SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
(Mark One)
____ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
/ X / OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
/ / OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10258
Tredegar Industries, Inc.
(Exact name of registrant as specified in its charter)
Virginia 54-1497771
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1100 Boulders Parkway
Richmond, Virginia 23225
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 330-1000
Indicate by check whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares of Common Stock, no par value,
outstanding as of July 15, 1994: 10,594,225
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TREDEGAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30 December 31
ASSETS 1994 1993
Cash and cash equivalents $ 4,608 $ -
Accounts and notes receivable 74,210 70,173
Inventories 31,308 34,211
Deferred income taxes 11,111 11,555
Prepaid expenses and other 1,104 881
Total current assets 122,341 116,820
Property, plant and equipment, at cost 324,265 323,933
Less accumulated depreciation
and amortization 194,797 188,531
Net property, plant and equipment 129,468 135,402
Other assets and deferred charges 26,162 24,456
Goodwill and other intangibles 35,950 45,729
Net assets of discontinued operations 21,983 30,976
Total assets $ 335,904 $ 353,383
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 25,078 $ 19,376
Accrued expenses 36,581 35,380
Income taxes payable 2,673 -
Total current liabilities 64,332 54,756
Long-term debt 70,500 97,000
Deferred income taxes 19,071 23,108
Other noncurrent liabilities 9,692 9,431
Total liabilities 163,595 184,295
Shareholders' equity:
Common stock, no par value 165,839 170,140
Foreign currency translation
adjustment 84 (283)
Retained earnings (deficit) 6,386 (769)
Total shareholders' equity 172,309 169,088
Total liabilities and
shareholders' equity $ 335,904 $ 353,383
See accompanying notes to financial statements.
TREDEGAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts)
(Unaudited)
Second Quarter Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Net sales $122,913 $108,042 $243,907 $219,240
Other income (expense), net 160 (192) (71) (462)
123,073 107,850 243,836 218,778
Cost of goods sold 102,684 91,468 204,934 185,482
Selling, general & administrative
expenses 12,259 12,278 23,554 24,706
Research & development expenses 1,927 2,246 3,766 4,175
Interest expense 1,166 1,232 2,343 2,555
Unusual items - (736) 9,521 (2,263)
118,036 106,488 244,118 214,655
Income (loss) from continuing
operations before income taxes 5,037 1,362 (282) 4,123
Income taxes 1,963 688 1,737 1,739
Income (loss) from continuing
operations 3,074 674 (2,019) 2,384
Discontinued operations:
Income from energy segment operations 1,772 2,154 3,207 3,995
Gain on sale of remaining oil & gas
properties (net of income tax of
$2,121) - - 3,938 -
Deferred tax benefit on the difference
between the financial reporting and
income tax basis of The Elk Horn
Coal Corporation - - 3,320 -
Net income before extraordinary item
and cumulative effect of changes
in accounting principles 4,846 2,828 8,446 6,379
Extraordinary item - prepayment
premium on extinguishment of
debt (net of income tax benefits
of $685) - (1,115) - (1,115)
Cumulative effect of changes in
accounting for postretirement benefits
other than pensions (net of tax) and
income taxes - - - 150
Net income $ 4,846 $ 1,713 $ 8,446 $ 5,414
Earnings (loss) per share:
Continuing operations $ .29 $ .06 $ (.19) $ .22
Discontinued operations .16 .20 .97 .37
Before extraordinary item and
cumulative effect of changes
in accounting principles .45 .26 .78 .59
Extraordinary item - (.10) - (.10)
Cumulative effect of changes
in accounting principles - - - .01
Net income $ .45 $ .16 $ .78 $ .50
Shares used to compute earnings per share 10,722 10,895 10,808 10,895
See accompanying notes to financial statements.
TREDEGAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30
1994 1993
Cash flows from operating activities:
Continuing operations:
Income (loss) from continuing operations $(2,019) $ 2,384
Adjustments for noncash items:
Depreciation 11,789 11,380
Amortization of intangibles 1,010 ,281
Write-off of intangibles 9,521 -
Deferred income taxes (3,593) 363
Accrued pension income and postretirement benefits 177 115
Gain on sale of investments - (2,263)
Changes in assets and liabilities:
Accounts and notes receivable (4,037) (4,441)
Inventories 2,903 (3,066)
Prepaid expenses and other (230) (654)
Accounts payable 5,702 946
Accrued expenses and income taxes payable 3,625 (4,373)
Other,net (883) (1,429)
Net cash provided by continuing operating activities 23,965 243
Net cash used for extraordinary item - (1,115)
Net cash provided by discontinued operating activities 11,621 8,000
Net cash provided by operating activities 35,586 7,128
Cash flows from investing activities:
Continuing operations:
Capital expenditures (7,885) (5,905)
Investments (1,200) (200)
Proceeds from sales of investments - 5,263
Property disposals 2,569 2,208
Other, net (128) (334)
Net cash (used in) provided by investing
activities of continuing operations (6,644) 1,032
Discontinued operations:
Capital expenditures (16) (313)
Property disposals 7,853 1,685
Net cash provided by investing activities of
discontinued operations 7,837 1,372
Net cash provided by investing activities 1,193 2,404
Cash flows from financing activities:
Dividends paid (1,291) (1,308)
Net decrease in borrowings (26,500) (8,100)
Repurchase of Tredegar common stock (4,333) -
Other, net (47) (124)
Net cash used in financing activities (32,171) (9,532)
Increase in cash and cash equivalents 4,608 -
Cash and cash equivalents at beginning of period - -
Cash and cash equivalents at end of period $ 4,608 $ -
Supplemental cash flow information:
Interest payments (net of amount capitalized) $ 2,619 $ 5,249
Income tax payments, net $ 5,237 $ 3,935
See accompanying notes to financial statements.
TREDEGAR INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying consolidated
financial statements of Tredegar Industries, Inc. and
Subsidiaries ("Tredegar") contain all adjustments necessary
to present fairly, in all material respects, Tredegar's
consolidated financial position as of June 30, 1994, and the
consolidated results of their operations and their cash flows
for the six months ended June 30, 1994 and 1993. All such
adjustments are deemed to be of a normal recurring nature.
These financial statements should be read in conjunction with
the consolidated financial statements and notes thereto
included in the 1993 Annual Report. The results of operations
for the six months ended June 30, 1994 are not necessarily
indicative of the results to be expected for the full year.
2. Certain prior-period amounts have been reclassified to conform
to the current presentation.
3. The components of inventories are as follows:
(In thousands)
June 30 December 31
1994 1993
Finished goods $ 5,905 $ 5,735
Work-in-process 3,824 5,298
Raw materials 14,670 15,497
Stores, supplies and other 6,909 7,681
Total $ 31,308 $ 34,211
4. Unusual items in 1994 include the write-off of goodwill and
other intangibles in APPX Software, Inc. ($7.6 million after
income taxes or 70 cents per share). The write-off is the
result of management's determination that income generated by
the acquired products, which historically had been marketed
to small and medium-sized companies, will not be sufficient
to recover the unamortized costs associated with the
intangible software assets purchased by Tredegar in December
1992. The goodwill and other intangibles in APPX Software
were being amortized over 5 to 7 years at an annual rate of
approximately $1.5 million after income taxes, or 14 cents per
share. Unusual items in 1993 include gains on sales of
Emisphere Technologies, Inc. ("Emisphere") common stock
($460,000 after income taxes, or 4 cents per share for the
second quarter and $1.4 million after income taxes, or 13
cents per share, for the six months).
5. Tredegar is reporting its energy segment as discontinued
operations. In February 1994, Tredegar sold its remaining oil
and gas properties for approximately $8 million. In June
1994, Tredegar announced an agreement to sell its 97%-owned
subsidiary, The Elk Horn Coal Corporation ("Elk Horn"), to Pen
Holdings, Inc. for $71 million. Assuming completion of the
transaction during the third quarter, Tredegar expects to
realize an after-tax gain of approximately $26 million or
$2.43 per share. After-tax proceeds from the sale should be
approximately $50 million. Of this amount, it is expected
that $35 million will be used to repay certain outstanding
debt. Remaining proceeds will be invested in marketable
securities.
Results of energy segment operations are summarized below:
(In thousands)
Second Quarter Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
Revenues $ 8,443 $7,933 $16,154 $15,931
Costs and expenses:
Operating costs and
expenses 5,530 5,539 10,883 11,019
Interest allocated 133 161 269 334
Unusual items - (1,010) - (1,424)
Total 5,663 4,690 11,152 9,929
Income before income taxes 2,780 3,243 5,002 6,002
Income taxes 1,008 1,089 1,795 2,007
Income from energy segment
operations $ 1,772 $2,154 $ 3,207 $3,995
Unusual items for energy segment operations in 1993 include
gains of $1 million ($663,000 after income taxes or 6 cents
per share) for the second quarter and $1.4 million ($938,000
after income taxes or 9 cents per share) for the six months
related to sales of certain oil and gas properties.
Discontinued operations in 1994 include a gain of $6.1 million
($3.9 million after income taxes or 36 cents per share)
related to the sale of Tredegar's remaining oil and gas
properties, and a deferred tax benefit of $3.3 million (31
cents per share) recognized on the difference between the
financial reporting basis and income tax basis of Elk Horn in
connection with its anticipated sale.
