration Rights
Agreement, dated as of July 15, 1998, among the
Company and the Initial Purchasers (the
"Registration Rights Agreement").
EXPIRATION DATE;
WITHDRAWAL RIGHTS......
The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, or such later date
and time to which it is extended by the Company in
its sole discretion. The tender of Old Notes
pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. Any Old Note
not accepted for exchange for any reason will be
returned without expense to the tendering Holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer. See
"The Exchange Offer--Terms of the Exchange Offer;
Period for Tendering Old Notes" and "--Withdrawal
Rights."
PROCEDURES FOR
TENDERING OLD NOTES....
Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with either certificates for such Old Notes or a
Book-Entry Confirmation (as defined) of the transfer
of such Old Notes into the account of the exchange
agent (the "Exchange Agent") at the Depository Trust
Company (the "Book-Entry Transfer Facility"), and
any other required documentation to the Exchange
Agent at the address set forth herein. Persons
holding Old Notes through the Book-Entry Transfer
Facility and wishing to accept the Exchange Offer
must do so pursuant to the Book-Entry Transfer
Facility's Automated Tender Offer Program, by which
each tendering participant (each, a "Participant")
will agree to be bound by the Letter of Transmittal.
By executing the Letter of Transmittal, each Holder
will represent to the Company, among other things,
that (i) the New Notes acquired pursuant to the
Exchange Offer by the Holder and any other person
are being obtained in the ordinary course of
business of the person receiving such New Notes,
(ii) neither the Holder nor such other person is
participating in, intends to participate in or has
an arrangement or understanding with any person to
participate in the distribution of such New Notes
and (iii) neither the Holder nor such other person
is an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company. Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes, if such Old Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--Procedures
for Tendering Old Notes" and "Plan of Distribution."
4
<PAGE>
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS......
Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
exchange Old Notes for New Notes should contact such
registered Holder promptly and instruct such
registered Holder to exchange on such beneficial
owner's behalf. If such beneficial owner wishes to
exchange on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering
its Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly
completed bond power from the registered Holder. The
transfer of registered ownership may take
considerable time. See "The Exchange Offer--
Procedures for Tendering Old Notes."
GUARANTEED DELIVERY
PROCEDURES.............
Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
ACCEPTANCE OF OLD NOTES
AND DELIVERY OF NEW
NOTES..................
Subject to certain conditions described under "The
Exchange Offer," the Company will accept for
exchange any and all Old Notes properly tendered on
or prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes will be issued
promptly following acceptance of the Old Notes.
FEDERAL INCOME TAX
CONSEQUENCES...........
The exchange pursuant to the Exchange Offer should
not result in gain or loss to the Holders or the
Company for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
USE OF PROCEEDS......... There will be no proceeds to the Company from the
Exchange Offer.
EXCHANGE AGENT.......... UMB Bank, N.A. is serving as Exchange Agent in
connection with the Exchange Offer. See "The
Exchange Offer--Exchange Agent."
CONSEQUENCES OF EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on trans-
fer of such Old Notes as set forth in the legend thereon as a consequence of
the issuance of the Old Notes pursuant to an exemption from, or in a transac-
tion not subject to, the registration requirements of the Securities Act and
applicable state securities laws. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an ex-
emption from, or in a transaction not subject to, the Securities Act and appli-
cable state securities laws. The Company does not currently anticipate that it
will register the Old Notes under the Securities Act. Based on existing inter-
pretations by the staff of the SEC set forth in several no-action letters to
third parties, the Company believes that New Notes issued pursuant to the Ex-
change Offer may be offered for resale, resold and otherwise transferred by a
Holder thereof without further compliance with the registration and prospectus
delivery provisions of the Securities Act. Any purchaser of Notes, however, who
is an "affiliate" of the Company, who is not acquiring the New Notes in the or-
dinary course of its business, or who intends to participate in the Exchange
Offer for the purpose of distributing the New Notes (i) will not be able to
rely on the interpretations of the staff of the SEC, (ii) will not be able to
exchange its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery provisions of the Securities Act in con-
nection with any sale or transfer of the Old Notes unless such sale or transfer
is made pursuant to an exemption from such requirements. However, the staff of
the SEC has not rendered a no-action letter with respect to the Exchange Offer,
and there can be no assurance that the staff would make a similar determination
for the Exchange Offer as in such other circumstances. Each Holder, other than
a broker-dealer, must acknowledge that it is not
5
<PAGE>
engaged in, and does not intend to engage in, a distribution of New Notes and
has no arrangement or understanding to participate in a distribution of New
Notes. Each broker-dealer that receives New Notes for its own account in ex-
change for Old Notes must acknowledge that such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading activi-
ties and that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material re-
spects, except for certain transfer restrictions and registration rights relat-
ing to the Old Notes and except for certain provisions providing for an in-
crease in the interest rates on the Old Notes under certain circumstances re-
lating to timing of the Exchange Offer, which rights and provisions will termi-
nate upon consummation of the Exchange Offer. The New Notes will bear interest
from the most recent date to which interest has been paid on the Old Notes or,
if no interest has been paid on the Old Notes, from July 15, 1998. Accordingly,
registered Holders of New Notes on the relevant record date for the first in-
terest payment date following the consummation of the Exchange Offer will re-
ceive interest accruing from the most recent date to which interest has been
paid or, if no interest has been paid, from July 15, 1998. Old Notes accepted
for exchange will cease to accrue interest from and after the date of consumma-
tion of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted
for exchange will not receive any payment of interest on such Old Notes other-
wise payable on any interest payment date the record date for which occurs on
or after the date of consummation of the Exchange Offer, and any and all rights
to receive interest on such Old Notes will terminate upon consummation of the
Exchange Offer.
ISSUER.................. Republic Group Incorporated
SECURITIES OFFERED...... $100,000,000 of 9 1/2% Senior Subordinated Notes due
2008, the exchange of which has been registered un-
der the Securities Act.
MATURITY DATE........... July 15, 2008.
INTEREST PAYMENT DATE... January 15 and July 15, commencing on January 15,
1999.
OPTIONAL REDEMPTION..... The Notes are redeemable at the option of the Compa-
ny, in whole or in part, at any time on or after
July 15, 2003, at the redemption prices set forth
herein, plus accrued and unpaid interest to the re-
demption date. In addition, on or prior to July 15,
2001, the Company may redeem up to 35% of the Notes
originally issued at a redemption price equal to
109.5% of the principal amount thereof, plus accrued
and unpaid interest thereon to the redemption date,
with the net cash proceeds of one or more Public Eq-
uity Offerings; provided, however, that at least 65%
of the aggregate principal amount of Notes origi-
nally issued shall remain outstanding after each
such redemption.
RANKING................. The Notes constitute general unsecured obligations
of the Company and rank subordinate in right of pay-
ment to all existing and future Senior Debt, includ-
ing all of the obligations under the New Credit Fa-
cility. As of August 31, 1998, the Company had no
Senior Debt, but the Company expects to borrow a
significant amount of the $85 million available to
it under the New Credit Facility, which would con-
stitute Senior Debt and would rank senior in right
of payment to the Notes. In addition, the Notes ef-
fectively are subordinated to all outstanding in-
debtedness and other liabilities and commitments
(including Trade Payables) of the Company's subsidi-
aries. As of August 31, 1998, the Company's subsidi-
aries had Trade Payables and other liabilities ag-
gregating approximately $32.9 million and no out-
standing indebtedness. However, the Company's mate-
rial subsidiaries have each guaranteed all indebted-
ness incurred under the New Credit Facility. Subject
to certain limitations, the New Credit Facility and
the Indenture permit the Company and its subsidiar-
ies to incur additional indebtedness, including Se-
nior Debt.
6
<PAGE>
CHANGE OF CONTROL....... Upon the occurrence of a Change of Control, each
Holder of Notes will have the right to require the
Company to repurchase such Holder's Notes at 101% of
the principal amount thereof, plus accrued and un-
paid interest to the date of repurchase. However,
the New Credit Facility will provide that a change
of control (as defined therein) will constitute a
default thereunder, which would permit the lenders
to cause the indebtedness under the New Credit Fa-
cility to become immediately due and payable or to
institute a payment blockage with respect to the
Notes. In order to repurchase Notes upon a Change of
Control, the Company would have to repay all of its
obligations under the New Credit Facility (and any
other agreements relating to Senior Debt that con-
tain similar change of control provisions) or would
have to obtain the consent of the holders of such
indebtedness. There can be no assurance that the
Company will have the financial resources to repur-
chase the Notes in the event of a Change of Control,
particularly if such Change of Control requires the
Company to refinance, or results in the acceleration
of, other indebtedness. See "Description of the New
Credit Facility" and "Description of Notes--Repur-
chase at the Option of Holders Upon a Change of Con-
trol."
CERTAIN COVENANTS....... The Indenture governing the Notes contains certain
covenants, including, but not limited to, covenants
limiting (i) the incurrence by the Company and its
Restricted Subsidiaries (as defined) of additional
indebtedness, (ii) the payment of dividends on and
the redemption of capital stock by the Company,
(iii) the creation of liens securing indebtedness,
(iv) the ability of Restricted Subsidiaries to pay
dividends, (v) transactions with affiliates, (vi)
the sale of assets and (vii) the Company's ability
to consolidate or merge with or into, or to transfer
all or substantially all of its assets to, another
person. See "Description of Notes--Certain Cove-
nants."
USE OF PROCEEDS......... The Company will not receive any proceeds from the
Exchange Offer. The net proceeds to the Company from
the sale of the Old Notes were approximately $97
million, after deducting the discount to the Initial
Purchasers and the expenses of the sale. Substan-
tially all of those proceeds, are being and will be
used to finance, and were used in part to repay in-
debtedness used to finance, the construction of the
Lawton Mill. Most of the proceeds of borrowings un-
der the New Credit Facility will also be used to fi-
nance the construction of the Lawton Mill. See
"Business--Business Strategy" and "Use of Proceeds."
RISK FACTORS............ Prospective purchasers of the New Notes should care-
fully consider the specific risk factors and other
information and data included, or incorporated by
reference, in this Prospectus prior to exchanging
Old Notes for New Notes pursuant to the Exchange Of-
fer. See "Risk Factors."
7
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables set forth certain summary historical consolidated finan-
cial data, which should be read in connection with the Company's consolidated
financial statements, including the footnotes thereto, and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
summary income statement data for the years ended June 30, 1995, 1996 and 1997
and the summary balance sheet data as of June 30, 1996 and 1997, have been de-
rived and calculated from the Company's audited financial statements incorpo-
rated by reference herein. The summary income statement data for the years
ended June 30, 1993 and 1994 and the summary balance sheet data as of June 30,
1993, 1994 and 1995, have been derived and calculated from the Company's au-
dited financial statements not included or incorporated by reference herein.
The summary consolidated financial data presented below for the nine months
ended March 31, 1997, and as of and for the nine months ended March 31, 1998,
are derived from the Company's unaudited consolidated financial statements in-
corporated by reference herein. The summary balance sheet data as of March 31,
1997 are also derived from the Company's unaudited financial statements not in-
cluded or incorporated by reference herein. The unaudited financial statements
include all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for a fair presentation of the Company's finan-
cial position and results of operations for these periods. Operating results
for the nine months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for future periods. See "Risk Factors." More re-
cent financial results are discussed under "Business--Recent Financial Re-
sults."
<TABLE>
<CAPTION>
------------------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
---------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Dollars in thousands
INCOME STATEMENT DATA:
Gross sales............. $61,720 $77,131 $112,400 $135,626 $144,234 $105,913 $111,450
Net sales............... 49,189 63,200 96,413 117,902 123,697 90,701 96,231
Operating profit........ 4,269 11,961 19,008 25,405 31,756 23,597 20,048
Income before income
taxes.................. 4,450 12,436 19,158 23,974 31,141 23,016 20,206
Net income.............. 3,235 7,739 11,677 14,912 19,663 14,624 12,529
BALANCE SHEET DATA:
Working capital......... 10,596 8,170 13,520 22,485 12,939 33,038 14,602
Total assets............ 44,097 53,796 95,442 106,124 100,400 119,046 112,433
Total debt (including
current portion)....... -- -- 28,000 24,840 -- 23,170 --
Stockholders' equity.... 35,058 41,173 50,569 62,664 77,845 74,569 87,394
OTHER FINANCIAL DATA:
EBITDA (1).............. $ 6,820 $15,267 $ 22,798 $ 32,114 $ 39,697 $ 29,363 $ 25,801
EBITDA margin (1)....... 14% 24% 24% 27% 32% 32% 27%
Interest expense........ 10 22 7 1,937 1,476 1,175 2
Depreciation and amorti-
zation................. 2,360 2,809 3,633 6,203 7,080 5,172 5,593
Capital expenditures
(2).................... 5,589 13,318 8,800 9,062 11,556 5,827 14,090
Pro forma ratio of
EBITDA to interest ex-
pense (3).............. 3.6:1 3.6:1
SHIPMENTS (INCLUDING
INTERCOMPANY
SHIPMENTS):
Recycled paperboard (in
thousand tons)......... 110 123 125 181 188 138 141
Gypsum wallboard (in
million sq. ft.)....... 400 476 494 529 570 426 429
Reclaimed paper fiber
(in thousand tons)..... -- 17 97 112 153 115 108
</TABLE>
8
<PAGE>
- -------
(1) EBITDA is defined as pre-tax income before interest expense, depreciation
and amortization. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. However, EBITDA
should not be considered in isolation as a substitute for net income. In addi-
tion, this measure of EBITDA may not be comparable to similar measures reported
by other companies. EBITDA margin is calculated as the ratio of EBITDA to net
sales for the period presented.
(2) The data for 1995 does not include the acquisition of Halltown Paperboard
Company. The data for 1997 includes $4.1 million for the expansion of the Duke
Plant. The data for 1998 includes $9.3 million for the expansion of the Duke
Plant.
(3) The pro forma ratio of EBITDA to interest expense has been adjusted to give
effect to the issuance and sale of the Notes at a rate of 9 1/2% and the re-
lated interest expense (including capitalized interest) as if the Notes were
issued and sold at the beginning of the period. In addition, the Company ex-
pects to borrow a significant amount of the $85 million available to it under
the New Credit Facility in order to fund the construction of the Lawton Mill,
which would significantly increase the Company's interest expense. However, the
ratio has not been adjusted to give effect to any interest expense related to
such borrowings or to any increase in earnings that the Company may realize as
a result of the upgrade to the Duke Plant or from the operation of the Lawton
Mill. See "Management's Discussion and Analysis of Financial Condition and Re-
sults of Operations--Liquidity and Capital Resources" and "Business--The Lawton
Mill."
9
<PAGE>
RISK FACTORS
An investment in the Notes involves a high degree of risk. Prospective invest-
ors should consider carefully the principal risk factors set forth below as
well as the other information set forth, or incorporated by reference, in this
Prospectus in evaluating the Company and its business before deciding to ex-
change Old Notes in the Exchange Offer. The following risk factors are gener-
ally applicable to both the Old Notes and the New Notes.
FORWARD-LOOKING STATEMENTS
This Prospectus includes forward-looking statements within the meaning of Sec-
tion 27a of the Securities Act and Section 21e of the Exchange Act. All state-
ments regarding the Company's expected future financial position, results of
operations, cash flows, dividends, financing plans, business strategy, budgets,
projected costs and capital expenditures, competitive positions, growth oppor-
tunities, plans and objectives of management for future operations and words
such as "anticipate," "believe," "plan," "estimate," "expect," "intend," and
other similar expressions are forward-looking statements. Such forward-looking
statements are inherently uncertain, and prospective purchasers of the Notes
must recognize that actual results may differ from the Company's expectations.
Actual future results and trends for the Company may differ materially depend-
ing on a variety of factors discussed in this "Risk Factors" section and else-
where in this Prospectus. Factors that may affect the plans or results of the
Company include, without limitation, (i) success in implementing the Company's
business strategies, including the continued growth of the Company's operations
through expansion of new and existing facilities and through the construction
of the Lawton Mill, (ii) the cost and availability of raw materials used in the
Company's businesses, (iii) the nature and extent of future competition and
(iv) the changes in the general economic condition and/or in the markets in
which the Company competes. Many of such factors are beyond the control of the
Company and its management.
LEVERAGE; RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Company is significantly more leveraged than it has been in the past, and a
substantial portion of its cash flow from operations will be dedicated to the
payment of principal and interest on indebtedness. As of March 31, 1998, after
giving effect to the issuance of the Notes, the Company's total consolidated
indebtedness and total stockholders' equity would have been $100 million and
$87 million, respectively, and total indebtedness would have represented 53% of
total capitalization. The Company expects to borrow a significant amount of the
$85 million available to it under the New Credit Facility in order to fund the
construction of the Lawton Mill, which will further increase the Company's lev-
erage and total indebtedness as a percentage of total capitalization. Subject
to certain limitations, the New Credit Facility and the Indenture permit the
Company and its subsidiaries to incur additional indebtedness. The Company ex-
pects to capitalize a significant amount of the cash interest expense of the
Notes and the New Credit Facility as a cost of the construction of the Lawton
Mill, and payment of such interest will have an adverse effect on the Company's
cash flows in the near term.
The ability of the Company to service its debt and to comply with the financial
and restrictive covenants contained in the New Credit Facility and the Inden-
ture depends upon its future performance and business growth, which, in turn,
are subject to financial, economic, competitive and other factors, many of
which are beyond the Company's control. While the Company believes that it will
be able to generate sufficient cash flow to cover required debt service pay-
ments, no assurance can be given to that effect. If the Company is unable to
generate sufficient funds to meet its debt service obligations, then the Com-
pany may be required to refinance some or all of such debt, sell assets or
raise additional equity. No assurance can be given that such refinancings, as-
set sales or equity sales could be accomplished or, if accomplished, would
raise sufficient funds to service the Company's indebtedness. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's degree of leverage and the restrictions imposed by the financial
covenants contained in the New Credit Facility and the Indenture could have a
material adverse effect on the Company's ability to withstand competitive pres-
sures or adverse economic conditions, make material capital investments or ac-
quisitions, obtain future financing or take advantage of business opportunities
that may arise. In addition, a general downturn in economic conditions or in
the Company's industries could have a material adverse effect on the Company's
ability to meet debt service obligations or to conduct its business in the or-
dinary course. After the Company has expended the net proceeds from the sale of
the Notes and the borrowings under the New Credit Facility toward the construc-
tion of the Lawton Mill and until the Lawton Mill has been accretive to earn-
ings for a period of time, the Company's additional leverage will make it more
vulnerable to economic pressures from any delays or cost overruns with respect
to the project or from other factors that may produce adverse changes in the
results of operations generally.
10
<PAGE>
The New Credit Facility contains financial covenants that, among other things,
require the Company to maintain certain financial ratios and restrict the abil-
ity of the Company and its subsidiaries to incur indebtedness, make acquisi-
tions or investments, create or permit liens and make capital expenditures. The
Indenture likewise contains covenants that limit the Company's incurrence of
additional indebtedness, and that restrict the Company from creating liens on
its assets, making certain asset dispositions and entering into Affiliate
Transactions (as defined). If the Company is unable to generate sufficient cash
flows or otherwise obtain the funds necessary to make required payments of
principal and interest under, or is unable to comply with the covenants of, the
New Credit Facility or the Indenture, then the Company could be in default un-
der the terms thereof. Under the terms of the New Credit Facility, the occur-
rence of such a default under either of these instruments would permit the
lenders to accelerate the maturity of the Senior Debt created pursuant thereto
and receive payment in full prior to the receipt by the Holders of Notes of any
payment of principal of, premium, if any, or interest on the Notes. See "De-
scription of the New Credit Facility" and "Description of Notes."
SUBORDINATION OF THE NOTES; RISKS ASSOCIATED WITH CORPORATE STRUCTURE
The Notes are subordinated in right of payment to all Senior Debt of the Compa-
ny, including all obligations under the New Credit Facility. As of August 31,
1998, the Company had no Senior Debt, but the Company expects to borrow a sig-
nificant amount of the $85 million available to it under the New Credit Facili-
ty, which would constitute Senior Debt and would rank senior in right of pay-
ment to the Notes. Moreover, subject to certain limitations, the New Credit Fa-
cility and the Indenture permit the Company and its subsidiaries to incur addi-
tional indebtedness, including Senior Debt. In the event of a circumstance in
which the contractual subordination provisions apply, Holders of Notes will not
be entitled to receive, and will have an obligation to pay over to holders of
Senior Debt, any payments they may receive in respect of the Notes. The indebt-
edness under the New Credit Facility will become due prior to the time the
principal obligations under the Notes become due. Certain subsidiaries of the
Company have issued Guarantees under the New Credit Facility that are secured
by both the subsidiaries' pledge of their equity interests in other subsidiar-
ies and by each such subsidiary's pledge of (i) all intercompany debt owed to
it and (ii) substantially all of the personal property of that subsidiary. In
the event of a bankruptcy, liquidation or reorganization of the Company, the
assets of the Company would be available to pay obligations on the Notes only
after all Senior Debt has been paid in full, and, as a result, there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes then
outstanding. See "Description of the New Credit Facility" and "Description of
Notes."
The operations of the Company are primarily conducted through its subsidiaries.
Thus, the Company's ability to make required principal and interest payments
with respect to its indebtedness, including the Notes, depends on the earnings
of its subsidiaries and on its ability to receive funds from such subsidiaries
through dividends or other payments. Since the Notes are obligations of the
Company only, the Company's subsidiaries are not obliged or required to pay any
amounts due pursuant to the Notes or to make funds available therefor in the
form of dividends or advances to the Company. Furthermore, the Notes effec-
tively are subordinated to all outstanding indebtedness and other liabilities
and commitments (including Trade Payables and other liabilities) of the
Company's subsidiaries. Any right of the Company to receive assets of any of
its subsidiaries upon the latter's liquidation or reorganization (and the con-
sequent right of Holders of Notes to participate in those assets) will be sub-
ordinated to the claims of that subsidiary's creditors, except to the extent
that the Company itself is recognized as a creditor of such subsidiary, in
which case the claims of the Company would still be subordinate to any security
interest in the assets of such subsidiary and any indebtedness of such subsidi-
ary senior to that held by the Company. As of August 31, 1998, the Company's
subsidiaries had Trade Payables and other liabilities aggregating approximately
$32.9 million and no outstanding indebtedness. However, the Company's material
subsidiaries have each guaranteed all indebtedness incurred under the New
Credit Facility.
INABILITY TO SUCCESSFULLY COMPLETE OR INTEGRATE THE LAWTON MILL
Construction of the Lawton Mill may be significantly delayed or may not be com-
pleted at all as a result of problems frequently associated with construction
projects, including delays in construction, cost overruns, labor problems and
the inability to obtain required governmental approvals, licenses and permits
or the funds required to complete the project. Completion and operation of the
Lawton Mill may also be affected by general economic conditions. In addition,
no assurance can be given that the Company will be able to successfully imple-
ment the technology to be used in the operation of the Lawton Mill. The con-
struction of the Lawton Mill could also have a material adverse effect on the
Company due to the impact of start-up costs and the potential for under-utili-
zation, especially in the start-up phase. No assurance can be given that opera-
tion of the Lawton Mill will be implemented, that the Company will be able to
sell its products once production has commenced or that production will be
profitable. In addition, there also can be no assurance that the Company will
have sufficient resources available to successfully integrate the Lawton Mill
into its overall operations. The Company may
11
<PAGE>
be required to obtain additional financing should the actual costs of the Law-
ton Mill exceed the Company's then available funds. In such event, the Company
may decide to incur additional indebtedness to pay for construction costs or
expansion costs, which could have a material adverse effect on the Company.
When the Duke Plant converts to the use of recycled paperboard supplied by the
Lawton Mill, the Company will need to find replacement customers for that por-
tion of the productive capacity of the Hutchinson Mill that presently supplies
the Duke Plant. The Company expects to shift approximately one-third of the
production at the Hutchinson Mill currently used for the manufacture of gypsum-
grade recycled paperboard to other grades of recycled paperboard and to con-
tinue concentrating the Commerce City Mill on the production of gypsum-grade
recycled paperboard. However, the Company may experience a significant lag time
in converting production at the Hutchinson Mill to other grades of recycled pa-
perboard, prices available for such other grades may be significantly lower
then those currently available for existing grades or the Company might be un-
able to find replacement customers on acceptable terms.
DEPENDENCE ON HARDIE AGREEMENT
The Company expects that the amount of paperboard supplied to Hardie pursuant
to the Hardie Agreement will eventually account for approximately 50% of the
Lawton Mill's production. The Hardie Agreement provides for only minimal sales
to Hardie until October 1, 2000. Although the Company may be able to sell addi-
tional quantities to Hardie prior to that time, there can be no assurance that
such sales will occur or that the Lawton Mill will be able to produce the quan-
tities that Hardie might seek to purchase prior to commencement of its long-
term commitment. The Duke Plant is expected to utilize another 25% of the Law-
ton Mill's output. Although it is actively pursuing several potential custom-
ers, the Company does not yet have any other supply agreements for the output
of the Lawton Mill. There can be no assurance that the Company will be success-
ful in obtaining any further supply agreements, and, in that case, the Company
would attempt to sell the remaining production in the spot market or under
other short term arrangements.
Pursuant to the Hardie Agreement, three of Hardie's plants will purchase at
least 90% of their requirements of gypsum-grade recycled paperboard from the
Lawton Mill beginning in October 2000-January 2001 until the later of October
1, 2010 or ten years after the start of commercial production. Each sale will
be made at a fixed base price determined at the execution of the Hardie Agree-
ment that is subject to adjustment based on changes in the major variable costs
of production of recycled paperboard, including the cost of power, transporta-
tion and the primary raw materials, and changes in the purchaser price index
for industrial commodities and a reference employment cost index. The Hardie
Agreement also contains a "most favored nations" clause requiring the Company
to offer Hardie the lowest price that is available from the Company to other
third-party purchasers of its recycled paperboard. As a result of the pricing
formula, Hardie may be able to make purchases at substantially below market
prices if market prices rise faster than the cost of production. Because of the
"most favored nations" clause, if the Company were unable to sell its uncommit-
ted production from the Lawton Mill to third parties at prices equal to or ex-
ceeding the prices offered to Hardie, then it either would have to forego such
third party sales or lower the selling price offered to Hardie. Because of the
expected volume of product to be sold to Hardie, any such decrease in sales
price could have a material adverse effect on the Company.
In addition, the Hardie Agreement is a "requirements" contract, and a termina-
tion or reduction of Hardie's production of gypsum wallboard could have a mate-
rial adverse effect on the Company. If, after October 1, 2004, technology
changes make it substantially more economical for Hardie to utilize paperboard
of a kind not presently commercially available and that is not contemplated for
the Lawton Mill, then Hardie and the Company are obligated to negotiate in good
faith to include such recycled paperboard within the scope of the Hardie Agree-
ment. However, any failure to reach an agreement on this point could result in
a reduction or termination of Hardie's purchases from the Lawton Mill and, as a
result, could have a material adverse effect on the Company.
The Hardie Agreement also imposes detailed specifications for the gypsum-grade
recycled paperboard sold to Hardie. The Company believes that the production
from its Lawton Mill will be able to meet such specifications. However, if the
Company were unable to produce gypsum-grade recycled paperboard meeting such
specifications or were unable to complete the Lawton Mill or achieve commercial
production in a timely fashion, the Company would be obligated to supply Hardie
with gypsum-grade recycled paperboard from its other mills or from purchases
from third parties or otherwise compensate Hardie for its additional costs in
obtaining replacement. If the Company is unable to give notice that commercial
production has been achieved at the Lawton Mill by July 1, 2001, Hardie may
terminate the Hardie Agreement. See "Business--The Hardie Agreement."
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COMPETITION
Recycled Paperboard Industry. The recycled paperboard industry is highly com-
petitive. The Company's competitors include large, vertically integrated pa-
perboard and packaging products companies, numerous smaller companies and, to
a lesser extent, manufacturers of virgin paperboard and recycled
containerboard. In selling recycled paperboard to the packaging industry, the
Company competes with approximately 75 producers, many of which have substan-
tially greater financial resources than the Company. In selling the portion of
its gypsum-grade recycled paperboard not consumed by its own gypsum wallboard
operations, the Company competes with approximately eight other manufacturers,
six of which have gypsum wallboard manufacturing operations and substantially
all of which have greater financial resources than the Company. The primary
competitive factors in the recycled paperboard industry are price, quality,
personal relationships and timeliness of deliveries, with varying emphasis on
these factors depending on the specific product line. To the extent that one
or more of the Company's competitors becomes more successful with respect to
any key competitive factor, the Company's business could be adversely affect-
ed. In recent years, there has been a trend toward consolidation within the
paperboard and packaging products industries, and the Company believes that
this trend is likely to continue. If the independent gypsum wallboard produc-
ers or independent manufacturers of commercial and industrial paperboard prod-
ucts to whom the Company sells recycled paperboard acquire the capability to
manufacture recycled paperboard, then the Company may experience a loss of
customers, which could have a material adverse effect on the Company.
Gypsum Wallboard Industry. The gypsum wallboard industry is also highly com-
petitive. There are approximately 11 manufacturers of gypsum wallboard in the
United States, many of which have significantly greater financial resources
than the Company. Overall market share is dominated by a small number of pro-
ducers, including Georgia-Pacific Corporation ("Georgia-Pacific"), National
Gypsum Company ("National") and USG Corporation ("USG"), which companies pro-
duce, in the aggregate, approximately 75% to 80% of the gypsum wallboard sold
in the United States. The relative ease of entry into the gypsum wallboard in-
dustry, coupled with high demand and increasing prices, encouraged the expan-
sion of capacity in the industry in the mid-1980s, resulting in overcapacity
and increased competition. Although demand for gypsum wallboard has been rela-
tively strong in recent years, the Company is unable to predict future wall-
board demand and prices and there can be no assurance that current levels of
demand and pricing will continue or that any future price increases can be
sustained. Further expansion of capacity within the industry may also occur
during the current period of increased demand. In addition to the Company's
expansion of the Duke Plant, the Company is aware of at least two other gypsum
wallboard manufacturers that have recently completed expansions of their gyp-
sum wallboard plants. Additional gypsum wallboard manufacturers have begun or
are beginning the process of adding gypsum wallboard capacity and are expected
to complete this process during the next 18 to 36 months. As a result of these
and other expansions, the Company believes that a significant amount of new
capacity may be on line in the near future, which could have a material ad-
verse effect on gypsum wallboard selling prices. Furthermore, because high
exit barriers exist in the gypsum wallboard industry, plants that are contrib-
uting to the excess capacity may not be dismantled during periods of low de-
mand or low prices and may, therefore, be capable of a quick reentry into the
market when the market improves. In addition, larger, multiple-plant gypsum
wallboard manufacturers often have a competitive advantage over the Company in
markets outside the Company's primary markets because of the strategic loca-
tion of their plants as well as other cost efficiencies, such as the ability
to spread fixed costs over several plants. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--Gyp-
sum Wallboard Operations--Competition."
CYCLICAL AND SEASONAL NATURE OF BUSINESSES
The Company's results of operations during any given period depend signifi-
cantly on the amount of gypsum wallboard and gypsum-grade paperboard sold and
the prevailing prices of such products. The demand for, and price of, gypsum
wallboard and gypsum-grade paperboard, in turn, depend heavily on both the
level of new residential and nonresidential construction activity and the
level of repair and remodel activity undertaken at existing residential and
nonresidential properties. As a result of strong construction and repair and
remodel activity, the demand for such products has increased during the last
few years, resulting in the Commerce City Mill, the Hutchinson Mill and the
Duke Plant operating at or near capacity and a general increase in the pre-
vailing prices for gypsum wallboard. While the demand for gypsum wallboard and
gypsum-grade paperboard has remained strong through the third quarter of 1998,
there can be no assurances that the current level of demand and pricing will
continue or that any future price increases can be sustained. Both the con-
struction and the repair and remodel industries are cyclical in nature and are
sensitive to larger macroeconomic factors, including fluctuations in economic
activity, movement in interest rates and the availability of short and long-
term financing. As a result of this cyclicality, the Company has experienced,
and in the future may experience, reduced revenues and margins, which could
have a material adverse effect on the Company and could impair the Company's
ability to satisfy its debt service obligations on a timely basis. The busi-
ness of the Company may also be deemed to be seasonal to the extent inclement
winter weather impacts building and construction activity and the collection
of reclaimed paper fiber.
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PRICING AND AVAILABILITY OF RAW MATERIALS AND UTILITIES
Reclaimed paper fiber, which is a commodity product, is the principal raw ma-
terial used by the Company in the production of recycled paperboard. Although
the Company does collect, process and ship reclaimed paper fiber internally,
and controls over one-half of its present requirements, it also purchases re-
claimed paper fiber from a number of third parties. In 1997, the Company pur-
chased approximately 69% of its required reclaimed paper fiber from other man-
ufacturers, and the cost of reclaimed paper fiber accounted for approximately
26% of the Company's total recycled paperboard operating expense. Increases
early in the current fiscal year in the price of reclaimed paper fiber have
had an adverse impact on the margins of the Company's recycled paperboard op-
erations during the first nine months of fiscal 1998. The Company generally
does not enter into long-term contractual relationships or forward contracts
at predetermined prices with its suppliers of reclaimed paper fiber. A signif-
icant increase in the price of reclaimed paper fiber that the Company is un-
able to pass on, or is delayed in passing on, to its customers could have a
material adverse effect on the Company.
The Company obtains its electricity, natural gas, coal and other utilities
(which accounted for approximately 14% of the Company's operating expenses in
1997) at standard industrial and negotiated rates under short and long-term
contracts, and significant price increases or shortages of supply could have a
material adverse effect on the Company.
LIMITED CONTRACTUAL RELATIONSHIPS; DEPENDENCE ON KEY CUSTOMERS
As is typical in the Company's industry, the Company does not enter into long-
term contractual relationships with the majority of its customers. Most cus-
tomers may unilaterally reduce their purchases of the Company's products or,
in certain cases, terminate existing orders for which the Company may have in-
curred significant production costs. Moreover, in the absence of binding com-
mitments, customers are free to quickly switch their sources of supply away
from the Company. Any such action by a significant customer could have a mate-
rial adverse effect on the Company. In fiscal 1997, sales to Sonoco Products
Company ("Sonoco") and Centex American Gypsum ("Centex") accounted for approx-
imately 15% and 12%, respectively, of the recycled paperboard segment's gross
sales and 9% and 7%, respectively, of consolidated gross sales. For the nine
months ended March 31, 1998, Sonoco and Centex each accounted for approxi-
mately 9% of consolidated gross sales and approximately 16% and 15%, respec-
tively, of the recycled paperboard segment's gross sales. Sonoco has not en-
tered into a contractual arrangement with the Company, and it may discontinue
purchases from the Company at any time. The loss of either or both of these
customers could have a material adverse effect on the Company. When the Hardie
Agreement is implemented, Hardie is expected to account for a significant per-
centage of consolidated gross sales. See "--Dependence on Hardie Agreement."
ENVIRONMENTAL CONSIDERATIONS
The Company's operations are subject to various federal, state and local envi-
ronmental laws and regulations, including, but not limited to, those governing
discharges into the air and water, the storage, handling and disposal of solid
and hazardous wastes, the remediation of soil and groundwater contaminated by
petroleum products or hazardous substances or wastes, and the health and
safety of employees. The nature of the Company's current and former operations
potentially expose the Company to the risk of liabilities or claims with re-
spect to environmental and worker health and safety matters. Compliance with
environmental laws, stricter interpretations of, or amendments to, such laws,
or more vigorous enforcement policies by regulatory agencies may require mate-
rial expenditures by the Company. See "Business--Legal Proceedings."
A number of the Company's facilities have a history of industrial use. Under
certain environmental laws, a current or previous owner or operator of proper-
ty, or the generator of wastes disposed of offsite, may be jointly and sever-
ally liable for the costs of site cleanup, without regard to negligence or
fault. Responsible parties also may be subject to common law claims by third
parties based on damages and costs resulting from environmental contamination
emanating from a site. See "Business--Environmental Regulation."
Although the Company does not believe that costs incurred in connection with
compliance with environmental laws, including remedial costs, are likely to
have a material adverse effect on the Company, there can be no assurance that
future events, such as changes in existing laws, the promulgation of new laws
or the development of new facts or conditions, will not require the Company to
incur significant costs that could have a material adverse effect on the Com-
pany.
WATER SUPPLY
The manufacture of recycled paperboard involves the use of large volumes of
water in the production process and for cooling purposes. In Colorado and Kan-
sas, the Company's water rights are subject to the legal rights of prior ap-
propriators
14
<PAGE>
of the same water source and to limitations on the permitted uses of such wa-
ter, as decreed by the courts. The Company's recycled paperboard mill in
Halltown, West Virginia (the "Halltown Mill") uses water from a stream running
through its property and has done so for over 100 years. The Company's right to
use the water from the stream is subject to the riparian rights of other prop-
erty 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 wa-
ter shortages, legal curtailment of any 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. Any such limitation could
have a material adverse effect on the Company.
POSSIBLE INABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, each Holder of Notes will have the right to require
the Company to purchase all of the outstanding Notes owned by such Holder at a
price equal to 101% of the aggregate principal amount thereof, together with
accrued and unpaid interest. However, the Company's ability to repurchase the
Notes upon a Change of Control may be limited by the terms of then existing
contractual obligations of the Company and its subsidiaries. For example, the
Indenture does not prohibit the Company from incurring future indebtedness (in-
cluding Senior Debt) otherwise permitted by the Indenture that contains Change
of Control provisions. Furthermore, the New Credit Facility provides that a
Change of Control constitutes a default thereunder, thereby permitting the
lenders to cause the indebtedness under the New Credit Facility to become imme-
diately due and payable or to institute a payment blockage with respect to the
Notes. In order to repurchase Notes upon a Change of Control, the Company will
have to repay all of its obligations under the New Credit Facility (and any
other agreements relating to Senior Debt that contain similar Change of Control
provisions) or will have to obtain the consent of the holders of such indebted-
ness. Thus, there can be no assurance that the Company will have adequate fi-
nancial resources to repurchase the Notes upon a Change of Control, particu-
larly if such Change of Control requires the Company to refinance its indebted-
ness, or results in the acceleration of other indebtedness. If the Company
fails to repurchase all of the Notes tendered for purchase upon the occurrence
of a Change of Control, then such failure will constitute an Event of Default
(as defined) under the Indenture. See "Description of Notes--Repurchase at the
Option of Holders upon a Change of Control."
The Change of Control provision may not necessarily afford the Holders protec-
tion in the event of a highly leveraged transaction, including a reorganiza-
tion, restructuring, merger or other similar transaction involving the Company
that may adversely affect the Holders, because such transactions may not in-
volve a shift in voting power, beneficial ownership or management control or,
even if they do, may not involve a shift of the magnitude required under the
definition of Change of Control to trigger such provision. Except as described
under "Description of Notes--Repurchase at the Option of the Holders upon a
Change of Control," the Indenture does not contain provisions that permit Hold-
ers of the Notes to require the Company to repurchase or redeem the Notes in
the event of a takeover, recapitalization or similar transaction.
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the Holders of the Old Notes. The Old Notes
were issued on July 15, 1998 to a small number of institutional investors and
are eligible for trading in the Private Offerings, Resale and Trading through
Automated Linkages ("PORTAL") market. To the extent that Old Notes are ex-
changed in the Exchange Offer, the trading market for the remaining unexchanged
Old Notes could be adversely affected. There is no existing trading market for
the New Notes, and there can be no assurance regarding the future development
of a market for the New Notes, or the ability of Holders of New Notes to sell
their New Notes or the price at which such Holders may be able to sell their
New Notes. If such a market were to develop, the New Notes could trade at
prices that may be higher or lower than the initial offering price of the Old
Notes depending on many factors, including prevailing interest rates, the
Company's operating results and the market for similar securities. The Company
does not intend to apply for listing of the New Notes on any securities ex-
change or for quotation through the National Association of Securities Dealers
Automated Quotation System. Although the Company believes that the Initial Pur-
chasers currently intend to make a market in the New Notes, the Initial Pur-
chasers are not obligated to do so, and any such market making may be discon-
tinued at any time without notice. Moreover, such market making activity will
be subject to the limits imposed by the Securities Act and the Exchange Act and
may be limited during the Exchange Offer and the pendency of any shelf regis-
tration statement. The liquidity of any market for the Notes will depend upon
the number of Holders of the Notes, the interest of securities dealers in mak-
ing a market in the Notes and other factors. Accordingly, there can be no as-
surance as to the development or liquidity of any market for the Notes.
Historically, the market for noninvestment grade debt has been subject to dis-
ruptions that have caused substantial volatility in the prices of securities
similar to the Notes. There can be no assurance that the market, if any, for
the Notes will not be subject to similar disruptions. Any such disruptions may
have an adverse effect on the Holders of the Notes.
15
<PAGE>
RESTRICTIONS ON RESALE OF OLD NOTES
The Old Notes have not been registered under the Securities Act or any state
securities laws and, unless so registered, may not be offered or sold except
pursuant to an exemption from, or in a transaction not subject to, the regis-
tration requirements of the Securities Act and applicable state securities
laws.
16
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus and
in the accompanying Letter of Transmittal (which together constitute the Ex-
change Offer), the Company will accept for exchange Old Notes that are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted be-
low. As used herein, the term "Expiration Date" means 5:00 p.m., New York City
time, on , 1998; provided, however, that if the Company, in its sole dis-
cretion, has extended the period of time for which the Exchange Offer is open,
the term "Expiration Date" means the latest time and date to which the Exchange
Offer has been extended.
As of the date of this Prospectus, $100 million aggregate principal amount of
Old Notes is outstanding. This Prospectus, together with the Letter of Trans-
mittal, is first being sent on or about , 1998, to all Holders of Old
Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth under "--Certain Conditions to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any Old Notes, by giving oral or written no-
tice of such extension to the Holders thereof as described below. During any
such extension, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange will be returned without expense to the tendering
Holder thereof as promptly as practicable after the expiration or termination
of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of principal
amount of $1,000 or any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange Of-
fer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions to the Exchange Offer
specified below under "--Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, nonacceptance or
termination to the Holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day following the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth below
and the acceptance thereof by the Company will constitute a binding agreement
between the tendering Holder and the Company upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a Holder (which term, for purposes of
the Exchange Offer, includes any participant in the Book-Entry Transfer Facil-
ity (as defined) system whose name appears on the security position listing as
the holder of such Old Notes) who wishes to exchange Old Notes pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of Transmit-
tal, to UMB Bank, N.A. (the "Exchange Agent") at the address set forth below
under "Exchange Agent" on or prior to the Expiration Date, accompanied by ei-
ther (i) certificates for such Old Notes or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Old Notes into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below. Persons holding Old Notes through the Book-Entry Transfer Facility and
wishing to accept the Exchange Offer must do so pursuant to the Book-Entry
Transfer Facility's Automated Tender Offer Program, by which each tendering
Participant will agree to be bound by the Letter of Transmittal. A Holder who
is unable to timely comply with the above-described procedure prior to the Ex-
piration Date may effect a tender of Old Notes by complying with the guaranteed
delivery procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LET-
TERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND
RISK OF EACH HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGIS-
TERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS
OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to ten-
der should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on his own behalf, such beneficial owner must, prior to com-
pleting and executing the Letter of Transmittal and delivering Old Notes, ei-
ther make appropriate
17
<PAGE>
arrangements to register ownership of the Old Notes in such beneficial owner's
name or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange are
tendered (i) by a registered Holder of the Old Notes who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the Letter of Transmittal or (ii) for the account of an Eligible Institution
(as defined below). If signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, then such guar-
antees must be by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as "an eligible guarantor institution," including (as such terms
are defined therein) (i) a bank, (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer, (iii) a credit
union, (iv) a national securities exchange, registered securities association
or clearing agency, or (v) a savings association that is a participant in a Se-
curities Transfer Association (collectively, "Eligible Institutions"). If Old
Notes are registered in the name of a person other than the signatory of the
Letter of Transmittal, then the Old Notes surrendered for exchange must be en-
dorsed by, or be accompanied by a written instrument or instruments of transfer
or exchange, in satisfactory form as determined by the Company in its sole dis-
cretion, duly executed by the registered Holder with the signature thereon
guaranteed by an Eligible Institution, in either case signed exactly as the
name or names of the registered Holder or Holders appear on the Old Notes.
All questions as to the validity, form, eligibility (including time of receipt)
and acceptance of Old Notes tendered for exchange will be determined by the
Company in its sole discretion, which determination shall be final and binding.
The Company reserves the absolute right to reject any and all tenders of any
particular Old Notes not properly tendered or to not accept any particular Old
Note which acceptance might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any Holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Notes either before or after the Expiration Date (includ-
ing the Letter of Transmittal and the instructions thereto) by the Company
shall be final and binding on all parties. Unless waived, any defects or irreg-
ularities in connection with tenders of Old Notes for exchange must be cured
within such reasonable period of time as the Company shall determine. Neither
the Company, the Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Old Notes for exchange, nor shall any of them incur any liability for failure
to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
then such persons should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being ob-
tained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, and that neither the Holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Notes. In the case of a Holder that
is not a broker-dealer, each such Holder, by tendering, will also represent to
the Company that such Holder is not engaged in and does not intend to engage
in, a distribution of the New Notes. If any Holder or any such other person is
an "affiliate," as defined in Rule 405 under the Securities Act, of the Compa-
ny, or is engaged in or intends to engage in or has an arrangement or under-
standing with any person to participate in a distribution of such New Notes to
be acquired pursuant to the Exchange Offer, such Holder or any such other per-
son (i) will not be able to rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus de-
livery requirements of the Securities Act in connection with any resale trans-
action. Each broker-dealer that receives New Notes for its own account in ex-
change for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must ac-
knowledge that it will deliver a prospectus meeting the requirements of the Se-
curities Act in connection with any resale of such New Notes. See "Plan of Dis-
tribution." The Letter of Transmittal states that by so acknowledging and by
delivering such a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
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<PAGE>
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all conditions to the Exchange Offer, the Com-
pany will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "--Certain Conditions to the Exchange Offer" below. For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly ten-
dered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent, with written confirmation of any
oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Holder will receive a New Note
having a principal amount equal to that of the surrendered Old Note. The New
Notes will bear interest from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid on the Old Notes, from
July 15, 1998. Accordingly, Holders of New Notes on the relevant record date
for the first interest payment date following the consummation of the Exchange
offer will receive interest accruing from the most recent date to which inter-
est has been paid or, if no interest has been paid, from July 15, 1998. Old
Notes accepted for exchange will cease to accrue interest from and after the
date of consummation of the Exchange Offer. Holders of Old Notes whose Old
Notes are accepted for exchange will not receive any payment in respect of ac-
crued interest on such Old Notes otherwise payable on any interest payment date
the record date for which occurs on or after the date of consummation of the
Exchange Offer, and any and all rights to receive interest on such Old Notes
will terminate upon consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for ex-
change pursuant to the Exchange Offer will be made only after timely receipt by
the Exchange Agent of (i) certificates for such Old Notes (or a timely Book-En-
try Confirmation of the transfer of such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), (ii) a properly completed and
duly executed Letter of Transmittal and (iii) all other required documents. If
any tendered Old Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Old Notes are submitted for a
greater principal amount than the Holder desires to exchange, such unaccepted
or non-exchanged Old Notes will be returned without expense to the tendering
Holder (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry procedures described below, such non-exchanged Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange Of-
fer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect to
the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer within two (2) business days after the date of this Prospectus, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although de-
livery of Old Notes may be effected through book-entry transfer at the Book-En-
try Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth below under "--Exchange
Agent" on or prior to the Expiration Date or in accordance with the guaranteed
delivery procedures described below.
The Book-Entry Transfer Facility Automated Tender Offer Program ("ATOP") is the
only method of processing exchange offers through the Book-Entry Transfer Fa-
cility. To accept the Exchange Offer through ATOP, Participants in the Book-
Entry Transfer Facility must send electronic instructions to the Book-Entry
Transfer Facility through the Book-Entry Transfer Facility communication system
in place of sending a signed, hard copy Letter of Transmittal. The Book-Entry
Transfer Facility is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic instruc-
tions sent to the Book-Entry Transfer Facility and transmitted by the Book-En-
try Transfer Facility to the Exchange Agent must contain the character by which
the Participant acknowledges its receipt of and agrees to be bound by the Let-
ter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a Holder of the Old Notes desires to tender such Old Notes and the Old Notes
are not immediately available, or if time will not permit such Holder's Old
Notes or other required documents to reach the Exchange Agent before the Expi-
ration Date, or if the procedure for book-entry transfer cannot be completed on
a timely basis, then a tender may be effected if (i) the tender is made through
an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
has received from such Eligible Institution (by facsimile transmission, mail or
hand delivery) a properly completed and duly executed Notice
19
<PAGE>
of Guaranteed Delivery, substantially in the form provided by the Company, (a)
setting forth the name and address of the Holder of Old Notes and the amount
of Old Notes tendered, (b) stating that the tender is being made thereby and
(c) guaranteeing that, (I) within five New York Stock Exchange ("NYSE") trad-
ing days after the execution of the Notice of Guaranteed Delivery, the certif-
icates for all tendered Old Notes, in proper form for transfer, or a Book-En-
try Confirmation, as the case may be, (II) the Letter of Transmittal and (III)
any other documents required by the Letter of Transmittal will all be depos-
ited by the Eligible Institution with the Exchange Agent, and (iii) the cer-
tificates for all tendered Old Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, the Letter of Transmittal and all
other documents required by the Letter of Transmittal, are all received by the
Exchange Agent within five NYSE trading days after the execution of the Notice
of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be re-
ceived by the Exchange Agent at the address or, in the case of Eligible Insti-
tutions, at the facsimile number, set forth below under "--Exchange Agent"
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such no-
tice of withdrawal must (i) specify the name of the person having tendered the
Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) contain a statement that such person is withdrawing his
election to have such Old Notes exchanged, (iv) be signed by the person in the
same manner as the original signature on the Letter of Transmittal by which
such Old Notes were tendered (including any required signature guarantees) or
be accompanied by documents of transfer to have the Trustee with respect to
the Old Notes register the transfer of such Old Notes in the name of the per-
son withdrawing the tender, and (v) specify the name in which such Old Notes
are registered, if different from that of the Depositor. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the ac-
count at the Book-Entry Transfer Facility to be credited with the withdrawn
Old Notes and otherwise comply with the procedures of such facility. All ques-
tions as to the validity, form and eligibility (including time of receipt) of
such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer, and no New Notes will be issued with respect thereto, unless the Old
Notes so withdrawn are validly re-tendered. Any Old Notes that have been ten-
dered for exchange but that are not exchanged for any reason will be returned
to the tendering Holder without cost to such Holder (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
the Book-Entry Transfer Facility for the Old Notes) as soon as practicable af-
ter withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following the procedures de-
scribed under "--Procedures for Tendering Old Notes" above at any time on or
prior to 5:00 p.m., New York City time, on the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue Notes in exchange for, any
Old Notes and may terminate or amend the Exchange Offer if, at any time before
the acceptance of such Old Notes for exchange or the exchange of the Notes for
such Old Notes, the Company determines that the Exchange Offer violates any
applicable law, any applicable interpretation of the staff of the Commission
or any order of any governmental agency or court of competent jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its reasonable discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes tendered,
and no Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to (i) the
Registration Statement of which this Prospectus constitutes a part or (ii) the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended. In any such event, the Company is required to use its reasonable best
efforts to obtain the withdrawal of any stop order at the earliest possible
time.