6. Net income and earnings per share, adjusted for nonrecurring
items affecting the comparability of operating results, are
presented below:
(In thousands, except per-share amounts)
Second Quarter Six Months
1994 1993 1994 1993
Net income as reported $4,846 $1,713 $8,446 $5,414
After-tax effects of
nonrecurring items:
Write-off of APPX
Software intangibles - - 7,642 -
Gain on sale of oil & gas
properties - (663) (3,938) (938)
Deferred tax benefit
associated with the
expected sale of Elk
Horn Coal - - (3,320) -
Gain on sale of Emisphere - (460) - (1,410)
Extraordinary charge - 1,115 - 1,115
Cumulative effect of
accounting changes - - - (150)
Net income as adjusted for
nonrecurring items 4,846 1,705 8,830 4,031
Income from discontinued
operations as adjusted
for nonrecurring items (1,772) (1,491) (3,207) (3,057)
Net income from continuing
operations as adjusted
for nonrecurring items $3,074 $ 214 $5,623 $ 974
Earnings per share:
As reported $ .45 $ .16 $ .78 $ .50
As adjusted for
nonrecurring items .45 .16 .81 .37
From continuing
operations as adjusted
for nonrecurring items .29 .02 .52 .09
7. During the second quarter of 1994, Tredegar purchased 303,000
shares of Tredegar common stock for $4.3 million. In the
first quarter of 1994, Tredegar granted stock options to
purchase 381,000 shares of Tredegar common stock at prices not
less than the fair market value on the date of grant ($15.125)
and for a term not to exceed 10 years.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
In February 1994, Tredegar sold its remaining oil and gas
properties for approximately $8 million and recognized an after-tax
gain of $3.9 million (36 cents per share). In June 1994, Tredegar
announced an agreement to sell its 97%-owned subsidiary, The Elk
Horn Coal Corporation ("Elk Horn"), to Pen Holdings, Inc. for $71
million. Assuming completion of the transaction during the third
quarter, Tredegar expects to recognize an after-tax gain of
approximately $26 million ($2.43 per share). See "Liquidity and
Capital Resources" for discussion of the cash flow effects of these
transactions. The Elk Horn sale will complete the divestiture of
Tredegar's energy businesses. The energy segment is being reported
as discontinued operations.
Results of Operations
Second Quarter 1994 Compared with Second Quarter 1993
Net income for the second quarter of 1994 increased 183% to
$4.8 million, or 45 cents per share, from $1.7 million, or 16 cents
per share, in 1993. Results for the 1993 second quarter include an
after-tax charge of $1.1 million (10 cents per share) related to a
loan prepayment, an after-tax gain of $460,000 (4 cents per share)
on the sale of Emisphere Technologies, Inc. ("Emisphere") common
stock and an after-tax gain of $663,000 (6 cents per share) on the
sale of certain oil and gas properties. There were no special
charges or gains in the second quarter of 1994.
Second-quarter net income from continuing operations
(excluding energy results and nonrecurring items) was $3.1 million,
or 29 cents per share, up from $214,000, or 2 cents per share, in
1993. Results from continuing operations exclude the potential
benefit from the reinvestment of Elk Horn divestiture proceeds.
Second quarter net sales from continuing operations increased
14% in 1994 due primarily to higher volume in Film Products and
Aluminum Extrusions and the inclusion of Polestar Plastics, Inc.
("Polestar") in 1994. Tredegar acquired the assets of Polestar in
the third quarter of 1993.
The gross profit margin from continuing operations increased
to 16.5% in 1994 from 15.3% in 1993. The improvement in gross
profit margin was due primarily to higher volume in Film Products
and Aluminum Extrusions.
Selling, general and administrative expenses were essentially
flat.
Research and development expenses decreased 14% due to lower
spending in Film Products, partially offset by higher software
development costs at APPX Software, Inc. and higher spending at
Molecumetics.
Interest expense for continuing operations decreased 5% as a
result of significantly lower average debt levels, partially offset
by higher average interest rates. The average interest rate on
debt outstanding during the second quarter of 1994 was 6%, compared
with 5.6% in 1993. Interest expense of $133,000 and $161,000 was
allocated to discontinued operations in the second quarter of 1994
and 1993, respectively, based on relative capital employed.
The effective tax rate for continuing operations, excluding
nonrecurring items, decreased to 39% in the second quarter of 1994
from 65.8% in the second quarter of 1993. The higher rate in 1993
was due to the combined effects of non-deductible goodwill
amortization and relatively low income. In addition, a significant
portion of goodwill amortization was eliminated with the write-off
of APPX Software intangibles at the end of the first quarter of
1994.
Six Months 1994 Compared With Six Months 1993
Net income for the first six months of 1994 increased 56% to
$8.4 million, or 78 cents per share, from $5.4 million, or 50 cents
per share, in 1993. Results for 1994 include a $3.9 million after-
tax gain (36 cents per share) on the sale of Tredegar's remaining
oil and gas properties, a $3.3 million deferred tax benefit (31
cents per share) recognized on the difference between the financial
reporting and income tax basis of Elk Horn in connection with its
anticipated sale and a $7.6 million after-tax charge (70 cents per
share) related to the write-off of goodwill and other intangibles
in APPX Software.
The write-off in APPX Software is the result of management's
determination that income generated by the acquired products, which
historically had been marketed to small and medium-sized companies,
will not be sufficient to recover the unamortized costs associated
with the intangible software assets purchased by Tredegar in
December 1992. APPX Software is actively engaged in efforts to
enhance current products and develop next-generation products aimed
at medium and large-sized companies. The goodwill and other
intangibles in APPX Software were being amortized over 5 to 7 years
at an annual rate of approximately $1.5 million after income taxes,
or 14 cents per share.
Results for 1993 include an after-tax gain of $1.4 million (13
cents per share) on the sale of Emisphere common stock, an after-
tax gain of $938,000 (9 cents per share) on the sale of oil and gas
properties, an after-tax charge of $1.1 million (10 cents per
share) related to a loan prepayment and a net gain of $150,000 (1
cent per share) related to the adoption of new accounting standards
for postretirement health benefits and deferred income taxes.
Net income from continuing operations (excluding energy
results and nonrecurring items) for the first six months of 1994
was $5.6 million, or 52 cents per share, up from $974,000, or 9
cents per share, in 1993. Results from continuing operations
exclude the potential benefit from reinvestment of Elk Horn
divestiture proceeds.
Net sales from continuing operations for the first six months
increased 11% in 1994 due primarily to higher volume in Film
Products and Aluminum Extrusions. Plastics sales also increased
due to the inclusion of Polestar in 1994.
The gross profit margin from continuing operations increased
to 16% in 1994 compared with 15.4% in 1993, due to higher volume in
Film Products and Aluminum Extrusions.
Selling, general and administrative expenses decreased 5% in
1994 due to restructuring and cost-reduction efforts.
Research and development expenses decreased 10% due to lower
spending in Film Products, partially offset by higher software
development costs at APPX Software and higher spending at
Molecumetics.
Interest expense for continuing operations decreased 8% due to
lower average debt levels. The average interest rate on debt
outstanding during the six months was 5.8% in 1994 compared with
5.7% in 1993. Interest expense of $269,000 and $334,000 was
allocated to discontinued operations in 1994 and 1993,
respectively, based on relative capital employed.
The effective tax rate for continuing operations, excluding
nonrecurring items, decreased to 39.1% in the first six months of
1994 from 47.6% in the first six months of 1993. The higher rate
in 1993 was due to the combined effects of non-deductible goodwill
amortization and relatively low income.
Segment Results
The following tables present Tredegar's net sales and
operating profit by industry segment for the second quarter and six
months ended June 30, 1994 and 1993.
Net Sales by Industry Segment(a)
(In thousands)
(Unaudited)
Second Quarter Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
Plastics $ 67,263 $ 59,695 $136,101 $125,637
Metal Products 55,111 47,577 106,888 92,251
Other 539 770 918 1,352
Total continuing
operations 122,913 108,042 243,907 219,240
Discontinued operations 8,443 7,933 16,154 15,931
Total net sales $131,356 $115,975 $260,061 $235,171
Operating Profit by Industry Segment(a)
(In thousands)
(Unaudited)
Second Quarter Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
Plastics $ 7,771 $ 3,649 $16,766 $ 9,041
Metal Products 3,143 2,881 4,807 4,323
Other:
Ongoing operations (2,448) (2,464) (4,825) (4,599)
Unusual items (b) - 736 (9,521) 2,263
Total Other (2,448) (1,728) (14,346) (2,336)
Total continuing
operations 8,466 4,802 7,227 11,028
Discontinued
operations (c) 2,913 3,404 11,330 6,336
Total operating profit $11,379 $ 8,206 $18,557 $17,364
Notes:
(a) Amounts previously reported for 1993 have been reclassified to conform to
the 1994 presentation.
(b) Unusual items in 1994 include the first-quarter write-off of goodwill and
other intangibles in APPX Software ($7.6 million after income taxes or 70
cents per share). Unusual items in 1993 include gains on the sale of
Emisphere common stock ($460,000 after income taxes, or 4 cents per share,
for the second quarter and $1.4 million after income taxes, or 13 cents
per share, for the six months).
(c) Discontinued operations in 1994 include the first-quarter gain of $6.1
million ($3.9 million after income taxes or 36 cents per share) on the
sale of Tredegar's remaining oil and gas properties. Discontinued
operations in 1993 include gains on the sale of oil and gas properties of
$1 million ($663,000 after income taxes or 6 cents per share) and $1.4
million ($938,000 after income taxes or 9 cents per share) for the second
quarter and six months, respectively.
Tredegar Film Products sales improved over 1993 for both the
second quarter and the six months due to significantly higher
volume in all business segments, partially offset by lower average
prices. Operating profit also improved due to restructuring and
cost reduction efforts, higher volume and lower raw material
prices, partially offset by lower average selling prices.
Tredegar Molded Products sales improved for the second quarter
and the six months due to the inclusion of Polestar. Operating
results were unfavorable compared with 1993 due to lower volume and
margins in packaging and industrial segments, partially offset by
favorable results from Polestar.
Metal Products sales increased for the second quarter and six
months of 1994 due to higher Aluminum Extrusions volume. Volume
increased primarily as a result of better economic conditions in
construction and automotive markets.
Tredegar's Other segment generated operating losses in the
second quarter of $2.4 million related primarily to APPX Software
and Molecumetics, Tredegar's synthetic chemistry research
laboratory. Excluding the pretax charge of $9.5 million for the
first quarter write-off of goodwill and other intangibles in APPX
Software, operating losses for the six months totaled $4.8 million.
Excluding the pretax gains on the sale of Emisphere common stock
($736,000 and $2.3 million for the second quarter and six months,
respectively), operating losses for the second quarter and six
months in 1993 were $2.4 million and $4.6 million, respectively.
APPX Software and Molecumetics represent efforts to add technology-
based growth components to Tredegar's mix of businesses.
Revenue from discontinued operations increased for both the
second quarter and the six months in 1994 despite the sale of
Tredegar's remaining oil and gas properties in February 1994. Coal
revenues and operating profit increased due to higher volume and
prices. Operating profit from discontinued operations for 1994
includes a pretax gain of $6.1 million from the sale of Tredegar's
remaining oil and gas properties. Operating profit in 1993
includes pretax gains from the sale of oil and gas properties of $1
million and $1.4 million for the second quarter and six months,
respectively.
Liquidity and Capital Resources
Tredegar's total assets at June 30, 1994, were $335.9 million,
a decrease of $17.5 million from December 31, 1993. The decrease
is primarily attributable to the write-off of goodwill and other
intangibles in APPX Software, the sale of Tredegar's remaining oil
and gas properties and the reduction of working capital supporting
the coal trading operation. In addition, depreciation for
continuing operations exceeded capital expenditures by
approximately $4 million. The ratio of current assets to current
liabilities was 1.9 to 1 at June 30, 1994. Accounts receivable
have increased as sales volumes have improved. Inventories
declined as a result of the shutdown and sale of certain assets at
the Flemington, New Jersey, Film Products plant. Inventory also
declined to satisfy higher sales activity. Higher accounts payable
primarily reflect higher aluminum ingot costs not fully reflected
in inventories as a result of the LIFO pricing method. Income taxes
payable increased due to the timing of estimated tax payments.
For the first six months of 1994, the net increase in cash
($4.6 million), cash used to repay debt ($26.5 million) and cash
used to purchase 303,000 shares of Tredegar common stock ($4.3
million) was primarily generated from (i) cash flow from operating
activities in excess of capital expenditures and dividends of $14.8
million, (ii) cash flow from discontinued operating activities in
excess of capital expenditures of $11.6 million (including the
liquidation of working capital supporting the coal trading
operation of $8 million), (iii) proceeds from the sale of
Tredegar's remaining oil and gas properties of approximately $8
million, and (iv) property disposals of approximately $2.6 million
primarily relating to facilities previously shut down. Since
becoming an independent company in 1989, Tredegar has purchased a
total of 1.4 million shares of its common stock for $18.9 million.
Tredegar is currently authorized to purchase up to 1.8 million
additional shares.
Net debt (debt less cash and cash equivalents) was $65.9
million at June 30, 1994, a decrease of $31.1 million since
December 31, 1993. Net debt as a percentage of capitalization was
28% and 36% at June 30, 1994 and December 31, 1993, respectively.
The average interest rate on debt outstanding at June 30, 1994 was
6.4%, compared with 5.3% at the end of last year. This increase is
due to proportionally higher fixed-rate debt and higher rates on
variable-rate borrowings.
On June 22, Tredegar announced an agreement to sell Elk Horn
to Pen Holdings, Inc. for $71 million. Assuming completion of the
transaction during the third quarter, Tredegar expects to realize
an after-tax gain of approximately $26 million or $2.43 per share.
After-tax proceeds from the sale should be approximately $50
million. Of this amount, it is expected that $35 million will be
used to repay certain variable-rate debt. Remaining proceeds will
be invested in marketable securities.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Tredegar's Annual Meeting of Shareholders was held on May
26, 1994. The following sets forth the vote results with
respect to each of the matters voted upon at the meeting:
(a) Election of Directors
No. of No. of
Nominee Votes "For" Votes "Withheld"
Austin Brockenbrough, III 9,499,006 51,737
Bruce C. Gottwald 9,504,757 45,986
W. Thomas Rice 9,491,135 59,608
Norman A. Scher 9,504,319 46,424
There were no broker non-votes with respect to the
election of directors.
(b) Approval of Auditors Approval of the designation of
Coopers & Lybrand as the auditors for Tredegar for 1994.
No. of No. of No. of
Votes "For" Votes "Against" Abstentions
9,498,115 36,382 16,246
There were no broker non-votes with respect to the approval of
auditors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No.
10 Agreement of Merger by and among Tredegar Investments,
Inc., The Elk Horn Coal Corporation, Pen Holdings, Inc.
and PHI Acquisition Corp. made as of June 22, 1994.
(Schedules and exhibits omitted; Registrant agrees to
furnish a copy of any schedule or exhibit to the
Securities and Exchange Commission upon request.)
11 Statement re computation of earnings per share.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
for the quarter ended June 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Tredegar Industries, Inc.
(Registrant)
Date: July 25, 1994 /s/ N. A. Scher
Norman A. Scher
Executive Vice President,
Treasurer and Chief Financial
Officer (Principal Financial
Officer)
Date: July 25, 1994 /s/ D. Andrew Edwards
D. Andrew Edwards
Corporate Controller
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
10 Agreement of Merger by and among Tredegar
Investments, Inc., The Elk Horn Coal Corporation,
Pen Holdings, Inc. and PHI Acquisition Corp. made
as of June 22, 1994. (Schedules and exhibits
omitted; Registrant agrees to furnish a copy of any
schedule or exhibit to the Securities and Exchange
Commission upon request.)
11 Statement re computation of earnings per-share.
Exhibit 10 - Material Contracts
AGREEMENT OF MERGER
BY AND AMONG
TREDEGAR INVESTMENTS, INC.,
THE ELK HORN COAL CORPORATION,
PEN HOLDINGS, INC.
AND
PHI ACQUISITION CORP.