20
<PAGE>
EXCHANGE AGENT
UMB Bank, N.A. has been appointed as the Exchange Agent for the Exchange Offer.
All executed Letters of Transmittal should be directed to the Exchange Agent at
the address set forth below. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
UMB Bank, N.A., Exchange Agent
By Mail or Hand Delivery: By Facsimile Transmission
UMB Bank, N.A. (for Eligible Institutions only):
Corporate Trust Department (816) 221-0438
928 Grand Boulevard Attention: Mr. R. William Bloemker
Kansas City, Missouri 64106 Confirm by Telephone:
Attention: Mr. R. William Bloemker (816) 860-7446
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others soliciting
acceptances of the Exchange Offer. The estimated cash expenses to be incurred
in connection with the Exchange Offer will be paid by the Company and are esti-
mated in the aggregate to be $160,000.
TRANSFER TAXES
Holders who exchange their Old Notes will not be obligated to pay any transfer
taxes in connection therewith, except that Holders who instruct the Company to
register New Notes in the name of, or request that Old Notes not tendered or
not accepted in the Exchange Offer be returned to, a person other than the reg-
istered tendering Holder will be responsible for the payment of any applicable
transfer tax.
PAYMENT OF INTEREST
The New Notes will bear interest from the most recent date to which interest
has been paid on the Old Notes or, if no interest has been paid on the Old
Notes, from July 15, 1998. Accordingly, registered Holders of New Notes on the
relevant record date for the first interest payment date following the consum-
mation of the Exchange Offer will receive interest accruing from the most re-
cent date to which interest has been paid or, if no interest has been paid,
from July 15, 1998. Old Notes accepted for exchange will cease to accrue inter-
est from and after the date of consummation of the Exchange Offer. Holders of
Old Notes whose Old Notes are accepted for exchange will not receive any pay-
ment of interest on such Old Notes otherwise payable on any interest payment
date the record date for which occurs on or after the date of consummation of
the Exchange Offer, and any and all rights to receive interest on such Old
Notes will terminate upon consummation of the Exchange Offer.
CONSEQUENCES OF EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the provisions in the In-
denture regarding transfer and exchange of the Old Notes and the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a conse-
quence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under, pursuant to an exemption from or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register Old Notes
under the Securities Act. Based on existing interpretations by the staff of the
SEC, as set forth in several no-action letters issued to third parties, the
Company believes that New Notes issued pursuant to the Exchange Offer in ex-
change for Old Notes may be offered for resale, resold or otherwise transferred
by Holders thereof (other than any such Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without com-
pliance with the registration and prospectus delivery provisions of the Securi-
ties Act,
21
<PAGE>
provided that such New Notes were acquired in the ordinary course of such Hold-
ers' business and such Holders have no arrangement or understanding with any
person to participate in the distribution of such New Notes. However, the staff
of the SEC has not rendered a no-action letter with respect to the Exchange Of-
fer, and there can be no assurance that the staff would make a similar determi-
nation for the Exchange Offer as in such other circumstances. Each Holder,
other than a broker-dealer, must acknowledge that it is not engaged in, and
does not intend to engage in, a distribution of New Notes and has no arrange-
ment or understanding to participate in a distribution of New Notes. If any
Holder who is an affiliate of the Company is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) will
not be able to rely on the applicable interpretations of the staff of the SEC
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account in exchange for Old Notes
must acknowledge that such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution."
FEDERAL INCOME TAX CONSIDERATIONS
A summary of United States federal income tax consequences associated with
the exchange of Old Notes for New Notes and the ownership and disposition of
the New Notes by Holders who acquired the New Notes pursuant to the Exchange
Offer is included herein under "Certain Federal Income Tax Considerations."
22
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net pro-
ceeds to the Company from the sale of the Old Notes were approximately $97 mil-
lion, after deducting the discount to the Initial Purchasers and the expenses
of the sale. Substantially all of those net proceeds are being and will be used
to finance, and were used in part to repay indebtedness used to finance, the
construction of the Lawton Mill. Most of the proceeds of borrowings under the
New Credit Facility will also be used to finance the construction of the Lawton
Mill. Pending the use of the net proceeds from the sale of the Old Notes for
the purposes described above, the Company expects to invest the proceeds in
short-term interest-bearing investments.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 and as adjusted to give effect to the issuance of the Notes. See "Use
of Proceeds."
<TABLE>
<CAPTION>
----------------------
AS OF MARCH 31, 1998
ACTUAL AS ADJUSTED
--------- ------------
<S> <C> <C>
Dollars in thousands
Short-term debt, including current portion of long
term debt............................................ -- --
Long-term debt (less current portion):
New Credit Facility(1)................................ -- --
9 1/2% Senior subordinated notes due 2008............. -- $ 100,000
--------- ----------
Total long-term debt................................. -- 100,000
--------- ----------
Stockholders' equity:
Common stock and additional paid-in capital........... $ 39,637 39,637
Treasury stock--common stock--at cost................. (585) (585)
Retained earnings..................................... 48,342 48,342
--------- ----------
Total stockholders' equity........................... 87,394 87,394
--------- ----------
Total capitalization................................ $ 87,394 $187,394
========= ==========
</TABLE>
- -------
(1) The New Credit Facility provides for borrowings of up to $85 million in ag-
gregate principal amount. The Company expects to borrow a significant amount of
the $85 million available to it under the New Credit Facility in order to fund
the construction of the Lawton Mill. See " Description of the New Credit Facil-
ity."
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth certain selected consolidated financial data,
which should be read in connection with the Company's consolidated financial
statements, including the footnotes thereto, and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The selected
income statement data for the years ended June 30, 1995, 1996 and 1997 and the
selected balance sheet data as of June 30, 1996 and 1997, have been derived and
calculated from the Company's audited financial statements incorporated by ref-
erence herein. The selected income statement data for the years ended June 30,
1993 and 1994 and the selected balance sheet data as of June 30, 1993, 1994 and
1995 have been derived and calculated from the Company's audited financial
statements not included or incorporated by reference herein. The selected con-
solidated financial data presented below for the nine months ended March 31,
1997, and as of and for the nine months ended March 31, 1998, are derived from
the Company's unaudited consolidated financial statements incorporated by ref-
erence herein. The selected balance sheet data as of March 31, 1997 are also
derived from the Company's unaudited financial statements not included or in-
corporated by reference herein. The unaudited financial statements include all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the Company's financial position
and results of operations for these periods. Operating results for the nine
months ended March 31, 1998 are not necessarily indicative of the results that
may be expected for future periods. See "Risk Factors." More recent financial
results are discussed under " Business--Recent Financial Results."
<TABLE>
<CAPTION>
---------------------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
----------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- -------- -------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands, except per
share amounts, ratios,
shipments and percent-
ages
INCOME STATEMENT DATA:
Gross sales............. $61,720 $77,131 $112,400 $135,626 $144,234 $105,913 $111,450
Net sales............... 49,189 63,200 96,413 117,902 123,697 90,701 96,231
Operating profit........ 4,269 11,961 19,008 25,405 31,756 23,597 20,048
Other income (expenses),
net.................... 181 475 150 (1,431) (615) (581) 158
Income before income
taxes.................. 4,450 12,436 19,158 23,974 31,141 23,016 20,206
Provision for income
taxes.................. 1,215 4,697 7,481 9,062 11,478 8,392 7,677
Net income.............. 3,235 7,739 11,677 14,912 19,663 14,624 12,529
Basic earnings per share
(1).................... 0.28 0.67 1.01 1.28 1.68 1.25 1.07
Basic weighted average
shares outstanding
(1).................... 11,581 11,590 11,603 11,640 11,698 11,697 11,699
Diluted earnings per
share (1).............. 0.28 0.66 1.00 1.27 1.67 1.24 1.06
Diluted weighted average
shares outstanding
(1).................... 11,617 11,667 11,669 11,736 11,795 11,776 11,801
BALANCE SHEET DATA:
Working capital......... 10,596 8,170 13,520 22,485 12,939 33,038 14,602
Total assets............ 44,097 53,796 95,442 106,124 100,400 119,046 112,433
Total debt (including
current portion)....... -- -- 28,000 24,840 -- 23,170 --
Stockholders' equity.... 35,058 41,173 50,569 62,664 77,845 74,569 87,394
OTHER FINANCIAL DATA:
EBITDA (2).............. $ 6,820 $15,267 $ 22,798 $ 32,114 $ 39,697 $ 29,363 $ 25,801
EBITDA margin (2)....... 14% 24% 24% 27% 32% 32% 27%
Interest expense........ 10 22 7 1,937 1,476 1,175 2
Depreciation and
amortization........... 2,360 2,809 3,633 6,203 7,080 5,172 5,593
Capital expenditures
(3).................... 5,589 13,318 8,800 9,062 11,556 5,827 14,090
Cash dividends per
share.................. 0.19 0.16 0.21 0.26 0.34 0.25 0.27
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
--------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
RATIOS:
Ratio of earnings to
fixed charges (4)...... N/A N/A N/A 13:1 22:1 21:1 N/A
Pro forma ratio of
earnings to fixed
charges (5)............ 3.0:1 2.8:1
Pro forma ratio of
EBITDA to interest
expense (5) 3.6:1 3.6:1
SHIPMENTS (INCLUDING
INTERCOMPANY
SHIPMENTS):
Recycled paperboard (in
thousand tons)......... 110 123 125 181 188 138 141
Gypsum wallboard (in
million sq. ft.)....... 400 476 494 529 570 426 429
Reclaimed paper fiber
(in thousand tons)..... -- 17 97 112 153 115 108
</TABLE>
- -------
(1) See Notes 1 and 11 of Notes to Consolidated Financial Statements for the
fiscal years ended June 30, 1995, 1996 and 1997 and Note 2 of Notes to Consoli-
dated Financial Statements for the nine months ended March 31, 1997 and 1998
(unaudited) that are incorporated by reference herein for information concern-
ing the calculation of basic and diluted net income per share. Such calcula-
tions reflect the adoption by the Company of Statement of Financial Accounting
Standards No 128, "Earnings per Share" (FAS 128), effective October 1, 1997,
which requires the restatement of all periods presented in the Company's Con-
solidated Financial Statements included in this Prospectus and incorporated by
reference herein.
(2) EBITDA is defined as pre-tax income before interest, depreciation and amor-
tization. EBITDA is presented because it is a widely accepted financial indica-
tor of a company's ability to incur and service debt. However, EBITDA should
not be considered in isolation as a substitute for net income. In addition,
this measure of EBITDA may not be comparable to similar measures reported by
other companies. EBITDA margin is calculated as the ratio of EBITDA to net
sales for the period presented.
(3) The data for 1995 does not include the acquisition of Halltown Paperboard
Company. The data for 1997 includes $4 million for the expansion of the Duke
Plant. The data for 1998 includes $9.3 million for the expansion of the Duke
Plant.
(4) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings represent earnings before income taxes and fixed charges and (ii)
fixed charges consist of interest expense. The ratio of earnings to fixed
charges is not meaningful for the years ended June 30, 1993, 1994 and 1995, and
for the nine months ended March 31, 1998, due to the insignificance of interest
expense in such periods.
(5) The pro forma ratios of earnings to fixed charges and of EBITDA to interest
expense have been adjusted to give effect to the issuance and sale of the Notes
at a rate of 9 1/2% and the related interest expense (including capitalized in-
terest) as if the Notes were issued and sold at the beginning of the period.
The Company expects to borrow a significant amount of the $85 million available
to it under the New Credit Facility in order to fund the construction of the
Lawton Mill, which would significantly increase the Company's interest expense.
However, neither ratio has been adjusted to give effect to any interest expense
related to such borrowings or to any increase in earnings that the Company may
realize as a result of the upgrade to the Duke Plant or from the operation of
the Lawton Mill. See "Management's Discussion and Analysis of Financial Condi-
tion and Results of Operations--Liquidity and Capital Resources" and "Busi-
ness--The Lawton Mill."
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto incorporated by reference in this Pro-
spectus.
OVERVIEW
Republic Group Incorporated is an integrated manufacturer and distributor of
gypsum wallboard and recycled paperboard and also sells reclaimed paper fiber.
The Company's operations are split into two operating segments: (i) recycled
paperboard operations (which includes its reclaimed paper fiber operations),
which accounted for approximately 59% of the Company's total net sales in fis-
cal 1997 prior to intercompany eliminations, and (ii) gypsum wallboard opera-
tions, which accounted for approximately 41% of the Company's total net sales
in fiscal 1997 prior to intercompany eliminations.
The Company's revenues and income from its recycled paperboard business segment
have increased significantly in recent years as a result of the Company's 1995
acquisition of the Halltown Mill and continuing, recent increases in the pro-
ductive capacity of the Commerce City Mill and the Hutchinson Mill pursuant to
a capital expansion plan implemented over the course of the past five years.
The Commerce City Mill and Hutchinson Mill have been operating at near capacity
the last two years, and management expects that further incremental upgrades
and expansions will be completed as production schedules and time permit. When
the Lawton Mill is completed, the Company will approximately double its recy-
cled paperboard manufacturing capacity. The Company will need to find customers
for approximately 25% of the Lawton Mill's capacity and replacement customers
for that portion of its existing sales that will be switched to the Lawton
Mill.
In recent years, the primary variable affecting the results of the Company's
recycled paperboard segment has been the price of reclaimed paper fiber. The
price of reclaimed paper fiber can fluctuate significantly. During fiscal 1995,
variable recycled paperboard manufacturing per unit costs, a majority of which
are attributable to the cost of reclaimed paper fiber, increased approximately
45%. Although the Company was able to raise its recycled paperboard selling
prices during fiscal 1995, a time lag existed between the rise in material
costs and the subsequent increase in selling prices. As a result, the Company's
overall margins were reduced. During fiscal 1996, this trend reversed, and the
Company became the beneficiary of slowly declining selling prices and rapidly
declining raw material costs, resulting in operating margins for the recycled
paperboard segment of approximately 21% in fiscal 1996 compared to approxi-
mately 14% in fiscal 1995. In fiscal 1997, raw material costs declined slowly
early in the year and began to increase again later in the year while net sell-
ing prices continued to decline, resulting in operating margins of approxi-
mately 19%. Reclaimed paper fiber costs rose sharply during the first half of
fiscal 1998 but have begun to decline during the third quarter of fiscal 1998.
As a result, through the first nine months of fiscal 1998, the Company's oper-
ating margin in its recycled paperboard segment was approximately 11%.
During the first nine months of fiscal 1998, the Company's recycled paperboard
operations purchased approximately 33% of their needs from the Company's re-
claimed paper fiber operations and the remainder from several non-affiliated
suppliers. The Company generally has not entered into long-term, or forward,
contracts with its reclaimed paper fiber suppliers. The Company believes that
its sales of recycled paperboard and reclaimed paper fiber to third parties at
increased prices partially hedge against increased costs of these products in-
curred by the Company's gypsum wallboard and recycled paperboard operations,
respectively.
The Company's gypsum wallboard segment has experienced strong results in the
last several years as a result of the continued strength of the economy. The
price of gypsum wallboard depends on the level of new construction and home re-
pair and remodel activity, which, in turn, depends on general economic condi-
tions, interest rates and the availability of short and long-term financing.
Low interest rates and a strong domestic economy caused demand for gypsum wall-
board to be very strong throughout 1995, 1996 and 1997. New construction activ-
ity continues to be robust as does repair and remodel demand for gypsum wall-
board. As a result, the demand for gypsum wallboard has increased, resulting in
general increases in prevailing prices.
The Duke Plant has been operating at near capacity the last five years. As a
result of the strong performance of this segment, the Company undertook a capi-
tal expenditures program in 1997 to effectively double the productive capacity
of the Duke Plant. Construction is scheduled to be completed by the end of the
second quarter of fiscal 1999. Expenditures related to the expansion of the
Company's gypsum wallboard operations are estimated to total approximately $26
million for construction and production equipment improvements and $5 million
for additional railcars. Through fiscal 1998, these expenditures totaled ap-
proximately $18 million. In addition to the Company's expansion of the Duke
Plant, the Company is aware of at least two other gypsum wallboard manufactur-
ers that have
26
<PAGE>
recently completed expansions of their gypsum wallboard plants. Additional gyp-
sum wallboard manufacturers are also in the process of adding new gypsum wall-
board capacity and are expected to complete this process by during the next 18
to 36 months. Completion of these two expansions and the added capacity from
the other new plants may reduce prevailing prices. See "Risk Factors--Competi-
tion--Gypsum Wallboard Industry." The Company's gypsum wallboard business seg-
ment receives substantially all of its recycled paperboard requirements from
the Commerce City Mill and the Hutchinson Mill.
The Company issued the Notes and entered into the New Credit Facility in order
to finance the construction of the Lawton Mill. The Company anticipates that
the Lawton Mill will begin commercial production by the first quarter of 2000.
Until such time, the Lawton Mill will not generate any revenues, but the Com-
pany will incur interest expense associated with the Notes and the New Credit
Facility. The Company expects to capitalize a significant amount of the cash
interest expense of the Notes and the New Credit Facility as a cost of the con-
struction of the Lawton Mill, mitigating the impact of such interest expense on
the Company's net income. However, payment of such interest will have an ad-
verse effect on the Company's cash flows in the near term. Additionally, after
the Company has expended the net proceeds from the sale of the Old Notes and
the borrowings under the New Credit Facility toward the construction of the
Lawton Mill and until the Lawton Mill begins commercial production and can be
accretive to earnings for a period of time, the Company's additional leverage
will make it more vulnerable to economic pressures from any delays in the proj-
ect or cost overruns or from other factors that may produce adverse changes in
the results of operations generally.
PRESENTATION OF FINANCIAL INFORMATION
In the following discussion of the Company's results of operations, segment re-
sults are presented prior to intercompany eliminations. Sales of recycled pa-
perboard to the Duke Plant (approximately 15% of the recycled paperboard sales
for the nine months ended March 31, 1998) are accounted for as sales by the re-
cycled paperboard segment and included in cost of sales by the gypsum wallboard
segment. Unless otherwise stated, sales of reclaimed paper fiber within the re-
cycled paperboard segment are eliminated in determining recycled paperboard
segment results of operations. The Company believes that its intercompany sales
are made at prevailing market prices. In determining operating profits for each
segment, corporate general and administrative expenses have not been allocated
to that segment.
NINE MONTHS ENDED MARCH 31, 1998 COMPARED TO NINE MONTHS ENDED MARCH 31, 1997
General. For the nine months ended March 31, 1998 (the "1998 Period"), consoli-
dated net sales increased approximately 6% to $96.2 million, from $90.7 million
for the nine months ended March 31, 1997 (the "1997 Period"). This increase in
the 1998 Period resulted largely from an increase of approximately 8% in the
net selling price of gypsum wallboard and an increase of approximately 7% in
shipments of recycled paperboard to unaffiliated customers.
The Company had operating profits of $20.0 million in the 1998 Period, as com-
pared with operating profits of $23.6 million in the 1997 Period. In the 1998
Period, the operating margins of the gypsum wallboard operations were generally
similar to those experienced in the 1997 Period. However, operating margins of
the recycled paperboard operations decreased from approximately 20% in the 1997
Period to approximately 11% in the 1998 Period, primarily due to higher vari-
able per unit costs for raw materials and utilities and, to a lesser extent, to
downtime experienced at the Hutchinson Mill in connection with unscheduled
equipment maintenance.
As a result of the factors listed above, the Company's net income decreased to
$12.5 million in the 1998 Period from $14.6 million in the 1997 Period, a de-
crease of approximately 14%. Diluted earnings per share also decreased in the
1998 Period to $1.06 per share, down from $1.24 per share in the 1997 Period.
More recent financial results are discussed under "Business--Recent Financial
Results."
Recycled Paperboard. In the 1998 Period, shipments of recycled paperboard to
unaffiliated customers increased approximately 7% from the 1997 Period, primar-
ily as a result of an increase of approximately 20% in shipments of recycled
paperboard from the Halltown Mill. While overall reclaimed paper fiber operat-
ing results improved during the 1998 Period, shipments of reclaimed paper fiber
to unaffiliated customers dropped approximately 16% in this same period as a
result of the loss of two large suppliers of reclaimed paper fiber to the
Company's reclaimed paper fiber operations.
Net sales for the recycled paperboard operations increased slightly to $59.2
million in the 1998 Period from $59.1 million in the 1997 Period. Total costs
for the recycled paperboard operations increased approximately 11%, to $52.4
million in the 1998 Period from $47.3 million in the 1997 Period due primarily
to (i) an increase of approximately 24% in the variable per unit costs of raw
materials, (ii) an increase of approximately 13% in the variable per unit costs
of utilities and (iii) the overall increase in shipments of recycled paper-
board.
27
<PAGE>
Gypsum Wallboard. For the 1998 Period, shipments of gypsum wallboard increased
approximately 1% from the 1997 Period. The continued strong demand for gypsum
wallboard raised the net selling price of gypsum wallboard by approximately 8%
in the 1998 Period, which, in turn, caused net sales to increase approximately
9%, to $44.6 million in the 1998 Period from $41.1 million in the 1997 Period.
Total costs for the Company's gypsum wallboard operations also increased to
$26.0 million in 1998 from $24.6 million in the 1997 Period, primarily from
the increase in shipments, selling and administrative costs and costs incurred
in connection with the expansion of the Duke Plant. Nevertheless, the increase
in net sales outpaced the increase in total costs and, as a result, operating
profits, expressed as a percentage of net sales, increased to approximately
42% for the 1998 Period, up from approximately 40% for the 1997 Period.
FISCAL 1997 COMPARED TO FISCAL 1996
General. In fiscal 1997, consolidated net sales were $123.7 million, as com-
pared to consolidated net sales of $117.9 million in fiscal 1996. The increase
of approximately 5% in consolidated net sales resulted largely from an in-
crease of approximately 17% in the net selling price of gypsum wallboard and
an increase of approximately 4% in shipments of recycled paperboard to unaf-
filiated customers.
Selling and administrative expenses as a percent of net sales were flat at ap-
proximately 12% in fiscal 1997 and in fiscal 1996.
The Company had operating profits of $31.8 million in fiscal 1997, as compared
with operating profits of $25.4 million in fiscal 1996. This increase of ap-
proximately 25% in operating profits resulted largely from a large increase in
operating profits in the gypsum wallboard operations partially offset by a re-
duction in operating profits in recycled paperboard operations.
Interest expense totaled $1.5 million in fiscal 1997 compared to $1.9 million
in fiscal 1996, and the Company repaid all interest-bearing debt by fiscal
year-end 1997.
The Company's effective tax rate was 39% in fiscal 1995, 38% in fiscal 1996
and 37% in fiscal 1997. The Company believes its effective tax rate for fiscal
1998 will be in the range experienced over the last three years.
As a result of the factors described above, the Company's net income increased
to $19.7 million in fiscal 1997 from $14.9 million in fiscal 1996, an increase
of approximately 32%. Diluted earnings per share also increased in fiscal 1997
to $1.67 per share from $1.27 per share in fiscal 1996.
Recycled Paperboard. During fiscal 1997, approximately 59% of the Company's
total consolidated net sales before eliminations were contributed by the recy-
cled paperboard segment. Operating profits for the segment were $17.7 million
in fiscal 1996 and $15.2 million in fiscal 1997, a decrease of approximately
14%. Operating margins for recycled paperboard operations were approximately
19% in fiscal 1997 as compared to approximately 21% in fiscal 1996. The de-
crease in operating margins was primarily the result of a decrease in net
selling prices that was only partially offset by a decrease in raw material
and variable production costs.
Both the Commerce City Mill and the Hutchinson Mill operated at near capacity
in fiscal 1997. Shipments of recycled paperboard increased approximately 4%
from fiscal 1996 to fiscal 1997, to approximately 188,000 tons, primarily as a
result of an increase of approximately 4% in shipments to unaffiliated custom-
ers. Over this same period, shipments of reclaimed paper fiber increased ap-
proximately 37%, to approximately 153,000 tons, largely due to a higher level
of vertical integration within the Company.
Net sales for the segment prior to intercompany eliminations decreased approx-
imately 7% in fiscal 1997. This decrease resulted primarily from a decline of
approximately 9% in net selling prices of recycled paperboard and a decrease
of approximately 24% in net selling prices of reclaimed paper fiber during the
year. The decline in net selling prices resulted primarily from a decline in
raw material costs. Raw material costs, consisting primarily of the cost of
reclaimed paper fiber used in the production of recycled paperboard, declined
approximately 15% from fiscal 1996 to fiscal 1997. Per unit variable produc-
tion costs, other than the cost of raw materials, also decreased approximately
3% from fiscal 1996 to fiscal 1997.
The Company's reclaimed paper fiber operations had a similar experience. Net
selling prices eroded during the year, while the acquisition cost of baled and
unbaled paper also declined, but not to the same extent as net selling prices.
28
<PAGE>
Gypsum Wallboard. The Duke Plant operated at near capacity during fiscal 1997.
Shipments of gypsum wallboard increased approximately 8%, to 570 million square
feet in fiscal 1997 from 529 million square feet in fiscal 1996. Incremental
improvements in the Company's manufacturing process and continued strong growth
in the construction industry constituted the primary causes of the increase in
shipments of gypsum wallboard in fiscal 1997.
Net sales for the gypsum wallboard segment increased approximately 26% from
fiscal 1996 to fiscal 1997 due primarily to an increase of approximately 17% in
net selling prices and an increase of approximately 8% in shipments of gypsum
wallboard.
The Company's cost per unit for gypsum wallboard remained essentially unchanged
from fiscal 1996 to fiscal 1997. Segment operating profit margins increased to
approximately 41% in fiscal 1997 from approximately 32% in fiscal 1996. In fis-
cal 1997, the Company, like other producers, experienced strong demand for its
gypsum wallboard products, precipitating a rise in selling prices and which,
when combined with stable manufacturing costs, provided improved results for
the Company and the gypsum industry as a whole.
FISCAL 1996 COMPARED TO FISCAL 1995
General. In fiscal 1996, consolidated net sales were $117.9 million, as com-
pared to consolidated net sales of $96.4 million in fiscal 1995. This increase
of approximately 22% in consolidated net sales resulted primarily from addi-
tional recycled paperboard sales as a result of the acquisition of the Halltown
Mill.
Selling and administrative expenses as a percent of net sales increased to ap-
proximately 12% in fiscal 1996 from approximately 10% in fiscal 1995. The in-
crease in fiscal 1996 stemmed from the acquisition of the Halltown Mill and the
start-up of the paper fiber recycling center in Denver, Colorado.
The Company garnered operating profits of $25.4 million in fiscal 1996, as com-
pared with operating profits of $19.0 million in fiscal 1995. The increase of
approximately 34% was primarily the result of the contribution of the Halltown
Mill in fiscal 1996 and improved operating recycled paperboard margins in fis-
cal 1996 as a result of declining raw material prices. Operating margins im-
proved to approximately 22% in fiscal 1996 from approximately 20% in fiscal
1995, primarily as a result of improved recycled paperboard margins.
As a result of the factors described above, the Company's net income increased
to $14.9 million in fiscal 1996 from $11.7 million in fiscal 1995, an increase
of approximately 27%. Diluted earnings per share also increased in fiscal 1996
to $1.27 per share from $1.00 per share in fiscal 1995.
Recycled Paperboard. Shipments of recycled paperboard increased approximately
44% from fiscal 1995 to fiscal 1996, largely as a result of the Company's ac-
quisition of the Halltown Mill. Shipments of reclaimed paper fiber increased
approximately 16% in fiscal 1996, mostly because of the start-up of the paper
fiber recycling center in Denver. During fiscal 1995, variable recycled paper-
board manufacturing per unit costs, the majority of which are attributable to
the cost of reclaimed paper fiber, increased approximately 45%. Although the
Company was able to raise its recycled paperboard selling prices during fiscal
1995, a time lag existed between the rise in material costs and the subsequent
increase in selling prices. As a result, the Company's overall margins were re-
duced. During fiscal 1996, this trend reversed and the Company became the bene-
ficiary of slowly declining selling prices and rapidly declining raw material
costs, resulting in operating margins for the recycled paperboard segment of
approximately 21% in fiscal 1996 compared to approximately 14% in fiscal 1995.
Net sales of the recycled paperboard segment as a whole increased approximately
36% from fiscal 1995 to fiscal 1996. The acquisition of the Halltown Mill was
the primary factor contributing to the increase in net sales, although its ef-
fect was offset, in part, by a reduction in net selling prices of reclaimed pa-
per fiber sold by the Company's paper recycling centers.
Operating profits for the segment were $17.7 million in fiscal 1996 compared to
$8.9 million in fiscal 1995, an increase of approximately 99%. The contribution
of the Halltown Mill and the Company's overall improved operating margins were
two principal factors of this increase in operating profits. An increased
spread between net selling prices of recycled paperboard and variable per unit
manufacturing costs also contributed to this growth in operating profits.
Gypsum Wallboard Operations. Gypsum wallboard shipments increased approximately
7% from fiscal 1995 to fiscal 1996. Shipments grew to 529 million square feet
in fiscal 1996 from 494 million square feet in fiscal 1995. The Duke Plant op-
erated at near capacity both years. The increase in shipments resulted from an
upgrade of the production process in fiscal 1995 and the implementation of
other production adjustments during fiscal 1996.
29
<PAGE>
Net sales for the gypsum wallboard segment increased approximately 6% from fis-
cal 1995 to fiscal 1996 as a result of the increase in gypsum wallboard ship-
ments, as net selling prices of gypsum wallboard were virtually unchanged from
fiscal 1995 to fiscal 1996. Manufacturing per unit costs were approximately 5%
higher in fiscal 1996 compared to fiscal 1995. Materials, labor and fixed manu-
facturing costs also increased slightly. Operating profits were $14.3 million
in fiscal 1996 compared to $14.9 million in fiscal 1995, and segment operating
profit margins declined to approximately 32% in fiscal 1996 from approximately
36% in fiscal 1995, primarily as a result of the cost increases mentioned
above.
YEAR 2000 COMPLIANCE
The Company uses a number of computer software programs, operating systems, and
types of equipment with computer chips in its internal operations, including
applications used in the Company's financial business systems, manufacturing
processes and administrative functions. To the extent that the programs, oper-
ating systems, and equipment contain source code or computer chips that are un-
able to interpret appropriately the upcoming calendar year 2000, some level of
modification or possible replacement will be necessary. The costs necessary to
modify or replace the items mentioned above, or the interruption of administra-
tive or manufacturing processes resulting from compliance failure, may have a
material adverse effect on the Company's business and financial condition or
its results of operations.
The Company has appointed a team of employees to address the year 2000 issue.
The Company is following a six-step process evaluating critical software, oper-
ating systems and equipment for year 2000 compliance -- awareness, inventory,
assessment, remediation, testing and risk management (contingency planning).
Currently, the Company is in the inventory/assessment phase with some
remediation and testing taking place. The inventory phase is estimated to be
completed during the third quarter of 1998. Contingency planning is scheduled
to begin in the first quarter of 1999. The Company has established a goal of
July 1, 1999 for completing the entire process. The Company has received a cer-
tification from the vendor of its financial and payroll software that such
software is year 2000 compliant. However, this software will be analyzed by the
same processes outlined above.
To date, expenses associated with year 2000 compliance have been minimal. How-
ever, from fiscal 1995 through the present, the Company, in its normal course
of business, replaced substantially all of its business systems hardware and
software. The Company estimates expenditures of approximately $300,000 in fis-
cal 1999 and approximately $200,000 in fiscal 2000 for periodic, scheduled up-
grades of hardware and software as well as a portion for year 2000 compliance.
The Company believes that internally generated cash together with proceeds from
the New Credit Facility will be sufficient to fund these expenditures.
Furthermore, there can be no assurance that the Company's customers and suppli-
ers are, or will be, year 2000 compliant. The Company believes the most reason-
ably likely worst case year 2000 scenario would be the failure of key customers
to achieve year 2000 compliance, resulting in the loss of sales to such custom-
ers for an indefinite period of time. However, the Company is not aware of any
customers that are not year 2000 compliant. In order to address the potential
non-compliance with the year 2000 by the Company's customers and suppliers, the
Company is in the process of distributing and collecting questionnaires to its
customers and vendors asking them to respond with their year 2000 plans. Until
this process is substantially complete, the Company will not be in a position
to fully assess its year 2000 risks.
EFFECT OF INFLATION
Management believes that general inflation has not had a material impact on the
Company's net sales or operating income during the last three fiscal years. The
cost of reclaimed paper fiber, which is the principal raw material component
used in the manufacture of recycled paperboard, rose significantly during 1994
and 1995. Conversely, the cost of reclaimed fiber decreased substantially dur-
ing 1996 and was relatively stable throughout 1997. The Company believes that
these shifts were caused by changes in supply and demand and not general infla-
tion or deflation.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's operations have generated sufficient cash for work-
ing capital purposes, and the Company has borrowed money only for acquisitions
and major capital improvements. The Company generated $14.0 million, $23.3 mil-
lion and $28.7 million in cash from operations during fiscal 1995, 1996 and
1997, respectively, and generated $21.2 million in cash from operations during
the 1998 Period. On May 15, 1998, in order to provide funds primarily for the
construction of the Lawton Mill until permanent financing could be obtained,
the Company increased its then existing
30
<PAGE>
revolving line of credit with NationsBank, N.A. to $50.0 million. On July 15,
1998, in order to provide permanent financing for the Lawton Mill construction
and the Company's working capital needs, the Company issued the Old Notes and
entered into the New Credit Facility. The Company's then existing line of
credit was repaid and terminated in connection with the issuance of the Old
Notes and the effectiveness of the New Credit Facility.
The Company expects that its principal capital and liquidity needs during the
next several years will consist of (i) capital expenditures, including con-
struction of the Lawton Mill, expansion of the Duke Plant and other expansions
of its facilities, (ii) interest payments on the Notes and payments of princi-
pal and interest under the New Credit Facility and (iii) dividend payments to
stockholders.
The Company invested $31.2 million in capital expenditures in fiscal 1998, in-
cluding approximately $8 million on construction of the Lawton Mill and $16.6
million on the expansion of the Duke Plant and a related purchase of addi-
tional railcars. The Company estimates that capital expenditures for fiscal
1999 will total approximately $145.5 million, including approximately $122
million on the Lawton Mill, $13 million to complete the expansion of the Duke
Plant and the purchase of the related railcars and an additional $10.5 million
to be used principally for equipment upgrades (including an estimated $4.5
million for capital expenditures associated with routine replacement of exist-
ing production equipment). The Company estimates that it will spend $30-40
million in fiscal 2000 to complete the Lawton Mill and to provide working cap-
ital for the mill. The New Credit Facility imposes limits on the Company's
ability to make capital expenditures, but the Company believes that those lim-
its will not prevent it from implementing its capital expenditure program.
Interest on the Notes will be payable semi-annually in arrears on January 15
and July 15 of each year, commencing January 15, 1999. Each interest payment
will be $4,750,000. The New Credit Facility does not require principal amorti-
zation until after conversion of the then outstanding revolving credit loan to
a term loan on the Conversion Date (defined in the New Credit Facility as, in
general, the earlier of the start-up of the Lawton Mill and 24 months after
the establishment of the New Credit Facility). However, interest accrued under
the New Credit Facility will be payable quarterly (in the case of loans bear-
ing interest based on the prime rate) or at the end of an applicable interest
period (in the case of loans bearing interest based on a LIBOR rate). After
the Conversion Date, the principal of the term loan created on such date (an-
ticipated to be $50 million) will amortize (through quarterly payments) at a
rate of 10%, 20%, 30% and 40% in the first, second, third and fourth years,
respectively, following the Conversion Date. See "Description of the New
Credit Facility."
The Company paid cash dividends of approximately $3.0 million, $4.0 million
and $4.2 million in fiscal 1996, 1997 and 1998, respectively. Quarterly divi-
dends historically have been paid in September, December, March and June. The
payment of cash dividends has been and remains subject to the approval of the
Company's board of directors. The New Credit Facility and the Indenture impose
limits on the Company's ability to pay dividends, but the Company does not an-
ticipate that such limits will prevent the payment of dividends at fiscal 1998
levels.
The Company received net proceeds from the sale of the Old Notes of approxi-
mately $97 million. In addition, $85 million is available to the Company under
the New Credit Facility, subject to its terms and conditions. The Company be-
lieves that these funds, together with cash generated by operations and cash
and investments on hand, will be sufficient (i) to finance the construction of
the Lawton Mill, (ii) to finance the other capital expenditure requirements
identified above, (iii) to finance the Company's working capital requirements
and (iv) to pay dividends to stockholders.
31
<PAGE>
BUSINESS
GENERAL
Founded in 1961, Republic Group Incorporated is an integrated manufacturer and
distributor of recycled paperboard and gypsum wallboard. Management believes
that the Company is one of the leading producers of certain grades of recycled
paperboard sold to manufacturers of consumer and industrial paperboard products
such as tubes, cans, cores, spools, drums, partitions, puzzles and games as
well as one of the leading suppliers of gypsum-grade recycled paperboard to in-
dependent gypsum wallboard producers. In addition, the Company sells reclaimed
paper fiber for use in its recycled paperboard business as well as for sale to
third parties. Republic sells its products to customers located in 43 states.
In addition to the Duke Plant, the Company has recycled paperboard mills in
Colorado, Kansas and West Virginia and paper fiber recycling centers in Colora-
do, Kansas and Missouri. The Company had net sales and EBITDA of approximately
$123.7 million and $39.7 million, respectively, in fiscal 1997 and $96.2 mil-
lion and $25.8 million, respectively, for the 1998 Period. Before inter-company
eliminations, the Company's recycled paperboard (which includes reclaimed paper
fiber) and gypsum wallboard businesses accounted for approximately 59% and 41%,
respectively, of Republic's total net sales during fiscal 1997.
The following table summarizes the Company's businesses:
<TABLE>
<CAPTION>
PERCENT OF
FISCAL 1997
CONSOLIDATED
BUSINESS PRODUCT END-USE MARKET SITE(S) NET SALES
-------- ------------------------- ------------------------ ------------------------ -------------
(INCLUDING
INTERCOMPANY)
<C> <C> <S> <C> <C>
Recycled Paperboard Gypsum-grade recycled Internal (approximately Commerce City, Colorado; 19%
paperboard 16% of fiscal 1997 Hutchinson, Kansas
recycled paperboard net
sales) and third-party
use in the manufacture
of gypsum wallboard
Recycled paperboard rolls Sale to manufacturers of Commerce City, Colorado; 36%
and sheets paperboard tubes, cans, Hutchinson, Kansas;
cores, spools, drums, Halltown, West Virginia
partitions, puzzles and
games for sale to third-
parties
Reclaimed paper fiber Internal (approximately Denver, Colorado; 4%
43% of fiscal 1997 Topeka, Kansas;
reclaimed paper fiber Kansas City, Missouri
net sales) and third-
party use in the
manufacture of recycled
paperboard
Gypsum Wallboard Gypsum wallboard Gypsum wallboard Duke, Oklahoma 41%
distributors and
residential and
commercial builders and
remodelers
</TABLE>
Management has recently undertaken a number of important strategic initiatives
designed to increase Republic's production capabilities. On June 29, 1998 the
Company commenced the construction of the Lawton Mill. The Company intends to
use the Lawton Mill primarily for the production of gypsum-grade recycled pa-
perboard with weight and surface characteristics superior to that currently
available in the United States. Management believes that the operation of the
Lawton Mill will position Republic as the largest third-party supplier of gyp-
sum-grade recycled paperboard in the United States. The Lawton Mill is expected
to have a production capacity of approximately 220,000 tons per annum, which
will approximately double Republic's recycled paperboard capacity. The Company
intends to sell approximately 50% of the Lawton Mill's output pursuant to the
Hardie Agreement and to use approximately 25% of the Lawton Mill's output to
source its own gypsum wallboard operations. Management estimates that the Law-
ton Mill will cost approximately $160-170 million, inclusive of related working
32
<PAGE>
capital requirements and capitalized interest, and will achieve commercial
production by the first quarter of 2000. The Company estimates that construc-
tion of the project will be completed approximately 13 to 15 months after the
date of this Prospectus.
The Company is also currently completing the second phase of a two-phase ex-
pansion of the Duke Plant that will increase its capacity from 570 million to
1.2 billion square feet per year by the end of 1998. Management believes that,
after its expansion, the Duke Plant will be one of the largest, most-efficient
gypsum wallboard manufacturing plants in the world. In addition, the Company
has just completed an expansion of the capacity of the Commerce City Mill and
the Hutchinson Mill by approximately 25% in the aggregate. Management believes
that these initiatives, together with the construction of the Lawton Mill and
the continued expansion and incremental upgrading of its facilities, will sig-
nificantly increase Republic's overall production capabilities as well as en-
hance its competitive position in both the recycled paperboard and gypsum
wallboard business.
COMPETITIVE STRENGTHS
The Company believes that it has the following competitive strengths:
Low Cost Production. The Company believes that its production costs are among
the lowest in the industry and continually seeks to improve efficiency and al-
locate production in order to maximize capacity utilization. Management be-
lieves that the use of high-speed manufacturing equipment in particular has
enabled the Company to significantly reduce labor costs, waste and production
time. In addition, management believes that the strategic locations of the
Company's facilities provide it with cost advantages, including reduced trans-
portation and warehousing costs.
Product Line and Geographic Diversification. The Company's growth in the recy-
cled paperboard business has reduced its dependence on the construction and
housing industry in which gypsum wallboard is used. Management believes that
such diversification has lessened the effect of cyclical housing and construc-
tion markets on the Company's overall operations. In addition, the Company
produces a number of specialty grades of recycled paperboard that are sold to
manufacturers of consumer and industrial paperboard products and used for
packaging and other products, thereby reducing its dependence on sales of any
one grade. Management believes that the various locations of the Company's fa-
cilities reduce its dependence on any single geographic market.
Well-Integrated Operations. Management believes that the Company's well-inte-
grated operations reduce its dependence on third-parties and its overall pro-
duction costs. The Duke Plant obtains substantially all of its requirements
for raw gypsum from quarries owned and operated by the Company and purchases
substantially all of its requirements for recycled paperboard from the Com-
merce City Mill and the Hutchinson Mill. The Company's recycled paperboard
mills, in turn, purchase approximately 33% of their reclaimed paper fiber
needs from the Company's own reclaimed paper fiber operations. The Company
also owns and operates a short-line railroad that it uses to transport approx-
imately one-third of its gypsum wallboard to major carriers located 15 miles
from the Duke Plant for distribution throughout the United States.
High-Quality Products and Services; Strong Customer Relationships. The Company
has adopted strict quality control standards and procedures, which it regu-
larly reviews and updates. The Company believes that its ability to consist-
ently manufacture high quality products and to provide timely delivery and su-
perior customer service is an important element of the Company's success. As a
result of its focus on quality and customer service, the Company believes that
it has earned a reputation in the industry as a dependable supplier of prod-
ucts, enabling the Company to develop long-standing customer relationships.
Management Experience. The Company, which was founded by its current president
and chief executive officer in 1961, has assembled a management team with a
strong track record and an average of approximately 16 years of service per
executive officer. The Company's current management team has successfully di-
versified product lines, increased sales, strengthened customer and supplier
relationships, improved manufacturing efficiencies and productivity and se-
lected and integrated strategic acquisitions, all of which have enhanced the
competitive strength of the Company.
BUSINESS STRATEGY
The Company intends to take advantage of its competitive strengths by pursuing
the following business strategy:
Expand Productive Capabilities. Management believes that the operation of the
Lawton Mill will position Republic as the largest third-party producer of gyp-
sum-grade recycled paperboard in the United States. The Company expects the
Lawton Mill to produce gypsum-grade recycled paperboard that is 20-30% light-
er, superior in quality and equal in strength charac-
33
<PAGE>
teristics to the gypsum-grade recycled paperboard that is otherwise currently
available in the United States. Management believes that being the first pro-
ducer to bring a technologically-improved gypsum-grade recycled paperboard to
market will provide Republic with a distinct competitive advantage and increase
the ability of the Company to sell its product in new markets. The Company in-
tends to sell approximately 50% of the Lawton Mill's output pursuant to the
Hardie Agreement and expects to use an additional 25% of output to support its
gypsum wallboard business. Management also expects the operation of the Lawton
Mill to allow Republic to redeploy some of its existing gypsum-grade paperboard
capacity for non-wallboard use, thereby allowing the Company to continue to
grow and diversify its recycled paperboard business. The Lawton Mill will also
be capable of producing tube stock and other consumer and industrial paperboard
products, which management believes will help mitigate the impact of any future
downturns in the housing and construction industry.
Management also believes that the ongoing upgrades and expansions to its exist-
ing facilities will further enhance and increase the Company's overall produc-
tive capacity. The improvements to the existing production line, together with
the addition of a second production line at the Duke Plant, will provide the
Company with the capability of producing both specialty products, such as the
Company's recently introduced 54-inch wallboard, and increased volumes of its
core products, which management believes will allow Republic to increase its
sales to existing customers as well as obtain new customers. The Company ex-
pects to begin transitioning the Hutchinson Mill to tube stock and other con-
sumer and industrial paperboard products before the Lawton Mill comes on line.
In addition, management believes that the improvements made at the Commerce
City Mill will produce a higher quality gypsum-grade paperboard that can be
used in conjunction with the output from the Lawton Mill.
Continue to Operate as Low Cost Producer. In order to maintain and improve its
cost position, Republic expects to continue to identify opportunities for ongo-
ing cost reductions. The Lawton Mill is expected to be an efficient high-speed
mill with lower than average operating costs as a result of its design specifi-
cations. In addition, management expects the production of lighter gypsum-grade
paperboard at the Lawton Mill to result in freight cost savings as well as re-
duced drying and delivery costs to gypsum wallboard producers. The expansions
and improvements at the Duke Plant, the Commerce City Mill and the Hutchinson
Mill should also provide increased economies of scale. The Company continuously
scrutinizes its manufacturing processes and overhead infrastructure to conserve
material and energy, reduce set-up time and lower overhead expenses. To this
end, the Company has identified additional cost-saving opportunities it expects
to implement in fiscal year 1999, including incremental process equipment up-
grades at the Company's existing recycled paperboard mills.
Pursue Strategic Acquisitions. The Company may from time to time pursue small
to medium-sized strategic acquisitions, particularly in the recycled paperboard
business. Management believes that such acquisitions may provide opportunities
to further diversify its product lines as well as consolidate operations and
lower per unit costs.
COMPANY BACKGROUND AND HISTORY
The Company began manufacturing gypsum wallboard at the Duke Plant in 1965,
and, for the next 18 years, the Company operated almost exclusively as a pro-
ducer of gypsum wallboard. Then, in 1983, in an effort to diversify and inte-
grate its operations so as to make the Company more resistant to cyclical
downturns in the construction industry, the Company began to shift its primary
strategic focus away from the production of gypsum wallboard and toward the
production of recycled paperboard. In 1983, the Company purchased the Commerce
City Mill and the Hutchinson Mill; in 1993, the Company began an expansion pro-
gram to increase the productive capacity of these mills; in 1994, the Company
purchased paper fiber recycling centers in Topeka, Kansas and Kansas City, Mis-
souri; in 1995, the Company acquired the Halltown Mill; and, in 1996, the Com-
pany opened a paper fiber recycling center in Denver. This shift in strategic
focus diversified the Company both geographically and in terms of productive
business segments. Moreover, by adding new operations that complement its core
gypsum business, the Company has become significantly more integrated vertical-
ly. The Company's current operations provide it with access to both a steady
supply of quality gypsum-grade recycled paperboard for its gypsum wallboard op-
erations and additional supplies of reclaimed paper fiber for the Company's re-
cycled paperboard mills.
RECENT FINANCIAL RESULTS
On August 7, 1998, the Company reported fiscal year-end financial results. For
the quarter ended June 30, 1998, the Company reported net sales of $32.1 mil-
lion and net income of $5.3 million, or diluted earnings per share of $0.45.