June 22, 1994
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
1.1 Agreement . . . . . . . . . . . . . . . . . . . . . 1
1.2 Assignment and Assumption Agreement . . . . . . . . 2
1.3 Balance Sheet Date. . . . . . . . . . . . . . . . . 2
1.4 Buyer . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Buyer's Closing Certificate . . . . . . . . . . . . 2
1.6 Certificates. . . . . . . . . . . . . . . . . . . . 2
1.7 Closing . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Closing Date. . . . . . . . . . . . . . . . . . . . 2
1.9 Closing Date Balance Sheet. . . . . . . . . . . . . 2
1.10 Code. . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 Company . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Company Closing Certificate . . . . . . . . . . . . 3
1.13 Company Common Stock. . . . . . . . . . . . . . . . 3
1.14 Company Subsidiary. . . . . . . . . . . . . . . . . 3
1.15 Continuing Employee . . . . . . . . . . . . . . . . 3
1.16 Contracts . . . . . . . . . . . . . . . . . . . . . 3
1.17 Dissenting Holders. . . . . . . . . . . . . . . . . 3
1.18 Effective Date. . . . . . . . . . . . . . . . . . . 4
1.19 Employee Benefit Plans. . . . . . . . . . . . . . . 4
1.20 Equipment . . . . . . . . . . . . . . . . . . . . . 4
1.21 ERISA . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 ERISA Affiliate . . . . . . . . . . . . . . . . . . 4
1.23 Exchange Agent. . . . . . . . . . . . . . . . . . . 4
1.24 Financial Statements. . . . . . . . . . . . . . . . 5
1.25 HSR Act . . . . . . . . . . . . . . . . . . . . . . 5
1.26 Interim Balance Sheet . . . . . . . . . . . . . . . 5
1.27 Knowledge of the Company; Knowledge of Buyer. . . . 5
1.28 Law . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 Merger. . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Merger Consideration. . . . . . . . . . . . . . . . 5
1.31 Opinion of Buyer's Counsel. . . . . . . . . . . . . 6
1.32 Opinion of Company's Counsel. . . . . . . . . . . . 6
1.33 Parent. . . . . . . . . . . . . . . . . . . . . . . 6
1.34 Permitted Liens . . . . . . . . . . . . . . . . . . 6
1.35 Permits . . . . . . . . . . . . . . . . . . . . . . 6
1.36 Plan of Merger. . . . . . . . . . . . . . . . . . . 6
1.37 Proxy Statement . . . . . . . . . . . . . . . . . . 6
1.38 Real Property . . . . . . . . . . . . . . . . . . . 6
1.39 Retained Liabilities. . . . . . . . . . . . . . . . 7
1.40 Shareholders. . . . . . . . . . . . . . . . . . . . 8
1.41 Seller. . . . . . . . . . . . . . . . . . . . . . . 8
1.42 Seller Agreement and Proxy. . . . . . . . . . . . . 8
1.43 Special Meeting . . . . . . . . . . . . . . . . . . 8
1.44 Subsidiary. . . . . . . . . . . . . . . . . . . . . 8
1.45 Subsidiary Common Stock . . . . . . . . . . . . . . 9
1.46 Surviving Corporation . . . . . . . . . . . . . . . 9
1.47 Transferred Business. . . . . . . . . . . . . . . . 9
1.48 WVCA. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
THE MERGER
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . 9
2.2 Effective Date; Effects of the Merger . . . . . . . 9
2.3 Special Meeting . . . . . . . . . . . . . . . . . . 10
2.4 Closing; Filing of Articles of Merger . . . . . . . 11
2.5 Exchange of Shares. . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Qualification. . . . . . . . . . . 13
3.2 Execution, Delivery and Performance . . . . . . . . 14
3.3 Authorization . . . . . . . . . . . . . . . . . . . 15
3.4 Status of Company . . . . . . . . . . . . . . . . . 15
3.5 Capital Stock of the Company. . . . . . . . . . . . 16
3.6 Financial Statements. . . . . . . . . . . . . . . . 17
3.7 Absence of Changes. . . . . . . . . . . . . . . . . 18
3.8 Real Property . . . . . . . . . . . . . . . . . . . 20
3.9 Tangible Personal Property. . . . . . . . . . . . . 21
3.10 Permits, Licenses and Environmental Compliance. . . 22
3.11 Reclamation Bonds . . . . . . . . . . . . . . . . . 24
3.12 Contracts, Agreements, etc. . . . . . . . . . . . . 24
3.13 Litigation. . . . . . . . . . . . . . . . . . . . . 29
3.14 Insurance . . . . . . . . . . . . . . . . . . . . . 29
3.15 Employee Benefits . . . . . . . . . . . . . . . . . 29
3.16 Employment Matters. . . . . . . . . . . . . . . . . 35
3.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . 36
3.18 Mining and Geological Information . . . . . . . . . 37
3.19 Transactions With Affiliates. . . . . . . . . . . . 38
3.20 No Broker . . . . . . . . . . . . . . . . . . . . . 38
3.21 Bank Accounts . . . . . . . . . . . . . . . . . . . 39
3.22 Intellectual Property . . . . . . . . . . . . . . . 39
3.23 Hazardous Material. . . . . . . . . . . . . . . . . 39
3.24 Disclosure. . . . . . . . . . . . . . . . . . . . . 39
3.25 Beneficiaries of UMWA Benefit Fund. . . . . . . . . 39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE SUBSIDIARY
4.1 Organization. . . . . . . . . . . . . . . . . . . . 40
4.2 Execution, Delivery and Performance . . . . . . . . 40
4.3 Authorization . . . . . . . . . . . . . . . . . . . 41
4.4 No Broker . . . . . . . . . . . . . . . . . . . . . 41
4.5 Buyer's Due Diligence . . . . . . . . . . . . . . . 42
ARTICLE V
CERTAIN MATTERS PENDING THE MERGER
5.1 Carry on in Regular Course. . . . . . . . . . . . . 42
5.2 Distributions; Assignment of Retained Liabilities . 42
5.3 Indebtedness. . . . . . . . . . . . . . . . . . . . 43
5.4 Issuance of Stock . . . . . . . . . . . . . . . . . 43
5.5 Compensation. . . . . . . . . . . . . . . . . . . . 43
5.6 Compliance with Law . . . . . . . . . . . . . . . . 43
5.7 Access to Information . . . . . . . . . . . . . . . 44
5.8 Cooperation; Best Efforts . . . . . . . . . . . . . 44
5.9 Consents. . . . . . . . . . . . . . . . . . . . . . 45
5.10 Publicity . . . . . . . . . . . . . . . . . . . . . 45
5.11 Confidentiality . . . . . . . . . . . . . . . . . . 46
5.12 No Solicitation . . . . . . . . . . . . . . . . . . 46
5.13 Articles and Bylaws . . . . . . . . . . . . . . . . 47
5.14 Buyer's Conduct of Business . . . . . . . . . . . . 47
5.15 Assignment and Assumption Agreement . . . . . . . . 47
5.16 Copy of Proxy Statement . . . . . . . . . . . . . . 47
5.17 Buyer's Financing . . . . . . . . . . . . . . . . . 47
ARTICLE VI
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
6.1 Conditions Precedent to Each Party's Obligations
to Effect the Merger. . . . . . . . . . . . . . . . 47
6.2 Conditions Precedent to Obligations of the Buyer
and the Subsidiary. . . . . . . . . . . . . . . . . 48
6.3 Conditions Precedent to Obligations of the Company
and the Seller. . . . . . . . . . . . . . . . . . . 51
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Continuing Employment . . . . . . . . . . . . . . . 53
7.2 Employee Benefit Plan Matters . . . . . . . . . . . 53
7.3 Income Tax Matters. . . . . . . . . . . . . . . . . 56
7.4 Financial Condition of Buyer. . . . . . . . . . . . 64
7.5 Access to Books and Records . . . . . . . . . . . . 65
7.6 Payment of Retained Liabilities . . . . . . . . . . 65
7.7 Release of Parent Financial Commitments . . . . . . 66
7.8 Financial Condition of Parent . . . . . . . . . . . 66
7.9 Confidentiality . . . . . . . . . . . . . . . . . . 67
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Limitation on, and Survival of Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . 67
8.2 Indemnification by Seller and Parent . . . . . . . 69
8.3 Indemnification by Buyer. . . . . . . . . . . . . . 70
8.4 Limitation of Liability.. . . . . . . . . . . . . . 71
8.5 Notice of Indemnity Claims. . . . . . . . . . . . . 71
8.6 Arbitration.. . . . . . . . . . . . . . . . . . . . 72
8.7 Relationship of Section 7.3 to Sections 8.2
through 8.6 . . . . . . . . . . . . . . . . . . . . 74
8.8 Indemnity Amounts to be Computed on After-Tax
Basis . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE IX
TERMINATION
9.1 Termination . . . . . . . . . . . . . . . . . . . . 75
9.2 Effect of Termination . . . . . . . . . . . . . . . 75
9.3 Amendment . . . . . . . . . . . . . . . . . . . . . 76
9.4 Extension; Waiver . . . . . . . . . . . . . . . . . 76
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. . . . . . . . . . . . . . . . . . 76
10.2 Expenses. . . . . . . . . . . . . . . . . . . . . . 77
10.3 Governing Law . . . . . . . . . . . . . . . . . . . 77
10.4 Assignment. . . . . . . . . . . . . . . . . . . . . 77
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . 77
10.6 Counterparts; Headings. . . . . . . . . . . . . . . 78
10.7 Specific Performance. . . . . . . . . . . . . . . . 79
10.8 Interpretation. . . . . . . . . . . . . . . . . . . 79
10.9 Severability. . . . . . . . . . . . . . . . . . . . 79
10.10 No Reliance . . . . . . . . . . . . . . . . . . . . 79
10.11 Performance by the Subsidiary . . . . . . . . . . . 80
EXHIBITS
Exhibit 1.2 Assignment and Assumption Agreement
Exhibit 1.5 Buyer's Closing Certificate
Exhibit 1.12 Company's Closing Certificate
Exhibit 1.31 Opinion of Buyer's Counsel
Exhibit 1.32 Opinion of Company's Counsel
Exhibit 1.36 Plan of Merger
Exhibit 1.42 Seller Agreement and Proxy
Exhibit 2.5 Form of Transmittal Letter
SCHEDULES
Schedule 1.24 Financial Statements
Schedule 1.26 Interim Balance Sheet
Schedule 1.34 Permitted Liens
Schedule 1.39 Rockefeller Beneficiaries
Schedule 3.2 Conflicts, Violations, etc.
Schedule 3.4 Foreign Qualification, Subsidiaries
Schedule 3.5 Stock Ownership
Schedule 3.7 Changes
Schedule 3.8C Compliance with Leases and Subleases
Schedule 3.8D Real Property
Schedule 3.9A Owned Equipment
Schedule 3.9B Leased Equipment
Schedule 3.10A Permits
Schedule 3.10B Violations
Schedule 3.12 Contracts
Schedule 3.13 Litigation
Schedule 3.14 Insurance
Schedule 3.15 Employee Benefit Plans
Schedule 3.16 Employment Matters
Schedule 3.17 Taxes
Schedule 3.19 Transactions with Affiliates
Schedule 3.21 Bank Accounts
Schedule 3.22 Intellectual Property
Schedule 7.1 Employees
AGREEMENT OF MERGER
AGREEMENT OF MERGER, made as of the 22nd day of June, 1994,
by and among TREDEGAR INVESTMENTS, INC., a Virginia corporation,
THE ELK HORN COAL CORPORATION, a West Virginia corporation, PEN
HOLDINGS, INC., a Tennessee corporation, and PHI ACQUISITION
CORP., a West Virginia corporation.
RECITALS
WHEREAS, the Buyer desires to merge the Subsidiary with and
into the Company and the parties hereto desire to effect such
merger upon the terms and subject to the conditions of this
Agreement and the Plan of Merger.
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, covenants, conditions and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which hereby are
acknowledged, it hereby is agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have
the meanings specified:
1.1 Agreement. "Agreement" shall mean this Agreement and
the Plan of Merger, together with the Exhibits and Schedules
attached hereto, as the same may be amended from time to time in
accordance with the terms hereof.