For the fiscal year ended June 30, 1998, the Company reported net sales of
$128.3 million and net income of $17.8 million, or diluted earnings per share
of $1.51. The results for the quarter and the fiscal year were augmented by $1
million of non-taxable life insurance income from a policy owned by the Company
on an executive officer.
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RECYCLED PAPERBOARD OPERATIONS
Manufacturing. The Company's recycled paperboard manufacturing operations are
conducted at the Commerce City Mill, the Halltown Mill and the Hutchinson
Mill. All of the paperboard products manufactured at the Company's paperboard
mills are produced from 100% reclaimed paper fiber and are classified by the
industry as recycled paperboard. These recycled paperboard products include
the facing paper used in the manufacture of gypsum wallboard and recycled pa-
perboard used by manufacturers of consumer and industrial paperboard products
such as tubes, cans, cores, spools, drums, partitions, puzzles and games.
Recycled paperboard is manufactured at the Company's existing mills in a con-
tinuous process during which reclaimed paper fiber is mixed with water and
pulped to separate the individual fibers. The slurry is then applied to a se-
ries 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 be packaged either in
roll form or in sheets, according to customer specifications.
In 1998, the Company completed a program to expand and develop its recycled
paperboard business which involved the expenditure of approximately $16 mil-
lion and expanded the productive capacity of the Commerce City Mill and the
Hutchinson Mill by approximately 25%. As of March 31, 1998, the rated produc-
tive capacity of the Company's three recycled paperboard mills was 213,500
tons per year.
Raw Materials. The principal raw materials used by the Company's recycled pa-
perboard mills are reclaimed paper fiber, water and chemicals. Reclaimed paper
fiber is currently purchased from several sources, including the Company's own
paper fiber recycling centers. Management believes that adequate supplies of
reclaimed paper fiber will continue to be available from wholesalers located
in cities near its recycled paperboard mills and its own paper fiber recycling
centers. Since reclaimed paper fiber is a commodity, its cost is subject to
quick corrections based on supply and demand. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
Chemicals, including size, retention aids and bactericides, used by the Com-
pany in its recycled paperboard operations are also readily available from
several manufacturers at competitive prices. Size is used principally as a wa-
ter resisting agent or strength enhancer in the production of recycled paper-
board. 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 proc-
ess.
The manufacture of recycled paperboard involves the use of large volumes of
water both in the production process and for cooling purposes. In Colorado and
Kansas, where two of the Company's recycled paperboard mills are located, the
appropriation of water is regulated by state laws. The Commerce City Mill uses
water pumped from wells located on, or adjacent to, the Company's property.
Most of these wells have been in use for more than 20 years. In connection
with the purchase of the Commerce City Mill, the Company acquired an approxi-
mate 80% interest in certain of these water wells as tenant-in-common with
Packaging Corporation of America (now Tenneco Packaging) and the right to use
up to approximately 80% of the water produced by the wells. The Company's wa-
ter rights are subject, however, to the legal rights of prior appropriators of
the same water source and to court-decreed limitations on the permitted uses
for such water. The Hutchinson Mill uses large volumes of water pumped from
wells located on owned or controlled property near the mill. 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. The
Halltown Mill uses water from a stream running through the Company's property
and has done so for over 100 years. The Company's rights to use the water from
the stream are 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 recycled paperboard mills, an extended period of general
water shortages, legal curtailment of any mill's current water sources or us-
es, or deterioration of the current quality of water sources could affect that
mill's operations and limit its productive capacity.
Electricity, natural gas and other utilities are available to the plants ei-
ther at contracted rates or at standard industrial rates in adequate supplies,
subject to standard industrial curtailment provisions. Management believes
there are adequate supplies of coal available to the Halltown Mill on either a
contracted or spot basis. The Hutchinson Mill generates approximately 44% of
the electricity it uses, and the Halltown Mill generates approximately 33% of
its total requirements. During periods of natural gas curtailment, the Com-
merce City Mill and the Hutchinson Mill are equipped to use fuel oil. The
Halltown Mill can use either coal or fuel oil.
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The prevailing market price for natural gas and coal was stable to slightly
higher in 1997 than in 1996 and has been moderately higher during 1998. All of
the Company's recycled paperboard mills periodically contract fuel supplies in
advance for varying time limits to hedge against fluctuations in the market.
The Company has historically been successful at contracting future supplies at
favorable rates. However, because natural gas and coal are commodities, there
is always the possibility of contracting future requirements at higher prices
than actual spot prices.
Sales, Marketing and Distribution. The recycled paperboard products manufac-
tured by the Company are sold to gypsum wallboard manufacturers and to convert-
ers that manufacture composite cans, cores, tubes and other packaging and spe-
cialty products. During fiscal 1997, approximately 16% of the recycled paper-
board manufactured and shipped by the Company's recycled paperboard mills was
consumed by the Company's gypsum wallboard manufacturing operations, another
approximately 19% was shipped to other gypsum wallboard manufacturers and the
balance was shipped to over 150 different converter customers. Sonoco and
Centex accounted for approximately 15% and 12%, respectively, of the recycled
paperboard segment's gross sales and approximately 9% and 7%, respectively, of
consolidated gross sales. For the nine months ended March 31, 1998, Sonoco and
Centex each accounted for approximately 9% of consolidated gross sales and ap-
proximately 16% and 15%, respectively, of the recycled paperboard segement's
gross sales. When the Hardie Agreement is fully implemented, Hardie is expected
to account for a significant percentage of consolidated gross sales. See "--
The Hardie Agreement."
In fiscal 1997, approximately 43% of the Company's reclaimed paper fiber sales
were to the Company's recycled paperboard mills. The balance was sold to exter-
nal customers. Most customers are located within 600 miles of the particular
paper fiber recycling center. The Company's paper fiber recycling centers have
the capability to sort and bale reclaimed paper fiber purchased from generators
and haulers. In addition, the Company's paper fiber recycling centers act as
brokers for certain generators of reclaimed paper fiber by arranging for direct
shipments from the generator to the purchaser of the reclaimed fiber.
Sales of recycled paperboard and reclaimed paper fiber are typically made on
credit terms in accordance with normal industry practice. Currently, recycled
paperboard production normally occurs after an order is received, and recycled
paperboard is rarely produced for general inventory purposes. The backlog of
orders for recycled paperboard is usually not significant. Deliveries of recy-
cled paperboard and reclaimed paper fiber are made to customers by common car-
riers, as well as by rail, although some customers pick up their orders at the
Company's facilities.
Competition. In selling the portion of its production not consumed by its own
gypsum wallboard manufacturing operations, the Company competes with approxi-
mately eight other manufacturers of gypsum-grade paperboard, six of which have
gypsum wallboard manufacturing operations. Substantially all of these competi-
tors have greater financial resources than the Company. During periods of peak
demand for gypsum wallboard, the demand for recycled paperboard typically
matches or exceeds the productive capacities of the gypsum-grade paperboard
producers. During periods of reduced demand for gypsum wallboard, the demand
for recycled paperboard falls, and selling prices may decrease. In selling re-
cycled paperboard to the packaging industry, the Company competes with approxi-
mately 75 producers, many of whom have substantially greater financial re-
sources than the Company. Management believes that its sales constitute less
than approximately 5% of total sales of recycled paperboard nationally.
Price, quality, personal relationships and timeliness of deliveries are the
principal methods of competition among paperboard producers. The locations of
the Company's recycled paperboard mills allow the Company to serve a variety of
markets, including several gypsum wallboard plants in the central and south-
western United States. The Halltown Mill is within an hour and a half from the
metropolitan centers of Baltimore, Maryland and Washington, D.C. The central-
ized location of the Commerce City Mill and the Hutchinson Mill does, however,
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. Moreover, many of the Company's competitors are more ver-
tically integrated than the Company and produce end-use products utilizing re-
cycled paperboard manufactured from their own recycled paperboard mills. See
"Risk Factors--Competition."
THE LAWTON MILL
The Lawton Mill is being constructed in southwestern Oklahoma. The Lawton Mill
is being designed to manufacture gypsum-grade recycled paperboard utilizing
technologies that have been successfully employed in recycled paper mills that
manufacture products other than recycled paperboard and in European gypsum-
grade recycled paperboard mills, but that have not yet been entirely incorpo-
rated into any gypsum-grade recycled paperboard mills in the United States.
These technologies include (i) the use of an advanced paper forming section us-
ing the "Fourdrinier" process, which has a pressur-
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ized headbox and forms paper sheets on a long wire table that permits machine
speeds to be increased two to three times that of other formers, thereby al-
lowing reduced labor costs per ton produced, (ii) an advanced control system,
which immediately senses changes in the paper as it is being formed and ad-
justs the forming section of the paper machine to maintain the uniformity of
the paper and also monitors and adjusts the reclaimed paper fiber cleaning
process to maintain the quality of this raw material, (iii) modern pressing
technology, which permits water removal in a way that provides more uniformity
and enhances the properties of the paper, (iv) dryer felts on all dryer sec-
tions, which improve drying efficiency and reduce shrinkage, and (v) an en-
hanced cleaning and screening process for the reclaimed paper fiber that en-
hances the strength, surface characteristics and overall surface uniformity of
the paperboard.
The Company expects that the Lawton Mill will be able to produce recycled pa-
perboard that is superior in surface characteristics to and approximately 20%-
30% lighter than that currently produced in the United States, but that has
equal strength characteristics. The Company believes that being the first to
produce higher quality, lower basis-weight recycled paperboard will give it a
competitive advantage over other recycled paperboard manufacturers until other
mills using similar technology come on-line. Because gypsum-grade recycled pa-
perboard generally is sold on the basis of surface area, manufacturing lighter
paper potentially translates into higher profit margins per ton for the recy-
cled paperboard manufacturer. Lighter recycled paperboard also reduces drying
costs associated with the production of gypsum wallboard by approximately 10%
to 20% and reduces inbound and outbound freight costs for both recycled paper-
board and gypsum wallboard. In addition, because the Lawton Mill is being de-
signed as an efficient, high-speed mill, operating costs are expected to be
lower than existing mills now producing recycled paperboard for the wallboard
industry. In addition to producing a product which should be more attractive
to customers, it is anticipated that the lighter weight, better quality recy-
cled paperboard from the Lawton Mill will reduce production and transportation
costs at the Duke Plant.
The Lawton Mill is expected to have the capacity to produce approximately 11
billion square feet, or approximately 220,000 tons, of gypsum-grade recycled
paperboard annually. Production from the Lawton Mill will be used both inter-
nally at the Duke Plant and sold externally to other gypsum wallboard manufac-
turers. Upon completion of the expansion of the Duke Plant, the Company's in-
ternal demand for gypsum-grade recycled paperboard is expected to be approxi-
mately 2.5 billion square feet, or approximately 50,000-60,000 tons per year,
which represents approximately 25% of the Lawton Mill's capacity. An addi-
tional 5.2 billion square feet, or approximately 100,000-110,000 tons, com-
prising an additional approximate 50% of the Lawton Mill's output, is expected
to be purchased by Hardie pursuant to a long-term "requirements" agreement.
The Company is actively pursuing potential customers for the Lawton Mill's re-
maining output. Although primarily designed for the production of gypsum-grade
recycled paperboard, the Lawton Mill is also capable of producing recycled pa-
perboard for other uses.
Construction of the Lawton Mill commenced on June 29, 1998. The Company esti-
mates that construction will be completed approximately 13 to 15 months after
the date of this Prospectus and that the total cost of the Lawton Mill, inclu-
sive of related working capital requirements and capitalized interest, will be
$160 to $170 million. Management expects that the Lawton Mill will achieve
commercial production by the first quarter of 2000.
The Company has entered into an agreement for the design and construction of
the Lawton Mill with Fluor Daniel, Inc. ("Fluor Daniel"), an engineering and
construction firm with substantial background in the construction of recycled
paper mills. Fluor Daniel has entered into a subcontract for the paper machine
to be used at the Lawton Mill with Voith Sulzer, a manufacturer with extensive
experience in the design and fabrication of paper machines using the Fourdrin-
ier process. Of the estimated $160 to $170 million cost of the Lawton Mill,
approximately $42 million represents the cost of the paper machine.
The agreement with Fluor Daniel is a "cost plus" contract under which the Com-
pany bears the cost of construction and pays fees to Fluor Daniel for its
services. Portions of Fluor Daniel's fee are tied to the successful completion
of the Lawton Mill within a target cost and on schedule. If costs are below
the target, then Fluor Daniel's fee is increased, and, if the costs exceed the
target, then the fee is reduced. Similarly, if the Lawton Mill is completed
ahead of schedule, then the fee is increased, and, if it is completed behind
schedule, then the fee is reduced. In addition, if Fluor Daniel identifies
cost savings that are used on the project, then a portion of the savings will
be shared with Fluor Daniel.
There can be no assurance that the construction of the Lawton Mill will pro-
ceed on schedule and without cost overruns. Construction of the Lawton Mill
may be significantly delayed or may not be completed at all as a result of
problems frequently associated with construction projects, including delays in
construction, cost overruns, labor problems, the inability to obtain required
governmental approvals, licenses and permits or to obtain the funds required
to complete the project. Completion and operation of the Lawton Mill may also
be affected by general economic conditions. In addition, no assurance can be
given that the Company will be able to successfully implement the technology
to be used in the operation of
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the Lawton Mill into its operation. Other unforeseen expenses, difficulties,
complications or delays may be encountered in connection with the construction
and initial operations of the Lawton Mill. Construction of the Lawton Mill is
subject to the satisfaction of certain conditions, including approval by vari-
ous state and local regulatory agencies. There also can be no assurance that
the Company will have sufficient resources available to integrate the Lawton
Mill successfully into its overall operations. In addition, after construction
of the Lawton Mill is completed, it is expected that there will be a period
during which further testing and refinement of its recycled paperboard prod-
ucts will occur and during which the Lawton Mill's line speed will be
incrementally increased up to normal operating levels. During this transition
period, which is expected to last for approximately eight months, the Lawton
Mill will not be able to contribute to earnings at its full potential. In ad-
dition, if production problems or quality problems with the recycled paper-
board produced at the Lawton Mill should occur, then the contribution to earn-
ings of the Lawton Mill could be further delayed. See "Risk Factors--Inability
to Successfully Complete or Integrate The Lawton Mill."
When the Duke Plant converts to the use of recycled paperboard supplied by the
Lawton Mill, the Company will need to find replacement customers for that por-
tion of the productive capacity of the Hutchinson Mill that presently supplies
the Duke Plant. The Company expects to shift production at the Hutchinson Mill
away from the manufacture of gypsum-grade recycled paperboard to other grades
of recycled paperboard and to continue concentrating the Commerce City Mill on
the production of gypsum-grade recycled paperboard. However, the Company may
experience a significant lag time in converting production to such other
grades, prices available to the Company may be significantly lower, or the
Company might be unable to find replacement customers.
One factor in the decision to locate the new mill in Lawton was the incentive
package offered by the State of Oklahoma, Comanche County and the City of Law-
ton, which includes the provision of the real property upon which the Lawton
Mill is to be located, a cash incentive payment, certain income tax, sales tax
and property tax benefits, the construction of a rail spur and an additional
roadway to serve the site, the extension of a water line toward the site,
pricing advantages on fresh water supplies and sewage and employee training
and related services. In return for the incentive package, the Company has
agreed not to sell the Lawton Mill for a period of 15 years from completion,
other than to an affiliate or successor, and to employ approximately 110 full
time employees at the Lawton Mill during the first five years of operation,
subject to a reduction of up to 25% in the number of employees if technology
and manufacturing processes or market conditions dictate that such a reduction
is prudent.
The Company intends to use municipal water to supply the Lawton Mill and mu-
nicipal sewer systems to discharge its waste water after it is processed and
treated at the mill. The Company believes that adequate supplies of electric-
ity and natural gas are available to the Lawton Mill and is in the process of
negotiating for both electricity and natural gas requirements with several po-
tential suppliers. The Company believes that these utilities will be adequate
for operations at the Lawton Mill under normal circumstances. The Lawton Mill
will be served by a rail spur that will tie in to a major rail line operated
by Burlington Northern Santa Fe Corporation. Lawton is located on an inter-
state highway and other major highways that will facilitate transportation by
truck. The Company believes that adequate supplies of reclaimed paper fiber
are available within reasonable distances from the Lawton Mill.
THE HARDIE AGREEMENT
On May 14, 1998, the Company entered into the Hardie Agreement, pursuant to
which the Company has agreed to supply at least approximately 90% of the gyp-
sum-grade recycled paperboard requirements of Hardie's three gypsum wallboard
plants with the bulk of such sales beginning in October 2000-January 2001. The
Company expects the amount of paperboard supplied to Hardie pursuant to the
Hardie Agreement eventually to account for approximately 50% of the Lawton
Mill's production. The Duke Plant is expected to utilize another approximately
25% of the Lawton Mill's output. Although it is actively pursuing several po-
tential customers, the Company does not yet have any other supply agreements
for the output of the Lawton Mill. There can be no assurance that the Company
will be successful in obtaining any further supply agreements, and, in that
case, the Company would attempt to sell the excess production in the spot mar-
ket or under other short term arrangements.
Subject to earlier termination, the current term of the Hardie Agreement will
terminate on the later of October 1, 2010 or ten years after the start of com-
mercial production. The Hardie Agreement specifies that commercial production
has been achieved when the Lawton Mill has produced, for two consecutive
months, recycled paperboard meeting the required product specifications in an
amount equal to or greater than approximately 30% of the Lawton Mill's planned
monthly capacity. Under the Hardie Agreement, the Company has agreed to pro-
vide to Hardie, and Hardie has agreed to purchase, the following volumes of
recycled gypsum-grade paperboard: (i) approximately 7% of the requirements of
Hardie's gypsum wallboard plant near Nashville, Arkansas until December 31,
2000; (ii) at least 90% of the requirements of Hardie's
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gypsum wallboard plant near Nashville, Arkansas beginning January 1, 2001; and
(iii) at least 90% of the requirements of Hardie's gypsum wallboard plants near
Las Vegas, Nevada and Seattle, Washington beginning October 1, 2000. Although
the Company may be able to sell additional quantities to Hardie prior to that
time, there can be no assurance that such sales will occur or that the Lawton
Mill will be able to produce the quantities that Hardie might seek to purchase
prior to commencement of its long-term commitment. Under the Hardie Agreement,
the Company will maintain a minimum inventory of 2,000 tons of gypsum-grade re-
cycled paperboard at the Lawton Mill as to which Hardie will have priority of
shipment.
Initially, each sale to Hardie will be made at a fixed base price determined at
the execution of the Hardie Agreement that is subject to adjustment based on
changes in the major variable costs of production of recycled paperboard, in-
cluding the cost of power, transportation and the primary raw materials, and
changes in the purchaser price index for industrial commodities and a reference
employment cost index. The Hardie Agreement also contains a "most favored na-
tions" clause requiring the Company to offer Hardie the lowest price that is
available from the Company to other third-party purchasers of its recycled pa-
perboard. The "most favored nations" clause requires the Company to offer the
same price on an equivalent volume as the volume being sold to the third party
at such price, but makes the price applicable to all sales while such third-
party pricing remains in effect if the third-party price offered is pursuant to
a long-term agreement of more than two years. As a result of the pricing formu-
la, Hardie may be able to make purchases at substantially below market prices
if market prices rise faster than the cost of production. Because of the "most
favored nations" clause, if the Company were unable to sell its uncommitted
production from the Lawton Mill to third parties at prices equal to or exceed-
ing the pricing to Hardie, then it either would have to forego such third party
sales or lower the selling price to Hardie.
In addition, the Hardie Agreement is a "requirements" contract, and a termina-
tion or reduction of Hardie's production of gypsum wallboard could have a mate-
rial adverse effect on the Company. If, after October 1, 2004, technology
changes make it substantially more economical for Hardie to utilize paperboard
of a kind not presently commercially available and that is not contemplated for
the Lawton Mill, then Hardie and the Company are obligated to negotiate in good
faith to include such recycled paperboard within the scope of the Hardie Agree-
ment. However, any failure to reach an agreement on this point could result in
a reduction or termination of Hardie's purchases from the Lawton Mill, and, as
a result, could have a material adverse effect on the Company.
The Hardie Agreement imposes detailed specifications for the gypsum-grade recy-
cled paperboard sold to Hardie. The Company believes that the production from
its Lawton Mill will be able to meet such specifications. However, if the Com-
pany were unable to produce gypsum-grade recycled paperboard meeting such spec-
ifications or were unable to complete the Lawton Mill or achieve satisfactory
commercial production in a timely fashion, then the Company would be obligated
to supply Hardie with gypsum-grade recycled paperboard from its other mills or
from purchases from third parties or otherwise compensate Hardie for its addi-
tional costs in obtaining replacement gypsum-grade recycled paperboard. If Re-
public is unable to give notice that commercial production has been achieved at
the Lawton Mill by July 1, 2001, then Hardie may terminate the Hardie Agree-
ment. The inability of the Company to complete construction of, or to achieve
commercial production at, the Lawton Mill could have a material adverse effect
on the Company. See "Risk Factors--Dependence on Hardie Agreement."
The Hardie Agreement provides that, during the two year period beginning on the
later of October 1, 2005 or the fifth anniversary of commercial production, the
parties will negotiate in good faith toward a long-term extension of the agree-
ment past its initial term on mutually acceptable terms.
GYPSUM WALLBOARD OPERATIONS
Manufacturing. The Company's gypsum wallboard manufacturing operations are con-
ducted at the Duke Plant near the Company's principal gypsum deposit. Based on
the Company's historical product mix, the Duke Plant's current rated productive
capacity is 570 million square feet of gypsum wallboard per year, when operat-
ing three shifts per day and six and two-thirds days per week. This represents
an increase in rated capacity of approximately 40 million feet of gypsum wall-
board per year over 1996. The increase resulted largely from incremental pro-
ductivity improvements made at the Duke Plant, which operated at or near capac-
ity during 1996, 1997 and 1998. The Company is also currently completing a sec-
ond phase expansion of the Duke Plant that will increase its capacity to 1.2
billion square feet per year by the end of 1998. Construction is progressing
satisfactorily, and expenditures in connection with this project are estimated
to total approximately $26 million for production equipment improvements and $5
million for additional railcars. Through fiscal 1998, these expenditures to-
taled approximately $18 million. See "Management's Discussion and Analysis--
Overview" and "--Liquidity and Capital Resources."
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The Company produces gypsum wallboard by a method common to most gypsum wall-
board manufacturers. 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 Duke 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 recycled paperboard, the sheet is
cut into appropriate lengths, dried in kilns and packaged for sale. The Com-
pany produces gypsum wallboard in standard industry thicknesses and varieties,
and also produces 54-inch wallboard, a premium product used in commercial and
residential applications with 9-foot ceilings, which management believes is
currently produced at only a limited number of manufacturing facilities in the
United States.
Gypsum Supply. The Company owns in fee simple all surface rights and mineral
rights to gypsum, gypsite and anhydride with respect to 2,374 acres of land
near the Duke Plant. Additionally, approximately 740 acres of mineral rights
for gypsum, gypsite and anhydrite are leased by the Company with an option to
lease approximately another 720 acres. The Company estimates that the reserves
of these gypsum deposits should be sufficient to supply the Duke Plant, after
the completion of its present expansion and operating at capacity, for approx-
imately 15 years. The land on which the deposits are located is adjacent ei-
ther 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 imme-
diate 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,
Canada.
Other Raw Materials, Utilities and Fuel. Other than gypsum, the principal raw
material used by the Company in manufacturing gypsum wallboard is recycled pa-
perboard. The primary sources of this recycled paperboard currently are the
Commerce City Mill and the Hutchinson Mill. See "Business--Recycled Paperboard
Operations."
Water, electricity and natural gas are also required by the Company's manufac-
turing process. Water wells located near the Duke Plant produce sufficient
quantities of water for current and anticipated plant requirements. A 125,000
gallon overhead water storage tank is also situated adjacent to the Duke
Plant. In addition, the Duke Plant can purchase water from the public water
supply system of the town of Duke, Oklahoma. Electric power is supplied to the
Company at standard industrial rates by a local electric cooperative.
Sales, Marketing and Distribution. In 1997, approximately 61% of the Company's
shipments of gypsum wallboard products went to customers located in its pri-
mary historical markets of Texas, Oklahoma, Colorado and Kansas. The remaining
39% of shipments went to customers in other states, with an emphasis on the
midwestern and southeastern regions of the United States.
Gypsum 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 1997. Sales representatives, working in sepa-
rate territories, market gypsum wallboard for the Company. Most of these sales
representatives have significant experience in the building materials indus-
try.
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 produces to inventory, but balances inventories with or-
ders. The backlog of orders for the Company's gypsum wallboard generally is
not significant.
The Company utilizes contract and common carriers with 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. The Company's strategy has enabled the Company to ship
economically without affecting the timeliness of deliveries. Additionally, the
Company ships approximately one-third of its product by rail. Rail shipments
are facilitated by the Company's subsidiary, the Hollis & Eastern Railroad
Company, a short-line railroad that connects the Duke Plant with major rail
lines located 15 miles away, thus enabling the Company to ship to distant mar-
kets economically. The Company also owns 115 railcars that operate in, and are
dispatched through, the national rail system. In order to effectively and ef-
ficiently transport the additional product produced by the Duke Plant, the
Company has ordered an additional 40 railcars that are expected to be deliv-
ered in October, 1998. The Company receives car hire revenues from its
railcars.
The Company also ships gypsum wallboard by rail to public warehouses located
in Birmingham, Alabama and Cincinnati, Ohio. The warehouses unload and store
the gypsum wallboard until the Company instructs them to arrange deliveries by
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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 typ-
ically cheaper than truck delivery.
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. Very little differentiation currently exists between the
gypsum wallboard produced by the Company and its competitors. The Company be-
lieves, however, that the lower weight and the enhanced surface characteristics
of the recycled paperboard to be produced by the Lawton Mill will give the gyp-
sum wallboard produced with it a competitive advantage. The Company also be-
lieves that price, personal relationships with customers, quality and timeli-
ness of deliveries will continue to be important methods of competition among
gypsum wallboard manufacturers.
There are approximately 11 manufacturers of gypsum wallboard in the United
States, many of which have significantly greater financial resources than the
Company. Three of these companies, Georgia-Pacific, National and USG, 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% of the total
gypsum wallboard sold nationally and approximately 10% of the total gypsum
wallboard sold in its primary historical markets. See "Risk Factors--Competi-
tion."
In addition to the Company's expansion of the Duke Plant, the Company is aware
of at least two other gypsum wallboard manufacturers that have recently com-
pleted expansions of their gypsum wallboard plants. Additional gypsum wallboard
manufacturers have begun or are beginning the process of adding gypsum wall-
board capacity and are expected to complete this process during the next 18 to
36 months. As a result of these and other expansions, the Company believes that
a significant amount of new capacity may be on line in the near future, which
could have a material adverse effect on gypsum wallboard selling prices. Fur-
thermore, because high exit barriers exist in the gypsum wallboard industry,
plants that are contributing to the excess capacity may not be dismantled dur-
ing periods of low demand or low prices and may, therefore, be capable of a
quick reentry into the market when the market improves.
Larger, multiple-plant gypsum wallboard manufacturers often have a competitive
advantage over the Company in markets outside the Company's primary markets be-
cause of the strategic location of their plants as well as other cost efficien-
cies, such as the ability to spread fixed costs over several plants. See "Man-
agement's Discussion and Analysis of Financial Condition and Results of Opera-
tions" and "Risk Factors--Competition--Gypsum Wallboard Industry."
EMPLOYEES AND EMPLOYEE RELATIONS
The Company employs approximately 800 people, approximately 590 of whom are
covered by collective bargaining agreements with four labor unions. The expira-
tions of current collective bargaining agreements range from 1999 to 2003. The
Company believes that its relations with employees are satisfactory.
ENVIRONMENTAL REGULATION
The Company's operations are subject to various federal, state and local envi-
ronmental laws and regulations, including those governing discharges into the
air and water, the storage, handling and disposal of wastes, the remediation of
contaminated soil and groundwater and the health and safety of employees. The
nature of the Company's operations, which include quarrying gypsum by open-face
mining methods and the manufacture of recycled paperboard, which involves the
discharge of large volumes of waste water and solid waste, expose it to the
risk of liability or claims with respect to environmental and worker health and
safety matters. Although the Company believes that it is in material compliance
with applicable federal, state and local environmental laws and regulations
governing surface quarrying and reclamation of quarried property near its gyp-
sum plant and the discharge of waste from its recycled paperboard mills, the
West Virginia Division of Environmental Protection (the "DEP") has filed a com-
plaint alleging that Republic Paperboard Company of West Virginia (the "West
Virginia Subsidiary") is in violation of certain provisions of its wastewater
discharge permit at the Halltown Mill and an administrative order entered into
between the DEP and the West Virginia Subsidiary. See "--Legal Proceedings."
A number of the Company's facilities have a history of industrial use. Under
certain environmental laws a current or previous owner or operator of property,
or the generator of wastes disposed of offsite, may be jointly and severally
liable for site cleanup costs, regardless of fault. Responsible parties may
also be subject to common law claims by third parties based on damages and
costs resulting from environmental contamination emanating from a site. In con-
nection with the Company's preparation for a warehouse addition to the Commerce
City Mill, the Company discovered and has been investigating the presence of
subsurface petroleum hydrocarbons. The Company retained an environmental con-
sultant who con-
41
<PAGE>
cluded that fuel oil, jet fuel, and gasoline additives had migrated in the sub-
surface of the Company's property from an adjacent property. The Company and
the adjacent property owner have both conducted their own investigations and
have additionally sponsored joint investigations. Discussions between the par-
ties continue. The Company has completed the construction of the warehouse ad-
dition under approval of the Colorado Department of Health. At this time, the
Company has not ascertained the future liability, if any, resulting from this
matter. Aggregate environmental expenditures were $11,000 in 1997, $3,000 in
1996 and $32,000 in 1995. These costs have been accounted for as selling and
administrative expenses. Due to the complexity of the environmental laws, rules
and policies currently applicable to the Company and the uncertainty about fu-
ture changes in such laws and regulations, the Company maintains accounting re-
serves for future unexpected expenses of the nature and magnitude incurred dur-
ing the past three years.
Management believes that compliance with environmental laws and regulations is
a cost of manufacturing that has widespread applicability to the 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 envi-
ronmental problems; however, the discovery of new facts and future events, in-
cluding changes in the law, unknown practices by prior owners and spills by
neighboring facilities, could result in material environmental problems, and
there can be no assurance that such matters will not adversely affect the Com-
pany in the future.
LEGAL PROCEEDINGS
In October 1997, the DEP filed a complaint against the West Virginia Subsidiary
in the Circuit Court of Jefferson County, West Virginia. The complaint alleges
that the West Virginia Subsidiary has violated and continues to violate a pre-
vious order entered into between the West Virginia Subsidiary and the DEP on
January 17, 1995 and further alleges that the West Virginia Subsidiary has vio-
lated and continues to violate certain provisions of its wastewater discharge
permit. The West Virginia Subsidiary discharges treated process wastewater into
a creek running through the Halltown Mill pursuant to a permit issued to the
West Virginia Subsidiary by the DEP. The permit requires that the quality of
the water that may be discharged into the creek under the permit comply with
certain effluent limitations. The complaint alleges 33 violations over a time
period from October 1995 to March 1997. The complaint also alleges that the
earlier administrative order has been violated because of the failure of the
West Virginia Subsidiary to pay a stipulated penalty of $1,000 for two alleged
violations of the permit that occurred between January 1995 and October 1995.
The DEP is seeking by virtue of the complaint to require the West Virginia Sub-
sidiary to enter into a consent agreement that sets forth a compliance schedule
for correcting the alleged deficiencies in the wastewater treatment facilities
of the West Virginia Subsidiary that have led to the alleged effluent excesses.
The DEP is also requesting a civil monetary penalty of unspecified amount but
which, according to the complaint, may not exceed $10,000 per day for each of
the alleged violations many of which involved monthly limitations and may be
treated as involving the entire number of days in the month in question. The
DEP is also seeking to recover all of its costs of court including attorneys
fees. The West Virginia Subsidiary has responded in a timely manner to the al-
legations of the complaint. At this time, the Company has not ascertained the
future liability, if any, of the above matter.
Other than as set forth above there are no material pending legal proceedings
involving the Company, other than ordinary routine litigation incidental to the
business of the Company.
42
<PAGE>
MANAGEMENT
The names, ages and titles of the Company's directors and officers are listed
below. Each director is elected at the annual meeting of the stockholders of
the Company to serve a one year term until the next annual meeting or until a
successor is elected and qualified, or until his earlier resignation. Each ex-
ecutive officer holds his office until a successor is chosen and qualified or
until his earlier resignation or removal.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME AGE POSITION
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Phil Simpson............ 63 Chairman of the Board, President and Chief Executive Officer
Doyle R. Ramsey......... 47 Executive Vice President and Chief Financial Officer
Geary D. Cribbs......... 55 Senior Vice President
Todd T. Brown........... 44 Vice President
Susan G. Hall........... 52 Vice President
Joe T. Brown, Jr........ 54 Vice President
Lon D. Lewis............ 54 Vice President
James M. Britz.......... 47 Vice President
Janey L. Rife........... 53 Vice President, Treasurer and Secretary
Michael W. Dirks........ 36 Vice President and Principal Accounting Officer
Bert A. Nelson.......... 66 Director
C. William Claypool..... 62 Director
Talbot Rain............. 78 Director
Gerald L. Ray........... 65 Director
Robert F. Sexton........ 64 Director
L.L. Wallace............ 83 Director
David B. Yarbrough...... 79 Director
</TABLE>
Mr. Phil Simpson has been Chairman of the Board of Directors since 1967. He has
been President since 1965 with the exception of years 1968 to 1973, 1975 to
1985, and the years of 1987 to 1990. He has been Chief Executive Officer since
1965 with the exception of the years 1968 to 1973 and the years 1982 to 1986.
Mr. Doyle R. Ramsey was elected Executive Vice President in August 1998 and
continues to hold the additional post of Chief Financial Officer. Mr. Ramsey
has overall responsibility for finance, treasury and credit, accounting, man-
agement information services and human resources. Previously, he served as Vice
President--Finance and Chief Financial Officer from 1992 to 1998.
Mr. Geary D. Cribbs was elected Senior Vice President in March 1998. He is re-
sponsible for the Company's gypsum wallboard operations. Previously, Mr. Cribbs
served as Vice President, from 1992 to 1998, and as General Manager of the Duke
Plant.
Mr. Todd T. Brown was elected Vice President in September 1992. He is responsi-
ble for the Company's recycled paperboard operations. Previously, he served as
Mill Manager of the Commerce City and Hutchinson Mills.
Ms. Susan G. Hall was elected Vice President in October 1993. She is responsi-
ble for gypsum sales. She served as Gypsum Sales Manager from October 1991 to
October 1993.
Mr. Joe T. Brown, Jr. was elected Vice President in March 1998. He is responsi-
ble for the Company's gypsum wallboard manufacturing operations. Previously,
Mr. Brown held senior management positions in manufacturing with Temple-Inland,
Inc., a diversified manufacturing and financial services company, and its af-
filiates.
Mr. James M. Britz was elected Vice President in August 1994. He is responsible
for the 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. Previously, he held similar posi-
tions with the Genlyte Group, Inc, a maker of lighting products.
43
<PAGE>
Ms. Janey L. Rife was elected Vice President and Treasurer of the Company in
August 1998. She has served as Treasurer and Secretary since May 1993. Previ-
ously, she served as Credit Manager.
Mr. Lon D. Lewis was elected Vice President in September 1996. He is responsi-
ble for the Company's recycled paperboard sales and assumed responsibilities
for the Company's recovered fiber operations in August 1998. He served as Di-
rector of Engineering from March 1996 to October 1996. Previously, he held var-
ious management positions with Simkins Industries Inc. and Jefferson Smurfit
Corporation, both producers of recycled paperboard.
Mr. Michael W. Dirks was elected Vice President and Principal Accounting Offi-
cer in August 1998. He has direct responsibility for accounting and management
information services. Since 1991 Mr. Dirks has held the positions of Mill Con-
troller, Corporate Accounting Manager, Special Projects Manager and Manager of
Internal Audit and Management Information Services. From May 1995 to December
1996, Mr. Dirks was employed by a public accounting and consulting firm.
Mr. C. William Claypool has been a director of the Company since January 1998.
He retired as Corporate Vice President and General Manager-Paper Division of
Sonoco Products Company, a multinational packaging products company, in June
1997.
Mr. Bert A. Nelson has been a director of the Company since 1990. He is engaged
in the management of his own personal investments in Dallas, Texas.
Mr. Talbot Rain has been a director of the Company since 1967. Additionally, he
is of Counsel to Locke Purnell Rain Harrell (A Professional Corporation), which
law firm represented the Company with respect to various legal matters during
fiscal year 1998.
Mr. Gerald L. Ray has been a director of the Company since 1969. Additionally,
he is President of Gerald L. Ray & Associates, an investment advisory company.
Mr. Robert F. Sexton has been a director of the Company since 1990. Addition-
ally, he is President of Bakery Associates, Inc., a food industry supplier, and
a director of Ultrak, Inc, a manufacturer and distributor of video closed cir-
cuit television systems.
Mr. L. L. Wallace has been a director of the Company since 1980. Mr. Wallace
retired from business in 1980. Prior to that time, he was Vice President of
Packaging Corporation of America (now Tenneco Packaging), a manufacturer of pa-
per products.
Mr. David B. Yarbrough has been a director of the Company since 1973. Mr.
Yarbrough retired from business in 1987. Prior to that time, he was President
of Yarbrough Construction Co., Inc., a general contractor.
Mr. Stephen L. Gagnon, who had served as Executive Vice President of the Com-
pany since September 1992, died on June 19, 1998, from complications during
treatment for leukemia.
44
<PAGE>
DESCRIPTION OF THE NEW CREDIT FACILITY
On July 15, 1998, the Company entered into a credit agreement with a syndicate
of banks led by Morgan Guaranty Trust Company of New York and NationsBank,
N.A., as co-agents, establishing a credit facility (the "New Credit Facility").
All information relating to the New Credit Facility is qualified in its en-
tirety by reference to the complete text of the documents entered into in con-
nection with the New Credit Facility. For purposes of this description only,
the term "Company" refers only to Republic Group Incorporated. Capitalized
terms used but not defined herein have the meanings ascribed to them in the New
Credit Facility.
GENERAL
The New Credit Facility provides for up to $85 million in principal amount of
revolving loans during a period ending on the earlier of the start-up of the
Lawton Mill or the date two years after the establishment of the New Credit Fa-
cility. At the end of that period, the New Credit Facility will convert into a
term loan in the principal amount of up to $50 million and a revolving credit
facility with a $35 million maximum principal amount. (If the funded amount un-
der the New Credit Facility is less than $50 million in principal amount at the
time of conversion, then the principal amount of the term loan will be such
lesser, funded amount, instead of $50 million.) The Company is permitted to use
up to $5 million of amounts available under the New Credit Facility for the is-
suance of letters of credit, which usage is subject to standard fees. The term
loan will amortize as to principal quarterly over a period of four years after
the date of conversion, with 10% due during the first year, 20% during the sec-
ond year, 30% during the third year and the balance during the fourth year. The
revolving credit facility will mature four years after the date of conversion.
Availability under the New Credit Facility is not subject to a borrowing base
but is subject to, among other things, a condition that the construction of the
Lawton Mill be progressing on a satisfactory schedule and within agreed-upon
cost parameters. The Company expects to use the proceeds of the New Credit Fa-
cility to finance, in part, the construction of the Lawton Mill and for general
corporate purposes, including working capital. See "Business--Business Strate-
gy" and "Use of Proceeds."
INTEREST RATES
The New Credit Facility bears interest at a rate equal to, at the election of
the Company, the Base Rate plus an applicable margin (between 0% and 0.75%) per
annum or (ii) one-, two-, three- or six-month LIBOR plus an applicable margin
(between 0.75% and 1.75%) per annum. The variable percentage is determined
based on a formula and decreases as the ratio of the Consolidated Debt of the
Company and its subsidiaries to Consolidated EBITDA decreases.
SECURITY AND GUARANTEE
The New Credit Facility is a direct obligation of the Company and is fully
guaranteed by all of the Company's material subsidiaries. Such obligations and
Guarantees rank senior in right of payment to the Notes. The Company's obliga-
tions under the New Credit Facility are secured by (i) a mortgage on the real
estate and permanent improvements at the Lawton Mill site, (ii) a pledge by the
Company of all of the outstanding capital stock of its subsidiaries and (iii) a
security interest in substantially all of the Company's other personal proper-
ty, including any unused proceeds from the issuance and sale of the Notes. Cer-
tain subsidiaries of the Company have issued Guarantees under the New Credit
Facility which are secured by both the subsidiaries' pledge of their equity in-
terests in other subsidiaries and by each such subsidiary's pledge of (i) all
intercompany debt owed to it and (ii) substantially all of the personal prop-
erty of the subsidiary. At such time, if any, as outstanding loans under the
New Credit Facility exceed $50 million, the Lenders may require that all other
real property and permanent improvements of the Company and its subsidiaries be
mortgaged as security for the New Credit Facility.
PREPAYMENT
The Company must prepay amounts outstanding under the New Credit Facility in
amounts equal to (i) the net proceeds of certain asset sales and insurance from
certain casualty events (to the extent the same exceed $500,000 in a fiscal
year), (ii) approximately 50% of Excess Cash Flow for each fiscal year begin-
ning after the conversion described above and (iii) the net proceeds of certain
future debt issuances. The Company may at any time voluntarily prepay amounts
outstanding under the New Credit Facility.
45
<PAGE>
COVENANTS
The New Credit Facility contains covenants requiring the Company to maintain
the following financial ratios on a consolidated basis: (i) maximum debt to
EBITDA, (ii) minimum EBITDA to interest expense, (iii) minimum EBITDA and (iv)
minimum net worth.
The New Credit Facility also contains covenants that impose certain limitations
on the right of the Company and its subsidiaries in respect of, among other
things, (i) the payment of dividends and other distributions, (ii) capital ex-
penditures and operating lease obligations, (iii) the creation or incurrence of
liens, (iv) transactions with affiliates, (v) the incurrence, prepayment or re-
purchase of indebtedness, including the Notes, (vi) investments, (vii) the
terms of subordinated indebtedness (including the indebtedness evidenced by the
Notes) and (viii) mergers, asset sales and divestitures. The New Credit Facil-
ity also includes a covenant requiring that the Lawton Mill be at least 90%
complete by the Conversion Date and that the start up of the Lawton Mill occur
no later than six months after the Conversion Date.
FEES AND EXPENSES
The Company has paid customary fees in connection with structuring the New
Credit Facility and will also pay to the Lenders a commitment fee on the unused
portion of the New Credit Facility, payable quarterly in arrears, which fee is
subject to change as the ratio of the Consolidated Debt of the Company and its
subsidiaries to Consolidated EBITDA decreases or increases. The Company also
has paid certain fees to Morgan Guaranty Trust Company of New York and
NationsBank, N.A. as co-agents and has reimbursed them for certain expenses.
46
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Old Notes have been and the New Notes will be issued pursuant to an Inden-
ture dated as of July 15, 1998 (the "Indenture") between the Company and UMB
Bank, N.A., as Trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. A copy of the
Indenture and the Registration Rights Agreement described below are filed as
exhibits to the Registration Statement of which this Prospectus forms a part
and are incorporated herein by reference. The statements under this caption re-
lating to the Notes, the Indenture and the Registration Rights Agreement are
summaries and do not purport to be complete, and where reference is made to
particular provisions of the Indenture and the Registration Rights Agreement,
such provisions, including the definitions of certain terms, are qualified in
their entirety by such reference. The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions."
The Old Notes and the New Notes are treated as a single series of debt securi-
ties under the Indenture. Holders of Old Notes who do not exchange their Old
Notes for New Notes pursuant to the Exchange Offer will vote together with the
Holders of the New Notes as a single series of Notes for all relevant purposes
under the Indenture. In that regard, the Indenture requires that certain ac-
tions by the Holders thereunder (including acceleration following an Event of
Default) must be taken, and certain rights must be exercised, by specified min-
imum percentages of the aggregate principal amount of the outstanding securi-
ties issued under the Indenture. In determining whether Holders of the requi-
site percentage of principal amount have given any notice, consent or waiver or
taken any other action permitted under the Indenture, any Old Notes that remain
outstanding after the Exchange Offer will be aggregated with the New Notes, and
the Holders of such Notes will vote together for all such purposes. According-
ly, at any time after the Exchange Offer is consummated, all references herein
to specified percentages of aggregate principal amount of the outstanding Notes
means such percentages of aggregate principal amount of the Old Notes and the
New Notes then outstanding.
PRINCIPAL, MATURITY AND INTEREST
The Notes are general unsecured obligations of the Company limited in aggregate
principal amount to $100 million and will mature on July 15, 2008. Interest on
the Notes accrues at a rate of 9 1/2% per annum and will be payable semi-annu-
ally in arrears on January 15 and July 15 of each year, commencing on January
15, 1999, to Holders of record on the immediately preceding January 1 and July
1, respectively. The New Notes will bear interest from the most recent date to
which interest has been paid on the Old Notes or, if no interest has been paid
on the Old Notes, from July 15, 1998. See "The Exchange Offer--Payment of In-
terest."
Interest on the Notes will be computed on the basis of a 360-day year comprised
of twelve 30-day months. Principal of, premium, if any, and interest on the
Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check mailed to Holders of Notes at
their respective addresses set forth in the register of Holders of Notes; pro-
vided that all payments with respect to Global Notes, the Holders of which have
given wire transfer instructions on or prior to the relevant record date to the
paying agent, must be made by wire transfer of immediately available funds to
the accounts specified by such Holders. Until otherwise designated by the Com-
pany, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Old Notes have been, and the New Notes
will be, issued in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes is sub-
ordinated in right of payment, as set forth in the Indenture, to the prior pay-
ment in full of all Senior Debt, whether outstanding on the date of sale of the
Old Notes or thereafter incurred. Upon any distribution to creditors of the
Company in a liquidation or dissolution of the Company or in a bankruptcy, re-
organization, insolvency, receivership or similar proceeding relating to the
Company or its property, an assignment for the benefit of creditors or any mar-
shaling of the Company's assets and liabilities, (a) the holders of Senior Debt
are entitled to receive payment in full of all such Senior Debt (including all
Obligations with respect thereto) before Holders of Notes are entitled to re-
ceive any payment with respect to the Notes and (b) until all amounts with re-
spect to Senior Debt are paid in full, any distribution to which Holders of
Notes would be entitled, but for the subordination provisions of the Indenture,
shall be made to the holders of Senior Debt (except payments made from the
trust described
47
<PAGE>
under "--Legal Defeasance and Covenant Defeasance" and except that Holders of
Notes may receive securities so long as (i) the Notes are not treated in any
case or proceeding or other event described above as part of the same class of
claims as the Senior Debt or any class of claims on a parity with or senior to
the Senior Debt for any payment or distribution, (ii) such securities are sub-
ordinated at least to the same extent as the Notes to Senior Debt and any secu-
rities issued in exchange for such Senior Debt and (iii) such securities are
authorized by an order or decree of a court of competent jurisdiction in a re-
organization proceeding under any applicable bankruptcy, insolvency or similar
law that gives effect to the subordination of the Notes to Senior Debt in a
manner and with an effect which would be required if this parenthetical clause
were not included in this paragraph; provided that the Senior Debt is assumed
by the new corporation, if any, resulting from any such reorganization or read-
justment and issuing such securities).
The Company may not make any payment upon or in respect of the Notes (except in
such subordinated securities as described above or from the trust described un-
der "--Legal Defeasance and Covenant Defeasance") if (i) a Payment Default on
Designated Senior Debt occurs and is continuing or (ii) any other default oc-
curs and is continuing with respect to Designated Senior Debt that permits
holders of the Designated Senior Debt as to which such default relates to ac-
celerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the representative of the hold-
ers of such Designated Senior Debt. Payments on the Notes may be resumed (a) in
the case of a Payment Default, upon the date on which such Payment Default is
cured or waived and (b) in case of any default other than a Payment Default,
the earlier of the date on which such default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received, un-
less the maturity of such Designated Senior Debt has been accelerated. No new
period of payment blockage may be commenced unless and until 360 days have
elapsed since the date of receipt by the Trustee of the immediately prior Pay-
ment Blockage Notice. No default other than a Payment Default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee will be, or be made, the basis for a subsequent Payment Blockage No-
tice.
As a result of the subordination provisions described above, in the event of a
liquidation, insolvency or similar proceeding, Holders of Notes may recover
less ratably than creditors of the Company who are holders of Senior Debt. See
"Risk Factors--Subordination of the Notes; Risks Associated with Corporate
Structure." The Company may borrow up to $85 million under the New Credit Fa-
cility (and expects to borrow a substantial portion thereof to finance the con-
struction of the Lawton Mill), which would constitute Senior Debt, and may,
subject to the limitations of the Indenture, incur additional Senior Debt, all
of which Senior Debt would rank senior in right of payment to the Notes.
The Indenture limits, subject to certain financial tests, the amount of addi-
tional Indebtedness, including Senior Debt, that the Company and its Restricted
Subsidiaries can incur. See "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Disqualified Stock." The operations of the Company are con-
ducted through its Subsidiaries. Therefore, the Company depends upon the cash
flow of its Subsidiaries to meet its obligations, including obligations under
the Notes. The Notes effectively are subordinated to all outstanding Indebted-
ness and other liabilities and commitments (including Trade Payables) of the
Company's Subsidiaries. Any right of the Company to receive assets of any of
its Subsidiaries upon the latter's liquidation or reorganization (and the con-
sequent right of the Holders of Notes to participate in those assets) effec-
tively is subordinated to the claims of that Subsidiary's creditors, except to
the extent that the Company is recognized as a creditor of such Subsidiary, in
which case the claims of the Company would still be subordinate to any security
interest in the assets of such Subsidiary and any Indebtedness of such Subsidi-
ary senior to that held by the Company. As of August 31, 1998, the Company's
Subsidiaries had Trade Payables and other liabilities aggregating approximately
$32.9 million and no other Indebtedness. However, the Company's material sub-
sidiaries have each Guaranteed all indebtedness incurred under the New Credit
Facility.
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to July 15, 2003.
Thereafter, the Notes are subject to redemption at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest to the applicable redemption date, if
redeemed during the twelve-month period beginning on July 15 of the years
indicated below:
<TABLE>
<CAPTION>
----------
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003 104.750%
2004 103.167%
2005 101.583%
2006 and thereafter 100.000%
</TABLE>
48
<PAGE>
In addition, prior to July 15, 2001, the Company may redeem up to 35% of the
principal amount of the Notes with the net cash proceeds received by the Com-
pany from one or more Public Equity Offerings, at a redemption price of 109.5%
of the principal amount thereof, plus accrued and unpaid interest to the date
fixed for redemption (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on an Interest Payment Date that
is on or prior to the redemption date); provided, however, that at least 65% of
the aggregate principal amount of the Notes originally issued pursuant to the
Offering remains outstanding immediately after any such redemption (excluding
any Notes owned by the Company or any of its Affiliates). Notice of redemption
pursuant to this paragraph must be mailed to holders of Notes not later than 60
days following the consummation of such Public Equity Offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such method as the Trustee will deem fair and appropriate; provided that no
Notes of $1,000 or less will be redeemed in part. Notices of redemption will be
mailed by first class mail at least 30 but not more than 60 days before the re-
demption date to each Holder of Notes to be redeemed at its registered address.
If any Note is to be redeemed in part only, the notice of redemption that re-
lates to such Note will state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to ac-
crue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders upon a
Change of Control" and "--Certain Covenants--Asset Sales," the Company is not
required to make any mandatory redemption or sinking fund payments with respect
to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer de-
scribed below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid in-
terest thereon to the date of purchase (the "Change of Control Payment") on a
date that is not more than 90 days after the occurrence of such Change of Con-
trol (the "Change of Control Payment Date"). Prior to the mailing of notice to
Holders provided for in the succeeding paragraph, but in any event within 30
days following any Change of Control, the Company covenants to (i) repay in
full all Senior Debt that would prohibit the repurchase of the Notes as pro-
vided for in the succeeding paragraph or (ii) obtain any requisite consents un-
der instruments governing any such Senior Debt to permit the repurchase of the
Notes as provided for in the succeeding paragraph. The Company shall first com-
ply with the covenant in the preceding sentence before it shall be required to
repurchase Notes pursuant to the "Repurchase at the Option of Holders upon a
Change of Control" covenant.
Within 30 days following any Change of Control, the Company will mail, or at
the Company's request the Trustee will mail, a notice to each Holder offering
to repurchase the Notes held by such Holder pursuant to the procedures speci-
fied in such notice. The Company will comply with the requirements of Rule 14e-
1 under the Exchange Act and any other United States federal, state or territo-
rial securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent lawful,
(i) accept for payment all Notes or portions thereof properly tendered and not
withdrawn pursuant to the Change of Control Offer, (ii) deposit with the paying
agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stat-
ing the aggregate principal amount of Notes or portions thereof being purchased
by the Company. The paying agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
A failure by the Company to comply with the provisions of the three preceding
paragraphs will constitute an Event of Default. Except as described above with
respect to a Change of Control, the Indenture does not contain provisions that
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permit Holders of Notes to require that the Company repurchase or redeem the
Notes in the event of a takeover, recapitalization or similar transaction. See
"--Events of Default and Remedies."
With respect to the sale of assets referred to in the definition of "Change of
Control," the phrase "all or substantially all" of the assets of the Company
will likely be interpreted under applicable law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of un-
certainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred. In addition, no assurances can
be given that the Company will be able to acquire Notes tendered upon the oc-
currence of a Change of Control. There can be no assurances that the Company
will have sufficient funds available or will be able to obtain third party fi-
nancing at the time of any Change of Control to make any debt payment (includ-
ing repurchases of Notes) required by the "Repurchase at the Option of Holders
upon a Change of Control" covenant of the Indenture (as well as any similar
covenant that may be contained in other securities of the Company that might
be outstanding at the time). Unless the consents referred to above are ob-
tained, the "Repurchase at the Option of Holders upon a Change of Control"
covenant of the Indenture requires the Company to repay all Senior Debt then
outstanding that by its terms would prohibit such Note repurchase, either
prior to or concurrently with such Note repurchase. The New Credit Facility
provides that a Change of Control will constitute a default thereunder, which
would permit the lenders to cause the indebtedness under the New Credit Facil-
ity to become immediately due and payable or to institute a payment blockage.
See "--Subordination." Any future credit agreements or other agreements relat-
ing to Senior Debt to which the Company becomes a party may contain similar
provisions.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any distribution on account of the Company's or any Re-
stricted Subsidiary's Equity Interests (other than (x) dividends or distribu-
tions payable in Qualified Equity Interests of the Company and (y) in the case
of any Restricted Subsidiary, dividends or distributions payable to the Com-
pany or any Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company or
any of its Restricted Subsidiaries (other than any such Equity Interests that
are owned by the Company or a Restricted Subsidiary); (iii) make any voluntary
or optional principal payment on, or voluntary or optional purchase, redemp-
tion, defeasance, or other acquisition or retirement for value of, any Subor-
dinated Debt; or (iv) make any Investment that is a Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time
of and after giving effect to such Restricted Payment (the amount of any such
Restricted Payment, if other than cash, being the fair market value (as con-
clusively evidenced by a resolution of the Board of Directors of the Company
set forth in an Officers' Certificate delivered to the Trustee within 60 days
prior to the date of such Restricted Payment) of the asset(s) proposed to be
transferred by the Company or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment):
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the most recently ended four full fiscal quarter period
for which internal financial statements are available immediately preceding
the date of such Restricted Payment, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ra-
tio test set forth in the first paragraph of the covenant in the Indenture
described below under the caption "--Incurrence of Indebtedness and Issu-
ance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate of all other Re-
stricted Payments made by the Company and its Restricted Subsidiaries after
June 30, 1998 (excluding Restricted Payments permitted by clauses (B), (C)
and (D) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commenc-
ing after June 30, 1998 to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
(other than to a Subsidiary of the Company) since June 30, 1998 of Quali-
fied Equity Interests of the Company or of debt securities of the Company
or any of its Restricted Subsidiaries that have been converted into or ex-
changed for Qualified Equity Interests of the Company.
If no Default or Event of Default has occurred and is continuing, or would oc-
cur as a consequence thereof, the foregoing provisions will not prohibit the
following Restricted Payments: (A) the payment of any dividend within 60 days
after the
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date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture; (B) the payment of cash
dividends on any series of Disqualified Stock issued after the date of the In-
denture in an aggregate amount not to exceed the cash received by the Company
since the date of the Indenture upon issuance of such Disqualified Stock; (C)
the redemption, repurchase, retirement or other acquisition of any Equity In-
terests of the Company or any Restricted Subsidiary in exchange for, or out of
the net cash proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of Qualified Equity Interests of the Company; pro-
vided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(ii) of the preceding paragraph; (D) the defeasance, redemption
or repurchase of Subordinated Debt (including any Subordinated Debt that con-
stitutes Acquired Debt) with the net cash proceeds from an incurrence of Per-
mitted Refinancing Indebtedness or in exchange for or out of the net cash pro-
ceeds from the substantially concurrent sale (other than to a Subsidiary of the
Company) of Qualified Equity Interests of the Company; provided that the amount
of any such net cash proceeds that are utilized for any such redemption, repur-
chase, retirement or other acquisition shall be excluded from clause (c) (ii)
of the preceding paragraph; (E) the repurchase, redemption or other acquisition
or retirement for value of any Equity Interests of the Company or any Re-
stricted Subsidiary held by any present or former member of the Company's (or
any of its Subsidiary's) management (which for purposes of this clause (E) in-
cludes directors) or the heirs, estate or legatees of, or any entity controlled
by, any such member pursuant to any management equity subscription agreement,
stock option agreement or other employee benefit plan; provided that the aggre-
gate price paid for all such repurchased, redeemed, acquired or retired Equity
Interests pursuant to this clause (E) shall not exceed $1 million in any calen-
dar year (with unused amounts in a calendar year being carried forward to a
subsequent calendar year, subject to a maximum of $2 million in any calendar
year); (F) the repurchase of any Subordinated Debt at a purchase price not
greater than 101% of the principal amount of such Subordinated Debt in the
event of a Change of Control pursuant to a provision similar to the provision
described under "--Repurchase at the Option of Holders upon a Change of Con-
trol"; provided that prior to such repurchase the Company has made a Change of
Control Offer as provided under "Repurchase at the Option of Holders upon a
Change of Control" and has repurchased all Notes validly tendered for payment
in connection with such Change of Control Offer and (G) any other Restricted
Payment which, together with all other Restricted Payments made pursuant to
this clause (G) on or after the Issue Date, does not exceed $7 million.
Not later than the date of making any Restricted Payment, the Company shall de-
liver to the Trustee an Officers' Certificate stating that such Restricted Pay-
ment is permitted and setting forth the basis upon which the calculations re-
quired by the covenant "Restricted Payments" were computed.
Incurrence of Indebtedness and Issuance of Disqualified Stock
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, Guarantee or otherwise become directly or indirectly liable, contin-
gently or otherwise, with respect to (collectively, "incur") after the date of
the Indenture any Indebtedness (including Acquired Debt) and that the Company
will not issue any Disqualified Stock and the Company will not permit any of
its Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) and
the Company may issue shares of Disqualified Stock if (i) no Default or Event
of Default will have occurred and be continuing or would occur as a consequence
thereof and (ii) the Fixed Charge Coverage Ratio for the Company's most re-
cently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional Indebted-
ness is incurred or such Disqualified Stock is issued would have been at least
2.5 to 1, determined on a pro forma basis as if the additional Indebtedness had
been incurred, or the Disqualified Stock had been issued, as the case may be,
at the beginning of such four-quarter period. Indebtedness consisting of reim-
bursement obligations in respect of a letter of credit will be deemed to be in-
curred when the letter of credit is first issued. The Company will not permit
any of its Unrestricted Subsidiaries to incur any Indebtedness other than Non-
Recourse Debt.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Senior Debt under the New Credit Fa-
cility, and Guarantees thereof by its Restricted Subsidiaries, in an aggre-
gate principal amount at any time outstanding not to exceed an amount equal
to $85 million less the aggregate amount of all mandatory payments applied
to repay loans (other than revolving credit loans) outstanding thereunder
or to permanently reduce the revolving credit commitments thereunder;
(ii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iii) Existing Indebtedness;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund, In-
debtedness that was permitted by the Indenture to be incurred (including,
without limitation, Existing Indebtedness);
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(v) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Re-
stricted Subsidiaries; provided that upon either (a) the transfer or other
disposition by the Company or a Restricted Subsidiary of any Indebtedness
so permitted under this clause (v) to a Person other than the Company or a
Restricted Subsidiary or (b) the issuance, sale, transfer or other disposi-
tion of Equity Interests (including by consolidation or merger) in a Re-
stricted Subsidiary to a Person other than the Company or a Restricted Sub-
sidiary which results in such Restricted Subsidiary ceasing to be a Re-
stricted Subsidiary, the provisions of this clause (v) shall no longer be
applicable to such Indebtedness and such Indebtedness shall be deemed to
have been incurred at the time of any such issuance, sale, transfer or
other disposition, as the case may be;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations or Guarantees thereof, provided that such Hedging Obli-
gations are incurred for the purpose of (A) fixing or hedging interest rate
or currency risk with respect to any fixed or floating rate Indebtedness
that is permitted by the Indenture to be outstanding or any receivable or
liability, the payment of which receivable or liability is determined by
reference to a foreign currency; provided that the notional principal
amount of any such Hedging Obligation does not exceed the principal amount
of the Indebtedness to which such Hedging Obligation relates or (B) fixing
or hedging risk with respect to fluctuations in the cost of raw materials;
provided that such obligation is entered into by the Company or a Re-
stricted Subsidiary for valid business purposes other than speculative pur-
poses (as determined by the Company's or such Restricted Subsidiary's chief
financial officer in the exercise of his or her good faith business judg-
ment);
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by performance bonds, bankers' acceptances,
standby letters of credit, mechanic's lien bonds or appeal bonds, in each
case to the extent incurred in the ordinary course of business of the Com-
pany or such Restricted Subsidiary;
(viii) the issuance by any of the Company's Restricted Subsidiaries of
shares of preferred stock to the Company or a Restricted Subsidiary; pro-
vided that upon the transfer or other disposition by the Company or a Re-
stricted Subsidiary of any such shares to a Person other than the Company
or a Restricted Subsidiary, the provisions of this clause (viii) shall no
longer be applicable to such preferred stock and such preferred stock shall
be deemed to have been issued to such Person at the time of any such trans-
fer or other disposition and shall be required to satisfy the provisions of
clause (ix) hereof;
(ix) the incurrence by any Restricted Subsidiary of Indebtedness, or the
issuance by any Restricted Subsidiary of preferred stock, the aggregate
principal amount of which, in the case of Indebtedness, or the total liqui-
dation preference of which, in the case of preferred stock, together with
(x) all other Indebtedness of the Company's Restricted Subsidiaries (other
than Guarantees of the New Credit Facility) at the time outstanding and (y)
the total liquidation preference of all other preferred stock of the
Company's Restricted Subsidiaries at the time issued and outstanding and,
in each case, held by any Person other than the Company or any Restricted
Subsidiary, does not exceed the greater of (1) 5% of the Company's Stock-
holders' Equity as of the date of incurrence or (2) $2 million; provided
that, in the case of clause (1) only, the Fixed Charge Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which in-
ternal financial statements are available immediately preceding the date on
which such Indebtedness (including Acquired Subsidiary Debt) is incurred
would have been at least 2.5 to 1, determined on a pro forma basis, pro-
vided further, that solely for the purpose of determining whether the ag-
gregate principal amount of Indebtedness of the Company's Restricted Sub-
sidiaries at any time outstanding exceeds 5% of the Company's Stockholders'
Equity, Acquired Subsidiary Debt shall be excluded;
(x) the incurrence by the Company or any Restricted Subsidiary of Indebted-
ness arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of the
Company or any of its Restricted Subsidiaries pursuant to such agreements,
in each case incurred in connection with the disposition of any business,
assets or Restricted Subsidiary (other than Guarantees of Indebtedness in-
curred by any Person acquiring all or any portion of such business, assets
or Restricted Subsidiary for the purpose of financing such acquisition), in
a principal amount not to exceed the gross proceeds actually received by
the Company or any Restricted Subsidiary in connection with such disposi-
tion; and
(xi) the incurrence by the Company of Indebtedness (in addition to Indebt-
edness permitted by any other clause of this paragraph) in an aggregate
principal amount at any time outstanding not to exceed $10 million.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the fair market value (as conclu-
sively determined by a resolution of the Board of Directors
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of the Company set forth in an Officer's Certificate delivered to the Trustee)
of the assets or Equity Interests issued or sold or otherwise disposed of and
(ii) at least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of (x) cash or Temporary Cash Investments
or (y) property or assets that are used or useful in any Permitted Business;
provided that for purposes of this provision, the amount of (A) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto), of the Company or any Restricted Subsidiary
(other than, in the case of an Asset Sale by the Company, liabilities that are
by their terms subordinated to the Notes) that are assumed by the transferee of
any such assets and (B) any securities or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are immedi-
ately converted by the Company or such Restricted Subsidiary into cash (or as
to which the Company or such Restricted Subsidiary has received at or prior to
the consummation of the Asset Sale a commitment (which may be subject to cus-
tomary conditions) from a nationally recognized investment, merchant or commer-
cial bank to convert into cash within 90 days of the consummation of such Asset
Sale and which are thereafter actually converted into cash within such 90-day
period) will be deemed to be cash (but shall not be deemed to be Net Proceeds
for purposes of the following provisions until reduced to cash). Notwithstand-
ing the foregoing, it will not be a violation of the foregoing provisions if
the Company or a Restricted Subsidiary receives Investments as all or part of
the consideration for an Asset Sale (which consideration is not otherwise per-
mitted), if such Investments constitute Restricted Investments permitted by the
covenant in the Indenture described under the caption "--Restricted Payments."
Pursuant to the Indenture, within 365 days after the receipt of any Net Pro-
ceeds from an Asset Sale, the Company or the Restricted Subsidiary, as the case
may be, may apply such Net Proceeds (i) to make a capital expenditure or to ac-
quire other tangible assets, in each case, that are used or useful in any Per-
mitted Business or (ii) to the extent not applied pursuant to clause (i), to
permanently reduce Senior Debt (and, in the case of revolving credit loans, to
correspondingly reduce commitments with respect thereto). Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds." When the ag-
gregate amount of Excess Proceeds exceeds $5 million, the Company will be re-
quired to make an offer to all Holders of Notes and holders of any other In-
debtedness of the Company ranking on a parity with the Notes from time to time
outstanding with similar provisions requiring the Company to make an offer to
purchase or to redeem such Indebtedness with the proceeds from any Asset Sales,
pro rata in proportion to the respective principal amounts of Notes and such
other Indebtedness then outstanding (an "Asset Sale Offer") to purchase the
maximum principal amount of the Notes and such other Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash equal to 100%
of the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase, in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate amount of Notes and such other Indebtedness
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes.
If the aggregate principal amount of Notes and such other Indebtedness surren-
dered by holders thereof exceeds the amount of Excess Proceeds, the Notes and
such other Indebtedness will be purchased on a pro rata basis. Upon completion
of an Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The New Credit Facility prohibits the Company from repurchasing Notes pursuant
to an Asset Sale Offer unless certain conditions are met. In order to repur-
chase Notes pursuant to an Asset Sale Offer, the Company will have to repay all
obligations under the New Credit Facility (and any other agreements relating to
Senior Debt that contain similar provisions) or would have to obtain the con-
sent of the holders of such Indebtedness. In the event the Company makes an As-
set Sale Offer, the Company must comply with the requirements of Rule l4e-1 un-
der the Exchange Act and any other United States Federal, state or territorial
securities laws and regulations thereunder to the extent such laws and regula-
tions are applicable in connection with such Asset Sale Offer.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, incur any Indebtedness secured by a Lien ("Se-
cured Indebtedness") which is not Senior Debt unless contemporaneously there-
with effective provision is made to secure the Notes equally and ratably with
(or, if the Secured Indebtedness is Subordinated Debt, on a basis senior to)
such Secured Indebtedness for so long as such Secured Indebtedness is secured
by a Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or re-
striction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted Subsid-
iaries (1) on its Capital Stock or (2) with respect to any other interest or
participation in, or measured by,
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<PAGE>
its profits, or (b) pay any Indebtedness owed to the Company or any of its Re-
stricted Subsidiaries, (ii) make loans or advances to the Company or any of its
Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. The foregoing shall not re-
strict encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, and any extensions,
refinancings, renewals or replacements of any of the foregoing; provided that
the encumbrances and restrictions in any such extensions, refinancings, renew-
als or replacements are no more restrictive than those contained in the initial
agreement or instrument, (b) the Indenture, (c) applicable law, (d) any instru-
ment governing Indebtedness or Capital Stock of a Person acquired by, or the
properties or assets of which Person are acquired by, the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contempla-
tion of such acquisition or in violation of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock"),
which encumbrance or restriction is not applicable to any Person, or the prop-
erties or assets of any Person, other than the Person (including its Subsidiar-
ies), or the property or assets of the Person (including its Subsidiaries), so
acquired, (e) any lease, license, conveyance or contract insofar as the provi-
sions thereof restrict in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to such lease, license, con-
veyance or contract, (f) purchase money obligations for acquired property that
impose restrictions of the nature described in clause (iii) above on the prop-
erty so acquired, (g) Permitted Refinancing Indebtedness, provided that the re-
strictions contained in the agreements governing such Permitted Refinancing In-
debtedness are no more restrictive than those contained in the agreements gov-
erning the Indebtedness being refinanced, (h) an agreement that has been en-
tered into for the sale or disposition of all or substantially all of the Capi-
tal Stock of, or property and assets of, a Restricted Subsidiary so long as
such agreement is not otherwise prohibited by the Indenture; provided that the
restrictions contained in such agreement are applicable only to such Restricted
Subsidiary or its assets and provided further that such sale or disposition is
otherwise permitted by the terms of the Indenture, (i) any agreement to trans-
fer, an option or a right with respect to any property of the Company or any of
its Restricted Subsidiaries that imposes restrictions of the nature described
in clause (iii) above so long as such agreement to transfer, option or right is
not otherwise prohibited by the Indenture, or (j) the New Credit Facility and
related documentation as the same is in effect on the date of the Indenture and
as amended or replaced from time to time, provided that no such amendment or
replacement is more restrictive as to the matters enumerated above than the New
Credit Facility and related documentation as in effect on the date of the In-
denture. Nothing contained in the provisions of the Indenture described in this
paragraph shall prevent the Company or any Restricted Subsidiary from incurring
any Secured Indebtedness or from restricting the sale or other disposition of
property or assets that secure such Secured Indebtedness; provided that the
incurrence of such Secured Indebtedness is otherwise permitted under the provi-
sions of the Indenture described above under "--Liens."
Line of Business
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage to any material extent in any business
other than any one or more of the paperboard, packaging and paper businesses,
the gypsum wallboard and other gypsum businesses, recycling businesses general-
ly, and businesses related to any of the foregoing (each, a "Permitted Busi-
ness").
Limitation on Senior Subordinated Debt
The Indenture provides that the Company will not incur, create, issue, assume,
Guarantee or otherwise become liable for any Indebtedness that is subordinate
or junior in right of payment to any Senior Debt and senior in any respect in
right of payment to the Notes.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company will not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, as-
sign, transfer, lease, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company in one or more related transactions,
to another corporation, Person or entity unless (i) the surviving corporation
or the entity or the Person formed by or surviving any such consolidation or
merger (if other than the Company, as applicable) or to which such sale, as-
signment, transfer, lease, conveyance or other disposition shall have been made
(the "Surviving Entity") is a corporation organized or existing under the laws
of the United States, any state thereof or the District of Colombia; (ii) the
Surviving Entity assumes all the obligations of the Company under the Notes and
the Indenture pursuant to a supplemental Indenture in form reasonably satisfac-
tory to the Trustee; (iii) immediately before and after giving effect to such
transaction, and treating any Indebtedness which becomes an obligation of the
Company as a result of such transaction as having been incurred by the Company
at the time of the transaction, no Default or Event of
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<PAGE>
Default shall have occurred and be continuing; and (iv) the Company or the Sur-
viving Entity (A) will have Consolidated Net Worth immediately after the trans-
action and prior to any purchase accounting adjustments equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the trans-
action and (B) will, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the ap-
plicable four-quarter period, be permitted to incur at least $1.00 of addi-
tional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth
in the first paragraph of the covenant in the Indenture described above under
the caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock."
The sale, assignment, transfer, lease, conveyance or other disposition by the
Company of all or substantially all of its property or assets to one or more of
its Subsidiaries shall not relieve the Company from its obligations under the
Indenture and the Notes.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into or make any contract, agreement, understanding, loan, advance or
Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Company or the relevant Restricted Subsidiary
than those that could have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and (ii) the
Company delivers to the Trustee (a) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $1 million, a resolution of the
Board of Directors of the Company set forth in an Officer's Certificate certi-
fying that such Affiliate Transaction complies with clause (i) above and that
such Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors of the Company and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $5 mil-
lion, an opinion as to the fairness to the Company or such Restricted Subsidi-
ary of such Affiliate Transaction from a financial point of view issued by an
investment banking firm of national standing, or by another nationally recog-
nized independent expert with experience appraising the terms and conditions of
transactions similar to such Affiliate Transaction. Notwithstanding the forego-
ing: (A) transactions or payments pursuant to any employment arrangements, em-
ployee relations or employee or director benefit plans entered into by the Com-
pany or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted Subsid-
iary, (B) transactions between or among the Company and/or its Restricted Sub-
sidiaries and (C) transactions between a Person and an Affiliate existing at
the time such Person is merged with or into or becomes a Restricted Subsidiary,
except to the extent such transaction was entered into in connection with, or
in contemplation of, such Person merging with or into or becoming a Restricted
Subsidiary, in each case, shall not be deemed to be Affiliate Transactions.
Notwithstanding the foregoing, any Investment in Affiliates permitted by the
provisions of the Indenture described above under the caption "--Restricted
Payments" shall not be prohibited by the foregoing limitations on Affiliate
Transactions.
Limitations on Issuances of Guarantees of Indebtedness by Restricted
Subsidiaries
The Indenture provides that the Company will not permit any Restricted Subsidi-
ary, directly or indirectly, to Guarantee or secure the payment of any other
Indebtedness of the Company or any of its Restricted Subsidiaries (except In-
debtedness of a Restricted Subsidiary of such Restricted Subsidiary) unless (i)
such Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for the Guarantee of the payment of the
Notes by such Restricted Subsidiary, which Guarantee shall be senior to or pari
passu with such Restricted Subsidiary's Guarantee of or pledge to secure such
other Indebtedness and (ii) such Restricted Subsidiary waives and will not in
any manner whatsoever claim or take the benefit or advantage of any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Re-
stricted Subsidiary under such Guarantee. Notwithstanding the foregoing, any
such Guarantee by a Restricted Subsidiary of the Notes shall provide by its
terms that it shall be automatically and unconditionally released and dis-
charged upon a sale or other disposition, by way of merger or otherwise, to any
Person not an Affiliate of the Company, of the Company's stock in, or the as-
sets of, such Restricted Subsidiary, which sale or other disposition results in
such Restricted Subsidiary ceasing to be a Restricted Subsidiary and such sale
or other disposition is made in compliance with, and the Net Proceeds therefrom
are applied in accordance with, the applicable provisions of the Indenture. The
foregoing provisions are not applicable to (i) Guarantees by Restricted Subsid-
iaries of Indebtedness under the New Credit Facility, (ii) Guarantees of In-
debtedness of a Person by its subsidiaries in effect prior to the time such
Person is merged with or into or otherwise became a Restricted Subsidiary, pro-
vided that such Guarantees do not extend to any other Indebtedness of such Per-
son or any other Person and (iii) any one or more Guarantees of up to $2 mil-
lion in aggregate principal amount of Indebtedness of the Company or any Re-
stricted Subsidiary at any time outstanding.
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REPORTS
The Indenture provides that, whether or not required by the rules and regula-
tions of the SEC, so long as any Notes are outstanding, the Company will fur-
nish to Holders of Notes (i) all quarterly and annual financial information re-
quired to be contained in a filing with the SEC on Forms 10-Q and 10-K, includ-
ing a "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the SEC on Form 8-K. In addi-
tion, whether or not required by the rules and regulations of the SEC, the Com-
pany will file a copy of all such information and reports with the SEC for pub-
lic availability and make such information available to securities analysts and
prospective investors upon request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of De-
fault: (i) default for 30 days in the payment when due of interest on the Notes
(whether or not prohibited by the provisions of the Indenture described under
"--Subordination" above); (ii) default in payment when due of the principal of
or premium, if any, on the Notes (whether or not prohibited by the provisions
of the Indenture described under "--Subordination" above); (iii) failure by the
Company to comply with the provisions described under the captions "--Repur-
chase at the Option of Holders upon a Change of Control", "--Certain Cove-
nants--Asset Sales", "--Restricted Payments" or "--Incurrence of Indebtedness
and Issuance of Disqualified Stock"; (iv) failure by the Company for 30 days
after notice to comply with any of its other agreements in the Indenture or the
Notes; (v) any default that occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any Significant Subsidi-
ary of the Company (or the payment of which is Guaranteed by the Company or any
Significant Subsidiary of the Company), whether such Indebtedness or Guarantee
exists on the date of the Indenture or is thereafter created, which default (a)
constitutes a Payment Default or (b) results in the acceleration of such In-
debtedness prior to its express maturity and, in each case, the principal
amount of any Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or that has been
so accelerated, aggregates $3 million or more; (vi) failure by the Company or
any Significant Subsidiary of the Company to pay final judgments aggregating in
excess of $3 million, which judgments are not paid, discharged or stayed for a
period of 60 days; and (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; provided that for so
long as the New Credit Facility is in effect, such declaration shall not become
effective until the earlier of (i) five Business Days after receipt of the
written notice declaring the Notes to be due and payable immediately by the ad-
ministrative agent under the New Credit Facility or (ii) acceleration of the
Indebtedness under the New Credit Facility. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any Significant Subsidiary of the
Company, all outstanding Notes will become due and payable without further ac-
tion or notice. Holders of Notes may not enforce the Indenture or the Notes ex-
cept as provided in the Indenture. Subject to certain limitations, Holders of a
majority in aggregate principal amount of the then outstanding Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default (ex-
cept a Default or Event of Default relating to the payment of principal or in-
terest) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then out-
standing by notice to the Trustee on behalf of the Holders of all of the Notes,
may waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, premium, if any, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regard-
ing compliance with the Indenture, and, upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company or
of a Subsidiary thereof, as such, shall have any liability for any obligations
of the Company under the Notes or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the Federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its obli-
gations discharged with respect to the outstanding Notes ("Legal Defeasance")
except for (i) the rights of Holders of outstanding Notes to receive payments
in respect of the principal of, premium, if any, and interest on such Notes
when such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issues of temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the main-
tenance of an office or agency for payment and money for security payments held
in trust, (iii) the rights, powers, trusts, duties and immunities of the Trust-
ee, and the Company's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture ("Cove-
nant Defeasance") and thereafter any omission to comply with such obligations
shall not constitute a Default or Event of Default with respect to the Notes.
In the event Covenant Defeasance occurs, certain events (not including non-pay-
ment, bankruptcy, receivership and insolvency events) described under "Events
of Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
Holders of Notes, cash in U.S. dollars, noncallable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the prin-
cipal of, premium, if any, and interest on such outstanding Notes to redemption
(and the Company must irrevocably authorize the Trustee to issue a timely no-
tice of redemption and to take such other steps reasonably requested by the
Trustee to ensure that such redemption will be effectuated) or at stated matu-
rity; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of the Indenture, there has been a
change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the Holders
of such outstanding Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such Legal Defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred,
(iii) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States confirming that the
Holders of such outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be con-
tinuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or viola-
tion of, or constitute a default under any material agreement or instrument
(other than the Indenture) to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound (other than a
breach, violation or default resulting from the borrowing of funds to be ap-
plied to such deposit); (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights general-
ly; (vii) the Company must deliver to the Trustee an Officer's Certificate
stating that the deposit was not made by the Company with the intent of prefer-
ring the Holders of such Notes over the other creditors of the Company with the
intent of defeating, hindering, delaying or defrauding creditors of the Company
or others; and (viii) the Company must deliver to the Trustee an Officer's Cer-
tificate and an opinion of counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant Defeasance, as
the case may be, have been complied with.
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TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The registered Holder of a Note will be treated as the owner of it for all pur-
poses.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at
least a majority in aggregate principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange of-
fer for such Notes), and any existing default or compliance with any provision
of the Indenture or the Notes may be waived with the consent of the Holders of
a majority in aggregate principal amount of the then outstanding Notes (includ-
ing consents obtained in connection with a tender offer or exchange offer for
such Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non- consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supple-
ment or waiver, (ii) reduce the principal of or change the fixed maturity of
any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described under the captions
"--Repurchase at the Option of Holders upon a Change of Control" and "--Certain
Covenants--Asset Sales"), (iii) reduce the rate of or change the time for pay-
ment of interest on any Note, (iv) waive a Default or Event of Default in the
payment of principal of, premium, if any, or interest on, the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount thereof and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable in money other than
that stated in the Notes, (vi) make any change in the provisions of the Inden-
ture relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of, premium, if any, or interest on the Notes,
(vii) waive a redemption payment with respect to any Note (other than a payment
required by one or the covenants described under the caption "--Repurchase at
the Option of Holders upon a Change of Control" and "--Certain Covenants--Asset
Sales"), (viii) modify the ranking or priority of the Notes or modify the defi-
nition of Senior Debt or Designated Senior Debt or amend or modify the subordi-
nation provisions of the Indenture in any manner adverse to the Holders or (ix)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for any sup-
plemental indenture required pursuant to the provisions of the covenant de-
scribed above under the caption "--Certain Covenants--Limitations on Issuances
of Guarantees of Indebtedness by Restricted Subsidiaries", to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
transaction described above under "Merger, Consolidation or Sale of Assets", to
make any change that would provide any additional rights or benefits to Holders
of Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder, or to comply with requirements of the SEC in order to ef-
fect or maintain the qualification of the Indenture under the Trust Indenture
Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee, should
the Trustee become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee is permitted to engage in
other transactions; however, if the Trustee acquires any conflicting interest
(as defined in the Indenture or the Trust Indenture Act) it must eliminate such
conflict within 90 days or resign.
The Holders of a majority in aggregate principal amount of the then outstanding
Notes have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to cer-
tain exceptions. The Indenture provides that in case an Event of Default shall
occur (which shall not be cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee is not under any obliga-
tion to exercise any of its rights or powers under the Indenture at the request
of any Holder of Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or ex-
pense.
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BOOK-ENTRY, DELIVERY AND FORM; THE GLOBAL NOTES
The Old Notes are represented by global Notes ("Global Old Notes") that were
deposited with the Trustee as custodian for The Depository Trust Company
("DTC") and registered in the name of Cede & Co., as nominee of DTC, and are
held for credit to the respective accounts of the purchasers of the Old Notes
(or in the case of the Global Old Note representing Old Notes sold in reliance
upon Regulation S, initially for credit to the accounts of Morgan Guaranty
Trust Company of New York, Brussels office, as operator of the Euroclear System
("Euroclear") or Cedel Bank, S.A., ("Cedel"). Beneficial interests in the
Global Old Notes are shown on, and transfers thereof are effected only through,
records maintained by the DTC. Except as provided below, the New Notes also
will be issued in the form of one or more global Notes (the "Global New Notes"
and together with the Global Old Notes, the "Global Notes"). The Global New
Notes will be deposited on the date of issuance thereof with the Trustee as
custodian for DTC and registered in the name of Cede & Co., as nominee of DTC.
Pursuant to the procedures established by DTC (a) upon the issuance of the
Global Notes, DTC or its custodian will credit, on its internal system, the
principal amount of Notes of the individual beneficial interests represented by
the Global Notes to the respective accounts of persons who have accounts with
DTC and (b) ownership of beneficial interests in the Global Notes will be shown
on, and the transfer of such ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of Participants (as
defined herein)) and the records of Participants (with respect to interests of
persons other than Participants). Ownership of beneficial interests in the
Global Notes will be limited to persons who have accounts with DTC ("Partici-
pants") or persons who hold interests through Participants. Interests in the
Global Notes may be held directly through DTC, by Participants, or indirectly
through organizations which are Participants.
Investors who initially acquired their interests in the Global Old Notes pursu-
ant to Regulation S may hold their interests in the Global New Notes directly
through Cedel or Euroclear, if they are participants in such systems, or indi-
rectly through organizations which are participants in such systems or may hold
such interests through organizations other than Cedel or Euroclear that are
Participants in the DTC system. Cedel and Euroclear will hold such interests in
the Global New Notes on behalf of their participants through customers' securi-
ties accounts in their respective names on the books of their respective depos-
itaries, which in turn will hold such interests in the Global New Notes in cus-
tomers' securities accounts in the depositaries' names on the books of DTC.
So long as DTC, or its nominee, is the registered owner or Holder of the Global
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or Holder of Notes represented by such Global Notes for all purposes un-
der the Indenture. No beneficial owner of an interest in any Global Notes will
be able to transfer that interest except in accordance with applicable proce-
dures of DTC, and, if applicable, Euroclear and Cedel, in addition to those
provided for under the Indenture. Payments of the principal of, premium, if
any, and interest on the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company or the
Trustee or any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or re-
viewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Notes, will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that pay-
ments by Participants to owners of beneficial interests in the Global Notes
held through such Participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such Participants.
Transfers between Participants will be effected in the ordinary way in accor-
dance with DTC rules and will be settled in immediately available funds. If a
Holder requires physical delivery of a Certificated Note for any reason, in-
cluding to sell Notes to persons in states which require physical delivery of
the Notes, or to pledge such securities, such Holder must transfer its interest
in a Global Note in accordance with the normal procedures of DTC and with the
procedures set forth in the Indenture.
Transfers by an owner of a beneficial interest in the Global Note that was ini-
tially acquired pursuant to Rule 144A to a transferee who takes delivery of
such interest through the Global Note that was initially issued pursuant to
Regulation S will be made only upon receipt by the Trustee of a certification
to the effect that such transfer is being made in accordance with Regulation S.
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Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in the other Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to bene-
ficial interests in such other Global Note for as long as it remains such an
interest.
DTC has advised the Company that it will take any action permitted to be taken
by a Holder of Notes (including the presentation of Notes for exchange) only at
the direction of one or more Participants to whose account the DTC interests in
the Global Notes are credited and only in respect of such portion of the aggre-
gate principal amount of Notes as to which such Participant or Participants has
or have given such direction. However, if there is an Event of Default under
the Indenture, DTC may request an exchange of the Global Notes in whole for
Certificated Notes, which it will distribute to the Participants.
DTC has advised the Company as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal Re-
serve System, a "clearing corporation" within the meaning of the Uniform Com-
mercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for Partic-
ipants and facilitate the clearance and settlement of securities transactions
between Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of certifi-
cates. Participants include securities brokers and dealers, banks, trust compa-
nies and clearing corporation and certain other organizations. Indirect access
to the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship, with a
Participant either directly or indirectly ("Indirect Participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing proce-
dures in order to facilitate transfers of interests in the Global Notes among
Participants of DTC, Euroclear and Cedel, they are under no obligation to per-
form such procedures, and such procedures may be discontinued at any time. Nei-
ther the Company nor the Trustee will have any responsibility for the perfor-
mance by DTC, Euroclear or Cedel or the Participants or Indirect Participants
of their respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for the
Global Notes and a successor depositary is not appointed by the Company within
90 days, Certificated Notes will be issued in exchange for the Global Notes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Restricted Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in contempla-
tion of, such other Person merging with or into or becoming a Restricted Sub-
sidiary of such specified Person, and (ii) Indebtedness secured by a Lien en-
cumbering any asset acquired by such specified Person.
"Acquired Subsidiary Debt" means, with respect to any specified Person, (i) In-
debtedness of any other Person existing at the time such other Person is merged
with or into or became a Restricted Subsidiary of such specified Person, except
to the extent such Indebtedness was incurred in connection with, or in contem-
plation of, such other Person merging with or into or becoming a Restricted
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person, except to the extent
such Lien was created or incurred in connection with, or in contemplation of,
such acquisition.
"Affiliate" of any specified Person means any other Person directly or indi-
rectly controlling or controlled by or under direct or indirect common control
with such specified Person. For purposes of this definition, "control" (includ-
ing, with correlative meanings, the terms "controlling," "controlled by" and
"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the di-
rection of the management or policies of such Person, whether through the own-
ership of voting securities, by agreement or otherwise; provided that benefi-
cial ownership of 10% or more of the voting securities of a Person shall be
deemed to be control.
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"Asset Sale" means (i) the sale, lease, conveyance or other disposition of any
assets (including, without limitation, by way of a sale and leaseback) other
than the disposition of inventory in the ordinary course of business (it being
understood that dispositions of inventory pursuant to long-term supply agree-
ments constitute the ordinary course of business); provided that the sale,
lease, conveyance or other disposition of all or substantially all of the
property or assets of the Company will be governed by the provision of the In-
denture described above under the caption "--Repurchase at the Option of Hold-
ers upon a Change of Control" and/or the provisions described above under the
caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant, and (ii) the issuance or sale by
the Company or any of its Restricted Subsidiaries of Equity Interests of any
of the Company's Restricted Subsidiaries, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $1 million or (b) for net proceeds
in excess of $1 million. Notwithstanding the foregoing, (a) a transfer of as-
sets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary
to the Company or another Restricted Subsidiary or (b) an issuance of Equity
Interests by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, in each case, will not be deemed to be an Asset Sale.
"Board of Directors" means, with respect to any Person, the Board of Directors
of such Person, or any authorized committee of the Board of Directors of such
Person.
"Business Day" means any day except a Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized by law to close.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance
with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii)
in the case of an association or business entity, any and all shares, inter-
ests, participations, rights or other equivalents (however designated) of cor-
porate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, of all or substantially all of the properties or assets
of the Company and its Restricted Subsidiaries taken as a whole to any Person
or group (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Ex-
change Act) other than Phil Simpson, his spouse, his descendants and their
spouses, trusts and estates of which any of them are primary beneficiaries and
any entities of which any of them are holders of a majority of the equity se-
curities, (ii) the acquisition by any Person or group (as defined above) of a
direct or indirect interest in more than 50% of the voting power of the voting
stock of the Company, by way of merger or consolidation or otherwise, other
than Phil Simpson, his spouse, his descendants and their spouses, trusts and
estates of which any of them are primary beneficiaries and any entities of
which any of them are holders of a majority of the equity securities, or (iii)
the first day on which a majority of the members of the Board of Directors of
the Company are not Continuing Directors.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an asset sale (to the extent such losses were deducted in computing such Con-
solidated Net Income), plus (ii) any non-cash charges (to the extent such
charges were deducted in computing such Consolidated Net Income), except for
any non-cash charges that represent accruals of, or reserves for, cash dis-
bursements to be made in any future accounting period, plus (iii) provision
for taxes based on income or profits of such Person and its Restricted Subsid-
iaries for such period, to the extent such provision for taxes was included in
computing such Consolidated Net Income, plus (iv) the Fixed Charges of such
Person and its Restricted Subsidiaries for such period, to the extent that
such Fixed Charges were deducted in computing such Consolidated Net Income,
plus (v) depreciation, amortization and depletion (including amortization of
goodwill and all other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation, amortiza-
tion and depletion were deducted in computing such Consolidated Net Income, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the amounts referred to in clauses (i) through
(v) above as they relate to a Restricted Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated EBITDA only
to the extent (and in same proportion) that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be paid as a dividend or similar distribution to the Company
by such Restricted Subsidiary or by a Restricted Subsidiary which is the par-
ent of such Restricted Subsidiary without prior approval (that has not been
obtained), pursuant to the terms
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of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted Sub-
sidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP; pro-
vided that (i) the Net Income of any Person that is not a Restricted Subsidiary
or that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions paid in cash to
the referent Person or a Restricted Subsidiary thereof, (ii) the Net Income of
any Restricted Subsidiary shall be excluded to the extent that the payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted to be made to the Company
by such Restricted Subsidiary or by a Restricted Subsidiary which is the parent
of such Restricted Subsidiary without any prior approval (that has not been ob-
tained) or, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or governmen-
tal regulation applicable to that Restricted Subsidiary or its stockholders,
(iii) solely for the purpose of calculating the amount of Restricted Payments
that may be made pursuant to clause (c) of the first paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments",
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date, the
sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the re-
spective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock), less
all write-ups (other than write-ups resulting from foreign currency transla-
tions and write-ups of tangible assets of a going concern business made in ac-
cordance with GAAP as a result of the acquisition of such business) subsequent
to the date of the Indenture in the book value of any asset owned by such Per-
son or a consolidated Restricted Subsidiary of such Person, and excluding the
cumulative effect of a change in accounting principles, all as determined in
accordance with GAAP.
"Continuing Director" means, as of any date of determination, any member of the
Board of Directors of the Company who (i) was a member of such Board of Direc-
tors on the date of the Indenture, (ii) was nominated for election or elected
to such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election or (iii) was nominated for election or elected to such Board of Direc-
tors by the Company.
"Default" means any event that is or with the passage of time or the giving of
notice or both would be an Event of Default.
"Designated Senior Debt" means (i) so long as the New Credit Facility is out-
standing, all Indebtedness under the New Credit Facility and (ii) thereafter,
any other Senior Debt permitted under the Indenture the principal amount of
which is $5 million or more and that has been designated by the Company as
"Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is exchange-
able), or upon the happening of any event, matures or is mandatorily redeem-
able, pursuant to a sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior to the stated
date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is con-
vertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the New Credit Facility) in exist-
ence on the date of the Indenture, until such amounts are repaid, including all
reimbursement obligations with respect to letters of credit outstanding as of
the date of the Indenture (other than letters of credit issued pursuant to the
New Credit Facility).
"Fixed Charge Coverage Ratio" means, with respect to any Person for any period,
the ratio of (i) the Consolidated EBITDA of such Person for such period to (ii)
the Fixed Charges of such Person for such period. In the event that the Company
or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems
any Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the four-quarter reference
period for which the Fixed Charge Coverage Ratio is being calculated but on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio
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shall be calculated by giving pro forma effect to such incurrence, assumption,
Guarantee or redemption of Indebtedness, or such issuance or redemption of pre-
ferred stock (and the application of the proceeds of any such incurrence of In-
debtedness or issuance of preferred stock), as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing transac-
tions, during the four-quarter reference period or subsequent to such reference
period and on or prior to the Calculation Date shall be deemed to have occurred
on the first day of the four-quarter reference period, and (ii) the Consoli-
dated EBITDA and Fixed Charges attributable to discontinued operations, as de-
termined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued (in-
cluding, without limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease Obliga-
tions, commissions, discounts, and other fees and charges incurred in respect
of letters of credit or bankers' acceptance financings, and net payments (if
any) pursuant to Hedging Obligations) and (ii) the consolidated interest ex-
pense of such Person and its Restricted Subsidiaries that was capitalized dur-
ing such period, and (iii) any interest expense on Indebtedness of another Per-
son that is Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted Subsidiar-
ies (whether or not such Guarantee or Lien is called upon) and (iv) the product
of (a) all cash dividend payments (and non-cash dividend payments in the case
of a payor that is a Restricted Subsidiary) on any Disqualified Stock of the
Company and on any series of preferred stock of any Restricted Subsidiary of
the Company, times (b) a fraction, the numerator of which is one and the denom-
inator of which is one minus the then current combined Federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fluor Daniel Agreement" means that certain Agreement for Engineering, Procure-
ment and Construction among the Company, Republic Paperboard Company and Fluor
Daniel, Inc. as further amended, modified, extended, renewed or replaced in
whole or in part, from time to time.
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the Finan-
cial Accounting Standards Board or in such other statements by such other enti-
ties as have been approved by a significant segment of the accounting profes-
sion, as in effect on the Issue Date.
"Guarantee" means a guarantee (other than by endorsement of negotiable instru-
ments for collection in the ordinary course of business), direct or indirect,
in any manner (including, without limitation, letters of credit and reimburse-
ment agreements in respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap agree-
ments and interest rate collar agreements, (ii) foreign exchange contracts or
currency swap agreements, (iii) other agreements or arrangements designed to
protect such Person against fluctuations in interest rates or currency values
and (iv) other agreements or arrangements designed to protect such Person
against fluctuations in raw material prices.
"Indebtedness" means, with respect to any Person, any indebtedness of such Per-
son, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or reim-
bursement agreement in respect thereof) or banker's acceptances or representing
Capital Lease Obligations or the balance deferred and unpaid of the purchase
price of any property or representing any Hedging Obligations, except any such
balance that constitutes an accrued expense or Trade Payable, if and to the ex-
tent any of the foregoing indebtedness (other than letters of credit and Hedg-
ing Obligations) would appear as a liability upon a balance sheet of such Per-
son prepared in accordance with GAAP, as well as all indebtedness of others se-
cured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the Guar-
antee by such Person of any indebtedness of any other Person; it being under-
stood that the obligations under the Fluor Daniel Agreement of the Company or
any Restricted Subsidiary incurred in connection with the Lawton Mill shall not
constitute Indebtedness.
"Investments" means, with respect to any Person, all investments by such Person
in other Persons (including Affiliates) in the forms of direct or indirect
loans (including Guarantees of Indebtedness or other obligations), advances or
capital contributions, purchases or other acquisitions for consideration of In-
debtedness, Equity Interests or other securities and all
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other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. For purposes of the definition of "Unre-
stricted Subsidiary" and the "Restricted Payments" covenant described above,
(i) "Investment" shall include the fair market value of the assets (net of lia-
bilities) of any Restricted Subsidiary at the time that such Restricted Subsid-
iary is designated an Unrestricted Subsidiary and shall exclude the fair market
value of the assets (net of liabilities) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary
and (ii) any property transferred to or from any Person shall be valued at its
fair market value at the time of such transfer, in each case as determined in
good faith by the Board of Directors of the Company.
"Issue Date" means the original issue date of the Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset given to
secure Indebtedness, whether or not filed, recorded or otherwise perfected un-
der applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction with respect to any such lien, pledge, charge or security
interest).
"Moody's" means Moody's Investors Services, Inc. and its successors.