1.2 Assignment and Assumption Agreement. "Assignment and
Assumption Agreement" shall mean the assignment and assumption
agreement in the form of Exhibit 1.2 attached hereto, pursuant to
which the Company will assign to the Seller, and the Seller will
assume, the Retained Liabilities.
1.3 Balance Sheet Date. "Balance Sheet Date" shall have
the meaning set forth in Section 3.7 hereto.
1.4 Buyer. "Buyer" shall mean Pen Holdings, Inc., a
Tennessee corporation.
1.5 Buyer's Closing Certificate. "Buyer's Closing
Certificate" shall mean the certificate of the Buyer and the
Subsidiary in the form of Exhibit 1.5 attached hereto.
1.6 Certificates. "Certificates" shall mean the
certificates that, immediately prior to the Effective Date,
represent shares of Company Common Stock.
1.7 Closing. "Closing" shall mean the conference held at
10:00 a.m., local time, on the Closing Date, at the offices of
Hunton & Williams, Riverfront Plaza, East Tower, 951 East Byrd
Street, Richmond, Virginia.
1.8 Closing Date. "Closing Date" shall mean the later of
(i) August 16, 1994 or (ii) three business days after
satisfaction of the conditions set forth in Sections 6.1(a), (c)
and (d) hereof, subject to the provisions of Section 9.1 hereof.
1.9 Closing Date Balance Sheet. "Closing Date Balance
Sheet" shall mean the pro forma balance sheet of the Transferred
Business as of the Closing Date internally prepared by the
Company in a manner consistent with the Interim Balance Sheet and
the accounting policies described in Schedule 1.26 hereto, and
delivered to the Buyer on or before the Closing Date.
1.10 Code. "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.11 Company. The "Company" shall mean The Elk Horn Coal
Corporation, a West Virginia corporation.
1.12 Company Closing Certificate. "Company Closing
Certificate" shall mean the certificate of the Company in the
form of Exhibit 1.12.
1.13 Company Common Stock. "Company Common Stock" shall
mean all of the issued and outstanding capital stock of the
Company consisting of 1,042,383 shares of common stock, no par
value.
1.14 Company Subsidiary. "Company Subsidiary" shall mean
each subsidiary of the Company listed on Schedule 3.4.
1.15 Continuing Employee. "Continuing Employee" shall
have the meaning set forth in Section 7.1 hereof.
1.16 Contracts. "Contracts" shall mean all contracts,
agreements, personal property leases (other than those listed on
Schedule 3.9B), relationships and commitments, written or oral,
to which the Company is a party or by which the Company is bound
that are included in Schedule 3.12.
1.17 Dissenting Holders. "Dissenting Holders" shall mean
those Shareholders, if any, who object to the Merger and comply
with the provisions of the WVCA concerning the right of such
holders to dissent from the Merger and demand appraisal rights of
their shares.
1.18 Effective Date. "Effective Date" shall mean the date
of issuance by the West Virginia Secretary of State of a
Certificate of Merger with respect to the Merger.
1.19 Employee Benefit Plans. "Employee Benefit Plans"
shall mean the employee benefit plans of the Company listed on
Schedule 3.15 attached hereto, which shall include without
limitation any contract, agreement, loan or arrangement which is
an "employee benefit plan," as defined in Section 3(3) of ERISA,
maintained by or on behalf of the Company covering the employees
of the Company or to which the Company is obligated to
contribute.
1.20 Equipment. "Equipment" shall mean all machinery,
vehicles, equipment, furniture, fixtures, furnishings, parts and
other items of tangible personal property owned or leased by the
Company and that are listed on the Company's "Book Depreciation
Summary."
1.21 ERISA. "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
1.22 ERISA Affiliate. "ERISA Affiliate" shall mean each
trade or business, whether or not incorporated, which with the
Company is treated as a single employer under Code section
414(b), (c), (m) or (o).
1.23 Exchange Agent. "Exchange Agent" shall mean the bank
or trust company designated by the Buyer prior to the Effective
Date in accordance with Section 2.5 hereof to act as exchange
agent for the Merger.
1.24 Financial Statements. "Financial Statements" shall
mean the internally prepared combined statements of net assets
representing the Transferred Business as of December 31, 1993 and
1992, and the related statements of income and cash flows of the
Transferred Business for the years ended December 31, 1993 and
1992, all of which are attached hereto as Schedule 1.24.
1.25 HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (15 U.S.C. Section 18a), as amended.
1.26 Interim Balance Sheet. "Interim Balance Sheet" shall
mean the internally prepared pro forma balance sheet of the
Transferred Business, as of March 31, 1994 and a description of
the accounting policies applied in the preparation thereof, which
is attached hereto as Schedule 1.26.
1.27 Knowledge of the Company; Knowledge of Buyer.
"Knowledge of the Company" shall mean actual knowledge of David
D. Reed, Francis X. Delzer, James B. Newman or James E. Allen.
"Knowledge of the Buyer" shall mean actual knowledge of William
Beckner, Peter Rumsey, David G. Gray, James Clevenger or James
Cook.
1.28 Law. "Law" shall mean any federal, state, local or
other law or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder, all of the
foregoing as in effect on the date hereof.
1.29 Merger. "Merger" shall mean the merger of the
Subsidiary into the Company pursuant to the Plan of Merger.
1.30 Merger Consideration. "Merger Consideration" shall
mean $59.25 in cash per share of Company Common Stock.
1.31 Opinion of Buyer's Counsel. "Opinion of Buyer's
Counsel" shall mean the opinion of David G. Gray, Esq., Vice
President and General Counsel to the Buyer and the Subsidiary, in
substantially the form of Exhibit 1.31 attached hereto.
1.32 Opinion of Company's Counsel. "Opinion of Company's
Counsel" shall mean the opinion of Hunton & Williams, counsel to
the Company, the Seller and the Parent, in substantially the form
of Exhibit 1.32 attached hereto.
1.33 Parent. "Parent" shall mean Tredegar Industries,
Inc., a Virginia corporation.
1.34 Permitted Liens. "Permitted Liens" shall mean those
liens, encumbrances, mortgages, charges, claims, restrictions,
pledges, security interests, impositions and other matters
affecting the assets of the Company that are listed on Schedule
1.34 attached hereto.
1.35 Permits. "Permits" shall mean all written permits,
licenses and governmental authorizations, registrations and
approvals required, as of the date hereof, to be obtained in the
conduct of the Company's business, including, but not limited to,
those Permits listed on Schedule 3.10A attached hereto.
1.36 Plan of Merger. "Plan of Merger" shall mean the plan
of merger attached hereto as Exhibit 1.36.
1.37 Proxy Statement. "Proxy Statement" shall mean the
proxy or information statement of the Company distributed in
connection with the Special Meeting.
1.38 Real Property. "Real Property" shall mean all real
property, coal rights, mineral estates, surface estates, coal
leases, coal subleases, surface leases, mining rights, spoilage
or overburden disposal rights, surface disturbance consents,
easements, rights-of-way, wheelage agreements, access rights and
other rights or interests in real property and improvements
thereon, or the coal therein and thereunder which are owned or
leased by the Company on the date hereof.
1.39 Retained Liabilities. "Retained Liabilities" shall
mean:
(a) All claims, liabilities, losses and expenses
incurred by the Company arising out of, or related to, the
case styled The Elk Horn Coal Corporation v. White Cloud
Mining Company, Inc. in the Circuit Court of Floyd County,
Kentucky;
(b) Any liabilities of the Company, existing as of
the Effective Date, to the UMWA Benefit Fund for the
beneficiaries of such Fund which have been assigned to the
Company, as listed on Schedule 1.39 hereto, based on the
provisions of the Coal Industry Retiree Health Benefit Act
of 1992, Law and applicable union contracts, all as in
effect on the Effective Date and only with respect to the
operations of the Company prior to the Effective Date;
(c) All benefits, rights, and obligations of the
Company pursuant to the Interim Operating and Stock Purchase
Agreement effective as of February 1, 1994 by and between
Tanoma Coal Sales, Inc. and the Company;
(d) all fees and expenses owed by the Company to its
financial and legal advisors in connection with the
transactions contemplated by this Agreement; and
(e) all obligations to Company employees to the
extent assumed or retained by Seller or Parent under
Sections 7.1 and 7.2. hereof.
1.40 Shareholders. "Shareholders" shall mean the holders
of Company Common Stock immediately prior to the Effective Date.
1.41 Seller. "Seller" shall mean Tredegar Investments,
Inc., a Virginia corporation and the owner of approximately 97%
of Company Common Stock.
1.42 Seller Agreement and Proxy. "Seller Agreement and
Proxy" shall mean the agreement attached hereto as Exhibit 1.42,
to be executed and delivered by the Seller on the date hereof and
pursuant to which the Seller agrees (i) to vote all of its shares
of Company Common Stock in favor of the Merger and (ii) to
provide the Buyer with a proxy for its shares of Company Common
Stock.
1.43 Special Meeting. "Special Meeting" shall mean the
special meeting of the Shareholders, and any adjournments
thereof, called pursuant to Section 2.3 hereof to consider the
Plan of Merger.
1.44 Subsidiary. "Subsidiary" shall mean PHI Acquisition
Corp., a West Virginia corporation and wholly-owned subsidiary of
the Buyer.