"Net Income" means, with respect to any Person for such period, the net income
(loss) of any such Person for such period, determined in accordance with GAAP,
excluding, however, (i) any gain (but not loss), together with any related pro-
vision for taxes on such gain (but not loss), realized in connection with (a)
any asset sale (including, without limitation, dispositions pursuant to sale
and leaseback transactions) other than dispositions of inventory in the ordi-
nary course of business (it being understood that dispositions of inventory
pursuant to long-term supply agreements constitute the ordinary course of busi-
ness) or (b) the disposition of any securities by such Person or any of its Re-
stricted Subsidiaries or the extinguishment of any Indebtedness of such Person
or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecur-
ring gain or loss, together with any related provision for taxes on such ex-
traordinary or nonrecurring gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or any
of its Restricted Subsidiaries in respect of any Asset Sale, net of the direct
costs relating to such Asset Sale (including, without limitation, legal, ac-
counting and investment banking fees and sales commissions) and any other ex-
penses incurred or to be incurred by the Company or a Restricted Subsidiary as
a direct result of the sale of such assets (including, without limitation, sev-
erance, relocation, lease termination and other similar expenses), taxes actu-
ally paid or payable as a result thereof, payments made to retire Indebtedness
where payment of such Indebtedness is required in connection with such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, dated as of July 15,
1998, by and among the Company and Morgan Guaranty Trust Company of New York,
as Syndication Agent, and NationsBank, N.A., as Administrative Agent, and the
other lenders that are parties thereto, including any related notes, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as further amended, modified, extended, renewed, refunded, replaced
or refinanced in whole or in part, from time to time (including amendments,
modifications, extensions, renewals, refundings, replacements or refinancings
which increase the principal amount of Indebtedness permitted thereunder; pro-
vided that any such increase will not increase the amount of Indebtedness which
may be incurred at the time of such increase pursuant to clause (i) of the sec-
ond paragraph of the covenant described above under "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Disqualified Stock").
"Non-Recourse Debt" means Indebtedness of a Subsidiary (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would con-
stitute Indebtedness of the Company or any of its Restricted Subsidiaries), or
(b) is directly or indirectly liable (as a guarantor or otherwise) and (ii) no
default with respect to which would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the pay-
ment thereof to be accelerated or payable prior to its stated maturity.
"Obligations" means all principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Payment Default" means any failure to pay any scheduled installment of princi-
pal of, premium, if any, or interest on any Indebtedness within the grace pe-
riod provided for such payment in the documentation governing, such Indebted-
ness.
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"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used solely to extend, refinance, renew, replace, defease or re-
fund, other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than Indebtedness constituting revolving credit loans under the New
Credit Facility permitted to be incurred under clause (i) of the second para-
graph of the covenant described above under "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock," provided that (i) the princi-
pal amount of such Permitted Refinancing Indebtedness does not exceed the prin-
cipal amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of any premiums paid and reasonable fees
and expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final stated maturity date not earlier than the final stated
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the In-
debtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at least
as favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the Com-
pany or by the Restricted Subsidiary which is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, a corporation, a partnership, a limited liability
company, an association, a trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Public Equity Offering" means an underwritten primary public offering of com-
mon stock of the Company pursuant to an effective Registration Statement under
the Securities Act.
"Qualified Equity Interests" means all Equity Interests of the Company other
than Disqualified Stock of the Company.
"Restricted Investment" means any Investment by the Company or any Restricted
Subsidiary in any Person other than (i) an Investment in the Company or a Re-
stricted Subsidiary or in any Person that, as a result of such Investment, be-
comes a Restricted Subsidiary or will be merged or consolidated with or into or
will transfer or convey all or substantially all of its assets to, the Company
or a Restricted Subsidiary and (ii) Temporary Cash Investments.
"Restricted Subsidiary" means any Subsidiary of any Person other than an Unre-
stricted Subsidiary of such Person and any Subsidiary of an Unrestricted Sub-
sidiary of such Person.
"S&P" means Standard & Poor's Ratings Service and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness of the Company under the New Credit
Facility, including principal of, premium, if any, and interest on such Indebt-
edness and all other amounts due on or in connection with such Indebtedness in-
cluding all charges, fees and expenses, (ii) all other Indebtedness of the Com-
pany, including principal of, premium, if any, and interest on such Indebted-
ness, unless the instrument under which such Indebtedness is created, incurred,
assumed or Guaranteed expressly provides that such Indebtedness is not senior
or superior in right of payment to the Notes, and all renewals, extensions mod-
ifications, amendments or refinancings thereof and (iii) all interest on any
Indebtedness referred to in clause (i) and (ii) accruing during the pendency of
any bankruptcy or insolvency proceeding whether or not allowed or allowable
thereunder. Notwithstanding the foregoing, Senior Debt shall not include (a)
Subordinated Debt of the Company; provided, however, that no Indebtedness shall
be deemed to be Subordinated Debt of the Company solely by reason of such other
Indebtedness being secured and such Indebtedness not being secured, (b) the
Notes, (c) any Indebtedness of the Company to any of its Restricted Subsidiar-
ies, (d) any Indebtedness which, when incurred and without respect to any elec-
tion under Section 1111 (b) of the Bankruptcy Code, is without recourse to the
Company, (e) any Indebtedness of the Company, to the extent not permitted by
the covenant described above under "--Certain Covenants--Incurrence of Indebt-
edness and Issuance of Disqualified Stock", (f) any Indebtedness to any em-
ployee of the Company or any of its Restricted Subsidiaries, (g) any liability
for taxes owed or owing by the Company and (h) Trade Payables.
"Significant Subsidiary" means, at any date of determination, any Subsidiary
that, together with its Subsidiaries, (i) accounted for more than 10% of the
consolidated revenues of the Company and its consolidated Subsidiaries or (ii)
was the owner of more than 10% of the consolidated assets of the Company and
its consolidated Subsidiaries, all as set forth on the most recently available
audited financial statements of the Company.
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"Stockholders' Equity" means, with respect to any Person as of any date, the
stockholders' equity of such Person determined in accordance with GAAP as of
the date of the most recent available internal financial statements of such
Person, and calculated on a pro forma basis to give effect to any acquisition
or disposition by such Person consummated or to be consummated since the date
of such financial statements and on or prior to the date of such calculation.
"Subordinated Debt" means any Indebtedness of the Company (whether outstanding
on the Issue Date or thereafter incurred) which is by its terms expressly sub-
ordinate or junior in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation, associa-
tion or other business entity of which more than 50% of the total voting power
of shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person (or a combination thereof)
and (ii) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or of one or more Subsidiaries of
such Person (or any combination thereof). Unrestricted Subsidiaries shall not
be included in the definition of Subsidiary for any purposes of the Indenture
(except, as the context may otherwise require, for purposes of the definition
of "Unrestricted Subsidiary"). Unless otherwise specified or the context other-
wise requires, "Subsidiary" means a Subsidiary of the Company.
"Temporary Cash Investment" means any of the following: (i) securities issued
or directly and fully guaranteed or insured by the United States of America or
any agent or instrumentality thereof; provided that the full faith and credit
of the United States of America is pledged in support thereof, (ii) time de-
posit accounts, bankers' acceptances, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by
any office located in the United States of America of a bank or trust company
which is organized or licensed under the laws of the United States of America
or any state thereof and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $500 million and has outstanding
debt which is rated "P-1" (or higher) by Moody's or "A-1" (or higher) by S&P or
any money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with an office located in the United States of America of a bank or trust
company meeting the qualifications described in clause (ii) above, (iv) commer-
cial paper, maturing not more than 90 days after the date of acquisition, is-
sued by a corporation (other than an Affiliate of the Company) organized under
the laws of the United States of America or any state thereof with a rating, at
the date of acquisition, of "P-1" (or higher) by Moody's or "A-1" (or higher)
by S&P, (v) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state, com-
monwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "P-1" (or higher)
by Moody's or "A-1" (or higher) by S&P and (vi) money market funds which invest
substantially all of their assets in securities described in the preceding
clauses (i) through (v).
"Trade Payables" means, with respect to any Person, any accounts payable or any
other indebtedness or monetary obligation to trade creditors created, assumed
or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary
course of business in connection with the acquisition of goods or services.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the Board
of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only if such Subsidiary (i) has no Indebtedness other than Non-
Recourse Debt, (ii) is not party to any agreement, contract, arrangement or un-
derstanding with the Company or any Restricted Subsidiary of the Company unless
the terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of the Compa-
ny, (iii) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe
for additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results and (iv) has not guaranteed or otherwise directly or indi-
rectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not cease to
qualify as an Unrestricted Subsidiary if the Company Guarantees Indebtedness of
such Unrestricted Subsidiary and such Guarantee is a Restricted Investment
which is permitted by the provisions of the Indenture described above under the
caption "--Certain Covenants--Restricted Payments."
Any such designation by the Board of Directors of the Company shall be evi-
denced to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate cer-
tifying that such
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designation complied with the foregoing conditions and was permitted under the
covenant described above under the caption "--Certain Covenants--Restricted
Payments." If at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebt-
edness of such Subsidiary shall be deemed to be incurred by a Restricted Sub-
sidiary of the Company as of such date (and, if such Indebtedness is not per-
mitted to be incurred as of such date under the Indenture, the Company shall be
in Default under the Indenture). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of Indebted-
ness by a Restricted Subsidiary of the Company of any outstanding Indebtedness
of such Unrestricted Subsidiary and such designation shall only be permitted if
(i) such Indebtedness is permitted under the Indenture, and (ii) no Default or
Event of Default would be in existence following such designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (b) the number of years (cal-
culated to the nearest one-twelfth) that will elapse between such date and the
making of such payment, by (ii) the then outstanding principal amount of such
Indebtedness.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of certain United States federal income tax conse-
quences associated with the exchange of Old Notes for New Notes and the owner-
ship and disposition of the New Notes by Holders who acquire the New Notes pur-
suant to the Exchange Offer. This summary is based upon provisions of the In-
ternal Revenue Code of 1986, as amended (the "Code"), regulations, rulings and
decisions currently in effect, all of which are subject to change (possibly
with retroactive effect). The discussion does not purport to deal with all as-
pects of the United States federal taxation that may be relevant to particular
Holders in light of their particular circumstances (for example, to persons
holding Notes as part of a conversion transaction or as part of a hedge or
hedging transaction, or as a position in a straddle for tax purposes), nor does
it discuss the United States federal income tax considerations applicable to
certain types of Holders subject to special treatment under the federal income
tax laws (for example, insurance companies, tax-exempt organizations, financial
institutions and persons who are not United States Holders or United States
Alien Holders (each as defined below)). In addition, the discussion does not
consider the effect of any foreign, state, local or other tax laws that may be
applicable to a particular Holder. The discussion assumes that Holders hold the
Notes as "capital assets" within the meaning of Section 1221 of the Code. The
Company intends to treat the Notes as indebtedness and not as equity for United
States federal income tax purposes, and the United States federal income tax
considerations described below are based on that characterization.
PROSPECTIVE HOLDERS CONSIDERING AN EXCHANGE OF NEW NOTES FOR OLD NOTES SHOULD
CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE UNITED STATES
FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CON-
SEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURIS-
DICTION.
As used herein, the term "United States Holder" means an owner of a New Note
that is, for United States federal income tax purposes, (i) a citizen or resi-
dent of the United States, (ii) a corporation, partnership or other entity cre-
ated or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source or (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the au-
thority to control all substantial decisions of the trust. The term also in-
cludes certain former citizens and certain former long-term residents of the
United States.
As used herein, the term "United States Alien Holder" means an owner of a New
Note that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien fidu-
ciary of a foreign estate or trust or (iv) a foreign partnership.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer should
not be treated as an exchange or other taxable event for United States federal
income tax purposes because under Treasury regulations, the New Notes should
not be considered to differ materially in kind or extent from the Old Notes.
Rather, the New Notes received by a Holder should be treated as a continuation
of the Old Notes in the hands of such Holder. As a result, there should be no
United States federal income tax consequences to Holders who exchange Old Notes
for New Notes pursuant to the Exchange Offer and any such Holder should have
the same tax basis and holding period in the New Notes as it had in the Old
Notes immediately before the exchange.
UNITED STATES HOLDERS
Interest on a New Note Interest on a New Note will generally be taxable to a
United States Holder as ordinary interest income at the time it accrues or is
received in accordance with the United States Holder's method of accounting for
United States federal income tax purposes.
Sale or Retirement of a New Note Upon the sale or retirement of a New Note, a
United States Holder will recognize taxable gain or loss equal to the differ-
ence between the amount realized on the sale or retirement and such Holder's
adjusted tax basis in the New Note.
Backup Withholding and Information Reporting Certain noncorporate United
States Holders may be subject to backup withholding at a rate of approximately
31% on payments of principal, premium and interest (including original issue
discount, if any) on, and the proceeds of disposition of, a New Note. Backup
withholding will apply only if the United
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States Holder (i) fails to furnish its Taxpayer Identification Number ("TIN")
which, for an individual, would be his Social Security number, (ii) furnishes
an incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest or dividends or (iv) under cer-
tain circumstances, fails to certify, under penalties of perjury, that it has
not been notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest and dividend payments. United States
Holders should consult their tax advisors regarding their qualification for ex-
emption from backup withholding and the procedure for obtaining such an exemp-
tion if applicable.
The amount of any backup withholding from a payment to a United States Holder
will be allowed as a credit against such Holder's United States federal income
tax liability and may entitle such Holder to a refund, provided that the re-
quired information is furnished to the Internal Revenue Service.
UNITED STATES ALIEN HOLDERS
Under present United States federal law, and subject to the discussion below
concerning backup withholding, payments of principal, interest and premium on
the New Notes by the Company or any paying agent to any United States Alien
Holder, and gain realized on the sale, exchange or other disposition of such
New Note, will not be subject to United States federal income or withholding
tax, provided that: (i) such Holder does not own, actually or constructively,
directly or indirectly, 10 percent or more of the total combined voting power
of all classes of stock of the Company entitled to vote, is not a controlled
foreign corporation related, directly or indirectly, to the Company through
stock ownership, and is not a bank receiving interest described in Section
881(c)(3)(A) of the Code; (ii) the statement requirement set forth in Section
871(h) or Section 881(c) of the Code has been fulfilled with respect to the
beneficial owner, as discussed below; (iii) such Holder is not an individual
who is present in the United States for 183 days or more in the taxable year of
disposition, or such individual does not have a "tax home" (as defined in Sec-
tion 911(d)(3) of the Code) or an office or other fixed place of business in
the United States; and (iv) such payments and gain are not effectively con-
nected with the conduct by such Holder of a trade or business in the United
States.
As noted above, the Company intends to treat the New Notes as indebtedness for
United States federal income tax purposes. No assurance can be given, however,
that the Company's treatment will not be challenged by the Internal Revenue
Service. If the New Notes were ultimately treated as equity rather than debt
for United States federal income tax purposes, the portfolio interest exception
would not apply and withholding tax at a flat rate of approximately 30% (or a
lower rate under an applicable income tax treaty) would be imposed on the in-
terest payments on New Notes to the extent of the Company's current or accumu-
lated earnings and profits or on the entire amounts of the interest payments if
the withholding agent does not know or cannot reasonably estimate the amount of
such earnings and profits. Further, any such withholding could commence when
the Internal Revenue Service first asserted that the New Notes constituted eq-
uity; in such event, if the Internal Revenue Service did not ultimately pre-
vail, the United States Alien Holders would be able to recover the tax withheld
by filing a claim for refund with the Internal Revenue Service.
Certain Certification Requirements. Sections 871(h) and 881(c) of the Code re-
quire that, in order to obtain the portfolio interest exemption from the with-
holding tax described in the paragraphs above, either the beneficial owner of
the New Note, or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution") and that is holding the New Note
on behalf of such beneficial owner, file a statement with the withholding agent
to the effect that the beneficial owner of the New Note is not a United States
Holder. Under current United States Treasury Regulations, such requirement will
be fulfilled if the beneficial owner of a New Note certifies on Internal Reve-
nue Service Form W-8, under penalties of perjury, that it is not a United
States Holder and provides its name and address, and any Financial Institution
holding the Note on behalf of the beneficial owner files a statement with the
withholding agent to the effect that it has received such a statement from the
Holder (and furnishes the withholding agent with a copy thereof). Under re-
cently finalized United States Treasury Regulations, which are generally appli-
cable to payments made after December 31, 1999, certain United States Alien
Holders would also need to provide their United States taxpayer identification
numbers on such forms in order to fulfill such requirement.
If a United States Alien Holder of a New Note is engaged in a trade or business
in the United States, and if interest on the Note is effectively connected with
the conduct of such trade or business, the United States Alien Holder, although
exempt from the withholding tax discussed in the preceding paragraphs, will
generally be subject to regular United States income tax on interest and on any
gain realized on the sale, exchange or other disposition of a New Note in the
same manner as if it were a United States Holder. In lieu of the certificate
described in the preceding paragraph, such a Holder will be required to provide
to the withholding agent a properly executed Internal Revenue Service Form 4224
(or the successor W-8 Form), in order to claim an exemption from withholding
tax. Under recently finalized United States Treasury Regulations, a United
States Alien Holder will also need to provide a United States taxpayer identi-
fication number on such form in
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order to fulfill such requirement. In addition, if such United States Alien
Holder is a foreign corporation, it may be subject to a branch profits tax
equal to approximately 30% (or such lower rate provided by an applicable trea-
ty) of its effectively connected earnings and profits for the taxable year,
subject to certain adjustments. For purposes of the branch profits tax, inter-
est on and any gain recognized on the sale, exchange or other disposition of a
New Note will be included in the effectively connected earnings and profits of
such United States Alien Holder if such interest or gain, as the case may be,
is effectively connected with the conduct by the United States Alien Holder of
a trade or business in the United States.
Estate Taxes. Under Section 2105(b) of the Code, a New Note held by an individ-
ual who is not a citizen or resident of the United States at the time of his
death will not be subject to United States federal estate tax as a result of
such individual's death, provided that the individual does not own, actually or
constructively, 10 percent or more of the total combined voting power of all
classes of stock of the Company entitled to vote and, at the time of such indi-
vidual's death, payments with respect to such New Note would not have been ef-
fectively connected to the conduct by such individual of a trade or business in
the United States.
As noted above, the Company intends to treat the New Notes as indebtedness for
United States federal income tax purposes. No assurance can be given, however,
that the Company's treatment will not be challenged by the Internal Revenue
Service. If the New Notes were ultimately treated as equity rather than debt
for United States federal income tax purposes, a United States Alien Holder who
is treated as the owner of, or has made certain lifetime transfers of, an in-
terest in the New Notes will be required to include the value thereof in his or
her gross estate for United States federal estate tax purposes, and may be sub-
ject to United States federal estate tax unless an applicable estate tax treaty
provides otherwise.
Backup Withholding and Information Reporting Under current Treasury Regula-
tions, backup withholding (approximately 31%) will not apply to payments by the
Company made on a New Note if the certifications required by Sections 871(h)
and 881(c) of the Code are received, provided in each case that the Company or
such paying agent, as the case may be, does not have actual knowledge that the
payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a New Note made to or through a foreign office of a broker gen-
erally will not be subject to backup withholding. However, if such broker is a
United States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50 percent or more of whose gross income is ef-
fectively connected with a United States trade or business for a specified
three-year period, information reporting will be required unless the broker has
in its records documentary evidence that the beneficial owner is not a United
States person and certain other conditions are met or the beneficial owner oth-
erwise establishes an exemption. Under recently finalized Treasury Regulations,
backup withholding may apply to any payment made after December 31, 1999 that
such broker is required to report if such broker has actual knowledge that the
payee is a United States person. Payments to or through the United States of-
fice of a broker will be subject to backup withholding and information report-
ing unless the Holder certifies, under penalties of perjury, that it is not a
United States person or otherwise establishes an exemption.
United States Alien Holders of New Notes should consult their tax advisors re-
garding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts with-
held from a payment to a United States Alien Holder under the backup withhold-
ing rules will be allowed as a credit against such Holder's United States fed-
eral income tax liability and may entitle such Holder to a refund, provided
that the required information is furnished to the Internal Revenue Service.
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ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement, or other employees bene-
fit plan subject to Title I of ERISA (each such plan, a "Plan") should consider
the fiduciary standards under ERISA in the context of the Plan's particular
circumstances and consult with its counsel before authorizing an investment of
such Plan's assets in the Notes. ERISA, and the corresponding provisions of the
Code, prohibits transactions involving the assets of a Plan or of an individual
retirement account or plan subject to Section 4975 of the Code (hereinafter a
Plan, such account and such plan are collectively referred to as an "ERISA
Plan") and persons who have certain specified relationships to the ERISA Plan
("parties in interest," within the meaning of ERISA, "disqualified persons,"
within the meaning of the Code). A prohibited transaction could arise if, for
example, any of the Initial Purchasers or the Company were a party in interest
or a disqualified person with respect to an ERISA Plan. Thus, a fiduciary of an
ERISA Plan considering an investment in the Notes also should consider whether
the acquisition of the Notes might constitute or give rise to a non-exempt pro-
hibited transaction. There are certain class exemptions issued by the Depart-
ment of Labor which could exempt the purchase of the Notes from the prohibited
transaction provision of ERISA and the Code, including: Prohibited Transaction
Exemption 75-1, for certain principal transactions with broker-dealers, Prohib-
ited Transaction Exemption 84-14, for certain transactions determined by quali-
fied professional asset managers, Prohibited Transaction Exemption 90-1, for
certain transactions involving insurance company pooled separate accounts, Pro-
hibited Transaction Exemption 91-38 for certain transactions involving bank
collective investment funds, Prohibited Transaction Exemption 95-60 for certain
transactions involving insurance company general accounts, and Prohibited
Transaction Exemption 96-23, for certain transactions determined by in-house
asset managers.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under Section 410(d) of the Code), are not subject to
the restrictions of ERISA. The investment in the Notes by such employee benefit
plans may, however, be subject to other applicable federal, state and local
laws, which should be carefully considered by such employee benefit plans be-
fore investing in Notes.
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EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the initial issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement pursuant to which the Company
agreed, for the benefit of the holders of the Old Notes, at the Company's
cost, to use its best efforts (i) to cause to be filed with the SEC the Regis-
tration Statement with respect to the Exchange Offer within 60 days after the
date of original issuance of the Old Notes, (ii) to have the Registration
Statement declared effective under the Securities Act within 120 days of the
date of original issuance of the Old Notes, (iii) to keep the Registration
Statement effective until the closing of the Exchange Offer, and (iv) to con-
summate the Exchange Offer within 150 days of the original issuance date of
the Old Notes. Promptly after the Registration Statement has been declared ef-
fective, the Company will offer the New Notes in exchange for surrender of the
Old Notes. The Company will keep the Exchange Offer open for not less than 20
business days after the date notice of the Exchange Offer has been mailed to
the holders of the Old Notes.
In the event that the Exchange Offer is not consummated within 150 days after
the original issuance of the Old Notes, or upon the request of the Initial
Purchasers in certain circumstances, the Company will, in lieu of effecting
(or, in the case of such a request by the Initial Purchasers, in addition to
effecting) the registration of the New Notes pursuant to the Registration
Statement (i) as promptly as practicable, file with the SEC a Shelf Registra-
tion Statement covering resales of the Old Notes, (ii) use its best efforts to
cause such Shelf Registration Statement to be declared effective under the Se-
curities Act by the 150th day after the date of original issuance of the Old
Notes (or promptly in the event of a request by the Initial Purchasers) and
(iii) use its best efforts to keep effective such Shelf Registration Statement
until 180 days after its effective date (or until two years after such effec-
tive date in certain circumstances) or until all of the Old Notes covered by
such Shelf Registration Statement have been sold. In the event of the filing
of a Shelf Registration Statement, the Company will provide to each Holder of
the Old Notes copies of the prospectus which is a part of the Shelf Registra-
tion Statement and notify each such Holder when the Shelf Registration State-
ment has become effective. A Holder of Notes that sells such Old Notes pursu-
ant to the Shelf Registration Statement generally will be required to be named
as a selling security holder in the related prospectus and to deliver a pro-
spectus to purchasers, will be subject to certain of the civil liability pro-
visions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are appli-
cable to such a Holder (including certain indemnification obligations). In ad-
dition, each Holder of the Old Notes will be required to deliver information
to be used in connection with the Shelf Registration Statement in order to
have its Old Notes included in the Shelf Registration Statement and to benefit
from the provisions regarding the increase in the interest rate borne by the
Old Notes described in the second succeeding paragraph.
The Registration Rights Agreement provides that, upon receipt of notice from
the Company of the occurrence of any event that makes any statement in the
prospectus that is part of the Shelf Registration Statement untrue in any ma-
terial respect or that requires the making of any changes in such prospectus
in order to make the statements therein not misleading or of certain other
events specified in the Registration Rights Agreement, such Holder will sus-
pend the sale of Old Notes pursuant to such prospectus until the Company has
furnished copies of an amended or supplemented prospectus to such Holder cor-
recting such misstatement or omission. If the Company shall give such notice
to suspend the sale of the Old Notes, it shall extend the relevant period re-
ferred to above during which it is required to keep effective the Shelf Regis-
tration Statement by the number of days during the period from and including
the date of the giving of such notice to and including the date when Holders
shall have received copies of the supplemented or amended prospectus necessary
to permit resales of the Old Notes or to and including the date on which the
Company has given notice that the sale of Old Notes may be resumed, as the
case may be.
Broker-dealers that receive New Notes in exchange for Old Notes that were ac-
quired by such broker-dealers as a result of market-making or other trading
activities and that are required to deliver this Prospectus in connection with
sales of the New Notes will also have and be subject to the rights and obliga-
tions under the Registration Rights Agreement of Holders participating in a
Shelf Registration Statement with such reasonable modifications as may be re-
quested by the representatives thereof.
In the event that the Exchange Offer is not consummated or a Shelf Registra-
tion Statement is not declared effective on or prior to the 150th day follow-
ing the date of original issuance of the Old Notes (such event, a "Registra-
tion Default"), then the Company will pay additional interest (in addition to
the interest otherwise due on the Old Notes) to each Holder of Old Notes dur-
ing the first 90-day period immediately following the occurrence of each such
Registration Default in an amount equal to 0.25% per annum for any and all
Registration Defaults. The amount of interest will increase by an additional
0.25% per annum for each subsequent 90-day period until such Registration De-
fault is cured, up to a maximum amount of
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additional interest of 1.00% per annum. Such additional interest will cease ac-
cruing on such Old Notes when the Registration Default has been cured.
The Registration Rights Agreement is governed by, and shall be construed in ac-
cordance with, the laws of the State of New York. The summary herein of certain
provisions of the Registration Rights Agreement is not complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. In addition, the
information set forth above concerning certain interpretations of and positions
taken by the staff of the SEC is not intended to constitute legal advice and
prospective investors should consult their own legal advisors with respect to
such matters.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market making activities or other trading ac-
tivities, must acknowledge that it will deliver a prospectus in connection with
any resale of such New Notes. This Prospectus, as it may be amended or supple-
mented from time to time, may be used by a broker-dealer in connection with re-
sales of New Notes received in exchange for Old Notes if such Old Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the Expiration
Date, it will make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition, un-
til , 1998 (90 days from the date of this Prospectus), all dealers effect-
ing transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by broker-
dealers. New Notes received by broker-dealers for their own account pursuant to
the Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through broker-dealers who may receive compensation in the
form of commissions or concessions from any such broker-dealer or the purchas-
ers of any such New Notes. Any broker-dealer that resells New Notes that were
received by it for its own account pursuant to the Exchange Offer and any bro-
ker-dealer that participates in a distribution of such New Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of New Notes and any commission or concessions received by
any such persons may be deemed to be underwriting compensation under the Secu-
rities Act. By acknowledging that it will deliver and by delivering a prospec-
tus, a broker-dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents. To the
extent provided the Registration Rights Agreement, the Company has agreed to
pay all expenses incident to the Exchange Offer (including the expenses of
counsel for the Holders of the Notes) other than commissions or concessions of
any broker-dealers and will indemnify the Holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
Certain legal matters relating to the Notes and the Exchange Offer will be
passed upon for the Company by Locke Purnell Rain Harrell (A Professional Cor-
poration), Dallas, Texas. Talbot Rain, a director of the Company, is of Counsel
to the firm of Locke Purnell Rain Harrell (A Professional Corporation).
INDEPENDENT AUDITORS
The consolidated financial statements of the Company as of June 30, 1996 and
1997 and for each of the three years in the period ended June 30, 1997 included
in the Company's 1997 Form 10-K incorporated by reference in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SO-
LICITATION IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH AN EXCHANGE OFFER OR A SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information.................................................... iii
Incorporation of Certain Documents by Reference.......................... iii
Prospectus Summary....................................................... 1
Risk Factors............................................................. 10
The Exchange Offer....................................................... 17
Use of Proceeds.......................................................... 23
Capitalization........................................................... 23
Selected Consolidated Financial Data..................................... 24
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Business................................................................. 32
Management............................................................... 43
Description of the New Credit Facility................................... 45
Description of Notes..................................................... 47
Certain Federal Income Tax Considerations................................ 68
ERISA Considerations..................................................... 71
Exchange Offer; Registration Rights...................................... 72
Plan of Distribution..................................................... 74
Legal Matters............................................................ 75
Independent Auditors..................................................... 75
</TABLE>
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$100,000,000
EXCHANGE OFFER
REPUBLIC GROUP INCORPORATED
9 1/2% SENIOR SUBORDINATED
NOTES DUE 2008
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PROSPECTUS
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SEPTEMBER , 1998
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware empowers a
corporation to indemnify its directors, officers, employees and agents and to
purchase insurance, with respect to liability arising out of their capacity or
status as directors, officers, employees and agents. Section 145 further pro-
vides that the indemnification provided therein shall not be deemed exclusive
of any other rights to which the directors, officers, employees and agents of a
corporation may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors or otherwise.
Article Tenth of the Company's Amended and Restated Certificate of Incorpora-
tion provides that the Company shall indemnify any and all of its directors or
officers or former directors or officers or any person who may have served at
its request as a director or officer of another corporation in which it owns
shares of capital stock or of which it is a credit against expenses actually
and necessarily incurred by them in connection with the defense of any action,
suit or proceeding in which they, or any of them, are made parties, or a party,
by reason of being or having been directors of officers or a director or offi-
cer of the Company, except in relation to matters as to which any such director
or officer or former director or officer shall be adjudged in such action, suit
or proceeding to be liable for negligence or misconduct in the performance of
duty.
Article VI of the Company's Amended and Restated Bylaws (the "Bylaws") provides
for indemnification of the Company's directors, officers, employees and agents
in certain circumstances and sets forth certain procedures for such indemnifi-
cation. Article VI of the Company's Bylaws, which are filed as Exhibit 3(b) to
this Registration Statement, is incorporated herein by reference.
The Company has a directors and officers insurance policy insuring directors
and officers and former directors and officers of the Company and its subsidi-
aries against damages, judgments, settlements and costs that any such persons
may become legally obligated to pay on account of claims made against them, for
any error, misstatement or misleading statement, act or omission, or neglect or
breach of duty committed, attempted or allegedly committed or attempted by such
persons in the discharge of their duties to the Company in their capacities as
directors or officers, or any matter claimed against them solely by reason of
their serving in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits: The following documents are filed or incorporated by reference
as exhibits to this Registration Statement as required by Item 601 of Regula-
tion S-K:
<TABLE>
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EXHIBIT NO. DESCRIPTION
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<C> <S>
1 --Purchase Agreement dated July 10, 1998, among the Company, J.P.
Morgan Securities, Inc., Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated, and A.G. Edwards & Sons, Inc.
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 ended September 30,
1996, SEC File Number 1-7210).
3(b) --Bylaws of the Company, as amended (incorporated by reference to
Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1996, SEC file Number 1-7210).
4(a) --Revolving and Term Credit Agreement (with related Promissory
Notes, Security Agreement, Mortgage, Deed of Trust and Guaranties
attached as Exhibits thereto) dated as of June 30, 1995, among
Republic Gypsum Company, Republic Paperboard Company, Republic
Paperboard Company of West Virginia and Boatmen's First National
Bank of Kansas City (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).
4(b) --Amendments One, Two and Three to Revolving and Term Credit
Agreement, in reference to the Company's name change from
Republic Gypsum Company to Republic Group Incorporated and to
extend the revolving credit facility one year (incorporated by
reference to Exhibit 4(b) to the Company's Annual Report on Form
10-K for the year ended June 30, 1996, SEC File Number 1-7210).
4(c) --Fourth Amendment to Loan Documents, dated as of April 28, 1998,
in reference to increasing the Revolving Credit Promissory Note
principal amount to $50,000,000 and to extend the revolving
credit facility one year.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4(d) --Credit Agreement (with related forms of Note, Pledge Agreement,
Security Agreement, Mortgage, and Subsidiary Guarantee attached
as Exhibits thereto) dated as of July 15, 1998, among the
Company, Morgan Guaranty Trust Company of New York, as
Syndication Agent, NationsBank, N.A., as Administrative Agent,
and the Banks and LC Issuing Banks, as defined therein
(incorporated by reference to Exhibit 99(a) to the Company's
Current Report on Form 8-K filed September 11, 1998, SEC file
Number 1-7210).
4(e) --Indenture dated as of July 15, 1998 between the Company and UMB
Bank, N.A., as Trustee, relating to the Company's 9 1/2% Senior
Subordinated Notes due 2008 (incorporated by reference to Exhibit
99(b) to the Company's Current Report on Form 8-K dated September
11, 1998, SEC File Number 1-7210).
4(f) --Registration Rights Agreement dated July 15, 1998, among the
Company, J.P. Morgan Securities, Inc., Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, and A.G. Edwards & Sons,
Inc.
*5 --Opinion of Locke Purnell Rain Harrell (A Professional
Corporation) regarding validity and enforceability of the New
Notes.
10(a) --The 1989 Long-Term Incentive Plan (As Restated and Amended
Effective August 16, 1996) (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1996, SEC File Number 1-7210).
10(b) --Non-Employee Director Stock Option Plan (As Amended Effective
August 16, 1996) (incorporated by reference to Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1996, SEC File Number 1-7210).
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).
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 Form 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 Form 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
year ended June 30, 1992, SEC File Number 1-7210).
10(g) --Paperboard Supply Agreement, dated May 14, 1998, between the
Company, Republic Paperboard Company and James Hardie Gypsum,
Inc. (incorporated by reference to Exhibit 99(c) to the Company's
Current Report on Form 8-K, dated September 11, 1998, SEC File
Number 1-7210). Portions of this Exhibit were omitted pursuant to
a request for confidential treatment filed with the Office of the
Secretary of the SEC.
10(h) --Amended and Restated Agreement for Engineering, Procurement and
Construction dated as of June 26, 1988 between Republic
Paperboard Company and Fluor Daniel, Inc. relating to the Lawton
Mill (incorporated by reference to Exhibit 99(d) to the Company's
Current Report on Form 8-K, dated September 11, 1998, SEC File
Number 1-7210). Portions of this Exhibit were omitted pursuant to
a request for confidential treatment filed with the Office of the
Secretary of the SEC.
10(i) --Amended and Restated Parent Company Guarantee effective as of
June 26, 1998 from the Company to Fluor Daniel, Inc. relating to
the Lawton Mill (incorporated by reference to Exhibit 99(e) to
the Company's Current Report on Form 8-K, dated September 11,
1998, SEC File Number 1-7210).
12 --Statement re Computation of Ratios.
21 --Significant Subsidiaries of the Registrant.
23(a) --Consent of Arthur Andersen, LLP.
*23(b) --Consent of Locke Purnell Rain Harrell (A Professional
Corporation)(included in Exhibit 5).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
24 --Power of Attorney (included on signature page of this
Registration Statement).
25 --Statement of Eligibility of Trustee.
27 --Financial Data Schedule.
99(a) --Form of Letter of Transmittal.
99(b) --Form of Notice of Guaranteed Delivery.
</TABLE>
* To be filed by amendment.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves (incorporated by
reference to the same Schedule included in Registrant's Annual Report on Form
10-K for the year ended June 30, 1997, SEC File Number 1-7210)
(c) Reports, Opinions and Appraisals:
None.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Se-
curities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggre-
gate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the SEC pur-
suant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securi-
ties Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termina-
tion of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of deter-
mining any liability under the Securities Act of 1933, each filing of the Reg-
istrant's annual report pursuant to Section 13(a) or Section 15(d) of the Ex-
change Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed pursu-
ant to paragraph (c) immediately preceding or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in connec-
tion with an offering of securities subject to Rule 415, will be filed as a
part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the Reg-
istrant pursuant to the provisions described in Item 20 hereof, or otherwise,
the Registrant has been advised that in the opinion of the SEC such indemnifi-
cation is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such di-
rector, officer or controlling person in connection with the securities being
registered, the Registrant will, unless, in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of appro-
priate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to request for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to this request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the com-
pany being acquired involved therein, that was not the subject of and included
in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, RE-
PUBLIC GROUP INCORPORATED HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON SEPTEM-
BER 10, 1998.
Republic Group Incorporated
/s/ Phil Simpson
By: ____________________________________
PHIL SIMPSON CHAIRMAN OF THE
BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWERS OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Phil Simpson and Doyle R. Ram-
sey, and each of them, such individual's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such individ-
ual and in his or her name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments) to this Reg-
istration Statement on Form S-4 and any and all applications and other docu-
ments in connection therewith, with the Securities and Exchange Commission and
any state or other securities authority, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises as fully and to intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRA-
TION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Phil Simpson Chairman of the September 10,
- ----------------------------------- Board, President 1998
PHIL SIMPSON and Chief
Executive Officer
and Director
(principal
executive
officer)
/s/ Doyle R. Ramsey Executive Vice September 10,
- ----------------------------------- President and 1998
DOYLE R. RAMSEY Chief Financial
Officer
(principal
financial
officer)
/s/ Michael W. Dirks Vice President and September 10,
- ----------------------------------- Principal 1998
MICHAEL W. DIRKS Accounting
Officer
(principal
accounting
officer)
/s/ Talbot Rain Director September 10,
- ----------------------------------- 1998
TALBOT RAIN
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Gerald L. Ray Director September 10,
- ----------------------------------- 1998
GERALD L. RAY
/s/ Robert F. Sexton Director September 10,
- ----------------------------------- 1998
ROBERT F. SEXTON
/s/ Bert A. Nelson Director September 10,
- ----------------------------------- 1998
BERT A. NELSON
/s/ L.L. Wallace Director September 10,
- ----------------------------------- 1998
L.L. WALLACE
/s/ David B. Yarbrough Director September 10,
- ----------------------------------- 1998
DAVID B. YARBROUGH
/s/ C. William Claypool Director September 10,
- ----------------------------------- 1998
C. WILLIAM CLAYPOOL
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 Purchase Agreement dated July 10, 1998, among the Company, J.P.
Morgan Securities, Inc., Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, and A.G. Edwards & Sons, Inc.
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, 1996. SEC File Number 1-7210).
3(b) Bylaws of the Company, as amended (incorporated by reference to
Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1996, SEC file Number 1-7210).
4(a) Revolving and Term Credit Agreement (with related Promissory
Notes, Security Agreement, Mortgage, Deed of Trust and 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).
4(b) Amendments One, Two and Three to Revolving and Term Credit
Agreement, in reference to the Company's name change from Republic
Gypsum Company to Republic Group Incorporated and to extend the
Revolving Credit Agreement one year (incorporated by reference to
Exhibit 4(b) to the Company's Annual Report on Form 10-K for the
year ended June 30, 1996, SEC File Number 1-7210).
4(c) Fourth Amendment to Loan Documents, dated as of April 28, 1998, in
reference to increasing the Revolving Credit Promissory Note
principal amount to $50,000,000 and to extend the revolving credit
facility one year.
4(d) Credit Agreement (with related forms of Note, Pledge Agreement,
Security Agreement, Mortgage, and Subsidiary Guarantee attached as
Exhibits thereto) dated as of July 15, 1998, among the Company,
Morgan Guaranty Trust Company of New York, as Syndication Agent,
NationsBank, N.A., as Administrative Agent, and the Banks and LC
Issuing Banks, as defined therein (incorporated by reference to
Exhibit 99(a) to the Company's Current Report on Form 8-K filed
September 11, 1998, SEC file Number 1-7210).
4(e) Indenture dated as of July 15, 1998 between the Company and UMB
Bank, N.A., as Trustee, relating to the Company's 9 1/2% Senior
Subordinated Notes due 2008 (incorporated by reference to Exhibit
99(b) to the Company's Current Report on Form 8-K dated September
11, 1998, SEC File Number 1-7210).
4(f) Registration Rights Agreement dated July 15, 1998, among the
Company, J.P. Morgan Securities, Inc., Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, and A.G. Edwards & Sons,
Inc.
*5 Opinion of Locke Purnell Rain Harrell (A Professional Corporation)
regarding validity and enforceability of the New Notes.
10(a) 1989 Long-Term Incentive Plan (As Restated and Amended Effective
August 16, 1996) (incorporated by reference to Exhibit 10(a) to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1996, SEC File Number 1-7210).
10(b) Non-Employee Director Stock Option Plan (As Amended Effective
August 16, 1996) (incorporated by reference to Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1996, SEC File Number 1-7210).
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).
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 Form 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 Form 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
year ended June 30, 1992, SEC File Number 1-7210).
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10(g) Paperboard Supply Agreement, dated May 14, 1998, between the
Company, Republic Paperboard Company and James Hardie Gypsum, Inc.
(incorporated by reference to Exhibit 99(c) to the Company's
Current Report on Form 8-K, dated September 11, 1998, SEC File
Number 1-7210). Portions of this Exhibit were omitted pursuant to
a request for confidential treatment filed with the Office of the
Secretary of the SEC.
10(h) Amended and Restated Agreement for Engineering, Procurement and
Construction dated as of June 26, 1988 between Republic Paperboard
Company and Fluor Daniel, Inc. relating to the Lawton Mill
(incorporated by reference to Exhibit 99(d) to the Company's
Current Report on Form 8-K, dated September 11, 1998, SEC File
Number 1-7210). Portions of this Exhibit were omitted pursuant to
a request for confidential treatment filed with the Office of the
Secretary of the SEC.
10(i) Amended and Restated Parent Company Guarantee effective as of June
26, 1998 from the Company to Fluor Daniel, Inc. relating to the
Lawton Mill (incorporated by reference to Exhibit 99(e) to the
Company's Current Report on Form 8-K, dated September 11, 1998,
SEC File Number 1-7210).
12 Statement re Computation of Ratios.
21 Significant Subsidiaries of the Registrant.
23(a) Consent of Arthur Andersen, LLP.
*23(b) Consent of Locke Purnell Rain Harrell (A Professional Corporation)
(included in Exhibit 5).
24 Power of Attorney (included on signature page of this Registration
Statement).
25 Statement of Eligibility of Trustee.
27 Financial Data Schedule.
99(a) Form of Letter of Transmittal.
99(b) Form of Notice of Guaranteed Delivery.
</TABLE>
*To be filed by amendment.
II-8
<PAGE>
EXHIBIT 1
$100,000,000
REPUBLIC GROUP INCORPORATED
9.50% SENIOR SUBORDINATED NOTES DUE 2008
Purchase Agreement
July 10, 1998
J.P. Morgan Securities Inc.
Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated
A.G. Edwards & Sons, Inc.
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
Republic Group Incorporated, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the initial purchasers listed in Schedule I hereto
(the "INITIAL PURCHASERS") $100,000,000 principal amount of its 9.50% Senior
Subordinated Notes due 2008 (the "SECURITIES"). The Securities will be issued
pursuant to the provisions of an indenture to be dated as of July 10, 1998 (the
"INDENTURE") between the Company and UMB Bank, N.A., as trustee (the "TRUSTEE").
The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), in reliance upon exemptions therefrom.
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum dated June 26, 1998 (the "PRELIMINARY
MEMORANDUM") and has prepared a final offering memorandum dated the date hereof
(the "FINAL MEMORANDUM" and, with the Preliminary Memorandum, collectively, the
"OFFERING MEMORANDUM"), for the information of the Initial Purchasers and for
delivery to prospective purchasers of the Securities. As used herein, the terms
"Preliminary Memorandum" and "Final Memorandum" shall include in each case the
documents incorporated by reference therein. The terms "supplement",
"amendment" and "amend" with respect to the Preliminary Memorandum and the Final
Memorandum shall be deemed to refer to and include
<PAGE>
the filing of any document with the Securities and Exchange Commission (the
"COMMISSION") deemed to be incorporated by reference therein.
The purchasers of the Securities and their direct and indirect transferees
will be entitled to the benefits of a Registration Rights Agreement, to be dated
as of the Closing Date and to be substantially in the form attached hereto as
Exhibit A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company
will file one or more registration statements with the Commission registering
with the Commission the Securities or the Exchange Securities referred to (and
as defined) in such Registration Rights Agreement.
It is understood that concurrently with or prior to the closing of the
offering and sale of the Securities, the Company will enter into a credit
agreement with a syndicate of banks led by Morgan Guaranty Trust Company of New
York and NationsBank, N.A. as co-agents, establishing a credit facility (the
"NEW CREDIT FACILITY") in an aggregate principal amount of up to $85 million.
It is further understood that substantially all of the net proceeds from the
offering, together with most of the net proceeds of borrowings under the New
Credit Facility, will be used to finance the construction of a recycled
paperboard mill in Lawton, Oklahoma (the "LAWTON MILL") or to repay indebtedness
incurred in connection therewith. In connection with the construction of the
Lawton Mill, the Company has entered into a long-term supply agreement dated as
of May 15, 1998 with James Hardie Gypsum, Inc. (the "HARDIE CONTACT"), an
equipment purchase agreement dated as of June 26, 1998 with Voith Sulzer Paper
Technology, North America, Inc. (the "VOITH SULZER AGREEMENT") and an
engineering, procurement and construction agreement dated as of June 26, 1998
with Fluor Daniel Inc. (the "FLUOR DANIEL AGREEMENT", and together with the
Hardie Agreement, the Voith Sulzer Agreement and the New Credit Facility, the
"TRANSACTION DOCUMENTS").
The Company hereby agrees with the Initial Purchasers as follows:
1. The Company agrees to issue and sell the Securities to the several
Initial Purchasers as hereinafter provided, and the Initial Purchasers, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agree to purchase, severally and not jointly,
from the Company the respective principal amount of Securities set forth
opposite such Initial Purchaser's name in Schedule I hereto at a price (the
"PURCHASE PRICE") equal to 97.375% of their principal amount plus accrued
interest, if any, from July 15, 1998 to the date of payment and delivery.
2. The Company understands that the Initial Purchasers intend (i) to
offer privately and pursuant to Regulation S under the Securities Act
("REGULATION S") their respective portions of the Securities as soon after this
2
<PAGE>
Agreement has become effective as in the judgment of the Initial Purchasers is
advisable and (ii) initially to offer the Securities upon the terms set forth in
the Offering Memorandum.
The Company confirms that it has authorized the Initial Purchasers, subject
to the restrictions set forth below, to distribute copies of the Offering
Memorandum in connection with the offering of the Securities. Each Initial
Purchaser hereby makes to the Company the following representations and
agreements:
(i) it is a "qualified institutional buyer" within the meaning of
Rule 144A under the Securities Act; and
(ii) (a) it will not solicit offers for, or offer to sell, the
Securities by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act ("REGULATION
D")), including: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and (ii any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising; (B) it will not solicit offers for, or offer to sell, the
Securities in a manner involving a public offering within the meaning of
Section 4(2) of the 1933 Act; and (C) it will solicit offers for the
Securities only from, and will offer and initially sell the Securities only
to, persons who it reasonably believes to be (x) in the case of offers
inside the United States, "qualified institutional buyers" within the
meaning of Rule 144A under the Securities Act and (y) in the case of offers
outside the United States, to persons other than U.S. persons ("FOREIGN
PURCHASERS", which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for
foreign beneficial owners (other than an estate or trust)) that, in each
case, in purchasing the Securities are deemed to have represented and
agreed as provided in the Offering Memorandum.
With respect to offers and sales outside the United States, as described in
clause (ii)(B)(y) above, each Initial Purchaser hereby represents and agrees
with the Company that:
(i) it understands that no action has been or will be taken by the
Company that would permit a public offering of the Securities, or
possession or distribution of the Offering Memorandum or any other offering
or publicity material relating to the Securities, in any country or
jurisdiction where action for that purpose is required;
3
<PAGE>
(ii) it will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or
has in its possession or distributes the Offering Memorandum or any such
other material, in all cases at its own expense;
(iii) it understands that the Securities have not been and will not
be registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the Securities Act or
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act;
(iv) it has offered the Securities and will offer and sell the
Securities (x) as part of its distribution at any time and (y) otherwise
until 40 days after the later of the commencement of the offering and the
Closing Date, only in accordance with Rule 903 of Regulation S.
Accordingly, neither such Initial Purchaser, nor any of its Affiliates, nor
any persons acting on its behalf has engaged or will engage in any directed
selling efforts (within the meaning of Regulation S) with respect to the
Securities, and such Initial Purchaser, its Affiliates and any such persons
have complied and will comply with the offering restrictions requirement of
Regulation S; and
(v) it agrees that, at or prior to confirmation of sales of the
Securities, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the distribution compliance period a confirmation
or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "SECURITIES ACT"), and
may not be offered and sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise prior to 40 days after the
closing of the offering, except in either case in accordance with
Regulation S (or Rule 144A, if available) under the Securities Act.
Terms used above have the meaning given to them by Regulation S."
Terms used in this Section 2 and not otherwise defined in this Agreement
have the meanings given to them by Regulation S.
3. Payment for the Securities shall be made by wire transfer in
immediately available funds to the account specified by the Company at 9:00
4
<PAGE>
A.M. on July 15, 1998, or at such other time on the same or such other date, not
later than the fifth Business Day thereafter, as the Initial Purchasers and the
Company may agree upon in writing. The time and date of such payment are
referred to herein as the "CLOSING DATE". As used herein, the term "BUSINESS
DAY" means any day other than a day on which banks are permitted or required to
be closed in New York City.
Payment for the Securities shall be made against delivery of the
certificates evidencing the Securities registered in such names and issued in
such denominations as the Initial Purchasers shall request no later than two
Business Days prior to the Closing Date, at the office of Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017 or at such other location as the
Initial Purchasers and the Company may agree, with any transfer taxes payable in
connection with the transfer to the Initial Purchasers of the Securities duly
paid by the Company. The certificates for the Securities will be made available
for inspection by the Initial Purchasers at the office of J.P. Morgan Securities
Inc. at the address set forth above not later than 10:00 A.M., New York City
time, on the Business Day prior to the Closing Date.
4. The Company represents and warrants to each Initial Purchaser that:
(a) the Preliminary Memorandum did not, as of its date, and the
Final Memorandum will not, in the form used by the Initial Purchasers to
confirm sales of the Securities and as of the Closing Date, contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances existing at such dates, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information relating
to any Initial Purchaser furnished to the Company in writing by such
Initial Purchaser expressly for use therein;
(b) the documents incorporated by reference in the Final
Memorandum, when they were filed with the Commission, conformed in all
material respects to the requirements of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and none of such documents contained
an untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and any further documents so
filed and incorporated by reference in the Final Memorandum, when such
documents are filed with the Commission, will conform in all material
respects to the requirements of the Exchange Act, and will not contain an
untrue statement of a material fact or omit to state
5
<PAGE>
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(c) the financial statements, and the related notes thereto,
included or incorporated by reference in the Offering Memorandum present
fairly the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates indicated and the results of
their operations and the changes in their consolidated cash flows for the
periods specified; and said financial statements have been prepared in
conformity with generally accepted accounting principles and practices
applied on a consistent basis (it being understood that the unaudited
financial statements do not contain complete footnotes and are subject to
normal fiscal year-end adjustments);
(d) since the respective dates as of which information is given in
the Preliminary Memorandum and Final Memorandum, there has not been any
decrease in the capital stock or increase in long-term debt of the Company
or any of its subsidiaries otherwise than as set forth or contemplated in
the Offering Memorandum, or any material adverse change or any development
involving a prospective material adverse change, in or affecting (i)(x) the
expected timetable for the construction, start-up, commercial production
and full operation of the Lawton Mill, (y) the anticipated cost of
construction of the Lawton Mill and (z) the expected quantitative and
qualitative production capability of the Lawton Mill, in each case as
contemplated by the Offering Memorandum (collectively, the "LAWTON MILL
DEVELOPMENT") or (ii) the general affairs, business, prospects, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole, otherwise than as set forth
or contemplated in the Offering Memorandum; and except as set forth or
contemplated in the Offering Memorandum, neither the Company nor any of its
subsidiaries has entered into any transaction or agreement (whether or not
in the ordinary course of business) material to the Company and its
subsidiaries taken as a whole;
(e) the Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Memoran
dum, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, other than where the failure
to be so qualified or in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole;
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<PAGE>
(f) each of the Company's subsidiaries has been duly incorporated
and is validly existing as a corporation under the laws of its jurisdiction
of incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering
Memorandum, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts any
business, so as to require such qualification, other than where the failure
to be so qualified or in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole; and all the
outstanding shares of capital stock of each subsidiary of the Company have
been duly authorized and validly issued, are fully-paid and non-assessable,
and, except as set forth on Exhibit B, are owned by the Company, directly
or indirectly, free and clear of all liens, encumbrances, security
interests and claims;
(g) this Agreement has been duly authorized, executed and delivered
by the Company and constitutes the valid and binding agreement of the
Company;
(h) the Securities have been duly authorized, and, when executed,
authenticated and issued under the Indenture and delivered to and paid for
by the Initial Purchasers, will have been duly executed, authenticated,
issued and delivered and will constitute valid and binding obligations of
the Company entitled to the benefits provided by the Indenture; the
Indenture has been duly authorized and, when executed and delivered by the
Company and the Trustee, will constitute a valid and binding instrument of
the Company; and the Securities and the Indenture conform in all material
respects to the descriptions thereof in the Offering Memorandum;
(i) the Exchange Securities have been duly authorized, and, when
authenticated and issued under the Indenture and delivered in exchange for
the Securities upon consummation of the Exchange Offer (as defined in the
Registration Rights Agreement) in accordance with the Registration Rights
Agreement, will have been duly executed, authenticated, issued and
delivered and will constitute valid and binding obligations of the Company
entitled to the benefits provided by the Indenture;
(j) the Registration Rights Agreement has been duly authorized,
executed and delivered by, and is a valid and binding instrument of, the
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<PAGE>
Company; and the Registration Rights Agreement conforms to the description
thereof in the Offering Memorandum;
(k) neither the Company nor any of its subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under (i) its Certificate of Incorporation or By-Laws, (ii) any
indenture, mortgage, deed of trust or loan agreement or (iii) any other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of them or any of their respective properties
is bound, except for violations and defaults which individually and in the
aggregate are not material to the Company and its subsidiaries taken as a
whole or to the holders of the Securities; the issue and sale of the
Securities and the execution, delivery and performance by the Company of
its obligations under the Securities, the Indenture, the Registration
Rights Agreement, this Agreement and the Transaction Documents and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, or, except as contemplated pursuant to the
Loan Documents (as defined in the New Credit Facility) result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries, under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is subject except for
conflicts with, breaches of or defaults under agreements (other than any
indenture or loan agreements) which individually and in the aggregate are
not material to the Company and its subsidiaries taken as a whole or to the
holders of the Securities, nor will any such action result in any violation
of the provisions of the Certificate of Incorporation or the By-Laws of the
Company or any applicable law or statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Company, its subsidiaries or any of their respective properties except for
violations (other than violations of the Certificate of Incorporation or
the By-Laws of the Company) which individually and in the aggregate are not
material to the Company and its subsidiaries taken as a whole or to the
holders of the Securities; and, except for the recording of the Mortgage
(as defined in the New Credit Facility) and for the filing of Uniform
Commercial Code financing statements as contemplated by the Loan Documents,
no consent, approval, authorization, order, license, registration,
qualification or notice of or with any court or governmental agency or body
is required for the issue and sale of the Securities or the consummation by
the Company of the transactions contemplated by this Agreement, the
Registration Rights
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<PAGE>
Agreement, the Indenture or the Transaction Documents, except such
consents, approvals, authorizations, orders, licenses, registrations,
qualifications or notices (i) as may be required under (A) state securities
or Blue Sky Laws in connection with the purchase and distribution of the
Securities by the Initial Purchasers or (B) under the Securities Act with
respect to the registration of the Exchange Securities pursuant to the
terms of the Registration Rights Agreement and the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, or (ii in the
case of consents, approvals, authorizations, orders, licenses,
registrations, qualifications or notices with respect to the Lawton Mill
Development, such as are not, in the good faith business judgment of the
Company's management, required to be obtained as of the date hereof and as
of the Closing Date in order to meet the time schedule and cost estimates
for the Lawton Mill Development contemplated by the Offering Memorandum;
(l) except as set forth in the Offering Memorandum, there are no
legal or governmental investigations, actions, suits or proceedings pending
or, to the knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries or any of their respective properties or
to which the Company or any of its subsidiaries is or may be a party or to
which any property of the Company or any of its subsidiaries is or may be
the subject which, if determined adversely to the Company or any of its
subsidiaries, could individually or in the aggregate reasonably be expected
to have, a material adverse effect on the general affairs, business,
prospects, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, taken as a whole;
(m) neither the Company, nor any affiliate (as defined in Rule
501(b) of Regulation D) of the Company has directly, or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Securities Act) which is or
will be integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the offering
contemplated by the Offering Memorandum;
(n) none of the Company, any affiliate (as defined in Rule 501(b)
of Regulation D) of the Company or any person acting on behalf of any of
them has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c) under
the Securities Act or, with respect to Securities sold outside the United
States to non-U.S. persons (as defined in Rule 902 under the Securities
Act) by means of any directed selling efforts within the meaning of Rule
902 under the Securities Act and the Company, any affiliate of the Company
and any person acting on behalf of any of them has complied
9
<PAGE>
with and will implement the "offering restrictions" requirements of
Regulation S;
(o) the Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act;
(p) assuming the accuracy of the representations of the Initial
Purchasers contained in Section 2 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify an indenture under the Trust Indenture Act of
1939, as amended;
(q) the Company is not and, after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Final Memorandum, will not be an "investment company", as
defined in the Investment Company Act of 1940, as amended;
(r) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants with respect to the Company and its subsidiaries as required by
the Securities Act;
(s) each of the Transaction Documents has been duly authorized,
executed and delivered by, and constitutes a valid and binding obligation
of, the Company and/or one or more of its subsidiaries, as applicable; each
of the Transaction Documents is in full force and effect as of the date
hereof and neither the Company nor any of its subsidiaries, nor, to the
knowledge of the Company, any of the other parties thereto, is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under any of the Transaction Documents, except for violations and
defaults which individually or in the aggregate would not be material to
the Lawton Mill Development, to the Company and its subsidiaries taken as a
whole or to the issuance and sale of the Securities;
(t) the Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names or licenses with
respect thereto, currently employed by them in connection with the business
now operated by them or necessary for the Lawton Mill Development except
where the failure to own, possess or have the ability
10
<PAGE>
to acquire the same could not, individually or in the aggregate, be
reasonably expected to have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, or on the Lawton Mill
Development, and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in any material adverse change in the condition, financial or
otherwise, or on the earnings, business or operations of the Company and
its subsidiaries, taken as a whole, or on the Lawton Mill Development;
(u) the Company and its subsidiaries have good and marketable title
in fee simple to all material items of real property and good and
marketable title to all material personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such as
are described or referred to in the Offering Memorandum or such as do not
materially affect the value of such property and do not interfere with the
use made or proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, existing and
enforceable leases with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company or its subsidiaries;
(v) the Company and its subsidiaries have led all material Federal,
state, and local tax returns which have been required to be filed and have
paid all taxes shown thereon and all assessments received by them or any of
them to the extent that such taxes have become due and are not being
contested in good faith; and, except as disclosed in the Offering
Memorandum there is no tax deficiency which has been or might reasonably be
expected to be asserted or threatened against the Company or any subsidiary
which could reasonably be expected to have, a material adverse effect on
the Company and its subsidiaries taken as a whole ;
(w) each of the Company and its subsidiaries owns, possesses or has
obtained all licenses, permits, certificates, consents, orders, approvals
and other authorizations from, and has made all declarations and filings
with, all Federal, state, local and other governmental authorities
(including regulatory agencies) and all courts and other tribunals
necessary to own or lease, as the case may be, and to operate its
properties and to carry on its business as conducted as of the date hereof,
and to effect the Lawton Mill Development (except for licenses, permits,
certificates, consents, approvals and other authorizations the failure to
own, possess or obtain
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<PAGE>
which could not reasonably be expected to have a material adverse effect on
the Company and its subsidiaries taken as a whole, and except for licenses,
permits, certificates, consents, approvals and other authorizations with
respect to the Lawton Mill Development that are not, in the good faith
business judgment of the Company's management, required to be obtained as
of the date hereof and as of the Closing Date in order to meet the time
schedule and cost estimates for the Lawton Mill Development), and neither
the Company nor any such subsidiary has received any notice of any
proceedings relating to revocation or modification of any such license,
permit, certificate, consent, order, approval or other authorization which
revocation or modification could reasonably be expected to have, a material
adverse effect on the Company and its subsidiaries taken as a whole or on
the Lawton Mill Development, and each of the Company and its subsidiaries
is in compliance with all laws and regulations relating to the conduct of
its business as conducted as of the date hereof except for violations which
individually and in the aggregate are not material to the Company and its
subsidiaries taken as a whole;
(x) there are no existing or, to the best knowledge of the Company,
threatened labor disputes with the employees of the Company or any of its
subsidiaries which could reasonably be expected to have a material adverse
effect on the Company and its subsidiaries taken as a whole;
(y) except as set forth in the Offering Memorandum, the Company and
its subsidiaries (i) are in compliance with any and all applicable Federal,
state and local laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not have, or would not reasonably be expected to have, a
material adverse effect on the Company and its subsidiaries, taken as a
whole;
(z) the Company has reasonably concluded that the costs and
liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities
12
<PAGE>
and any potential liabilities to third parties) of the Company and its
subsidiaries will not reasonably be expected to have a material adverse
effect on the Company and its subsidiaries, taken as a whole; and
(aa) none of the Company's subsidiaries is organized under the laws
of, or has its principal place of business in, a jurisdiction located
outside of the United States.
5. The Company covenants and agrees with each of the several Initial
Purchasers as follows:
(a) to deliver to the Initial Purchasers as many copies of the
Preliminary Memorandum, the Final Memorandum and any documents incorporated
by reference therein (including any amendments and supplements thereto) as
the Initial Purchasers may reasonably request;
(b) before distributing any amendment or supplement to the Offering
Memorandum, to furnish to the Initial Purchasers a copy of the proposed
amendment or supplement for review and not to distribute any such proposed
amendment or supplement to which the Initial Purchasers reasonably object;
(c) if, at any time prior to the completion of the initial
placement of the Securities, any event shall occur as a result of which it
is necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered to the Initial Purchasers, not misleading,
or if it is necessary to amend or supplement the Offering Memorandum to
comply with law, forthwith to prepare and furnish, at the expense of the
Company, to the Initial Purchasers and to the dealers (whose names and
addresses the Initial Purchasers will furnish to the Company) to which
Securities may have been sold by the Initial Purchasers on behalf of the
Initial Purchasers and to any other dealers upon request, such amendments
or supplements to the Offering Memorandum as may be necessary so that the
statements in the Offering Memorandum as so amended or supplemented will
not, in the light of the circumstances when the Offering Memorandum is
delivered to a purchaser, be misleading or so that the Offering Memorandum
will comply with law;
(d) to endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such United States state or territorial
jurisdictions as the Initial Purchasers shall reasonably request and to
continue such qualification in effect so long as reasonably required for
distribution of the Securities; provided that the Company shall not be
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required to register or qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction;
(e) for a period of three years beginning on the date hereof, to
furnish to the Initial Purchasers copies of all reports or other
communications (financial or other) furnished to holders of Securities, and
copies of any reports and financial statements furnished to or filed with
the Commission (other than those portions as to which confidential
treatment has been requested) or any national securities exchange or inter-
dealer quotation system;
(f) during the period beginning on the date hereof and continuing
to and including the Business Day following the Closing Date, not to offer,
sell, contract to sell (except pursuant to the Registration Rights
Agreement), or otherwise dispose of any debt securities of or guaranteed by
the Company which are substantially similar to the Securities without the
prior written consent of the Initial Purchasers;
(g) to use the net proceeds received by the Company from the sale
of the Securities pursuant to this Agreement in the manner specified in the
Offering Memorandum under the caption "Use of Proceeds";
(h) to use its reasonable best efforts to cause the Securities to
be eligible for the PORTAL trading system of the National Association of
Securities Dealers, Inc. (the Company hereby confirms that it has
authorized the Initial Purchasers to take steps necessary for that
purpose);
(i) to use its reasonable best efforts to have the Securities
accepted for settlement through DTC, and if requested by the Initial
Purchasers, Euroclear and Cedel (the Company hereby confirms that it has
authorized the Initial Purchasers to take steps necessary for that
purpose);
(j) during the period of two years after the Closing Date, the
Company will not, and will not permit any of its "affiliates" (as defined
in Rule 144 under the Securities Act) to, resell any of the Securities that
have been reacquired by any of them; provided that any individual that is
an affiliate of the Company may resell Securities if such Securities upon
acquisition by the purchaser thereof are freely tradeable under the 1933
Act.
(k) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all costs and expenses incident to the performance of its obligations
hereunder, including without limiting the generality of the
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<PAGE>
foregoing, all fees, costs and expenses (i) incident to the preparation,
issuance, execution, authentication and delivery of the Securities,
including any expenses of the Trustee, (ii incident to the preparation,
printing and distribution of the Preliminary Memorandum and the Final
Memorandum (including in each case all exhibits, amendments and supplements
thereto), (ii incurred in connection with the registration or qualification
and determination of eligibility for investment of the Securities under the
laws of such United States state or territorial jurisdictions as the
Initial Purchasers may designate (including reasonable fees of counsel for
the Initial Purchasers and their disbursements), (iv in connection with the
approval for trading of the Securities on any securities exchange or inter-
dealer quotation system (as well as in connection with the designation of
the Securities as PORTAL securities), (v) in connection with the printing
(including word processing and duplication costs) and delivery of this
Agreement, the Indenture, the Registration Rights Agreement, any Blue Sky
Memorandum and the furnishing to the Initial Purchasers and dealers of
copies of the Offering Memorandum, including mailing and shipping, as
herein provided, (vi related to any filing with the National Association of
Securities Dealers, Inc. with respect to the Securities or Exchange
Securities, (vi payable to rating agencies in connection with the rating of
the Securities, and (vi any expenses incurred by the Company in connection
with a "road show" presentation to potential investors;
(l) the Company will not take any action prohibited by Regulation M
under the Exchange Act, in connection with the distribution of the
Securities contemplated hereby;
(m) none of the Company, any of its affiliates (as defined in Rule
501(b) of Regulation D) or any person acting on behalf of the Company or
such affiliate will solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general
advertising, including: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and (ii any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising;
(n) none of the Company, any of its affiliates (as defined in Rule
144(a)(1) under the Securities Act) or any person acting on behalf of any
of them will engage in any directed selling efforts with respect to the
Securities within the meaning of Regulation S;
(o) none of the Company, any of its affiliates (as defined in
Regulation 501(b) of Regulation D) or any person acting on behalf of
15
<PAGE>
them will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act)
which will be integrated with the sale of the Securities in a manner which
would require the registration under the Securities Act of the Securities,
and the Company will take all action that is appropriate or necessary to
assure that its offerings of other securities will not be integrated for
purposes of the Securities Act with the offerings contemplated hereby;
(p) to comply with all of the terms and conditions of the
Registration Rights Agreement; and
(q) prior to any registration of the Securities pursuant to the
Registration Rights Agreement, or at such earlier time as may be so
required, to qualify the Indenture under the Trust Indenture Act of 1939,
as amended (the "TIA"), and to enter into any necessary supplemental
indentures in connection therewith.
6. The several obligations of the Initial Purchasers hereunder to
purchase the Securities on the Closing Date are subject to the performance by
the Company of its obligations hereunder and to the following additional
conditions:
(a) the representations and warranties of the Company contained
herein are true and correct on and as of the Closing Date as if made on and
as of the Closing Date and the Company shall have complied with all
agreements and all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date;
(b) subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any downgrading,
nor shall any notice have been given of (i) any downgrading, (ii) any
intended or potential downgrading or (iii) any review or possible change
that does not indicate an improvement, in the rating accorded any
securities of or guaranteed by the Company by any "nationally recognized
statistical rating organization", as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act;
(c) since the respective dates as of which information is given in
the Offering Memorandum, there shall not have been any decrease in the
capital stock or increase in the long-term debt of the Company or any of
its subsidiaries otherwise than as set forth or contemplated in the
Offering Memorandum, or any material adverse change or any development
which could reasonably be expected to result in a prospective material
adverse change, in or affecting the Lawton Mill Development or the general
affairs, business, prospects, management, financial position, stockholders'
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<PAGE>
equity or results of operations of the Company and its subsidiaries taken
as a whole, otherwise than as set forth or contemplated in the Offering
Memorandum, the effect of which in the judgment of the Initial Purchasers
makes it impracticable or inadvisable to proceed with the offering or the
delivery of the Securities on the Closing Date on the terms and in the
manner contemplated in the Offering Memorandum; and neither the Company nor
any of its subsidiaries has sustained since the date of the latest audited
financial statements included or incorporated by reference in the Offering
Memorandum any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Offering Memorandum;
(d) the Initial Purchasers shall have received on and as of the
Closing Date a certificate signed on behalf of the Company by Phil Simpson,
the chief executive officer of the Company, and Doyle R. Ramsey, the chief
financial officer of the Company, satisfactory to the Initial Purchasers to
the effect set forth in Sections 6 and 6 and to the further effect that (i)
there has not occurred any material adverse change, or any development
which would reasonably be expected to result in a prospective material
adverse change, in or affecting (A) the Lawton Mill Development or (B) the
general affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole from that set forth or contemplated in the
Offering Memorandum and (ii neither the Company nor any of its subsidiaries
has sustained since the date of the latest audited financial statements
included or incorporated by reference in the Offering Memorandum any
material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order to decree, otherwise than as
set forth or contemplated in the Offering Memorandum;
(e) Locke Purnell Rain Harrell (A Professional Corporation),
counsel for the Company, shall have furnished to the Initial Purchasers
their written opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority to
own its properties and conduct its business as described in the
Offering Memorandum;
17
<PAGE>
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in
good standing would not have a material adverse effect on the Company
and its subsidiaries taken as a whole;
(iii) each of the Company's significant subsidiaries as
defined in Rule 1-02 of Regulation S-X has been duly incorporated and
is validly existing as a corporation under the laws of its
jurisdiction of incorporation, with corporate power and authority to
own its properties and conduct its business as described in the
Offering Memorandum, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified and in
good standing would not have a material adverse effect on the Company
and its subsidiaries taken as a whole; and, except as set forth on
Exhibit B hereto, all of the outstanding shares of capital stock of
each subsidiary, have been duly and validly authorized and issued,
are fully paid and non-assessable, and are owned directly or
indirectly by the Company, to the best knowledge of such counsel free
and clear of all liens, encumbrances, equities or claims;
(iv) other than as described in the Offering Memorandum, to
the best of such counsel's knowledge (after due inquiry of the
Company) there are no legal or governmental investigations, actions,
suits or proceedings pending or threatened against or affecting the
Company or any of its subsidiaries or any of their respective
properties or to which the Company or any of its subsidiaries is or
may be a party or to which any property of the Company or its
subsidiaries is or may be the subject which, if determined adversely
to the Company or any of its subsidiaries, could individually or in
the aggregate reasonably be expected to have a material adverse
effect on the general affairs, business, prospects, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries taken as a whole;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
18
<PAGE>
(vi) the Securities have been duly authorized, executed and
delivered by the Company and, when duly authenticated in accordance
with the terms of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement,
will constitute valid and binding obligations of the Company entitled
to the benefits provided by the Indenture; and the Securities and the
Indenture conform in all material respects to the descriptions
thereof in the Offering Memorandum;
(vii) the Exchange Securities have been duly authorized, and,
when authenticated and issued under the Indenture and delivered in
exchange for the Securities upon consummation of the Exchange Offer
(as defined in the Registration Rights Agreement) in accordance with
the Registration Rights Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
binding obligations of the Company entitled to the benefits provided
by the Indenture;
(viii) the Indenture has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding
agreement of the Company;
(ix) the Registration Rights Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, except that no opinion need be expressed
with respect to the effect of federal or state securities laws and
principles of public policy on the rights of indemnification and
contribution contained therein;
(x) each of the Transaction Documents has been duly
authorized, executed and delivered by the Company and constitutes a
valid and binding instrument of the Company;
(xi) to the knowledge of such counsel, neither the Company
nor any of its subsidiaries is, or with the giving of notice or lapse
of time or both would be, in violation of or in default under, its
Certificate of Incorporation or By-Laws; to the knowledge of such
counsel, the issue and sale of the Securities and the execution,
delivery and performance by the Company of its obligations under the
Securities, the Indenture, the Registration Rights Agreement, this
Agreement and the Transaction Documents and the consummation of the
transactions herein and therein contemplated will not conflict with
or result in a breach of any of
19
<PAGE>
the terms or provisions of, or constitute a default under, or, except
as expressly contemplated by the Loan Documents, result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries, under
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel, nor will any such
action result in any violation of the provisions of the Certificate
of Incorporation or the By-Laws of the Company or any applicable law
or statute or any order, rule or regulation that in our experience is
typically applicable to transactions of the type contemplated by the
Transaction Documents (and in any case excluding such violations as
would not have a material adverse effect on the Company and its
subsidiaries as a whole) of any court or governmental agency or bo dy
having jurisdiction over the Company, any of its subsidiaries or any
of their respective properties;
(xii) no consent, approval, authorization, order, license,
registration, qualification or notice of, or with or to any court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation of the other transactions contemplated
by this Agreement, the Registration Rights Agreement or the Indenture
(but excluding the Transaction Documents), except such consents,
approvals, authorizations, registrations or qualifications as may be
required under (A) state securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the Initial
Purchasers or (B) state securities or Blue Sky laws or the Securities
Act with respect to the registration of the Exchange Securities
pursuant to the terms of the Registration Rights Agreement and the
qualification of the Indenture under the Trust Indenture Act of 1939,
as amended;
(xiii) based upon the representations, warranties and
agreements of the Company in this Agreement (other than the
representations and warranties set forth in Section 4(p)) and of the
Initial Purchasers in Section 2 of this Agreement (other than the
representations and agreements set forth in Section 2(ii)(B)) and on
the truth and accuracy of the representations and agreements deemed
to be made by purchasers of the Securities contained in the Final
Memorandum, it is not necessary in connection with the offer, sale
and delivery of the Securities to the Initial Purchasers under this
Agreement or in connection with the initial resale of such Securities
by the Initial Purchasers in accordance with Section 2 of this
Agreement to register the Securities under the Securities
20
<PAGE>
Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended; provided however that such counsel need not express
any opinion with respect to the conditions under which the Securities
may be further resold;
(xiv) the Securities satisfy the requirements set forth in
Rule 144A(d)(3) under the Securities Act;
(xv) the statements in the Offering Memorandum under
"Business--The Lawton Mill", "Business--The Hardie Agreement",
"Business--Environmental Regulation", "Business--Legal Proceedings",
"Description of New Credit Facility", "Description of Notes", "Plan
of Distribution" (other than the last three paragraphs under such
caption) and "Notice to Investors", insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, accurately present in all material respects such
legal matters, documents or proceedings;
(xvi) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of proceeds
thereof as described in the Offering Memorandum, will not be, an
"investment company", as defined in the Investment Company Act; and
(xvii) such counsel (A) is of the opinion that each document
filed with the Commission pursuant to the Exchange Act and
incorporated by reference in the Final Memorandum (except for the
financial statements or other financial and statistical information
included therein, as to which such counsel need express no opinion)
complied as to form in all material respects, when filed with the
Commission, with the Exchange Act; and (B) no facts have come to the
attention of such counsel that lead such counsel to believe that
(except for the financial statements or other financial and
statistical information included or incorporated by reference therein
as to which such counsel need express no belief) the Final Memorandum
as of its date of issuance, or as amended or supplemented, if
applicable, as of the Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
21
<PAGE>
In rendering such opinions, such counsel may (A) as to matters involving
the application of laws other than the laws of the State of Texas, the General
Corporation Law of the State of Delaware and the Federal securities laws of the
United States, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, either (x) rely upon an opinion or
opinions (reasonably satisfactory to the Initial Purchasers' counsel) of other
counsel, reasonably acceptable to the Initial Purchasers' counsel, familiar with
the applicable laws or (y) for purposes of expressing its opinion assume (1)
with respect to the Securities, Exchange Securities, Indenture, Registration
Rights Agreement, New Credit Facility and this Agreement, that New York law is
the same as Texas law, (2) with respect to the Fluor Daniel Agreement, that
Oklahoma law is the same as Texas law, and (3) with respect to the Voith Sulzer
Agreement, that California law is the same as Texas law; and (B) rely as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and certificates or other written statements
of officials of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and its subsidiaries. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel upon which they relied is in form satisfacto ry to such counsel
and, in such counsel's opinion, the Initial Purchasers and they are justified in
relying thereon. With respect to the matters to be covered in Section
6(e)(xvii) above counsel may state their opinion and belief is based upon their
participation in the preparation of the Offering Memorandum and any amendment or
supplement thereto but is without independent check or verification except as
specified.
The opinion of Locke Purnell Rain Harrell (A Professional Corporation)
described above shall be rendered to the Initial Purchasers at the request of
the Company and shall so state therein.
(f) on the date of the issuance of the Offering Memorandum and also
on the Closing Date, Arthur Andersen LLP shall have furnished to the
Initial Purchasers letters, dated the respective dates of delivery thereof,
in form and substance satisfactory to you, containing statements and
information of the type customarily included in accountants "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Offering Memorandum;
(g) all of the conditions to borrowing under the New Credit
Facility shall have been satisfied and not waived and the New Credit
Facility shall have been executed by each of the parties thereto and shall
be in full force and effect;
(h) the Initial Purchasers shall have received on and as of the
Closing Date an opinion of Davis Polk & Wardwell, counsel to the Initial
22
<PAGE>
Purchasers, as to such matters as you reasonably request, in form and
substance satisfactory to you; and
(i) on or prior to the Closing Date the Company shall have
furnished to you such further certificates and documents as you shall
reasonably request.
7. The Company agrees to indemnify and hold harmless each Initial
Purchaser, each person, if any, who controls any Initial Purchaser and, each
affiliate of any Initial Purchaser which assists such Initial Purchaser in the
distribution of the Securities within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including without limitation the legal
fees and other expenses reasonably incurred in connection with any suit, action
or proceeding or any claim asserted) caused by any breach or alleged breach of
any of the representatives and warranties contained in Section 4, breach or
alleged breach of any of the covenants contained in subparagraphs (l), (m), (n)
and (o) of Section 5 or any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (and any amendment or
supplement thereto if the Company shall have furnished any amendments or
supplements thereto) or the Preliminary Memorandum, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Initial Purchaser furnished to the
Company in writing by such Initial Purchaser expressly for use therein; provided
--------
that the foregoing indemnity with respect to any preliminary offering memorandum
shall not inure to the benefit of any Initial Purchaser (or to the benefit of
any person controlling such Initial Purchaser) from whom the person asserting
such losses, claims, damages or liabilities purchased Securities if such untrue
statement or omission or alleged untrue statement or omission made in the
Preliminary Memorandum is eliminated or remedied in the Final Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto to such Initial Purchaser prior to the confirmation of the
sale of such Securities to such person by such Initial Purchaser) and a copy of
the Final Memorandum (as so amended or supplemented) shall not have been
furnished to such person in connection with the sale of such Securities to such
person, to the extent such claims asserted by such person do not include
allegations of other untrue statements or omissions made in the Final
Memorandum.
Each Initial Purchaser agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers and each person who
23
<PAGE>
controls the Company within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to each Initial Purchaser, but only with reference to
information relating to such Initial Purchaser furnished to the Company in
writing by such Initial Purchaser expressly for use in the Offering Memorandum
or any amendment or supplement thereto.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "INDEMNIFIED PERSON") shall promptly
notify the person against whom such indemnity may be sought (the "INDEMNIFYING
PERSON") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel and counsel for the Indemnifying Person) for all Indemnified Persons,
and that all such fees and expenses shall be reimbursed as they are incurred
reasonably promptly after receipt by the Indemnifying Party of a request
therefor by the Indemnified Party. Any such separate firm for the Initial
Purchasers, each affiliate of any Initial Purchaser which assists such Initial
Purchaser in the distribution of the Securities and such control persons of
Initial Purchasers shall be designated in writing by J.P. Morgan Securities Inc.
and any such separate firm for the Company, its directors, its officers and such
control persons of the Company shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person
24
<PAGE>
for fees and expenses of counsel as contemplated by the second and third
sentence of this paragraph, the Indemnifying Person agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 120 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Initial Purchasers on the other in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Initial Purchasers on the other
shall be deemed to be in the same respective proportions as the net proceeds
from the offering (before deducting expenses) received by the Company and the
total discounts and commissions received by the Initial Purchasers, in each case
as set forth in the table on the cover of the Offering Memorandum, bear to the
aggregate offering price of the Securities. The relative fault of the Company
on the one hand and the Initial Purchasers on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Initial Purchasers and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
-
allocation (even if the Initial Purchasers were treated as one entity for such
25
<PAGE>
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall the Initial
Purchasers be required to contribute any amount in excess of the amount by which
the total price at which the Securities purchased by it were offered exceeds the
amount of any damages that the Initial Purchasers has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute pursuant to this Section 7 are several in
-
proportion to the respective principal amount of the Securities set forth
opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive and shall not
-
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution agreements contained in this Section 7 and
-
the representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Initial Purchaser or any person controlling any Initial Purchaser or by or
on behalf of the Company, its officers or directors or any other person
controlling the Company and (iii) acceptance of and payment for any of the
Securities.
8. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Initial Purchasers by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange or the National Association of Securities
Dealers, Inc., (ii) trading of any securities of or guaranteed by the Company
shall have been suspended on any exchange or in any over-the-counter market,
(iii) a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York State authorities, or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in the judgment of
the Initial Purchasers, is material and adverse and which, in the judgment of
the Initial Purchasers, makes
26
<PAGE>
it impracticable to market the Securities on the terms and in the manner
contemplated in the Offering Memorandum.
9. This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto.
If, on the Closing Date any one or more of the Initial Purchasers shall
fail or refuse to purchase Securities which it or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Securities which
such defaulting Initial Purchaser or Initial Purchasers agreed but failed or
refused to purchase is not more than one-tenth of the aggregate principal amount
of the Securities to be purchased on such date, the other Initial Purchasers
shall be obligated severally in the proportions that the principal amount of
Securities set forth opposite their respective names in Schedule I bears to the
aggregate principal amount of Securities set forth opposite the names of all
such non-defaulting Initial Purchasers, or in such other proportions as the
Initial Purchasers may specify, to purchase the Securities which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
on such date; provided that in no event shall the principal amount of Securities
that any Initial Purchaser has agreed to purchase pursuant to Section 1 be
increased pursuant to this Section 9 by an amount in excess of one-ninth of such
principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Securities which it or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of
Securities with respect to which such default occurs is more than one-tenth of
the aggregate principal amount of Securities to be purchased on such date, and
arrangements satisfactory to the Initial Purchasers and the Company for the
purchase of such Securities are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any non-
defaulting Initial Purchaser or the Company. In any such case either the
Initial Purchasers or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Offering Memorandum or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Initial Purchaser from liability in respect of any
default of such Initial Purchaser under this Agreement.
10. If this Agreement shall be terminated by the Initial Purchasers, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement (other than such inability as results from the default hereunder
of one or more Initial Purchaser) or any condition of the Initial Purchasers'
obligations cannot be fulfilled, the Company agrees to reimburse the Initial
Purchasers or
27
<PAGE>
such Initial Purchasers as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
expenses of their counsel) reasonably incurred by such Initial Purchasers in
connection with this Agreement or the offering contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon the
Company, the Initial Purchasers, each affiliate of any Initial Purchaser which
assists such Initial Purchaser in the distribution of the Securities, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No initial purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor by reason of such purchase.
12. Any action by the Initial Purchasers hereunder or under the
Registration Rights Agreement may be taken by the Initial Purchasers jointly or
by J.P. Morgan Securities Inc. alone on behalf of the Initial Purchasers, and
any such action taken by the Initial Purchasers jointly or by J.P. Morgan
Securities Inc. alone shall be binding upon the Initial Purchasers. All notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Initial Purchasers shall be given to J.P.
Morgan Securities Inc., 60 Wall Street, New York, New York 10260 (telefax: 212-
648-5348); Attention: Cathy Matanle, Syndicate Department. Notices to the
Company shall be given to it at1320 Greenway Drive, Suite 920, Irving, Texas
75038-2548 (telefax: 316-727-2727)); Attention: Phil Simpson, and at 811 East
30th Avenue, Hutchinson, Kansas 67503 (telefax: 316-727-2727); Attention: Doyle
R. Ramsey.
13. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAWS PROVISIONS THEREOF.
28
<PAGE>
If the foregoing is in accordance with your understanding, please sign
below.
Very truly yours,
REPUBLIC GROUP INCORPORATED
By: /s/ Doyle R. Ramsey
--------------------------------
Name: Doyle R. Ramsey
Title: Vice President Finance
Accepted: July 15, 1998
J.P. MORGAN SECURITIES INC.
DAIN RAUSCHER WESSELS,
a division of Dain Rauscher Incorporated
A.G. EDWARDS & SONS, INC.
By: J.P. Morgan Securities Inc.
By: /s/ John Gilbert
-----------------------------------------
Name: John Gilbert
Title: Managing Director
29
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT
OF SECURITIES
INITIAL PURCHASER TO BE PURCHASED
- ----------------- ----------------
J.P. Morgan Securities Inc............... $ 90,000,000
A.G. Edwards & Sons, Inc................. 5,000,000
Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated.......... 5,000,000
------------
Total:......................... $100,000,000
============
30
<PAGE>
EXHIBIT B
Approximately 99% of the issued and outstanding capital stock of Hollis &
Eastern Railroad Company, an Oklahoma corporation, is owned by Republic Gypsum
Company, a wholly-owned subsidiary of the Company. The remaining approximately
1% is owned by individuals.
The New Credit Facility will impose liens on the stock of the Company's direct
and indirect subsidiaries.
31
<PAGE>
[Letterhead of NationsBank appears here]
Exhibit 4(c)
May 5, 1998
Republic Group Incorporated
Republic Paperboard Company
Republic Paperboard Company of West Virginia
Republic Gypsum Company
c/o Doyle R. Ramsey
Vice-President - Finance & CFO
Republic Group Incorporated
811 East 30th Avenue
Hutchinson, KS 67502
Re: Revolving Credit Promissory Note (the "Note") dated June 30, 1995, in
the principal amount of $50,000,000.00 issued by Republic Gypsum
Company, a Delaware corporation, n.k.a. Republic Group Incorporated, a
Delaware corporation ("Borrower") and Boatmen's First National Bank of
Kansas City, n.k.a. NationsBank, N.A. ("NationsBank").
Dear Doyle:
This letter agreement is to document the agreement between the Borrower and
Republic Paperboard Company, a Kansas corporation, Republic Paperboard Company
of West Virginia, a West Virginia corporation, Republic Gypsum Company, an
Oklahoma corporation (collectively the "Guarantors") and NationsBank concerning
modifying the maturity of the Note. The Borrower is seeking financing in the
form of an $85,000,000.00 syndicated loan facility and the issuance of
$100,000,000.00 in high yield bonds. This alternate financing, when obtained,
will be used in part to pay off the outstanding balance of the Note.
Based upon the foregoing, the Borrower, NationsBank and the Guarantors agree to
amend the Note and the Revolving And Term Credit Agreement dated June 30, 1995
(the "Credit Agreement") as follows:
<PAGE>
Mr. Doyle R. Ramsey
Republic Group Incorporated
May 5, 1998
Page 2
(a) The Credit Agreement is amended such that the "Revolving Credit
Maturity Date" as defined in Section 2.1 shall be the earlier of (i) the closing
of the $85,000,000.00 syndicated loan facility in favor of the Borrower, (ii)
the issuance of the $100,000,000.00 in high yield bonds benefitting the
Borrower, or (iii) June 30, 1999;
(b) The definition of "Maturity", as contained in paragraph 1 of page
3 of the Note, is deleted and the following provision is inserted in lieu
thereof:
(1) "Maturity" means the earlier of (i) closing of the
$85,000,000.00 syndicated loan facility in favor of the Borrower, (ii)
issuance of the $100,000,000.00 in high yield bonds benefitting the
Borrower, (iii) June 30, 1999, or (iv) such earlier date to which the
maturity of the Note shall be accelerated as hereinafter provided.
Nothing in this letter agreement shall be deemed to or shall in any manner
prejudice or impair the Loan Documents held by NationsBank and nothing in this
letter agreement shall be deemed to constitute any alteration, waiver or
variation of any of the terms of such Loan Documents except as expressly set
forth herein. Further, the terms and provisions of the Credit Agreement, the
Note, the Revolving Loan Guaranty and the Loan Documents as amended hereby, are
ratified and confirmed by the Borrower and Guarantors in all respects.
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 (BORROWERS) 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.
<PAGE>
Mr. Doyle R. Ramsey
Republic Group Incorporated
May 5, 1998
Page 3
On behalf of the Borrower and Guarantors, please indicate your agreement to the
foregoing by executing this letter agreement in the space provided below.
Please sign and return the original of this agreement to my attention. The
Fourth Amendment to the Loan Documents will be effective upon receipt of this
agreement. Thank you for your assistance.
Sincerely,
NATIONSBANK, N.A., successor by merger
to Boatmen's First National Bank Of
Kansas City
By: /s/ KURT A. KNUTSON
-----------------------
Kurt A. Knutson
Vice President
<PAGE>
Mr. Doyle R. Ramsey
Republic Group Incorporated
May 5, 1998
Page 4
THE UNDERSIGNED BORROWER AND GUARANTORS HEREBY AGREE TO THE TERMS OF THIS LETTER
AGREEMENT AND HEREBY REPRESENT THAT THE OFFICER EXECUTING THIS LETTER AGREEMENT
ON THEIR BEHALF IS DULY AUTHORIZED TO EXECUTE AND DELIVER THIS AGREEMENT.
ATTEST: REPUBLIC GROUP INCORPORATED
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
- ---------------------------- -------------------------------
Janey L. Rife, Secretary Doyle R. Ramsey
Vice President Finance
(Corporate Seal) Date: May 15, 1998
-----------------------------
ATTTEST: REPUBLIC PAPERBOARD COMPANY
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
- ---------------------------- -------------------------------
Janey L. Rife, Secretary Doyle R. Ramsey
Vice President Finance
(Corporate Seal) Date: May 15, 1998
-----------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY
OF WEST VIRGINIA
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
- ---------------------------- -------------------------------
Janey L. Rife, Secretary Doyle R. Ramsey
Vice President Finance
(Corporate Seal) Date: May 15, 1998
-----------------------------
ATTEST: REPUBLIC GYPSUM COMPANY
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
- ---------------------------- -------------------------------
Janey L. Rife, Secretary Doyle R. Ramsey
Vice President Finance
(Coproate Seal) Date: May 15, 1998
-----------------------------
<PAGE>
FOURTH AMENDMENT TO LOAN DOCUMENTS
THIS FOURTH AMENDMENT TO LOAN DOCUMENTS (this "Agreement") is made as
of the 28th day of April, 1998, 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 NATIONSBANK, N.A. successor by merger to
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY, a national banking association
(the "Bank");
RECITALS
A. Bank has extended credit to Parent ("Revolving Loans") evidence 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, the Second Amendment To Loan Documents ("Second
<PAGE>
Amendment") dated January 23, 1996 and the Third Amendment to Loan Documents
dated September 5, 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 (i) amending the maturity of the Revolving Note, (ii) increasing the
principal amount available for borrowing under the Revolving Note and (iii) to
amend the definition of "Applicable Margin" as contained in 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 as
follows:
(a) Subparagraph 2.1 is deleted and the following provision is inserted
in lieu thereof.
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, 1999
(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
2
<PAGE>
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.
(b) The reference to "Seven Million Dollars ($7,000,000.00)" in the first
recital on the first page of the Credit Agreement is deleted and "Fifty Million
Dollars ($50,000,000.00)" is inserted in lieu thereof.
(c) The references to "Barry Sullivan" and "(Telecopy No. (816) 691-7426)"
in subparagraph 10.1(c) are deleted and references to "Kurt Knutson" and
"(Telecopy No. (816) 979-7561)", respectively, are inserted in lieu thereof.
(d) The definition of "Revolving Credit Commitment" contained in Exhibit 1
is deleted and the following definition is inserted in lieu thereof:
"Revolving Credit Commitment" shall mean Fifty Million Dollars
($50,000,000.00).
3. Amendments To Revolving Note. The Revolving Note is amended as
follows:
(a) References on the first page to "$7,000,000,00" or "Seven Million
Dollars ($7,000,000.00)" are deleted and references to "$50,000,000.00" and
"Fifty Million Dollars ($50,000,000.00)", respectively, are inserted in lieu
thereof.
(b) The portion of the definition of "Applicable Margin" contained within
(a) (v) is deleted and the following provision is inserted in lieu thereof:
(v) equal to or greater than 5.00 or 1.00, 50 basis points.
(c) The definition of "Maturity" as contained in paragraph 1 on page 3, is
deleted and the following provision is inserted in lieu thereof:
(l) "Maturity" means June 30, 1999.
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:
3
<PAGE>
(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 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 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
4
<PAGE>
Note, 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 Name: Doyle R. Ramsey
------------------------------
(Corporate Seal) Title: Vice President Finance
-----------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
- ---------------------------- --------------------------------
Secretary Name: Doyle R. Ramsey
------------------------------
(Corporate Seal) Title: Vice President Finance
-----------------------------
ATTEST: REPUBLIC PAPERBOARD COMPANY
OF WEST VIRGINIA
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
- ---------------------------- --------------------------------
Secretary Name: Doyle R. Ramsey
------------------------------
(Corporate Seal) Title: Vice President Finance
-----------------------------
ATTEST: REPUBLIC GYPSUM COMPANY
/s/ JANEY L. RIFE By: /s/ DOYLE R. RAMSEY
- ---------------------------- --------------------------------
Secretary Name: Doyle R. Ramsey
------------------------------
(Corporate Seal) Title: Vice President Finance
-----------------------------
5
<PAGE>
BANK:
NATIONSBANK, N.A.
SUCCESSOR BY MERGER TO
BOATMEN'S FIRST NATIONAL BANK
OF KANSAS CITY
By: /s/ KURT KNUTSON
----------------------------------
Kurt Knutson
Vice President
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 28th day of April, 1998, before me, personally appeared Doyle
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Fourth 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.
- -------------------------------
[SEAL APPEARS CHERRI L. HARMS /s/ CHERRI L. HARMS
HERE] NOTARY PUBLIC --------------------------
STATE OF KANSAS Notary Public
My Appt. Exp. 2-27-99
- -------------------------------
My Commission Expires:
February 27, 1999
- -----------------
6
<PAGE>
STATE OF KANSAS }
} SS.
COUNTY OF RENO }
On this 28th day of April, 1998, before me, personally appeared Doyle
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Fourth 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.
- ---------------------------
[LOGO] CHERRI L. HARMS /s/ CHERRI L. HARMS
APPEARS NOTARY PUBLIC -------------------
HERE] STATE OF KANSAS Notary Public
My Appt. Expp. 2-27-99
- ---------------------------
My Commission Expires:
February 27, 1999
- -----------------
STATE OF KANSAS }
} SS.
COUNTY OF RENO }
On this 28th day of April, 1998, before me, personally appeared Doyle
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Fourth 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.
- ---------------------------
[LOGO] CHERRI L. HARMS /s/ CHERRI L. HARMS
APPEARS NOTARY PUBLIC -------------------
HERE] STATE OF KANSAS Notary Public
My Appt. Expp. 2-27-99
- ---------------------------
My Commission Expires:
February 27, 1999
- -----------------
7
<PAGE>
STATE OF KANSAS )
) SS.
COUNTY OF RENO )
On this 28th day of April, 1998, before me, personally appeared Doyle
Ramsey, who, being first duly sworn and known by me to be the person who
executed this Fourth 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.
- -------------------------------
[SEAL APPEARS CHERRI L. HARMS /s/ CHERRI L. HARMS
HERE] NOTARY PUBLIC --------------------------
STATE OF KANSAS Notary Public
My Appt. Exp. 2-27-99
- -------------------------------
My Commission Expires:
February 27, 1999
- -----------------
STATE OF MISSOURI )
) SS.
COUNTY OF JACKSON )
On this _____ day of _____, 1998, before me, personally appeared Kurt
Knutson, who, being first duly sworn and known by me to be the person who
executed this Fourth Amendment To Loan Documents, did say that he has full power
and authority to execute this instrument in the name of NationsBank, N.A. 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
My Commission Expires:
- -----------------
8
<PAGE>
EXHIBIT 4(f)
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and entered
into as of July 15, 1998 by and among Republic Group Incorporated, a Delaware
corporation (the "COMPANY"), and J.P. Morgan Securities Inc., Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated, and A.G. Edwards & Sons, Inc.
(together the "INITIAL PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement dated July 10,
1998, among the Company and the Initial Purchasers (the "PURCHASE AGREEMENT"),
which provides for the sale by the Company to the Initial Purchasers of
$100,000,000 principal amount of the Company's 9.50% Senior Subordinated Notes
due 2008 (the "SECURITIES"). The Securities are to be issued by the Company
pursuant to the provisions of an indenture dated as of July 10, 1998 (as
amended, supplemented or otherwise modified from time to time, the "INDENTURE")
between the Company and UMB Bank, N.A., as trustee (the "TRUSTEE").
In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide to the Initial Purchasers and their
direct and indirect transferees the registration rights with respect to the
Securities set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended from time to
time.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended from
time to time.
<PAGE>
"CLOSING DATE" shall mean the Closing Date as defined in the Purchase
Agreement.
"COMPANY" shall have the meaning set forth in the preamble and shall also
include the Company's successors.
"EXCHANGE DATE" shall have the meaning set forth in Section 2(a)(ii).
"EXCHANGE OFFER" shall mean the exchange offer by the Company of Exchange
Securities for all Securities that are Registrable Securities pursuant to
Section 2(a).
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933 Act
effected pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on an appropriate form and all amendments and supplements
to such registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"EXCHANGE SECURITIES" shall mean securities issued by the Company under the
Indenture and containing terms identical to the Securities (except that (i)
interest thereon shall accrue from the last date on which interest was paid on
the Securities or, if no such interest has been paid, from July 15, 1998 and
(ii) the Exchange Securities will not provide for additional interest accruing
thereon following a failure to register such Exchange Securities under the 1933
Act and will not contain terms with respect to transfer restrictions) and to be
offered to Holders of Securities in exchange for Securities pursuant to the
Exchange Offer.