1.45 Subsidiary Common Stock. "Subsidiary Common Stock"
shall mean the common stock, par value $1.00 per share, of the
Subsidiary.
1.46 Surviving Corporation. "Surviving Corporation" shall
mean the Company as the surviving corporation in the Merger.
1.47 Transferred Business. "Transferred Business" shall
mean all the operations of the Company, as of March 31, 1994,
including but not limited to coal leasing and coal sales, but
specifically excluding the operations of the Elk Horn Coal Sales
Corporation.
1.48 WVCA. "WVCA" shall mean the West Virginia
Corporation Act.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, and in accordance with the WVCA, on
the Effective Date the Subsidiary shall be merged with and into
the Company pursuant to and on the terms set forth in the Plan of
Merger, as soon as practicable following the Closing. The
Company shall continue as the Surviving Corporation in the Merger
and the separate corporate existence of the Subsidiary shall
cease, and all of the Company Common Stock shall be owned by the
Buyer.
2.2 Effective Date; Effects of the Merger. The Merger
shall be consummated by filing with the West Virginia Secretary
of State Articles of Merger in such form as is required by, and
executed in accordance with, the relevant provisions of the WVCA,
together with such other documents as may be required by the
relevant provisions of the WVCA. The Merger shall become
effective on the Effective Date and shall have the effects set
forth in Section 31-1-37 of the WVCA and in the Plan of Merger.
As provided in the Plan of Merger, on the Effective Date, by
virtue of the Merger and without any action on the part of the
Company, the Buyer, the Subsidiary or any holder of capital stock
of any of them: (a) each share of Company Common Stock (other
than those Shares held by Dissenting Holders) outstanding
immediately prior to the Effective Date shall be converted into
the right to receive the Merger Consideration in accordance with
the Plan of Merger; (b) each share of Subsidiary Common Stock
outstanding immediately prior to the Effective Date shall be
converted into one share of Company Common Stock; and (c) the
Company, as the Surviving Corporation, shall have Articles of
Incorporation, Bylaws, directors and officers set forth in, or
determined in accordance with, the Plan of Merger.
2.3 Special Meeting. The Company, acting through its
Board of Directors, shall:
(a) Take all action required in accordance with the
WVCA and the Company's Articles of Incorporation and Bylaws
to duly call, give notice of, convene and hold the Special
Meeting as soon as practicable following the execution of
this Agreement for the purpose of considering and taking
action upon a proposal to approve and adopt this Agreement,
the Plan of Merger and the transactions contemplated hereby
and thereby;
(b) prepare and cause the Proxy Statement to be
mailed to the Shareholders at the earliest practicable time;
and
(c) use its reasonable best efforts to obtain the
necessary approvals of this Agreement, the Plan of Merger
and the transactions contemplated hereby and thereby by the
Shareholders.
2.4 Closing; Filing of Articles of Merger. Upon the
terms and subject to the conditions hereof, as soon as
practicable after all of the conditions to the obligations of the
parties hereunder have been satisfied or waived, the parties
shall conduct the Closing for the purpose of confirming the
foregoing. As soon as practicable following the Closing, the
Company and the Subsidiary shall in the manner required by the
WVCA deliver to and file with the West Virginia Secretary of
State duly executed Articles of Merger in accordance with the
provisions of the WVCA, and the parties hereto shall take all
such other and further action as may be required by law to make
the Merger effective.
2.5 Exchange of Shares.
(a) Prior to the Effective Date, the Buyer shall
designate a bank or trust company reasonably acceptable to
the Company to act as the Exchange Agent.
(b) On and after the Effective Date, the Buyer shall
make available to any record holder, as of the Effective
Date, of an outstanding Certificate, and promptly after the
Effective Date the Exchange Agent shall mail to each such
holder, a letter of transmittal in the form of Exhibit 2.5
hereto and instructions for use in effecting the surrender
of the Certificates for exchange. The Exchange Agent shall
mail therewith to each record holder of an outstanding
Certificate (other than the Seller) a form of certificate
under Treasury Regulation Section 1.1445-2(b)(2) providing that
the record holder is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust, or foreign
estate. Upon surrender to the Exchange Agent of a
Certificate, together with a duly executed letter of
transmittal and (if appropriate) certification under
Treasury Regulation Section 1.1445-2(b)(2), and any other required
documents, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration
represented by such Certificate, and such Certificate shall
forthwith be canceled. If a record holder does not provide
an executed certification under Treasury Regulation
Section 1.1445-2(b)(2), the amount of the Merger Consideration to
be received by the record holder shall be subject to federal
income tax withholding pursuant to Section 1445 of the Code.
If delivery is to be made to a person other than the person
in whose name the Certificate surrendered is registered, it
shall be a condition of delivery that the Certificate so
surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such
delivery shall pay any transfer or other taxes required by
reason of the delivery to a person other than the registered
holder of the Certificate surrendered or establish to the
satisfaction of the Buyer that such tax has been paid or is
not applicable. Until surrendered in accordance with the
provisions of this Section 2.5, each Certificate shall
represent for all purposes only the right to receive the
consideration set forth in the Plan of Merger.
(c) After the Effective Date, there shall be no
transfers on the stock transfer books of the Surviving
Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Date. If,
after the Effective Date, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged
for the consideration provided in this Article II in
accordance with the procedures set forth in this Section 2.5
and the Plan of Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer and
the Subsidiary that:
3.1 Organization and Qualification. Each of the Parent
and the Seller is a corporation, duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Virginia, and has all requisite power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated herein.
sh Execution, Delivery and Performance. Except as set
forth on Schedule 3.2, the execution, delivery and performance by
the Company, the Parent and the Seller of this Agreement and each
agreement or instrument executed in connection herewith or
delivered pursuant hereto and the consummation of the
transactions contemplated herein will not, with or without the
giving of notice or the passage of time, or both, (i) materially
conflict with, or result in a violation or breach of, or a
default, right to accelerate or loss of rights under, or result
in the creation of any lien, charge or encumbrance under or
pursuant to, any provision of the Seller's, the Parent's or
Company's Articles of Incorporation or Bylaws or of any
franchise, mortgage, deed of trust, lease, license, instrument,
agreement, consent, approval, waiver or understanding (in each
case, whether written or oral) to which the Company, the Parent
or the Seller is a party or by which either of them is bound, any
Law or any finding, order, judgment, writ, injunction or decree
to which the Seller, the Parent or the Company is a party or by
which the Seller, the Parent, the Company, the Company's assets
or Company Common Stock, may be bound or affected; or (ii)
require the approval, consent or authorization of, or prior
notice to, filing with or registration with, any federal, state
or local governmental body or authority, regulatory agency,
court, or any other person or entity, except notices and
approvals required under the HSR Act and the filing of the
Articles of Merger with the West Virginia Secretary of State.
3.3 Authorization. Each of the Seller, the Parent and
the Company has full power and authority to enter into, deliver
and perform this Agreement, and each agreement or instrument (to
which it is a party) executed in connection herewith or delivered
pursuant hereto and to consummate the transactions contemplated
hereby. The Seller's, the Parent's and the Company's execution,
delivery and performance of this Agreement and all agreements and
instruments executed in connection herewith or delivered pursuant
hereto and the transactions contemplated hereby have been duly
authorized by all requisite corporate action, subject to the
approval referenced in Section 6.1(a) hereof. This Agreement and
all agreements or instruments executed by the Seller, the Parent
and the Company in connection herewith or delivered by the
Seller, the Parent and the Company pursuant hereto have been duly
executed and delivered by the Seller, the Parent and the Company,
as the case may be, and this Agreement and all agreements and
instruments executed by the Seller, the Parent and the Company in
connection herewith or delivered by the Seller, the Parent or the
Company pursuant hereto constitute the Seller's, the Parent's or
the Company's, as the case may be, legal, valid and binding
obligation, enforceable in accordance with their respective
terms.
3.4 Status of Company. The Company and each Company
Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its respective state of
incorporation. The Company and each Company Subsidiary is duly
qualified as a foreign corporation in each jurisdiction in which
the nature of its respective business requires such qualification
and in which failure to so qualify would have a material adverse
effect on the Company or Company Subsidiary, and the
jurisdictions in which each is qualified as a foreign corporation
are identified on Schedule 3.4. The copy of the Articles of
Incorporation of the Company and the copy of the Bylaws of the
Company, in each case as heretofore delivered to Buyer, are true,
complete and correct. The Company and each Company Subsidiary
has the corporate power and authority to own those properties
purportedly owned by it and to lease those properties purportedly
leased by it and to carry on its respective business as now being
conducted. Except as set forth in Schedule 3.4, neither the
Company nor any Company Subsidiary has any subsidiaries or owns
shares or capital stock or otherwise has any ownership interest
or other investment in or advances to any corporation,
partnership, joint venture, mining partnership, entity,
enterprise or organization, and neither the Company nor any
Company Subsidiary is a partner (general or limited), joint
venturer or other member or participant in any partnership, joint
venture, mining partnership or other unincorporated association.