"HOLDERS" shall mean the Initial Purchasers, for so long as they own any
Registrable Securities, and their successors, assigns and direct and indirect
transferees who become registered owners of Registrable Securities under the
Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the
term "HOLDERS" shall include Participating Broker-Dealers.
"INDENTURE" shall have the meaning set forth in the preamble.
"INITIAL PURCHASERS" shall have the meaning set forth in the preamble.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate
principal amount of outstanding Registrable Securities; provided that, for
purposes of Section 6(b), whenever the consent or approval of Holders of a
2
<PAGE>
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or any of its affiliates (as such
term is defined in Rule 405 under the 1933 Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage or amount.
"OFFER TERMINATION DATE" shall have the meaning set forth in
Section 2(a)(iv).
"PARTICIPATING BROKER-DEALER" shall have the meaning set forth in
Section 4(a) hereof.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"PURCHASE AGREEMENT" shall have the meaning set forth in the preamble.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to such prospectus, and in each case including
all material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Securities; provided, however, that
the Securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to such Securities shall have been declared effective
under the 1933 Act and such Securities shall have been disposed of pursuant to
such Registration Statement, (ii) such Securities have been sold pursuant to
Rule 144 (or any similar provision then in force, but not Rule 144A) under the
1933 Act, (iii) such Securities shall have ceased to be outstanding or (iv) such
Securities have been exchanged for Exchange Securities upon consummation of the
Exchange Offer.
"REGISTRATION EXPENSES" shall mean any and all expense incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange and National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws, (iii) all expenses of any Person in preparing or assisting in
preparing, word processing, printing and distributing, at the request of the
Company, any Registration
3
<PAGE>
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all fees
and disbursements relating to the qualification of the Indenture under
applicable securities laws, (v) the reasonable fees and disbursements of the
Trustee and its counsel, (vi) the reasonable fees and disbursements of counsel
for the Company and for the Initial Purchasers or, in the case of a Shelf
Registration Statement, the reasonable fees and disbursements of one counsel for
the Holders incurred on or before the initial effectiveness of the Shelf
Registration Statement, which counsel shall either be counsel for the Initial
Purchasers or other counsel selected by the Majority Holders and satisfactory to
the Company ("COUNSEL FOR THE HOLDERS"), (vii) the fees and disbursements of the
independent public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, and (viii) the fees and expenses of listing the
Registrable Securities on any securities exchange or quotation system in
accordance with Section 3(o) hereof but excluding underwriting discounts, if
any, and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by the Holders.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company that covers any of the Exchange Securities or the Registrable Securities
pursuant to the provisions of this Agreement and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration statement
of the Company pursuant to the provisions of Section 2(b) of this Agreement
which covers all of the Registrable Securities (except Registrable Securities
that the Holders have elected not to include in such Shelf Registration
Statement) or Securities that represent an unsold allotment for the original
offering thereof on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
4
<PAGE>
"TRUSTEE" shall have the meaning set forth in the preamble.
"UNDERWRITERS" shall have the meaning set forth in Section 3 hereof.
"UNDERWRITTEN OFFERING" shall mean a registration in which Registrable
Securities are sold to an Underwriter for reoffering to the public.
2. Registration under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best
efforts to cause to be filed on or prior to the date that is 60 days after
the Closing Date an Exchange Offer Registration Statement covering the
offer by the Company to the Holders to exchange all of the Registrable
Securities for Exchange Securities, to have such Registration Statement
declared effective by the SEC on or prior to the date that is 120 days
after the Closing Date and remain effective until the closing of the
Exchange Offer and to consummate the Exchange Offer on or prior to the date
that is 150 days after the Closing Date. For purposes hereof, "CONSUMMATE"
shall mean that the Exchange Offer Registration Statement shall have been
declared effective, subject to Section 2(b), the period of the Exchange
Offer provided in accordance with clause 2(a)(ii) below shall have expired
and all Registrable Securities validly tendered in connection with such
Exchange Offer shall have been exchanged for Exchange Securities. The
Company shall commence the Exchange Offer by mailing the related exchange
offer Prospectus and accompanying documents to each Holder stating, in
addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 20 Business Days from the date such notice is
mailed) (each such date being an "EXCHANGE DATE");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Agreement, other than Securities that represent an
unsold allotment for the original offering thereof;
5
<PAGE>
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address specified in the
notice prior to the close of business on the last Exchange Date (the
"OFFER TERMINATION DATE"); and
(v) that Holders will be entitled to withdraw their election,
not later than the close of business on the Offer Termination Date, by
sending to the institution and at the address specified in the notice
a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange and a statement that such Holder is withdrawing
his election to have such Registrable Securities exchanged.
As soon as practicable after the Offer Termination Date, the Company shall:
(A) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the
Exchange Offer; and
(B) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so
accepted for exchange by the Company and issue, and cause the
Trustee to promptly authenticate and mail to each Holder, an
Exchange Security equal in aggregate principal amount to the
aggregate principal amount of the Registrable Securities
surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer shall not violate applicable law or any
applicable interpretation of the Staff of the SEC and other customary conditions
for offers of that type relating to acts of Holders required for a valid tender
of the Securities.
(b) In the event that (i) the Company determines that the Exchange
Offer Registration provided for in Section 2(a) above is not
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<PAGE>
available or may not be consummated as soon as practicable after the Offer
Termination Date because it would violate applicable law or the applicable
interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for
any other reason consummated within 150 days after the Closing Date or
(iii) in the opinion of counsel for the Initial Purchasers delivered in
writing to the Company not later than 20 business days after the Exchange
Offer is consummated a Registration Statement must be filed and a
Prospectus must be delivered by any of the Initial Purchasers in connection
with any offering or sale of Registrable Securities because such
Registrable Securities represent an unsold allotment for the original
offering thereof, the Company shall use its best efforts to cause to be
filed as soon as practicable after such determination, date or delivery of
such opinion of counsel is given to the Company, as the case may be, a
Shelf Registration Statement providing for the sale of such Registrable
Securities and to have such Shelf Registration Statement declared effective
by the SEC. In the event the Company is required to file a Shelf
Registration Statement solely as a result of the matters referred to in
clause (iii) of the preceding sentence, the Company shall file and use its
best efforts to have declared effective by the SEC both an Exchange Offer
Registration Statement pursuant to Section 2(a) with respect to all
Registrable Securities and a Shelf Registration Statement (which may at any
time be a combined Registration Statement with the Exchange Offer
Registration Statement or may be a separate Registration Statement) with
respect to offers and sales of Registrable Securities held by any of the
Initial Purchasers after completion of the Exchange Offer. If the Shelf
Registration Statement is filed pursuant to clause (i) of the second
preceding sentence, the Company agrees to use its best efforts to keep the
Shelf Registration Statement continuously effective until the earliest of
(i) two years after the Closing Date, (ii) the time when the Registrable
Securities registered thereunder can be sold by non-affiliates of the
Company pursuant to Rule 144(k), or (iii) such time as all of the
Registrable Securities covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement. If the Shelf
Registration Statement is filed only pursuant to clauses (ii) or (iii) of
the third preceding sentence, the Company agrees to use its best efforts to
keep the Shelf Registration Statement continuously effective until 180 days
from the effective date thereof or such shorter period that will terminate
when all of the Registrable Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement. The
Company further agrees to supplement or amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable
to the registration form used by the Company for such Shelf Registration
Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration or if
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<PAGE>
reasonably requested by a Holder with respect to information relating to
such Holder, and to use their best efforts to cause any such amendment to
become effective and such Shelf Registration Statement to become usable as
soon as practicable thereafter. The Company agrees to furnish to the
Holders of Registrable Securities copies of any such supplement or
amendment promptly after its being used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in connection
with the registration pursuant to Section 2(a) or Section 2(b). Each Holder
shall pay all underwriting discounts, if any, and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section
2(b) hereof will not be deemed to have become effective unless it has been
declared effective by the SEC; provided, however, that, if, after it has
been declared effective, the offering of Registrable Securities pursuant to
a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed
not to be effective during the period of such interference until the
offering of Registrable Securities pursuant to such Registration Statement
may legally resume.
(e) Without duplication of the provisions set forth in the Indenture,
in the event that (i) the Exchange Offer Registration Statement relating to
the Exchange Offer is not filed with the Commission on or prior to the date
that is 60 days after the Closing Date, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to the date
that is 120 days after the Closing Date, or (iii) the Exchange Offer is not
consummated or a Shelf Registration Statement with respect to resale of the
Securities is not declared effective on or prior to the date that is 150
days after the Closing Date (each such event referred to in clauses (i)
through (iii), a "Registration Default"), then the Company will pay
additional interest (in addition to the interest otherwise due on the
Securities) to each Holder of Securities during the first 90-day period
immediately following the occurrence of each such Registration Default in
an amount equal to 0.25% per annum. The amount of interest will increase by
an additional 0.25% per annum for each subsequent 90-day period until such
Registration Default is cured, up to a maximum amount of additional
interest of 1.00% per annum for any and all such Registration Defaults.
Such additional interest will cease accruing on such Securities
8
<PAGE>
with respect to any Registration Default when such Registration Default has
been cured.
(f) Without limiting the remedies available to the Initial Purchasers
and the Holders, the Company acknowledges that any failure by the Company
to comply with its obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Initial Purchasers or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damage for such injuries precisely and that, in the
event of any such failure, any Initial Purchaser or Holder may obtain such
relief as may be required to specifically enforce the Company's obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to Section 2(a) and Section 2(b) hereof and
subject to the terms and conditions thereof, the Company shall reasonably
promptly:
(a) use its best efforts to prepare and file with the SEC a
Registration Statement on the appropriate form under the 1933 Act, which
Registration Statement shall (x) be on a form selected by the Company, (y)
in the case of a Shelf Registration, be on a form available for the sale of
the Registrable Securities by the selling Holders thereof and (z) comply as
to form in all material respects with the requirements of the applicable
form and include all financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such Registration Statement to
become effective and remain effective in accordance with Section 2 hereof;
(b) use its best efforts to prepare and file with the SEC such
amendments and post-effective amendments to each Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act; and use its best efforts to keep
each Prospectus current during the period described under Section 4(3) and
Rule 174 under the 1933 Act that is applicable to transactions by brokers
or dealers with respect to the Registrable Securities or Exchange
Securities;
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<PAGE>
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, to counsel for the Holders and for the Initial
Purchasers (or, if applicable, separate counsel for the Holders) and to
each Underwriter of an Underwritten Offering of Registrable Securities, if
any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus and any amendment or supplement thereto and such
other documents as such Holder or Underwriter may reasonably request, in
order to facilitate the public sale or other disposition of the Registrable
Securities; and the Company consents to the use of such Prospectus and any
amendment or supplement thereto in accordance with applicable law by each
of the selling Holders of Registrable Securities and any such Underwriters
in connection with the offering and sale of the Registrable Securities
covered by and in the manner described in such Prospectus or any amendment
or supplement thereto in accordance with applicable law;
(d) use its best efforts (i) to register or qualify the Registrable
Securities under all applicable state securities or blue sky laws of such
jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably and timely request in writing by
the time the applicable Registration Statement is declared effective by the
SEC and (ii) to cooperate with such Holders in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc. and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the disposition
in each such jurisdiction of such Registrable Securities owned by such
Holder; provided, however, that the Company shall not be required to (A)
register or qualify as a foreign corporation or as a dealer in securities
in any jurisdiction where it would not otherwise be required to register or
qualify but for this Section, (B) file any general consent to service of
process or (C) subject itself to taxation in any such jurisdiction if it is
not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and for the Initial
Purchasers and, if requested by such Persons, confirm such advice in
writing, (i) when a Registration Statement has become effective and when
any post-effective amendment thereto has been filed and becomes effective,
(ii) of any request by the SEC or any state securities authority for
amendments and supplements to a Registration Statement and Prospectus or
for additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Registration
Statement
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<PAGE>
or the initiation of any proceedings for that purpose, (iv) if, between the
effective date of a Registration Statement and the closing of any sale of
Registrable Securities covered thereby, the representations and warranties
of the Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects or if the Company
receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or
the initiation of any proceeding for such purpose, (v) of the happening of
any event during the period a Shelf Registration Statement is effective
which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the
making of any changes in such Registration Statement or Prospectus in order
to make the statements therein not misleading and (vi) of any determination
by the Company that a post-effective amendment to a Registration Statement
would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment and provide prompt notice to each Holder of the
withdrawal of any such order;
(g) in the case of a Shelf Registration, upon request furnish to each
Holder of Registrable Securities, without charge, at least one conformed
copy of each Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference or exhibits
thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends (unless required by applicable
securities laws) and enable such Registrable Securities to be in such
denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders may reasonably request at
least two business days prior to the closing of any sale of Registrable
Securities;
(i) in th e case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(ii) through (vi) hereof, use its best
efforts to prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities,
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<PAGE>
such Prospectus will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The Company agrees to notify the Holders to suspend use of the Prospectus
as promptly as practicable after the occurrence of such an event, and the
Holders hereby agree to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or
omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, or any document which is to be
incorporated by reference into a Registration Statement or Prospectus after
the initial filing of a Registration Statement, provide copies of such
document to the Initial Purchasers and their counsel (and, in the case of a
Shelf Registration Statement, counsel for the Holders) and make such of the
representatives of the Company as shall be reasonably requested by the
Initial Purchasers or their counsel (and, in the case of a Shelf
Registration Statement, counsel for the Holders) reasonably available for
discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any amendment of
or supplement to a Registration Statement or a Prospectus or any document
which is to be incorporated by reference into a Registration Statement or a
Prospectus, of which the Initial Purchasers and their counsel (and, in the
case of a Shelf Registration Statement, counsel for the Holders) shall not
have previously been advised and furnished a copy or to which the Initial
Purchasers or their counsel (and, in the case of a Shelf Registration
Statement, counsel for the Holders) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be, and
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and execute, and use its best efforts
to cause the Trustee to execute, all documents as may be required to effect
such changes and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
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<PAGE>
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and counsel for the Holders, at
reasonable times and in a reasonable manner, all financial and other
records, pertinent documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, Underwriter,
attorney or accountant in connection with a Shelf Registration Statement,
in each case that would customarily be reviewed or examined in connection
with "DUE DILIGENCE" review of the Company;
(n) if reasonably requested by any Holder of Registrable Securities
covered by a Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information with
respect to such Holder as such Holder reasonably requests to be included
therein and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such filing;
(o) cause all Registrable Securities covered by a Registration
Statement (i) to be listed on each securities exchange or quotation system
on which similar securities issued by the Company are then listed, if so
requested by the Majority Holders and (ii) if not theretofore rated, to be
rated with the appropriate rating agencies, if so requested by the Majority
Holders; and
(p) in the case of an Underwritten Offering pursuant to a Shelf
Registration, enter into such customary agreements and take all such other
customary actions in connection therewith (including, those reasonably
requested by counsel for the Holders) in order to expedite or facilitate
the disposition of such Registrable Securities and in such connection, (i)
to the extent possible, make such representations and warranties to the
Holders and any Underwriters of such Registrable Securities with respect to
the business of the Company and its subsidiaries, the Registration
Statement, Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested, (ii) obtain opinions
of counsel to the Company (which counsel and opinions, in form, scope and
substance, shall be reasonably satisfactory to the Holders and such
Underwriters and their respective counsel) addressed to each selling Holder
and Underwriter of Registrable Securities, covering the matters
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<PAGE>
customarily covered in opinions requested in underwritten offerings, (iii)
obtain "cold comfort" letters from the independent certified public
accountants of the Company (and, if necessary, any other certified public
accountant of any subsidiary of the Company, or any business acquired by
the Company for which financial statements and financial data are or are
required to be included in the Registration Statement) addressed to each
selling Holder and Underwriter of Registrable Securities, such letters to
be in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with underwritten offerings, and
(iv) deliver such documents and certificates as may be reasonably requested
by counsel for the Holders to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause (i)
above and to evidence compliance with any customary conditions in an
underwriting agreement. In the case of any Underwritten Offering, the
Company shall provide written notice to the Holders of all Registrable
Securities of such Underwritten Offering at least 30 days prior to the
filing of a prospectus supplement for such Underwritten Offering. Such
notice shall (x) offer each such Holder the right to participate in such
Underwritten Offering, (y) specify a date, which shall be no earlier than
10 days following the date of such notice, by which such Holder must inform
the Company of its intent to participate in such Underwritten Offering and
(z) include the instructions such Holder must follow in order to
participate in such Underwritten Offering.
In the case of a Shelf Registration Statement, the Company may require each
Holder of Registrable Securities to promptly furnish to the Company such
information regarding the Holders and the proposed distribution by such Holder
of such Registration Securities as the Company may from time to time reasonably
request in writing and if any such Holder shall fail or refuse to furnish the
Company such information, the Company may exclude the securities of such Holder
from the Registration Statement, and any such Holder shall not be entitled to
additional interest payments as provided for in Section 2(e) hereof.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(e)(ii) through (vi) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) or destroy all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registration Securities current at the time of receipt of such notice.
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<PAGE>
If the Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to a Registration Statement, the Company shall
extend the period during which the Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice to and including the
date when the Holders shall have received copies of the supplemented or amended
Prospectus necessary to resume such dispositions.
The Holders of Registrable Securities covered by a Shelf Registration
Statement who desire to do so may sell such Registrable Securities in an
Underwritten Offering. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers (the "UNDERWRITERS") that will
administer the offering will be selected by the Holders of a majority in
principal amount of the Registrable Securities included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Company understands that the Staff of the SEC has taken the
position that any broker-dealer that receives Exchange Securities for its
own account in the Exchange Offer in exchange for Securities that were
acquired by such broker-dealer as a result of market-making or other
trading activities (a "PARTICIPATING BROKER-DEALER"), may be deemed to be
an "underwriter" within the meaning of the 1933 Act in connection with any
resale of such Exchange Securities.
The Company understands that it is the Staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Securities, without
naming the Participating Broker-Dealers or specifying the amount of Exchange
Securities owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the 1933
Act in connection with resales of Exchange Securities for their own accounts, so
long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of
this Agreement, the Company agrees that the provisions of this Agreement as
they relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto
as may be reasonably requested by the representative of the Participating
Broker-Dealers pursuant to clause 4(b)(ii) below in order to expedite or
facilitate the disposition of any Exchange Securities by Participating
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<PAGE>
Broker-Dealers consistent with the positions of the Staff recited in
Section 4(a) above; provided that:
(i) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement,
as would otherwise be contemplated by Section 3(i), for a period
exceeding 180 days after the Offer Termination Date (as such period
may be extended pursuant to the penultimate paragraph of Section 3)
and Participating Broker-Dealers shall not be authorized by the
Company to deliver and shall not deliver such Prospectus after such
period in connection with the resales contemplated by this Section;
and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer
Registration, to the extent not required by the positions of the Staff
of the SEC or the 1933 Act and the rules and regulations thereunder,
will be in conformity with the reasonable request to the Company by
the Initial Purchasers or with the reasonable request in writing to
the Company by the broker-dealers who certify to the Initial
Purchasers and the Company in writing that they anticipate that they
will be Participating Broker-Dealers; and provided further that, in
connection with such application of the Shelf Registration procedures
set forth in Section 3 to an Exchange Offer Registration, the Company
shall be obligated (x) to deal only with a single representative of
the Participating Broker-Dealers, which shall be J.P. Morgan
Securities Inc. unless it elects not to act as such representative, in
which case, the representative shall be selected by a majority of the
Participating Broker-Dealers, (y) to pay the fees and expenses of only
one counsel representing the Participating Broker-Dealers, which shall
be counsel to the Initial Purchasers unless such counsel elects not to
so act and (z) to cause to be delivered only one, if any, "cold
comfort" letter with respect to the Prospectus in the form existing on
the Offer Termination Date.
(c) The Initial Purchasers shall have no liability to the Company or
any Holder with respect to any request that they make pursuant to
Section 4(b) above.
5. Indemnification and Contribution.
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<PAGE>
(a) The Company agrees to indemnify and hold harmless each Initial
Purchaser, each Holder and each Person, if any who controls any Initial
Purchaser or any Holder within the meaning of either Section 15 of the 1933
Act or Section 20 of the 1934 Act, or is under common control with, or is
controlled by, any Initial Purchaser or any Holder, from and against any
and all losses, claims, damages and liabilities (including without
limitation the reasonable legal fees and other expenses incurred in
connection with any suit, action or proceeding or any claim asserted) and
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or
any amendment thereto pursuant to which Exchange Securities or Registrable
Securities were registered under the 1933 Act, including all documents
incorporated therein by reference), or arising out of or based upon any
omissions or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto, including all documents incorporated therein by
reference), or arising out of or based upon any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information relating
to such Initial Purchaser or Holder furnished in writing to the Company by
or on behalf of such Initial Purchaser or Holder expressly for use in
connection therewith; provided that the foregoing indemnity with respect to
any preliminary Prospectus shall not inure to the benefit of any Initial
Purchaser (or to the benefit of any Person controlling such Initial
Purchaser) from whom the Person asserting any such losses, claims, damages
or liabilities purchased Exchange Securities if such untrue statement or
omission or alleged untrue statement or omission made in the preliminary
Prospectus is eliminated or remedied in the final Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto to such Initial Purchaser prior to the confirmation of
the sale of such Exchange Securities to such person by such Initial
Purchaser) and a copy of the final Prospectus (as so amended or
supplemented) shall not have been furnished to such Person in connection
with the sale of such Exchange Securities to such Person to the extent the
claims asserted by such Person do not include allegations of other untrue
statements or omissions made in the final Prospectus. In
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<PAGE>
connection with any Underwritten Offering permitted by Section 3 hereof,
the Company will also indemnify the Underwriters, if any, selling brokers,
dealers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls
such Persons within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act to the same extent as provided above with
respect to the indemnification of the Holders, if requested in connection
with any Registration Statement; provided that such Underwriters provide
indemnification substantially to the same extent as is provided by the
Initial Purchasers and each Holder pursuant to Section 5(b) below and
provides a contribution substantially to the same extent as the Initial
Purchasers and each Holder pursuant to Section 5(d) and (e).
(b) Each Initial Purchaser and each Holder agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors and
officers, and any Person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to the Initial Purchasers and
the Holders, but only with respect to information relating to such Initial
Purchaser or such Holder furnished in writing by or on behalf of such
Initial Purchaser or such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any prospectus (or any amendment or
supplement thereto).
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any Person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such Person (the "INDEMNIFIED
PERSON") shall promptly notify the Person against whom such indemnity may
be sought (the "INDEMNIFYING PERSON") in writing, and the Indemnifying
Person, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying
Person has failed within a reasonable time to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named parties in any
such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of
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both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel and counsel
for the Indemnifying Person) for all Indemnified Persons and their
designees. Any such separate firm for the Initial Purchasers and all
Persons, if any, who control any of the Initial Purchasers within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall be designated in writing by J.P. Morgan Securities Inc., any such
separate firm for the Holders and all Persons, if any, who control Holders
within the meaning of either such Section shall be designated in writing by
the Majority Holders, and any such separate firm for the Company, its
directors, its officers and each Person, if any, who controls the Company
within the meaning of either such Section shall be designated in writing by
the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with
such consent or if there be a final judgment for the plaintiff, the
Indemnifying Person agrees to indemnify any Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the
Indemnified Person for reasonable fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of
any proceeding effected without its written consent if (i) such settlement
is entered into more than 120 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not
have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement. No Indemnifying Person shall, without
the prior written consent of the Indemnified Person, effect any settlement
of any pending or threatened proceeding in respect of which any Indemnified
Person is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on
claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section is
unavailable to an Indemnified Person under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages or liabilities referred to therein,
then an Indemnifying Person, in lieu of indemnifying such Indemnified
Person, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
19
<PAGE>
proportion as is appropriate to reflect the relative fault of the Company
on the one hand and the Initial Purchasers or Holders on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and the
Initial Purchasers or Holders on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one
hand or by the Initial Purchasers or the Holders on the other hand and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(e) The Company, the Initial Purchasers and each Holder agree that it
would not be just or equitable if contribution pursuant to this Section
were determined by pro rata allocation (even if the Initial Purchasers and
the Holders were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in paragraph 5(d) above. The amount paid or
payable by an Indemnified Person as a result of the losses, claims, damages
and liabilities referred to in paragraph 5(d) above shall be deemed to
include, subject to the limitations set forth above, any reasonable legal
or other expenses incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section, no Initial Purchaser or Holder shall be
required to indemnify or contribute any amount in excess of the amount by
which the total price at which Registrable Securities were sold by such
Initial Purchaser or Holder exceeds the amount of any damages that such
Initial Purchaser or Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation. The
Holders' obligations to contribute pursuant to this Section are several in
proportion to the aggregate principal amount of Registrable Securities sold
by them pursuant to such Registration Statement.
(f) Any losses, claims, damages or liabilities for which an
Indemnified Person is entitled to indemnification or contribution under
this Section shall be paid by the Indemnifying Person to the Indemnified
Person as such losses, claims, damages or liabilities are incurred
reasonably promptly after receipt by the Indemnifying Person of a request
20
<PAGE>
therefor by the Indemnified Person. The indemnity and contribution
agreements contained in this Section and the representations and warranties
of the Company set forth in this Agreement shall remain operative and in
full force and effect, regardless of (i) any investigation made by or on
behalf of any Initial Purchaser, any Holder or any Person controlling any
Initial Purchaser or any Holder, the Company's directors or officers or any
Person controlling the Company, (ii) acceptance of any Exchange Securities,
(iii) any termination of this Agreement and (iv) any sale of Registrable
Securities pursuant to a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered into, and
on or after the date of this Agreement will not enter into, any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any
such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given unless the Company has obtained the written consent
of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment,
modification, supplement, waiver or consent; provided, however, that no
amendment, modification, supplement, waiver or consent to any departure
from the provisions of Section 5 hereof shall be effective as against any
Holder of Registrable Securities unless consented to in writing by such
Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such
Holder to the Company by means of a notice given in accordance with the
provisions of this Section, which address initially is, with respect to the
Initial Purchasers, the address set forth in the Purchase Agreement; and
(ii) if to the Company, initially at the Company's address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section.
21
<PAGE>
All such notices and communications shall be deemed to have been duly given
at the time delivered, if personally delivered; five business days after being
deposited in the mail, postage pre-paid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of
the parties, including, without limitation and without the need for an
express assignment or assumption, subsequent Holders; provided that nothing
herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Securities in violation of the terms of the
Purchase Agreement. The Initial Purchasers shall have no liability or
obligation to the Company, and the Company shall have no liability or
obligation to the Initial Purchasers, with respect to any failure by a
Holder to comply with, or any breach by any Holder of, the obligations of
such Holder under this Agreement.
(e) Purchases and Sales of Securities. The Company shall not, and
shall cause its affiliates (as defined in Rule 405 under the 1933 Act) not
to, purchase and then resell or otherwise transfer any Securities (other
than Exchange Securities) other than to the Company or its affiliates.
(f) Third Party Beneficiary. Each Holder shall be a third party
beneficiary to the agreements made hereunder between the Company, on the
one hand, and the Initial Purchasers, on the other hand, and subject to the
terms hereof shall have the right to enforce such agreements directly to
the extent it deems such enforcement necessary or advisable to protect its
rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
22
<PAGE>
(i) Governing Law. This Agreement shall be governed by laws of the
State of New York.
(j) Severability. In the event that one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable the validity, legality and enforceability
of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
REPUBLIC GROUP INCORPORATED
By /s/ Doyle R. Ramsey
-------------------------
Name: Doyle R. Ramsey
Title: Vice President Finance
J.P. MORGAN SECURITIES INC.
DAIN RAUSCHER WESSELS,
a division of Dain Rauscher Incorporated
A.G. EDWARDS & SONS, INC.
By: J.P. Morgan Securities Inc.
By /s/ John Gilbert
--------------------------------
Name: John Gilbert
Title: Managing Director
24
<PAGE>
EXHIBIT 12
REPUBLIC GROUP INCORPORATED
COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
Nine Months
Year Ended June 30, Ended March 31,
-------------------------------------------------------- -----------------------
(dollars in thousands) 1993 1994 1995 1996 1997 1997 1998
- --------------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
Fixed Charges:
Interest expense $ 10 $ 22 $ 7 $ 1,937 $ 1,476 $ 1,175 $ 2
-------------------------------------------------------- -----------------------
Total fixed charges 10 22 7 1,937 1,476 1,175 2
-------------------------------------------------------- -----------------------
Income before income taxes 4,450 12,436 19,158 23,974 31,141 23,016 20,206
Fixed charges 10 22 7 1,937 1,476 1,175 2
-------------------------------------------------------- -----------------------
Earnings, as defined (1) 4,460 12,458 19,165 25,911 32,617 24,191 20,208
-------------------------------------------------------- -----------------------
Ratio of earnings to fixed charges (1) N/A N/A N/A 13:1 22:1 21:1 N/A
======================================================== =======================
Pro forma ratios: (2)
Pro forma fixed charges:
Pro forma interest expense 10,976 7,127
----------- -----------
Total pro forma fixed charges 10,976 7,127
----------- -----------
Pro forma income before income taxes 21,641 13,081
Pro forma fixed charges 10,976 7,127
----------- -----------
Pro forma earnings, as defined (1) (2) 32,617 20,208
----------- -----------
Pro forma ratio of earnings to fixed charges (2) 3.0:1 2.8:1
=========== ===========
Pro forma ratio of EBITDA to interest expense: (2) (3)
Pro forma income before income taxes 21,641 13,081
Pro forma interest expense 10,976 7,127
Depreciation and amortization 7,080 5,593
----------- -----------
EBITDA 39,697 25,801
----------- -----------
Pro forma interest expense 10,976 7,127
----------- -----------
Pro forma ratio of EBITDA to interest expense (2) 3.6:1 3.6:1
=========== ===========
</TABLE>
Notes
(1) Earnings, for the purpose of calculating the ratio of earnings to fixed
charges, is defined as earnings before income taxes and fixed charges. The
ratio of earnings to fixed charges is not meaningful for the years ended
June 30, 1993, 1994 and 1995, and for the nine months ended March 31, 1998,
due to the insignificance of interest expense in such periods.
(2) The pro forma ratios presented above have been adjusted to give effect to
the issuance and sale of the Notes at a rate of 9 1/2% and the related
interest expense (including capitalized interest) as if the Notes were
issued and sold at the beginning of the period. The Company expects to
borrow a significant amount of the $85 million available to it under the
New Credit Facility in order to fund the construction of the Lawton Mill,
which would significantly increase the Company's interest expense. However,
neither ratio has been adjusted to give effect to any interest expense
related to such borrowings or to any increase in earnings that the Company
may realize as a result of the upgrade to the Duke Plant or from the
operation of the Lawton Mill.
(3) EBITDA is defined as earnings before income taxes, interest expense,
depreciation and amortization.
<PAGE>
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.
Subsidiaries State of Incorporation
------------ ----------------------
Republic Gypsum Company Oklahoma
Republic Paperboard Company Kansas
Republic Paperboard Company of West Virginia West Virginia
Hollis & Eastern Railroad Company Oklahoma
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our reports dated
August 5, 1997, included in the Republic Group Incorporated's Form 10-K for the
year ended June 30, 1997, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Dallas, Texas
September 10, 1998
<PAGE>
EXHIBIT 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
---------------------------------
UMB BANK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
44-0201230
(I.R.S. Employer
Identification No.)
928 Grand Avenue, Kansas City, Missouri.............................64106
(Address of principal executive offices) (Zip Code)
---------------------------------
Republic Group Incorporated
(Exact name of obligor as specified in its charter)
Delaware 75-1155922
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
811 East 30th Avenue
Hutchinson, Kansas 67502
(Address of principal executive offices) (Zip Code)
9 1/2% Senior Subordinated Notes due 2008
(Title of the indenture securities)
- --------------------------------------------------------------------------------
<PAGE>
Item 1. General Information
-------------------
(a) Name and address of each examining or supervising authority to
which the Trustee is subject is as follows:
The Comptroller of the Currency
Mid-Western District
2345 Grand Avenue, Suite 700
Kansas City, Missouri 64108
Federal Reserve Bank of Kansas City
Federal Reserve P.O. Station
Kansas City, Missouri 64198
Supervising Examiner
Federal Deposit Insurance Corporation
720 Olive Street, Suite 2909
St. Louis, Missouri 63101
(b) The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor and Underwriters
------------------------------------------
The Obligor and the Underwriter are not affiliated with the Trustee.
Item 3. Voting securities of the Trustee
--------------------------------
The following information as to each class of voting securities of the
Trustee is furnished as of September 9, 1998:
Column A Column B
Title of Class Amount Outstanding
-------------- ------------------
Common 660,000
Item 4. Trusteeships under other indentures
-----------------------------------
The Trustee is not a trustee under another indenture under which any
other securities, or certificates of interest or participation in other
securities, of the Obligor are outstanding. The Trustee does serve as
Trustee for the Obligor's unregistered 9 1/2% Senior Subordinated Notes
due 2008, which are to be exchanged for the indenture securities.
Item 5. Interlocking directorates and similar relationships with the obligor or
-----------------------------------------------------------------------
underwriters
------------
Neither the Trustee nor any of its directors or officers is a director,
officer, partner, employee, appointee, or representative of the
Obligor.
<PAGE>
Item 6. Voting securities of the Trustee owned by the Obligor or its officials
----------------------------------------------------------------------
No voting securities of the Trustee are owned beneficially by the
Obligor or its directors and executive officers as of September 9,
1998.
Item 7. Voting securities of the Trustee owned by underwriters or their
---------------------------------------------------------------
officials
---------
No voting securities of the Trustee and not more than 1% of the voting
securities of the Trustee's parent holding company are owned
beneficially by an Underwriter for the Obligor or its directors,
partners or executive officers as of September 9, 1998
Item 8. Securities of the Obligor owned or held by the Trustee
------------------------------------------------------
No securities of Obligor are owned beneficially or held as collateral
security for obligations in default by the Trustee as of September 9,
1998.
Item 9. Securities of the underwriters owned or held by the Trustee
-----------------------------------------------------------
No securities of an Underwriter for the Obligor are owned beneficially
or held as collateral security for Obligations in default as of
September 9, 1998.
Item 10. Ownership or holdings by the Trustee of voting securities of certain
--------------------------------------------------------------------
affiliates or security holders of the Obligor
---------------------------------------------
The Trustee neither owns beneficially nor holds as collateral security
for obligations in default any voting securities of a person who, to
the knowledge of the Trustee, (1) owns 10 percent or more of the voting
securities of the Obligor, or (2) is an affiliate, other than a
subsidiary of Obligor, as of September 9, 1998.
Item 11. Ownership or holdings by the Trustee of any securities of a person
------------------------------------------------------------------
owning 50 percent or more of the voting securities of the Obligor
---------------------------- ------------------------------------
The Trustee neither owns beneficially nor holds as collateral security
for obligations in default any securities of a person who, to the
knowledge of the Trustee, owns 50 percent or more of the voting shares
of the Obligor as of September 9, 1998.
Item 12. Indebtedness of the Obligor to the Trustee
------------------------------------------
Not Applicable
Item 13. Defaults of the Obligor
-----------------------
Not Applicable
Item 14. Affiliations with the Underwriters
----------------------------------
Not Applicable
<PAGE>
Item 15. Foreign Trustee
---------------
Not Applicable
Item 16. List of exhibits
Listed below are all exhibits filed as a part of this statement of
eligibility and qualification.
EXHIBIT NUMBER EXHIBIT
1. Articles of Association of the Trustee, as now in
effect.
2. Certificate of Authority from the Comptroller of the
Currency and evidence of subsequent changes in the
corporate title of the Association.
3. Certificate from the Comptroller of the Currency
evidencing authority to exercise corporate trust
powers.
4. Bylaws, as amended, of the Trustee.
5. N/A
6. Consent of the Trustee required by Section 321 (b) of
the Act.
7. Report of Condition of the Trustee as of June 30,
1998.
8. N/A
9. N/A
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, UMB, National Association, a national bank organized and existing under
the laws of the United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Kansas City, and State of Missouri, on the 10th
day of September, 1998.
UMB BANK, NATIONAL ASSOCIATION
BY: /s/ R. William Bloemker
-----------------------------------
R. William Bloemker, Vice President
<PAGE>
T-l Exhibit No. l
TO WHOM IT MAY CONCERN
The attached Articles of Association are the Articles of Association for
the UMB Bank, National Association and are current as of this date.
BY: /s/ Randy S. McPhail
-----------------------------------
Assistant Secretary
September 10, 1998
[SEAL]
<PAGE>
UMB BANK, NATIONAL ASSOCIATION
RESTATED ARTICLES OF ASSOCIATION
--------------------------------
FIRST: The title of this Association shall be "UMB Bank, National
Association" (amended as of October 1, 1994).
SECOND: The main office shall be in the City of Kansas City, County of
Jackson, State of Missouri. The general business of this Association, and its
operations of discount and deposit, shall be conducted at its main office.
THIRD: The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five shareholders, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time to time by resolution of a majority of the full Board of Directors or by
resolution of the shareholders at any annual or special meeting thereof. Unless
otherwise provided by the laws of the Untied States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
FOURTH: The regular annual meeting of the shareholders for the election of
directors and the transaction of whatever other business which may be brought
before said meeting shall be held at the main office, or at such other place as
the Board of Directors may designate, on the day of each year specified therefor
in the By-Laws of the Association, but if no election be held on that day it may
be held on any subsequent day according to the provisions of law.
<PAGE>
FIFTH: The amount of authorized capital stock of this Association shall be
Thirteen Million Two Hundred Fifty Thousand Dollars ($16,500,000), divided into
660,000 shares of common stock of the par value of Twenty-Five Dollars ($25)
each; but said capital stock may be increased or decreased from time to time in
accordance with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares thereof,
each shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a resolution
adopted by the shareholders at the time the increase is authorized. The Board
of Directors shall have the power to prescribe a reasonable period of time
within which the preemptive rights to subscribe to the new shares of capital
stock must be exercised.
If the capital stock is increased by a stock dividend, each shareholder
shall be entitled to his proportion of the amount of such increase in accordance
with the number of shares of capital stock owned by him at the time the increase
is authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized.
SIXTH: The Board of Directors shall appoint one of its members to be
President of this Association. The Board of Directors may appoint one of its
members to be Chairman of the Board, who shall perform such duties as the Board
of Directors may designate.
The Board of Directors shall have the power to appoint one or more Vice
Presidents and to appoint a Cashier and such other officers and employees as may
be required to transact the business of the Association.
<PAGE>
The Board of Directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase in the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all By-Laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for the Board of
Directors to do and perform.
The Board of Directors, without the approval of the shareholders, but
subject to the approval of the Comptroller of the Currency, shall have the power
to change the location of the main office of the Association to any other place
within the limits of Kansas City, Missouri and to establish or change the
location of any branch or branches to any other location permitted under
applicable law.
SEVENTH: The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
EIGHTH: The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of the shareholders at any
time; provided, however, that unless otherwise provided by law, not less than
ten (10) days prior to the date fixed for any such meeting, a notice of the
time, place and purpose of the meeting shall be given by first class mail,
postage prepaid, to all shareholders of record at their respective addresses as
shown upon the books of the Association.
Subject to the provisions of the laws of the United States, these Articles
of Association may be amended at any meeting of the shareholders, for which
adequate notice has been given, by the affirmative vote of the owners of two-
thirds of the stock of this Association, voting in person or by proxy.
<PAGE>
NINTH: Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the Association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the Association or any firm, corporation, or
organization which he served in any capacity at the request of the Association;
provided, however, that no person shall be so indemnified or reimbursed in
relation to any matter in such action, suit, or proceeding as to which he shall
finally be adjudged to have been guilty of or liable for gross negligence or
willful misconduct or criminal acts in the performance of his duties to the
Association; and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the Association, or the Board of Directors, acting by vote
of directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of the directors. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such person, his heirs, executors, or administrators, may
be entitled as a matter of law.
<PAGE>
T-1 Exhibit 2
CERTIFICATE
-----------
For and on behalf of UMB Bank, National Association, a national banking
association organized under the laws of the United States of America (formerly
named The City National Bank and Trust Company of Kansas City and the United
Missouri Bank of Kansas City, National Association and United Missouri Bank,
National Association), the undersigned, Randy S. McPhail, Assistant Secretary
of said Association, hereby certifies that attached hereto are the following:
1) A true and correct copy of the certificate of the Comptroller of
the Currency, dated December 31, 1972, evidencing a change in
corporate title from the City National Bank and Trust Company of
Kansas City to United Missouri Bank of Kansas City National
Association;
2) A true and correct copy of the letter of authorization from the
Comptroller of the Currency, dated April 9, 1991, authorizing the
Association to adopt the name United Missouri Bank, National
Association; and
3) Certified Resolution evidencing recordation of change of the name
of the Association to UMB Bank, National Association.
Certified under the corporate seal of said Association this 10th day of
September, 1998.
/s/ Randy S. McPhail
-------------------------------------
Assistant Secretary
<PAGE>
T-1 Exhibit 3
CERTIFIED RESOLUTION
--------------------
I hereby certify that the following is an excerpt from a letter dated
October 3, 1994 from the Office of the Comptroller of the Currency (OCC)
confirming the Bank's change of name:
THE OCC HAS RECORDED THAT, AS OF OCTOBER 1, 1994, THE TITLE OF UNITED
MISSOURI BANK, NATIONAL ASSOCIATION, CHARTER NO. 13936, WAS CHANGED TO
"UMB BANK, NATIONAL ASSOCIATION."
/s/ Randy S. McPhail
-------------------------------------
Assistant Secretary
<PAGE>
CERTIFICATE
-----------
For and on behalf of UMB Bank, National Association, a national banking
association under the laws of the United States of America, the undersigned,
Randy S. McPhail, Assistant Secretary of said Association, hereby certifies
that the attached document is a true and correct copy of the certificate issued
by the Comptroller of the Currency of the United States evidencing its
authority to exercise fiduciary powers under the statutes of the United States.
Certified under the corporate seal of said Association this 10th day of
September, 1998.
/s/ Randy S. McPhail
-------------------------------------
Assistant Secretary
<PAGE>
T-1 Exhibit No. 4
TO WHOM IT MAY CONCERN
The attached By-Laws are the By-Laws for the UMB Bank, National
Association and are current as of this date.
/s/ Randy S. McPhail
-------------------------------------
Assistant Secretary
September 10, 1998
[SEAL]
<PAGE>
UMB BANK, NATIONAL ASSOCIATION
BY-LAWS
ARTICLE I
---------
Meetings of Shareholders
------------------------
Section 1.1 - Where Held. All meetings of shareholders of this Association
----------
shall be held at its main banking house in Kansas City, Jackson County,
Missouri, or at such other place as the Board of Directors may from time to time
designate.
Section 1.2 - Annual Meeting. The annual meeting of shareholders shall be held
--------------
at 11 o'clock in the forenoon, or at such other time as shall be stated in the
notice thereof, on the third Wednesday of January in each year or, if that day
be a legal holiday, on the next succeeding banking day, for the purpose of
electing a Board of Directors and transacting such other business as may
properly come before the meeting.
Section 1.3 - Special Meetings. Except as otherwise provided by law, special
----------------
meetings of shareholders may be called for any purpose, at any time, by the
Board of Directors or by any three or more shareholders owning, in the
aggregate, not less than ten percent (10%) of the outstanding stock in the
Association.
Section 1.4 - Notice of Meetings. Written notice of the time, place, and
------------------
purpose of any meeting of shareholders shall be given to each shareholder (a) by
delivering a copy thereof in person to the shareholder, or (b) by depositing a
copy thereof in the U.S. mails, postage prepaid, addressed to the shareholder at
his address appearing on the books of the Association, in either case at least
ten (10) days prior to the date fixed for the meeting.
Section 1.5 - Quorum. A majority of the outstanding capital stock, represented
------
in person or by proxy, shall constitute a quorum for the transaction of business
at any meeting or shareholders, unless otherwise provided by law. A majority of
the votes cast shall decide every question or matter submitted to the
shareholders at any meeting, unless otherwise provided by law or by the Articles
of Association.
Section 1.6 - Adjournment. Any meeting of shareholders may, by majority vote of
-----------
the shares represented at such meeting, in person or by proxy, though less than
a quorum, be adjourned from day to day or from time to time, not exceeding, in
the case of elections of directors, sixty (60) days from such adjournment,
without further notice, until a quorum shall attend or the business thereof
shall be completed. At any such adjourned meeting, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 1.7 - Voting. Each shareholder shall be entitled to one (1) vote on
------
each share of stock held, except that in the election of directors each
shareholder shall have the right to cast as many votes, in the aggregate, as
shall equal the number of shares owned by him, multiplied by the number of
directors to be elected, and said votes may be cast for one director or
distributed among two (2) or more candidates. Voting may be in person or by
proxy, but no officer or employee of this Association shall act as proxy.
Authority to vote by proxy shall be by written instrument, dated and filed with
the records of the meeting, and shall be valid only for one meeting, to be
specified therein, and any adjournments of such meeting.
<PAGE>
ARTICLE II
----------
Directors
---------
Section 2.1 - Number and Qualifications. The Board of Directors (hereinafter
-------------------------
sometimes referred to as the "Board") shall consist of not less than five (5)
nor more than twenty-five (25) shareholders, the exact number, within such
limits, to be fixed and determined from time to time by resolution of a majority
of the full Board of Directors or by resolution of the shareholders at any
meeting thereof; provided, however, that a majority of the full Board of
Directors shall not increase the number of directors to a number which: (a)
exceeds by more than two (2) the number of directors last elected by
shareholders where such number was fifteen (15) or less; or (b) exceeds by more
than four (4) the number of directors last elected by shareholders where such
number was sixteen (16) or more. No person who has attained the age of seventy
(70) shall be eligible for election to the Board of Directors unless such person
is actively engaged in business at the time of his election, but any person not
so disqualified at the time of his election as a director shall be entitled to
serve until the end of his term. All directors shall hold office for one (1)
year and until their successors are elected and qualified.
Section 2.2 - Advisory Directors. The Board of Directors may appoint Advisory
------------------
Directors, chosen from former directors of the Association or such other persons
as the Board shall select. The Advisory Directors shall meet with the Board at
all regular and special meetings of the Board and may participate in such
meetings but shall have no vote. They shall perform such other advisory
functions and shall render such services as may from time to time be directed by
the Board.
Section 2.3 - Powers. The Board shall manage and administer the business and
------
affairs of the Association. Except as expressly limited by law, all corporate
powers of the Association shall be vested in and may be exercised by said Board.
It may not delegate responsibility for its duties to others, but may assign the
authority and responsibility for various functions to such directors, committees
and officers or other employees as it shall see fit.
Section 2.4 - Vacancies. In case of vacancy occurring on the Board through
---------
death, resignation, disqualification, disability or any other cause, such
vacancy may be filled at any regular or special meeting of the Board by vote of
a majority of the surviving or remaining directors then in office. Any director
elected to fill a vacancy shall hold office for the unexpired term of the
director whose place was vacated and until the election and qualification of his
successor.
Section 2.5 - Organization Meeting. Following the annual meeting of
--------------------
shareholders, the Corporate Secretary shall notify the directors elect of their
election and of the time and place of the next regular meeting of the Board, at
which the new Board will be organized and the members of the Board will take the
oath required by law, after which the Board will appoint committees and the
executive officers of the Association, and transact such other business as may
properly come before the meeting; provided, however, that if the organization
meeting of the Board shall be held immediately following the annual meeting of
shareholders, no notice thereof shall be required except an announcement thereof
at the meeting of directors.
Section 2.6 - Regular Meetings. The regular meetings of the Board of Directors
----------------
shall be held, without notice except as provided for the organization meeting,
on the third Wednesday of each month at the main banking house in Kansas City,
Jackson County, Missouri. When any regular meeting of the Board falls upon a
holiday, the meeting shall be held on the next banking day, unless the Board
shall designate
<PAGE>
some other day. A regular monthly meeting of the Board may, by action of the
Board at its preceding meeting, be postponed to a later day in the same month.
Section 2.7 - Special Meetings. Special meetings of the Board may be called by
----------------
the Corporate Secretary on direction of the President or of the Chairman of the
Board, or at the request of three (3) or more directors. Each member of the
Board shall be given notice, by telegram, letter, or in person, stating the
time, place and purpose of such meeting.
Section 2.8 - Quorum. Except when otherwise provided by law, a majority of the
------
directors shall constitute a quorum for the transaction of business at any
meeting, but a lesser number may adjourn any meeting, from time to time, and the
meeting may be held, as adjourned, without further notice.
Section 2.9 - Voting. A majority of the directors present and voting at any
------
meeting of the Board shall decide each matter considered. A director may not
vote by proxy.
Section 2.10 - Compensation of Directors. The compensation to be paid the
-------------------------
directors of the Association for their services shall be determined from time to
time by the Board.
ARTICLE III
-----------
Committees Appointed by the Board
---------------------------------
Section 3.1 - Standing Committees. The standing committees of this Association
-------------------
shall be the Management Committee, Executive Committee, the Officers' Salary
Committee, the Discount Committee, the Bond Investment Committee, the Trust
Policy Committee, the Bank Examining Committee and the Trust Auditing Committee.
The members of the standing committees shall be appointed annually by the Board
of Directors at its organization meeting, or, on notice, at any subsequent
meeting of the Board, to serve until their respective successors shall have been
appointed. The President and the Chairman of the Board shall be, ex officio,
members of all standing committees except the Bank Examining Committee and the
Trust Auditing Committee. Each standing committee shall keep minutes of its
meetings, showing the action taken on all matters considered. A report of all
action so taken shall be made to the Board, and a copy of such minutes shall be
available for examination by members of the Board.