3.5 Capital Stock of the Company. The authorized capital
stock of the Company consists of 1,500,000 shares of common
stock, no par value, of which 1,042,383 shares are issued and
outstanding as of the date hereof. All of such shares have been
duly and validly authorized and issued, are fully paid and
nonassessable, and were not issued in violation of the preemptive
rights of any stockholder. The Seller owns good, valid and
marketable title to 1,010,282 shares of the Company Common Stock
free and clear of all liens, charges, security interests,
encumbrances, and claims of every kind, whether absolute,
matured, contingent or otherwise. Thirty Two Thousand One
Hundred One (32,101) shares of Company Common Stock are,
according to the records of the Company as of June 20, 1994, held
by the stockholders, other than Seller, and in the amounts
reflected on Schedule 3.5. There are no existing options,
warrants, calls or commitments relating to, or any securities or
rights convertible into, exercisable for or exchangeable for, any
capital stock of the Company or any other arrangements which
would require the Company to issue, deliver or sell any shares of
its capital stock. In addition, there are no shares of
authorized but unissued capital stock reserved for issuance.
There are no preemptive rights in effect in respect of the
capital stock of the Company. The Company owns all of the
authorized, issued, and outstanding stock of each Company
Subsidiary.
3.6 Financial Statements. The Company has delivered to
Buyer copies of the Financial Statements and the Interim Balance
Sheet. The Financial Statements present fairly the consolidated
financial condition, results of operations and cash flows of the
Transferred Business, as of the dates, and for the periods
indicated. The Interim Balance Sheet fairly presents the
consolidated financial condition of the Transferred Business as
of the date thereof, except that such statement has given effect
to the transactions contemplated by Sections 5.2 and 7.6 hereof.
3.7 Absence of Changes. Except as set forth in Schedule
3.7 or as contemplated by this Agreement, including but not
limited to Section 5.2 hereof and Schedule 1.26, since March 31,
1994 (the "Balance Sheet Date"), neither the Company nor any
Company Subsidiary has:
(a) borrowed or agreed to borrow any funds or
incurred, or become subject to, any obligation or liability
(absolute or contingent), except obligations and liabilities
incurred in the ordinary course of business, none of which
are materially adverse;
(b) paid any obligation or liability (absolute or
contingent) other than current liabilities reflected in or
shown on the Interim Balance Sheet and current liabilities
incurred since the Balance Sheet Date in the ordinary course
of business;
(c) sold, transferred or otherwise disposed of, or
agreed to sell, transfer or otherwise dispose of any of its
assets, property or rights, or canceled or otherwise
terminated, or agreed to cancel or otherwise terminate, any
debts or claims, except in the ordinary course of business
and consistent with past practice (with the ordinary course
of business exception to include, without limitation,
entering into or terminating customary coal leases,
amendments, and similar agreements);
(d) except in the ordinary course of business, and
consistent with past practice, made or permitted any
amendment or termination of any contract, agreement or
license to which it is a party or to which it or any of its
properties are subject;
(e) except for customary increases or adjustments
granted to its employees in accordance with its past
practices, increased the rate of compensation payable or to
become payable by it to any of its officers, directors or
employees or adopted any new, or made any increase in any,
profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement or other employee benefit
plan with any of its officers, directors or employees or
entered into any employment or severance agreement with any
of its officers, directors or employees;
(f) made any capital expenditures in excess of
$25,000 or commitment therefor;
(g) merged or consolidated with any other
corporation or entity, or acquired or agreed to acquire any
corporation, association, partnership, joint venture or
other entity;
(h) mortgaged, pledged or subjected to any pledge,
mortgage, security interest, conditional sales contract or
other similar encumbrance any of its assets or properties,
other than liens, if any, for current taxes not yet due and
payable;
(i) suffered any damage, destruction or loss,
whether or not covered by insurance, materially and
adversely affecting its business, operations, assets,
properties or prospects, or suffered any repeated, recurring
or prolonged shortage, cessation or interruption of
inventory shipments, supplies or utility services required
to conduct its business and operations or suffered any
change in its financial condition or in the nature of its
business or operations which has had or might have a
material adverse effect on its business, operations, assets,
properties or prospects;
(j) amended or modified, or granted any material
exception to, its credit criteria for new or existing
customers;
(k) changed any of the accounting principles
followed by it or the methods of applying such principles;
(l) entered into any agreement required to be
identified on Schedule 3.12, except agreements for the sale
of coal inventory prior to the Closing Date or agreements
entered into in the ordinary course of business;
(m) entered into any other transaction other than in
the ordinary course of business; or
(n) issued or reacquired any shares of the Company's
capital stock.
3.8 Real Property
(a) The Company has provided, and will continue to
provide pursuant to Section 5.7 hereof, Buyer with access to
all deeds, leases, bills of sale, documents of title,
abstracts, surveys, plats, maps, data and other material in
the Company's possession relating to all Real Property.
(b) Except for the Unmined Mineral Tax applicable to
coal properties in the Commonwealth of Kentucky, to the
Knowledge of the Company, no portion of the Real Property is
subject to or is affected by any special assessment by any
governmental authorities, and no such assessment is pending
or has been proposed.
(c) Except as set forth on Schedule 3.8C, to the
Knowledge of the Company, the Company and each Company
Subsidiary is in compliance in all material respects under
each of the leases and subleases to which it is a party
which is included in the Real Property; each of such leases
and subleases included in the Real Property is in full force
and effect, enforceable in accordance with its terms against
the respective lessee, sublessee, lessor or sublessor
thereunder; and to the Knowledge of the Company there is no
existing material default by the Company or any Company
Subsidiary under any such lease or sublease.
(d) Solely as to matters affecting the title to the
Real Property, to the Knowledge of the Company, there exists
no valid material claim(s) of any person(s) claiming by,
through or under the Company or any Company Subsidiary,
except as set forth in Schedule 3.8D.
3.9 Tangible Personal Property. Schedule 3.9A hereto
contains a reasonably detailed and complete listing of all the
Equipment owned by the Company and the Company Subsidiaries.
Except for dispositions or losses in the ordinary course of
business since the date of such Schedule 3.9A, at the Closing the
Company or the Company Subsidiaries will have good and marketable
title to all such Equipment, free and clear of any mortgage,
liability, claim, security interest, pledge, charge, agreement,
option, lien or encumbrance, other than Permitted Liens.
Schedule 3.9B hereto contains a reasonably detailed and complete
list of all Equipment leased by the Company and the Company
Subsidiaries. All of the Equipment listed on Schedule 3.9B is
held by the Company or the Company Subsidiaries under a valid and
enforceable lease.
3.10 Permits, Licenses and Environmental Compliance. (a)
To the Knowledge of the Company, neither it nor any Company
Subsidiary has received any notice that it has not obtained any
licenses, permits and other authorizations from federal, state,
local and other governmental or administrative authorities
necessary for the conduct of the business of the Company or the
Company Subsidiaries which is currently being conducted or has
been conducted at any time since January 1, 1990. Schedule 3.10A
contains a correct and complete list of all material Permits (as
of the date of preparation thereof). Except as set forth in
Schedule 3.10B and to the Knowledge of the Company, (a) each of
the Permits is in full force and effect; (b) the Company and the
Company Subsidiaries (or other designated permittee or licensee
thereunder) is in compliance in all material respects with the
terms, provisions and conditions thereof; and (c) there are no
outstanding violations, orders or notices of noncompliance issued
by the Federal Mine Safety and Health Administration, Federal
Office of Surface Mining, or Commonwealth of Kentucky, or any
other violations, penalties, notices of noncompliance,
agreements, judgments, consent decrees, agreed orders or
administrative actions or proceedings affecting any of the
Permits.
(b) Except as disclosed in Schedule 3.10B or Schedule
3.13 and to the Knowledge of the Company, since July 10, 1989 the
Company has not received any notice of violation, correction
order, cessation order, notice of penalty, notice of proposed
assessment or other notice from any regulatory authority or third
party that the Company or any Company Subsidiary is not in
compliance in any material respect(s) with all reclamation
activities, waste water treatment, discharge requirements, air
pollution abatement, health and safety requirements and
environmental responsibilities required to be performed by
Company or any Company Subsidiary pursuant to, and in connection
with or as a condition to the validity of such permits, licenses
and other authorizations or required of Company or any Company
Subsidiary pursuant to the Surface Mining Control and Reclamation
Act of 1977, as amended, and its Commonwealth of Kentucky
counterpart, the Federal Water Pollution Control Act (including
NPDES programs), as amended, and its Commonwealth of Kentucky
counterpart, the Clean Air Act, as amended, and its Commonwealth
of Kentucky counterpart, the Federal Mine Safety and Health Act
of 1977, as amended, and its Commonwealth of Kentucky
counterpart, the Resource Conservation and Recovery Act of 1976,
as amended, and its Commonwealth of Kentucky counterpart, the
Toxic Substances Control Act of 1976, as amended, and its
Commonwealth of Kentucky counterpart, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended, and its Commonwealth of Kentucky counterpart, or of
any other law, regulation or ordinance respecting the environment
or health and safety. Notwithstanding the foregoing, Buyer has
been advised that the Company has not conducted an environmental
audit of the Real Property with regard to compliance with any
referenced act or regulation, or otherwise.
3.11 Reclamation Bonds. Schedule 3.10A contains an
accurate and complete list of all cash (or cash equivalent) and
all surety bonds posted by and/or for the benefit of the Company
and the Company Subsidiaries to secure the performance of their
respective reclamation or other obligations pursuant to, in
connection with or as a condition of, the Permits.