Section 3.2 - Management Committee. The Management Committee shall consist of
--------------------
such executive officers of the Association as shall be designated by the Board.
One of the members of the Committee shall be designated by the Board as
Chairman. The Committee may adopt policies (not inconsistent with policies and
delegations of authority prescribed by these By-Laws or by the Board) with
respect to the executive and administrative functions of the Association, and in
general, it shall coordinate the performance of such functions in and among the
various departments of the Association, assisting and advising the executive
officers or department heads upon matters referred to it by such officers or
department heads. The Committee shall make reports and recommendations to the
Board upon such policies or other matters as it deems advisable or as may be
referred to it by the Board, and shall have such other powers and duties as may
be delegated or assigned to it by the Board from time to time. The secretary of
the Committee may be designated by the Board, or, in default thereof, by the
Committee, and may but need not be a member thereof.
<PAGE>
Section 3.3 - Executive Committee. The Executive Committee shall consist of
-------------------
such executive officers of the Association as shall be designated by the Board.
One of the members of the Committee shall be designated by the Board as
Chairman. The Committee shall carry out such responsibilities and duties as the
Management Committee shall delegate to it, from time to time.
Section 3.4 - Officers' Salary Committee. The Officers' Salary Committee shall
--------------------------
consist of such directors and officers of the Association as may be designated
by the Board. It shall study and consider the compensation to be paid to
officers of the Association and shall make recommendations to the Board with
respect thereto and with respect to such other matters as may be referred to it
by the Board.
Section 3.5 - Discount Committee. The Discount Committee shall consist of such
------------------
directors and officers as shall be designated by the Board of Directors. It
shall have the power to discount and purchase bills, notes and other evidences
of debt; to buy and sell bills of exchange; to examine and approve loans and
discounts; and to exercise authority regarding loans and discounts held by the
Association. At each regular meeting of the Board, the Board shall approve or
disapprove the report filed with it by the Discount Committee and record its
actions in the minutes of its meeting. The powers and authority conferred upon
the Discount Committee by this Section may, with the approval of the Board of
Directors, be assigned or delegated by it, to officers of the Association,
subject to such limits and controls as the Committee may deem advisable.
Section 3.6 - Bond Investment Committee. The Bond Investment Committee shall
-------------------------
consist of such directors and officers as shall be designated by the Board of
Directors. It shall have power to buy and sell bonds, to examine and approve
the purchase and sale of bonds, and to exercise authority regarding bonds held
by the Association. At each regular meeting of the Board, the Board shall
approve or disapprove the report filed with it by the Bond Investment Committee
and record its action in the minutes of its meeting.
Section 3.7 - Trust Policy Committee. The Trust Policy Committee shall consist
----------------------
of such directors and officers of the Association as shall be designated by the
Board of Directors. Such committee shall have and exercise such of the Bank's
fiduciary powers as may be assigned to it by the Board, with power to further
assign, subject to its control, the exercise of such powers to other committees,
officers and employees. The action of the Trust Policy Committee shall, at all
times, be subject to control by the Board.
Section 3.8 - Bank Examining Committee. The Bank Examining Committee shall
------------------------
consist of such directors of the Association as shall be designated by the
Board, none of whom shall be an active officer of the Association. It shall
make suitable examinations at least once during each period of twelve (12)
months of the affairs of the Association or cause a suitable audit to be made by
auditors responsible only to the Board of Directors. The result of such
examinations shall be reported in writing, to the Board at the next regular
meeting thereafter and shall state whether the Association is in a sound and
solvent condition, whether adequate internal controls and procedures are being
maintained, and shall recommend to the Board such changes as the Committee shall
deem advisable. The Bank Examining Committee, with the approval of the Board of
Directors, may employ a qualified firm of certified public accountants to make
an examination and audit of the Association. If such a procedure is followed,
the annual examination of directors, will be deemed sufficient to comply with
the requirements of this section of the By-Laws.
<PAGE>
Section 3.9 - Trust Auditing Committee. The Trust Auditing Committee shall
------------------------
consist of such directors of the Association as shall be designated by the
Board, none of whom shall be an active officer of the Association. At least
once during each calendar year, and within fifteen (15) months of the last such
audit, the Trust Auditing Committee shall make suitable audits of the Trust
Departments or cause suitable audit to be made by auditors responsible only to
the Board of Directors, and at such time shall ascertain whether the Departments
have been administered in accordance with law, the Regulations of the
Comptroller and sound fiduciary practices. As an alternative, in lieu of such
periodic audits, the Board may elect to adopt an adequate continuous audit
system.
Section 3.10 - Other Committees. The Board may appoint, from time to time, from
----------------
its own members or from officers of the Association, or both, other committees
of one or more persons for such purposes and with such powers as the Board may
determine.
Section 3.11 - Compensation of Committee Members. The Board shall determine the
---------------------------------
compensation to be paid to each member of any committee appointed by it for
services on such committee, but no such compensation shall be paid to any
committee member who shall at the time be receiving a salary from the
Association as an officer thereof.
ARTICLE IV
----------
Officers and Employees
----------------------
Section 4.1 - Chairman of the Board. The Board of Directors shall appoint one
---------------------
of its members (who may, but need not, be President of the Association) as
Chairman of the Board. He shall preside at all meeting of the Board of
Directors and shall have general executive powers and such further powers and
duties as from time to time may be conferred upon, or assigned to, him by the
Board of Directors. He shall be, ex officio, a member of all standing
committees except the Bank Examining Committee and the Trust Auditing Committee.
Section 4.2 - President. The Board of Directors shall appoint one of its
---------
members to be the President of this Association. The President shall be the
chief executive officer of the Association, except as the Board of Directors may
otherwise provide, and shall have and may exercise any and all other powers and
duties pertaining to such office. He shall also have and may exercise such
further powers and duties as from time to time may be conferred upon, or
assigned to, him by the Board of Directors. He shall be, ex officio, a member
of all standing committees except the Bank Examining Committee and the Trust
Auditing Committee.
Section 4.3 - Chairman of the Executive Committee. The Board of Directors may
-----------------------------------
appoint a Chairman of the Executive Committee, who shall have general executive
powers and shall have and may exercise such further powers and duties as from
time to time may be conferred upon, or assigned to, him by the Board of
Directors.
Section 4.4 - Vice Presidents. The Board of Directors shall appoint one or more
---------------
Vice Presidents. Each Vice President shall have such powers and duties as may
be assigned to him by the Board and may be given such descriptive or functional
titles as the Board may designate.
<PAGE>
Section 4.5 - Trust Officers. The Board of Directors shall appoint one or more
--------------
Trust Officers. Each Trust Officer shall have such powers and duties as may be
assigned to him by the Board of Directors in accordance with the provisions of
Article V. The Trust Officers may be given such descriptive or functional
titles as the Board may designate.
Section 4.6 - Corporate Secretary. The Board of Directors shall appoint a
-------------------
Corporate Secretary. The Corporate Secretary shall be responsible for the
minutes book of the Association, in which he shall maintain and preserve the
organization papers of the Association, the Articles of Association, the By-
Laws, minutes of regular and special meetings of the shareholders and of the
Board of Directors, and reports by officers and committees of the Association to
the shareholders and to the Board of Directors. He shall attend all meetings of
the shareholders and of the Board of Directors and shall act as the clerk of
such meetings and shall prepare and sign the minutes of such meetings. He shall
have custody of the corporate seal of the Association and of the stock transfer
books, except as given to the Comptroller's Department or the Corporate Trust
Department to act as transfer agent and registrar of the Association's capital
stock, and of such other documents and records as the Board of Directors shall
entrust to him. The Secretary shall give such notice of meetings of the
shareholders and of the Board of Directors as is required by law, the Articles
of the Association and the By-Laws. In addition, he shall perform such other
duties as may be assigned to him from time to time by the Board of Directors.
The Assistant Secretaries shall render the Corporate Secretary such assistance
as he shall require in the performance of his office. During his absence or
inability to act, the Assistant Secretaries shall be vested with the powers and
perform the duties of the Corporate Secretary.
Section 4.7 - Cashier. The Board of Directors may appoint a Cashier. He shall
-------
have such powers and shall perform such duties as may be assigned to him by
resolution of the Board of Directors.
Section 4.8 - Comptroller. The Board of Directors shall appoint a Comptroller.
-----------
The Comptroller shall institute and maintain the accounting policies and
practices established by the Board of Directors. He shall maintain, or cause to
be maintained, adequate records of all transactions of the Association. He
shall be responsible for the preparation of reports and returns to taxing and
regulatory authorities, and at meetings of the Board of Directors shall furnish
true and correct statements of condition and statements of operations of the
Association and such further information and data, and analyses thereof, as the
Board of Directors may require. He shall have custody of the Association's
insurance policies. In addition, the Comptroller shall perform such other
duties as may be assigned to him, from time to time by the Board of Directors.
The Assistant Comptroller(s) shall render the Comptroller such assistance as he
shall require in the performance of the duties of his office and, during his
absence or inability to act, the Assistant Comptroller(s), in the order
designated by the Board of Directors, shall be vested with the powers and
perform the duties of the Comptroller.
Section 4.9 - Auditor. The Board of Directors shall appoint an Auditor of the
-------
Association. He shall see that adequate audits of the Association are currently
and regularly made and that adequate audit systems and controls are established
and maintained. He shall examine each department and activity of the
Association and may inquire into transactions affecting the Association
involving any officer or employee thereof. The Board, however, may, in lieu of
appointing an Auditor, assign the duties thereof to the Auditor of the parent
company of the Association.
Section 4.10 - Other Officers. The Board of Directors may appoint one or more
--------------
Assistant Vice Presidents, one or more Assistant Trust Officers, one or more
Assistant Secretaries, one or more Assistant Cashiers, and such other officers
and Attorneys-In-Fact as from time to time may appear to the Board of Directors
to be required or desirable to transact the business of the Association. The
power to
<PAGE>
appoint such assistant or the additional officers may be delegated to the
Chairman of the Board or the President, or to such other executive officer or
officers as the Board may designate, but the power to appoint any officer of the
Audit Department or any Assistant Secretary may not be so delegated. Any officer
and Attorney-In-Fact appointed as herein provided shall exercise such powers and
perform such duties as pertain to his office or as may be conferred upon or
assigned to him by the Board of Directors of by the officer authorized to make
such appointment.
Section 4.11 - Tenure of Office. The Chairman of the Board and the President
----------------
shall hold office for the current year for which Board of Directors of which
they are members was elected, unless either of them shall resign, become
disqualified or be removed, and any vacancy occurring in either of such offices
shall be filled promptly by the Board of Directors. All other officers of the
Association shall serve at the pleasure of the Board of Directors.
Section 4.12 - Compensation of Officers. The compensation of the officers of
------------------------
the Association shall be fixed and may be altered, from time to time, by the
Board of Directors or, in the case of officers appointed by another officer, as
authorized by Section 4.10 of this Article, by the officer or officers making
such appointment, subject to the supervisory control of, and in accordance with
the policies established by, the Board.
Section 4.13 - Combining Offices. The Board of Directors, in its discretion,
-----------------
may combine two or more offices and direct that they be filled by the same
individual, except that (a) the office of Corporate Secretary shall not be
combined with that of the Chairman of the Board or of the President and (b) the
office of Auditor shall not be combined with any other office.
Section 4.14 - Succession. During the absence of the Chairman of the Board, or
----------
such other officer designated as Chief Executive Officer, all of the duties
pertaining to his office under these By-Laws and the resolutions of the Board of
Directors shall, subject to the supervisory control of the Board, devolve upon,
and be performed by, the officers, successively, who are next in the order of
authority as established by the Board of Directors from time to time, or, in the
absence of an order of authority so established, in the order of Chairman of the
Board, President and Chairman of the Executive Committee as may be applicable in
the particular case.
Section 4.15 - Clerks and Agents. Any one of the Chairman of the Board,
-----------------
President or Chairman of the Executive Committee, or any officer of the
Association authorized by them, may appoint and dismiss all or any clerks,
agents and employees and prescribe their duties and the conditions of their
employment, and from time to time fix their compensation.
Section 4.16 - Requiring Bond. The Board of Directors shall require such
--------------
officers and employees of the Association as it shall designate to give bond, of
suitable amount, with security to be approved by the Board, conditioned for the
honest and faithful discharge by each such officer or employee of his respective
duties. In the discretion of the Board, such bonds may be in blanket form and
the premiums may be paid by the Association. The amount of such bonds, form of
coverage, and the company acting as surety therefor, shall be reviewed by the
Board of Directors each year.
<PAGE>
ARTICLE V
---------
Administration of Trust Powers
------------------------------
Section 5.1 - Trust Department. Organization. There shall be one or more
---------------- ------------
departments of the Association which shall perform the fiduciary
responsibilities of the Association.
Section 5.2 - Management of Department. The Board of Directors shall be
------------------------
responsible for the management and administration of the Trust Department or
Departments, but is may assign or delegate such of its powers and authority to
the Trust Policy Committee and to such other committees and officers of the
Association as it may deem advisable.
Section 5.3 - Department Heads. The Board of Directors shall designate one of
----------------
the Trust Officers as the chief executive of each Trust Department. His duties
shall be to manage, supervise and direct all activities of such Department,
subject to such supervision as may be vested in the Trust Policy and other
committees. He shall do, or cause to be done, all things necessary or proper in
carrying on the business of such Department in accordance with provisions of
law, applicable regulations and policies established by authority of the Board.
He shall act pursuant to opinions of counsel where such opinion is deemed
necessary. He shall be responsible for all assets and documents held by the
Association in connection with fiduciary matters, in such Department, except as
otherwise provided in this Article V.
Section 5.4 - Custody of Securities. The Board of Directors shall designate two
---------------------
or more officers or employees of the Association to have joint custody of the
investments of each trust account administered by the Trust Department or
Departments.
Section 5.5 - Trust Department Files. There shall be maintained in each Trust
----------------------
Department files containing all fiduciary records necessary to assure that it
fiduciary responsibilities have been properly undertaken and discharged.
Section 5.6 - Trust Investments. Funds held in a fiduciary capacity shall be
-----------------
invested in accordance with the instrument establishing the fiduciary
relationship and governing law. Where such instrument does not specify the
character and class of investments to be made and does not vest in the
Association a discretion in the matter, funds held pursuant to such instrument
shall be invested in investments in which corporate fiduciaries may invest under
the laws of the State of Missouri and the decisions of its courts.
ARTICLE VI
----------
Stock and Stock Certificates
----------------------------
Section 6.1 - Transfers. Shares of the capital stock of the Association shall
---------
be transferable only on the books of the Association, and a transfer book shall
be kept in which all transfers of stock shall be recorded.
Section 6.2 - Stock Certificates. Certificates of stock shall bear the
------------------
signatures of (i) the Chairman of the Board, the President or any Vice
President, and (ii) the Secretary, Cashier, any Assistant Secretary, or any
other officer appointed by the Board of Directors for that purpose; and the seal
of the Association shall be impressed, engraved, or printed thereon. Such
signatures may be manual or engraved, printed or otherwise impressed by
facsimile process; but if both of the required signatures are by facsimile then
such certificates shall be manually countersigned by the person or persons
thereunto authorized by the
<PAGE>
Board of Directors. Certificates bearing the facsimile signature of an
authorized officer may be validly issued even though the person so named shall
have ceased to hold such office at the time of issuance. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of the Association upon the surrender of such certificate properly
endorsed.
Section 6.3 - Closing Transfer Books or Fixing Record Date. The Board of
--------------------------------------------
Directors shall have power to close the transfer books of the Association for a
period not exceeding thirty (30) days preceding the date of any meeting of
shareholders, or the date of payment of any dividend, or the date of allotment
of rights, or the date when any change or conversion of exchange of shares shall
go into effect; provided, however, that in lieu of closing the said transfer
books, the Board of Directors may fix, in advance, a date, not exceeding thirty
(30) days preceding the date of any such event, as record date for the
determination of the shareholders entitled to notice of, and to vote at, any
such meeting (and any adjournment thereof), or entitled to receive payment of
any such dividend or allotment of such rights, or to exercise rights in respect
of any such change, conversion or exchange of shares, and in such case, only
such shareholders as shall be shareholders of record at the close of business on
the date of closing the transfer books or on the record date so fixed shall be
entitled to notice of, and to vote at, such meeting (and any adjournment
thereof), or to receive payment of such dividend or allotment of such rights, or
to exercise such rights, as the case may be.
ARTICLE VII
-----------
Corporate Seal
--------------
Section 7.1 - Authority to Affix. The President, the Corporate Secretary, the
------------------
Cashier, and any Assistant Secretary or other officer designated by the Board of
Directors, shall have authority to affix the corporate seal on any document
requiring such seal, and to attest the same. The seal shall be substantially in
the following form:
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
Section 8.1 - Fiscal Year. The fiscal year of the Association shall be the
-----------
calendar year.
Section 8.2 - Execution of Instruments. All agreements, indentures, mortgages,
------------------------
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Association by the Chairman of the Board, the President, any Vice President,
or the Cashier; and, if in connection with the exercise of fiduciary powers of
the Association, by any of said officers or by any authorized officer of the
Trust Department or Departments. Any such instruments may also be executed,
acknowledged, verified, delivered, or accepted on behalf of the Association in
such other manner and by such other officers as the Board of Directors may from
time to time direct. The provisions of this Section are supplementary to any
other provisions of these By-Laws.
<PAGE>
Section 8.3 - Banking Hours. The Association shall be open for business on such
-------------
days and during such hours as may be prescribed by resolution of the Board of
Directors. Unless and until the Directors shall prescribe other and different
banking hours, this Association's main office shall be open for business from
9:30 o'clock a.m. to 2:00 o'clock p.m. of each day, except Fridays when the
hours shall be from 9:30 o'clock a.m. to 6:00 o'clock p.m., and except that the
Association shall be closed on Saturdays and Sundays, and, with the approval of
the Board on days recognized by the laws of the State of Missouri as public
holiday.
ARTICLE IX
----------
By-Laws
-------
Section 9.1. - Inspection. A copy of the By-Laws, with all amendments thereto,
----------
shall at all times be kept in a convenient place at the main office of the
Association and shall be open for inspection to all shareholders during banking
hours.
Section 9.2 - Amendments. The By-Laws may be amended, altered or repealed by
----------
vote of a majority of the entire Board of Directors at any meeting of the Board,
provided that ten (10) days' written notice of the proposed change has been
given to each Director. No amendment may be made unless the By-Laws, as
amended, is consistent with the requirements of the laws of the United States
and with the provisions of the Articles of the Association. A certified copy of
all amendments to the By-Laws shall be forwarded to the Comptroller of the
Currency immediately after adoption.
10-1-94
<PAGE>
T-1 Exhibit 6
CONSENT OF TRUSTEE
------------------
Pursuant to Section 32l(b) of the Trust Indenture Act of l939, UMB Bank,
National Association, a national bank organized under the laws of the United
States, hereby consents that reports of examinations by the Comptroller of the
Currency, of the Federal Deposit Insurance Corporation, and any other federal,
state, territorial or district authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefore.
UMB BANK, NATIONAL ASSOCIATION
/s/ R. William Bloemker
--------------------------------------
R. William Bloemker, Vice President
Date: September 10, 1998
<PAGE>
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: UMB BANK, NATIONAL ASSOCIATION Call Date: 6/30/98 FFIEC 032
Address: P. O. Box 419226 Page RC-1
City, State Zip: Kansas City, MO 64141-6226
FDIC Certificate No.: 1 3 6 0 1
---------------------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC - - BALANCE SHEET
<TABLE>
<CAPTION>
----------------------
C300
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS / / / / / / / / / / / / / / / / / / / / / /
<S> <C> <C>
1. Cash and balances due from depository institutions (from Schedule RC-A) / / / / / / / / / / / / / / / / / / / / / /
a. Noninterest-bearing balances and currency and coin (1)........... 0081 806,764 1.a.
b. Interest-bearing balances (2).................................... 0071 2,053 1.b.
2. Securities: // / / / / / / / / / / / / / / / / / / / /
a. Held-to-maturity securities (from Schedule RC-B, column A)....... 1754 173,893 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)..... 1773 1,005,244 2.b.
3. Federal funds sold and securities purchased under agreements
to resell............................................................ 1350 272,064 3.
4. Loans and lease financing receivables: / / / / / / / / / / / / / / / / / / / / / /
a. Loans and leases, net of unearned
--------------------
income (from Schedule RC-C) RCON 2122 1,550,057 / / / / / / / / / / / / / / / / / / / / / / 4.a.
a. LESS: Allowance for loan and lease losses......RCON 3123 17,502 / / / / / / / / / / / / / / / / / / / / / / 4.b.
c. LESS: Allocated transfer risk reserve..........RCON 3128 0 / / / / / / / / / / / / / / / / / / / / / / 4.c.
--------------------
d. Loans and leases, net of unearned income, / / / / / / / / / / / / / / / / / / / / / /
allowance, and reserve (item 4.a minus 4.b and 4.c).............. 2125 1,532,555 4.d.
5. Trading assets (from Schedule RC-D).................................. 3545 77,730 5.
6. Premises and fixed assets (including capitalized leases)............. 2145 133,932 6.
7. Other real estate owned (from Schedule RC-M)......................... 2150 583 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)....................................... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding......... 2155 6,593 9.
10. Intangible assets (from Schedule RC-M)............................... 2143 29,205 10.
11. Other assets (from Schedule RC-F).................................... 2160 86,560 11.
12. Total assets (sum of items 1 through 11)............................. 2170 4,127,176 12.
---------------------------------------------
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
Legal Title of Bank: UMB BANK, Call Date: 6/30/98 FFIEC 032
NATIONAL ASSOCIATION Page RC-2
Address: P. O. Box 419226
City, State Zip: Kansas City, MO 64141-6226
FDIC Certificate No.: 1 3 6 0 1
-----------------
SCHEDULE RC - - CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES / / / / / / / / / / / / / / /
13. Deposits: / / / / / / / / / / / / / / /
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E).... 2200 3,176,244 13.a.
a. (1) Noninterest-bearing (1).......................... RCON 6631 1,402,697 / / / / / / / / / / / / / / / 13.a.(1)
(2) Interest-bearing................................. RCON 6636 1,773,547 / / / / / / / / / / / / / / / 13.a.(2)
-----------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs................ / / / / / / / / / / / / / / /
(1) Noninterest-bearing..................................................... / / / / / / / / / / / / / / /
(2) Interest-bearing........................................................ / / / / / / / / / / / / / / /
14. Federal funds purchased and securities sold under agreements to repurchase....... 2800 515,261 14.
15. a. Demand notes issued to the U.S. Treasury..................................... 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D)..................................... 3548 2 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases): / / / / / / / / / / / / / / /
a. With a remaining maturity of one year or less................................ 2332 0 16.a.
b. With a remaining maturity of more than one year through three years.......... A547 0 16.b.
c. With a remaining maturity of more than three years........................... A548 0 16.c.
17. Not applicable / / / / / / / / / / / / / / /
18. Bank's liability on acceptances executed and outstanding......................... 2920 6,593 18.
19. Subordinated notes and debentures (2)............................................ 3200 0 19.
20. Other liabilities (from Schedule RC-G)........................................... 2930 65,779 20.
21. Total liabilities (sum of items 13 through 20)................................... 2948 3,763,879 21.
22. Not applicable / / / / / / / / / / / / / / /
EQUITY CAPITAL / / / / / / / / / / / / / / /
23. Perpetual preferred stock and related surplus.................................... 3838 0 23.
24. Common stock..................................................................... 3230 16,500 24.
25. Surplus (exclude all surplus related to preferred stock)......................... 3839 133,972 25.
26. a. Undivided profits and capital reserves....................................... 3632 209,956 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities....... 8434 2,869 26.b.
27. Cumulative foreign currency translation adjustments.............................. / / / / / / / / / / / / / / /
28. Total equity capital (sum of items 23 through 27)................................ 3210 363,297 28.
29. Total liabilities and equity capital (sum of items 21 and 28).................... 3300 4,127,176 29.
-------------------------------
</TABLE>
__________________________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,962,000
<SECURITIES> 1,295,000
<RECEIVABLES> 13,061,000
<ALLOWANCES> 757,000
<INVENTORY> 8,542,000
<CURRENT-ASSETS> 28,653,000
<PP&E> 135,127,000
<DEPRECIATION> 52,220,000
<TOTAL-ASSETS> 112,433,000
<CURRENT-LIABILITIES> 14,051,000
<BONDS> 0
0
0
<COMMON> 11,748,000
<OTHER-SE> 75,646,000
<TOTAL-LIABILITY-AND-EQUITY> 112,433,000
<SALES> 111,450,000
<TOTAL-REVENUES> 111,450,000
<CGS> 64,354,000
<TOTAL-COSTS> 64,354,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,206,000
<INCOME-TAX> 7,677,000
<INCOME-CONTINUING> 12,529,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,529,000
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.06
</TABLE>
<PAGE>
EXHIBIT 99(a)
LETTER OF TRANSMITTAL
REPUBLIC GROUP INCORPORATED
Offer For Any and All Outstanding
Privately Placed 9 1/2% Senior Subordinated Notes due 2008
in Exchange for
9 1/2% Senior Subordinated Notes due 2008
Which Have Been Registered Under The Securities Act of 1933
Pursuant to the Prospectus dated September ___, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON __________, 1998, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent For The Exchange Offer Is:
UMB Bank, N.A.
By Mail or Hand Delivery: By Facsimile Transmission
(Eligible Institutions Only):
UMB Bank, N. A. (816) 221-0438
Corporate Trust Department Attention: Mr. R. William Bloemker
928 Grand Boulevard Confirm by Telephone:
Kansas City, Missouri 64106 (816) 860-7446
Attention: Mr. R. William Bloemker
Delivery of this letter of transmittal to an address other than as set
forth above or transmission of instructions via facsimile other than as set
forth above does not constitute a valid delivery of such letter of transmittal.
The undersigned acknowledges receipt of the Prospectus, dated September
_____, 1998, as it may be amended from time to time (the "Prospectus"), of
Republic Group Incorporated, a Delaware corporation (the "Company"), and this
Letter of Transmittal, which together constitute the Company's offer (the
"Exchange Offer") to exchange an aggregate principal amount of up to
$100,000,000 of 9 1/2% Senior Subordinated Notes due 2008, which have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
(the "New Notes"), of the Company for a like principal amount of the issued and
outstanding privately placed 9 1/2% Senior Subordinated Notes due 2008 (the "Old
Notes") of the Company from the Holders thereof.
-1-
<PAGE>
PLEASE READ THE INSTRUCTIONS CONTAINED HEREIN CAREFULLY BEFORE COMPLETING
THIS LETTER OF TRANSMITTAL.
Capitalized terms used but not otherwise defined herein shall have the same
meanings respectively given to them in the Prospectus.
This Letter of Transmittal is to be completed by Holders of Old Notes,
whether certificates for Old Notes ("Certificates") are to be forwarded herewith
or whether tenders of Old Notes are to be made by book-entry transfer to an
account maintained by UMB Bank, N.A. (the "Exchange Agent") at the Depository
Trust Company (the "Book Entry Transfer Facility" or "DTC") pursuant to the
procedures set forth in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus.
Holders of Old Notes whose Certificates are not immediately available or
who cannot deliver their Certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date (as defined in the Prospectus)
or who cannot complete the procedures for book-entry transfer on a timely basis,
may tender their Old Notes by complying with the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- --------------------------------------------------------------------------------
Name(s) and Address(es) of Holder(s): Certificate Aggregate Principal
(Please fill in, if blank) Number(s)* Principal Amount of
Amount of Old Notes
Old Notes Tendered
(if less
than all)**
* Need not be completed if Old Notes are being tendered by book-entry Holders.
** Old Notes tendered in the Exchange Offer must be tendered in denominations
of the principal amount of $1,000 or any integral multiples of $1,000 in excess
thereof. See Instruction 4. Unless otherwise indicated in the column, a Holder
will be deemed to have tendered all Old Notes represented by the Old Notes
indicated in Column 2. See Instruction 4.
-2-
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________
Account Number: ___________________
Transaction Code Number: __________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Holder(s): _____________________________________
Window Ticket Number (if any): ________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________, 1998
Name of Institution which Guaranteed Delivery: ____________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution: ______________________________
Account Number: ___________________________
Transaction Code Number: ______________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT
NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR YOUR
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
-3-
<PAGE>
Name: ___________________________________
Address: ___________________________________
___________________________________
___________________________________
(include zip code)
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above described aggregate
principal amount of the Company's privately placed 9 1/2% Senior Subordinated
Notes due 2008 (the "Old Notes") in exchange for a like aggregate principal
amount of the Company's 9 1/2% Senior Subordinated Notes due 2008, which have
been registered under the Securities Act (the "New Notes"), upon the terms and
subject to the conditions set forth in the Prospectus, receipt of which is
acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitute the Exchange Offer).
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power,
coupled with an interest) subject only to the right of withdrawal described in
"The Exchange Offer -- Withdrawal Rights" in the Prospectus, to (i) deliver
Certificates to the Company, together with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company, upon receipt by
the Exchange Agent, as the undersigned's agent, of the New Notes to be issued in
exchange for such Old Notes, (ii) present Certificates for transfer, and to
transfer the Old Notes on the books of the Company and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS, PROXIES, OR ANY
OTHER RIGHTS OF THIRD PARTIES. UPON REQUEST, THE UNDERSIGNED WILL EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS
-4-
<PAGE>
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
If they are not already set forth above, please print the name(s) and
address(es) of the Holder(s) of the Old Notes tendered hereby as they appear on
the Certificates. The undersigned should indicate the Certificate number(s) of
the Old Notes that the undersigned wishes to tender in the appropriate boxes
above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer for
any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering Holder, promptly following the Expiration
Date.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus and in the instructions attached hereto will, upon the
Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated under "Special Issuance Instructions" below, the
undersigned hereby directs that the New Notes be issued in the name(s) of the
undersigned or, in the case of a book-entry transfer of Old Notes, that such New
Notes be credited to the account indicated above and maintained at DTC. If
applicable, substitute Certificates not exchanged or not accepted for exchange
will be issued to the undersigned or, in the case of a book-entry transfer of
Old Notes, will be credited to the account indicated above and maintained at
DTC. Similarly, unless otherwise indicated under "Special Delivery
Instructions," New Notes will be delivered to the undersigned at the address
shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED
ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED
HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE
RECEIVED IN THE EXCHANGE OFFER AND (IV), IF THE UNDERSIGNED IS NOT A BROKER-
DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF
-5-
<PAGE>
SUCH NEW NOTES. BY TENDERING OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND
EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES THAT IS A BROKER-
DEALER REPRESENTS AND WARRANTS, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS
ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND
EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) THE BROKER-DEALER HOLDS SUCH OLD
NOTES ONLY AS A NOMINEE, OR (B) THE BROKER-DEALER ACQUIRED SUCH OLD NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES AND THAT IT WILL DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED
FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION
WITH ANY RESALE OF SUCH NEW NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY
DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT
IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) MAY USE THE
PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, IN
CONNECTION WITH RESALES OF NEW NOTES THAT SUCH PARTICIPATING BROKER-DEALER
ACQUIRED FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER
TRADING ACTIVITIES, FOR A PERIOD ENDING 180 DAYS AFTER CONSUMMATION OF THE
EXCHANGE OFFER OR, IF EARLIER, WHEN SUCH PARTICIPATING BROKER-DEALER HAS
DISPOSED OF ALL SUCH NEW NOTES. IN THAT REGARD, EACH BROKER-DEALER THAT
ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER- DEALER"), BY TENDERING SUCH OLD
NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF
NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY
FACT THAT MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE
PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR THAT CAUSES THE PROSPECTUS TO OMIT
TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH
THEY WERE MADE, NOT MISLEADING, OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS
SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER
WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY
HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR
OMISSION AND THE COMPANY HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED
PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR UNTIL THE COMPANY HAS GIVEN
NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. IF THE
COMPANY GIVES NOTICE TO SUSPEND THE SALE OF THE NEW NOTES, IT SHALL EXTEND THE
180-DAY PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE
ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW NOTES BY THE
NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE
-6-
<PAGE>
GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-
DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS
NECESSARY TO PERMIT RESALES OF THE NEW NOTES OR TO AND INCLUDING THE DATE ON
WHICH THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF NEW NOTES MAY BE RESUMED, AS
THE CASE MAY BE.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive any payment in respect of accrued interest on such Old Notes otherwise
payable on any interest payment date the record date for which occurs on or
after the date of consummation of the Exchange Offer. Old Notes accepted for
exchange will cease to accrue interest from and after the date of consummation
of the Exchange Offer. Such Holders, as Holders of New Notes on the relevant
record date for the first interest payment date following the consummation of
the Exchange offer, will receive interest accruing from the most recent date to
which interest has peen paid or, if no interest has been paid, from July 15,
1998.
Upon request, the undersigned will execute and deliver any additional
documents that the Company or the Exchange Agent may deem necessary or desirable
to complete the sale, assignment and transfer of the Old Notes tendered hereby.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and all
obligations of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, a tender of Old Notes is irrevocable.
BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND DULY
SIGNING AND DELIVERING THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED WILL BE
DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX.
-7-
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREWITH)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by Holder(s) exactly as name(s) appear(s) on Certificate(s)
hereby tendered or on the Note Register, or by any person(s) authorized to
become the Holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as may
be required by the Company for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation or a person
acting in another fiduciary or representative capacity, please set forth the
signatory's full title. See Instruction 5.
SIGNATURE(S) OF HOLDER(S):
__________________________________________
__________________________________________
Date: ___________________________, 1998
Name(s): _________________________________
_____________________________________
(please print)
Capacity (full title): ___________________________
Address: ________________________________________
________________________________________
________________________________________
(include zip code)
Telephone Number (including area code): ________________
Taxpayer Identification or Social Security Number(s): ________________
-8-
<PAGE>
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5):
__________________________________
(authorized signature)
Date: _______, 1998
Name of firm: _____________________
(please print)
Capacity (full Title): ____________
Address: __________________________
__________________________
__________________________
(include zip code)
Telephone Number (including area code):_______________
-9-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes or Old Notes not tendered are to be
issued in the name of someone other than the Holder of the Old Notes whose
name(s) appear(s) above.
Please issue:
[ ] Old Notes not tendered to:
[ ] New Notes to:
Name(s): ____________________________________
____________________________________
(please print)
Capacity (full title): ______________________
Address: ____________________________________
____________________________________
____________________________________
(include zip code)
Telephone Number (including area code): ________________
Taxpayer Identification or Social Security Number(s): _____________
-10-
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be sent
to someone other than the Holder of the Old Notes whose name(s) appear(s) above,
or to such Holder(s) at an address other than that shown above.
Please mail:
[ ] Old Notes not tendered to:
[ ] New Notes to:
Name(s): ____________________________________
____________________________________
(please print)
Capacity (full title): ______________________
Address: ____________________________________
____________________________________
____________________________________
(include zip code)
Telephone Number (including area code): ________________
Taxpayer Identification or Social Security Number(s): _____________
-11-
<PAGE>
INSTRUCTIONS
(FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER)
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed if either
(a) Certificates are to be forwarded herewith or (b) tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in "The
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. The
Exchange Agent must receive Certificates, or timely confirmation of a book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC, as well as
this Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, at its address set forth herein on or
prior to the Expiration Date. Old Notes may be tendered in whole or in part in
the principal amount of $1,000 and integral multiples thereof; provided,
however, that, if any Old Notes are tendered for exchange in part, the
untendered principal amount thereof must be $1,000 or any integral multiple
thereof.
Holders who wish to tender their Old Notes (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on a timely basis, may tender their Old Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. Pursuant to such procedures: (i) such
tender must be made by or through an Eligible Institution (as defined below);
(ii) the Exchange Agent must receive a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form that the Company has
made available, on or prior to the Expiration Date; and (iii) the Exchange Agent
must receive the Certificates (or a book-entry confirmation (as defined in the
Prospectus)) representing all tendered Old Notes, in proper form for transfer,
together with a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees and any other
documents required by this Letter of Transmittal, within five (5) New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF
-12-
<PAGE>
THE TENDERING HOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN THE EXCHANGE
AGENT ACTUALLY RECEIVES ALL OF SUCH DOCUMENTS. IF DELIVERY IS BY MAIL, THEN
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT
DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering Holder, by execution and delivery of this Letter of
Transmittal (or facsimile thereof), waives any right to receive any notice of
the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the Holder (which term,
for purposes of this document, shall include any participant in
DTC whose name appears on the Note Register as the owner of the
Old Notes) of Old Notes tendered herewith, unless such Holder(s)
has completed either "Special Issuance Instructions" or "Special
Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s) on
this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule that is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in the principal amount of $1,000 and integral multiples thereof;
provided, however, that, if any Old Notes are tendered for exchange in part, the
untendered principal amount thereof must be $1,000 or any integral multiple
thereof. If less than all the Old Notes evidenced by any Certificate submitted
are to be tendered, please indicate the principal amount of Old Notes that are
to be tendered in the box entitled "Principal Amount of Old Notes Tendered (if
less than all)." In such case, new Certificate(s) for the remainder of the Old
Notes that were evidenced by the old Certificate(s) will only be sent to the
Holder of the Old Notes, promptly after the Expiration Date. All Old Notes
represented by Certificates delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn at
any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, the Exchange Agent must timely receive a
written, telegraphic, telex or facsimile transmission of such notice of
withdrawal at one of its addresses set forth above or in the Prospectus on or
prior to the Expiration Date. Any such notice of withdrawal must (i) specify
the name of the
-13-
<PAGE>
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number or numbers
and principal amount of such Old Notes), (iii) contain a statement that such
person is withdrawing his election to have such Old Notes exchanged, (iv) be
signed by the person in the same manner as the original signature on the Letter
of Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes in
the name of the person withdrawing the tender, and (v) specify the name in which
such Old Notes are registered, if different from that of the Depositor. If Old
Notes have been tendered pursuant to the procedures for book-entry transfer set
forth in the Prospectus under "The Exchange Offer--Procedures for Tendering Old
Notes," the notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawal of Old Notes, in which case a notice
of withdrawal will be effective if timely delivered to the Exchange Agent by
written, telegraphic, telex or facsimile transmission. Withdrawals of tenders
of Old Notes may not be rescinded. Old Notes properly withdrawn will not be
deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering Old Notes."
The Company will determine, in its sole discretion, all questions as to the
validity, form and eligibility (including time of receipt) of any such
withdrawal notice, and such determination shall be final and binding on all
parties. None of the Company, any affiliates or assigns of the Company, the
Exchange Agent or any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or shall incur
any liability for failure to give any such notification. Any Old Notes that have
been tendered but that are withdrawn will be returned to the Holder without cost
to such Holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the Holder(s) of the Old Notes tendered
hereby, the signature(s) must correspond exactly with the name(s) as written on
the face of the Certificate(s) without alteration, enlargement or any change
whatsoever.
If any tendered Old Notes are owned of record by two or more joint Holders,
all such Holders must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in another fiduciary or representative
capacity, such persons must so indicate when signing and must submit proper
evidence satisfactory to the Company, in its sole discretion, of each such
person's authority to act.
If this Letter of Transmittal is signed by the Holder(s) of the Old Notes
listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate
bond power(s) are required
-14-
<PAGE>
unless New Notes are to be issued in the name of a person other than the
Holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the Holder
of the Old Notes listed and transmitted hereby, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the Holder(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Trustee may require in accordance with the restrictions on
transfer applicable to the Old Notes. Signatures on such Certificates or bond
powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signatory of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signatory
of this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal must be completed. Certificates
for Old Notes not exchanged will be returned by mail or, if tendered by book-
entry transfer, by crediting the account indicated above maintained at DTC. See
Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes. Such
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders that it determines not to be in
proper form or the acceptance of which, or exchange for which, may, in the view
of counsel to the Company, be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer--Certain Conditions
to the Exchange Offer" or any conditions or irregularity in any tender of Old
Notes by any particular Holder, whether or not the Company waives similar
conditions or irregularities in the case of any other Holder. The Company's
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) will be final and binding on
all parties. No tender of Old Notes will be deemed to have been validly made
until all irregularities with respect to such tender have been cured or waived.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent or any other person shall be under any duty to give notification of any
irregularities in tenders or shall incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front cover of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from a broker,
dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. federal
income tax law, a Holder whose tendered Old Notes are accepted for exchange is
required to
-15-
<PAGE>
provide the Exchange Agent with such Holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the Holder or other payee to a $50 penalty.
The box in Part 2 of the Substitute Form W-9 should be checked if the
tendering Holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
Holder must also complete the Certificate of Awaiting Taxpayer Identification
Number below in order to avoid backup withholding. Notwithstanding that the box
in Part 2 has been checked and the Certificate of Awaiting Taxpayer
Identification Number has been completed, the Exchange Agent will withhold 31%
of all payments made prior to the time that a properly certified TIN is provided
to the Exchange Agent. The Exchange Agent will retain such amounts withheld
during the 60 day period following the date of the Substitute Form W-9. If the
Holder furnishes the Exchange Agent with its TIN within 60 days after the date
of the Substitute Form W-9, the amounts retained during the 60 day period will
be remitted to the Holder and no further amounts shall be retained or withheld
from payments made to the Holder thereafter. If, however, the Holder has not
provided the Exchange Agent with its TIN within such 60 day period, amounts
withheld will be remitted to the IRS as backup withholding. In addition, 31% of
all payments made thereafter will be withheld and remitted to the IRS until a
correct TIN is provided.
The Holder is required to give the Exchange Agent the TIN of the Holder of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain Holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such Holders should nevertheless
complete the attached Substitute Form W-9 below and write "exempt" on the face
thereof to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8
signed under penalties of perjury attesting to its exempt status. Please
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on which Holders are
exempt from backup withholding.
Backup withholding is not an additional U.S. federal income tax. Rather,
the U.S. federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of tax, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive satisfaction of any or all conditions to the Exchange Offer enumerated
herein or in the Prospectus.
11. NO CONDITIONAL TENDERS. The Company will not accept any alternative,
conditional, irregular or contingent tenders. By execution and delivery of this
Letter of Transmittal, a tendering Holder of Old Notes shall be deemed to have
irrevocably waived any right to receive notice of acceptance of such Old Notes
for exchange.
-16-
<PAGE>
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the Holder should
promptly notify the Exchange Agent, which will instruct the Holder as to the
steps that must be taken in order to replace the Certificate(s). In such event,
the Exchange Agent will be unable to process this Letter of Transmittal and
related documents until the Holder has followed the procedures for replacing
lost, destroyed or stolen Certificate(s).
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, a transfer tax is imposed because the New Notes are to
be delivered to, or are to be issued in the name of, any person other than the
Holder of the Old Notes tendered, or if a transfer tax is imposed for any reason
other than the exchange of Old Notes in connection with the Exchange Offer, then
the tendering Holder must pay the amount of any such transfer tax (whether
imposed on the Holder or any other person). If the tendering Holder submits
satisfactory evidence of payment of such taxes or exemption therefrom with the
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering Holder.
IMPORTANT: THE EXCHANGE AGENT MUST RECEIVE THIS LETTER OF
TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER REQUIRED
DOCUMENTS ON OR PRIOR TO THE EXPIRATION DATE.
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<PAGE>
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
(See Instruction 9)
PAYER'S NAME: UMB Bank, N.A.
================================================================================
PART I - PLEASE PROVIDE TIN:__________________
YOUR TIN ON THE LINE AT Social Security Number or
RIGHT AND CERTIFY BY Employer Identification
SIGNING AND DATING Number
BELOW
================================================================================
PART 2 -- TIN APPLIED FOR [__]
================================================================================
SUBSTITUTE CERTIFICATION - UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT:
Form W-9 (1) the number shown on this form is my correct
Department of The taxpayer identification number (or I am waiting to
Treasury for a number to be issued to me).
Internal Revenue Service
Payor's Request For (2) I am not subject to backup withholding because
Taxpayer Identification (a) I am exempt from backup withholding, or (b) I
Number ("TIN") and have not been notified by the Internal Revenue
Certification Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup
withholding, and
(3) any other information provided on this form is
true and correct.
Signature _____________________ Date _________, 1998
================================================================================
You must cross out Part (2) above if you have been notified by the IRS that you
are subject to backup withholding because of underreporting interest or
dividends on your tax return and you have not been notified by the IRS that you
are no longer subject to backup withholding.
================================================================================
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<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
================================================================================
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that, if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature _________________ Date ___________, 1998.
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<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--
Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- --------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL GIVE THE
SECURITY FOR THIS TYPE OF ACCOUNT EMPLOYER
NUMBER OF -- IDENTIFICATION
NUMBER OF --
- ------------------------------------------------------------- --------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
2. Two or more individuals The actual owner of the number of the personal
(joint account) account or, if combined representative or trustee
funds, the first individ- unless the legal entity
ual on the account (1) itself is not designated
in the account title.) (5)
3. Husband and wife (joint The actual owner of the
account) account or, if joint 10. Corporate account The corporation
funds, the first individ-
ual on the account (1)
4. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act) 11. Religious, charitable, or The organization
educational organization account
5. Adult and minor (joint The actual owner of the
account) account, or, if joint
funds, the first individ-
ual on the account (1) 12. Partnership account held in the The partnership
name of the business
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person (3) 13. Association, club or other The organization
designated ward, minor, or tax-exempt organization
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account 14. A broker or registered nominee The broker or nominee
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
15. Account with the Department of The public entity
8. Sole proprietorship account The owner (4) Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
================================================================================
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
-20-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a) of the Code, or an
. individual retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any
. subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
. any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a) of the Code.
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1) of the Code.
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made by an ESOP (employee stock ownership plan) pursuant to
Section 404(k) of the Code.
Payments of interest not generally subject to backup withholding include the
following:
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<PAGE>
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
. Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
. Payments on tax-free covenant bonds under section 1451 of the Code.
. Payments made by certain foreign organizations.
. Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A of the Code.
PRIVACY ACT NOTICE. Section 6109 of the Code requires most recipients of
dividend, interest, or other payments to give taxpayer identification numbers to
payers who must report the payments to IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1993, payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
-22-
<PAGE>
Exhibit 99(b)
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
OF
REPUBLIC GROUP INCORPORATED
FULLY AND UNCONDITIONALLY GUARANTEED
BY
-----------------------------
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i) the
Holder's certificates ("Certificates") for 9 1/2% Senior Subordinated Notes due
2008 of the Company (the "Old Notes") are not immediately available, (ii) the
Holder cannot deliver the Old Notes, Letter of Transmittal and all other
required documents to UMB Bank, N.A. (the "Exchange Agent") on or prior to 5:00
p.m. New York City time, on the Expiration Date or (iii) the Holder cannot
complete the procedures for delivery by book- entry transfer on a timely basis.
This Notice of Guaranteed Delivery may be delivered by hand, overnight courier
or mail, or transmitted by facsimile transmission, to the Exchange Agent. See
"The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus.
Capitalized terms not defined herein have the meanings respectively given to
them in the Prospectus.
The Exchange Agent For The Exchange Offer Is:
UMB Bank, N.A.
By Mail or Hand Delivery: Facsimile Transmissions
(Eligible Institutions Only):
UMB Bank, N.A.
Corporate Trust Department (816) 221-0438
928 Grand Boulevard Attention: Mr. R. William Bloemker
Kansas City, Missouri 64106 Confirm by Telephone:
Attention: Mr. R. William Bloemker (816) 860-7446
<PAGE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a valid
delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS HERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to Republic Group Incorporated, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated September __, 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Procedures for Tendering Old Notes."
Aggregate Principal Amount Tendered: $________________________ *
Name(s) of Holder(s): _____________________________________
Certificate No(s): ________________________________
Total Principal Amount
Represented by Certificate(s): $__________________________
If Old Notes will be tendered by book-entry transfer, please provide the
following information:
DTC Account Number: __________________________
Date: ____________________________
______________________________
* Must be in denominations of a principal amount of $1,000 and any integral
multiple thereof.
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- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN BELOW:
Signature(s) of Holder(s) or
Authorized Signatory: Date:
x_________________________________ ______________________, 1998
x_________________________________ ______________________, 1998
Telephone Number (including area code):______________________________________
Must be signed by Holder(s) of Old Notes exactly as name(s) appear(s) on
tendered Certificates or on a security position listing, or by person(s)
authorized to become Holder(s) by endorsement and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in another fiduciary or representative capacity, such person must
set forth his or her full title below.
Please print name(s) and address(es) below:
Name(s): ___________________________________
___________________________________
Capacity: ___________________________________
Address(es): ___________________________________
(include zip code)
THE GUARANTEE ON THE REVERSE SIDE HEREOF MUST BE COMPLETED.
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<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (each of
the foregoing being referred to as an "Eligible Institution"), hereby guarantees
to deliver to the Exchange Agent, at one of its addresses set forth above,
either the Old Notes tendered hereby in proper form for transfer, or
confirmation of the book-entry transfer of such Old Notes to the Exchange
Agent's account at The Depository Trust Company, pursuant to the procedures for
book-entry transfer set forth in the Prospectus, in either case together with
one or more properly completed and duly executed Letter(s) of Transmittal (or
facsimiles thereof) and any other required documents within five business days
after the date of execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
_________________________________
Name of Firm
_________________________________
Authorized Signature
_________________________________
_________________________________
Address (including zip code)
_________________________________
Title
_________________________________
Please type or print name
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<PAGE>
Telephone Number (including area code):
_________________________________________
Date: _________________________, 1998
* * * * *
DO NOT SEND CERTIFICATES WITH THIS FORM. CERTIFICATES SHOULD ONLY BE SENT WITH
A PROPERLY COMPLETED LETTER OF TRANSMITTAL.
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