3.12 Contracts, Agreements, etc. Schedule 3.12 contains a
correct and complete list of the following contracts, agreements,
or arrangements to which the Company or the Company Subsidiaries
are a party:
(a) notes, mortgages, indentures, loan or credit
agreements, equipment lease agreements having a
noncancellable term of not less than one year and annual
rental payments of not less than $25,000, security
agreements each of which secures indebtedness of not less
than $25,000, and other agreements and instruments
reflecting obligations for borrowed money or other monetary
indebtedness or otherwise relating to the borrowing of money
by, or the extension of credit to the Company or any Company
Subsidiary, in each case creating an actual or potential
obligation of the Company or any Company Subsidiary of not
less than $25,000, or commitments to enter into any such
agreements or commitments;
(b) management consulting, deferred compensation,
and employment agreements and binding agreements or
commitments to enter into the same;
(c) coal sales agreements, purchase orders, contract
bids or other agreements and commitments to sell or offer to
sell coal, or to purchase or offer to purchase coal;
(d) coal sales agency agreements or commitments
authorizing any person to act as agent for the purchase or
sale of coal or to otherwise represent the Company or any
Company Subsidiary in connection with the purchase or sale
of coal;
(e) contract mining agreements, whether as contract
miner or owner/employer;
(f) processing, storage, loading or transloading
agreements or other agreements or commitments pursuant to
which the Company or any Company Subsidiary utilizes or is
obligated to utilize or permits others to utilize any
preparation plant, stockpile area, crushing plant, screening
plant, tipple, processing facility, rail car or unit train
loading facility, barge loading facility or other
installation or facility owned, leased or used by it to
process, wash, crush, grade, screen, store, load, transload
or ship coal;
(g) agreements relating to the transportation and
movement of coal mined or sold by the Company or any Company
Subsidiary or agreements or commitments for any rates,
tariffs or other charges applicable to such transportation
or movement;
(h) agreements to pay any overriding royalty,
finder's fee, commission or other compensation or
consideration or to pay any person in connection with or
related to the identification, purchase, sale, leasing or
other acquisition of any real property, equipment,
machinery, personal property, lease, contract, opportunity,
permit, license, authorization or other right or asset,
tangible or intangible, of the Company or any Company
Subsidiary;
(i) option, purchase and sale or lease agreements
involving any real property, equipment, machinery, personal
property or other asset, tangible or intangible, involving
amounts payable by or to the Company or any Company
Subsidiary of $25,000 or more;
(j) agreements and purchase orders entered into or
issued in the ordinary course of business for the purchase
or sale of goods (other than coal), services, supplies or
capital assets requiring aggregate future payments by the
Company or any Company Subsidiary of more than $25,000;
(k) joint venture or other agreements involving the
sharing of profits or losses;
(l) contracts or agreements with the Seller, the
Parent or any subsidiary or affiliate of either, or any
director or officer of the Seller, the Parent or any
subsidiary or affiliate of either, or any person who is an
immediate relative of any such person, or any combination of
such persons;
(m) outstanding powers of attorney empowering any
person, company or other organization to act on behalf of
the Company or any Company Subsidiary;
(n) outstanding guarantees, subordination
agreements, indemnity agreements and other similar types of
agreements, whether or not entered into in the ordinary
course of business, which the Company or any Company
Subsidiary is or may become liable for or obligated to
discharge, or any asset of the Company or any Company
Subsidiary is or may become subject to the satisfaction of,
any indebtedness, obligation, performance or undertaking of
any other person, except for indemnification agreements
contained in any of the instruments listed in the Schedules
hereto and except for any of the foregoing in which in each
case the aggregate obligation of the Company or any Company
Subsidiary thereunder is less than $25,000;
(o) contracts, orders, decrees or judgments
preventing or restricting the Company or any Company
Subsidiary from carrying on business in any location;
(p) agreements, contracts or commitments relating to
the acquisition by the Company or any Company Subsidiary of
the outstanding capital stock or equity interest of any
business enterprise; and
(q) contracts, commitments or obligations not made
in the ordinary course of business and having unexpired
terms in excess of one year or requiring aggregate future
payments or receipts in excess of $25,000 or otherwise
material to the business or operations of the Company or any
Company Subsidiary.
The Company has provided, and will continue to provide pursuant
to Section 5.7 hereof, Buyer with access to true and complete
copies of all Contracts, including all amendments, modifications,
waivers and elections applicable thereto.
Except as set forth in Schedule 3.12, as to the Company and
each Company Subsidiary, such Contracts are valid and binding,
enforceable in accordance with their respective terms (subject to
any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting generally the enforcement of
creditors' rights), and are in full force and effect. Except as
disclosed in Schedule 3.12, there is not under any such Contract,
any existing material breach or material default (or event or
condition, which after notice or lapse of time, or both, would
constitute a material breach or material default), by the Company
or any Company Subsidiary with respect thereto. The Company has
not received written notice from any third party contesting the
enforceability of any Contract.
3.13 Litigation. Except as set forth on Schedule(s) 3.13
and 3.10B, there is no claim, legal action, suit, litigation,
arbitration, dispute or investigation, judicial, administrative
or otherwise, or any order, decree or judgment, now pending or in
effect, or, to the Knowledge of the Company, threatened or
contemplated, against or affecting the Company, any Company
Subsidiary, any of their respective property or assets or the
Company's Common Stock or the transactions contemplated by this
Agreement.
Except as disclosed on Schedule 3.8D or Schedule 3.13, to
the Knowledge of the Company, there are no existing claims by or
disputes with persons or entities owning or occupying lands or
realty adjoining or near any of the Real Property regarding
operations by the Company or any Company Subsidiary, regarding
the location of boundary lines, encroachments, subsidence,
blasting damage, transportation of coal or any other similar
matter.
3.14 Insurance. Attached hereto as Schedule 3.14 is a
list of all insurance policies held by the Company and each
Company Subsidiary now in force (including, without limitation,
comprehensive general liability, personal liability, automobile,
fire and lightning, workers' compensation, black lung and
fidelity bond coverage), showing for each the current premiums,
policy limits and coverages and the expiration dates of each such
policy. The premiums due thereon have been timely paid.
3.15 Employee Benefits.
(a) Except as otherwise described in Schedule 3.15:
(i) As to each Employee Benefit Plan which is
a "pension plan" (within the meaning of
ERISA section 3(2) but not including a
"multi-employer plan" within the meaning
of Section 3(37) of ERISA) (a "Pension
Plan"), the plan is expected to be
qualified under section 401(a) of the
Code and complies in all material
respects with ERISA.
(ii) A determination letter has been received
from the Internal Revenue Service (or an
application for such determination letter
is currently pending or will be filed
with the Internal Revenue Service on or
before the end of the remedial amendment
period under Section 401(b) of the Code)
with respect to each Pension Plan. No
Pension Plan has been amended in a manner
that would adversely affect its
qualification under Code section 401(c)
or materially increase its costs.
(iii) No Pension Plan and no "pension plan"
(within the meaning of ERISA section 3(2)
but not including a "multi-employer plan"
within the meaning of ERISA section
3(37)) maintained by an ERISA Affiliate
has an "accumulated funding deficiency,"
whether or not waived, as defined in
section 302(a)(2) of ERISA; no waiver of
the minimum funding standard has been
requested; and all required contributions
have been made on a timely basis in
accordance with Code section 412.
(iv) No "reportable event" within the meaning
of section 4043(b) of ERISA has occurred
with respect to any Pension Plan.
(v) With respect to each Pension Plan and
each "pension plan" (within the meaning
of ERISA section 3(2) but not including a
"multi-employer plan" within the meaning
of ERISA section 3(37)) maintained by an
ERISA Affiliate, no notice of intent to
terminate any plan that is subject to
Subtitle B of Title IV of ERISA has been
provided to participants or filed with
the Pension Benefit Guaranty Corporation
("PBGC") under section 4041 of ERISA, nor
has the PBGC instituted any proceeding
under section 4042 of ERISA to terminate
any such plan. There has not been any
termination or partial termination of any
such Pension Plan within the meaning of
Code section 411(d)(3).
(vi) Neither the Company nor any ERISA
Affiliate has engaged in a "prohibited
transaction" within the meaning of
Section 4975 of the Code or Section 406
of ERISA that was not exempt pursuant to
a statutory or regulatory exemption.
(vii) Each Employee Benefit Plan has been
administered in accordance with its
governing documents and in material
compliance with all applicable Law, and
neither the Company nor any ERISA
Affiliate is liable for tax under Section
4980B of the Code.
(viii) Other than employee claims for benefits
made in the ordinary course, to the
Knowledge of the Company there are no
pending claims, investigations or causes
of action with respect to the
qualification or administration of any
such Employee Benefit Plan and, to the
Knowledge of the Company, no such claims
are planned or threatened against any
Employee Benefit Plan or fiduciary of any
such plan by any participant, beneficiary
or governmental agency.
(b) Neither the Company nor any Company Subsidiary
has contributed to any "multi-employer plan," as defined in
Section 3(37) of ERISA and Section 414(f) of the Code, and
neither the Company nor any Company Subsidiary is under any
obligation to contribute to any such plan. Except as
disclosed on Schedule 3.15, neither the Company nor any
ERISA Affiliate has been assessed any withdrawal liability
to any "multi-employer plan", as defined above, that has not
been satisfied in full.
(c) Each Employee Benefit Plan is listed on Schedule
3.15. To the Knowledge of the Company, except as set forth
in Article VII hereof neither the Company nor any Company
Subsidiary has made, nor will it or any of its employees or
representatives make prior to the Effective Date, any
representation to or agreement with any of their respective
employees (whether written or oral) with respect to the
continuation of any benefits beyond the Effective Date under
any of the Employee Benefit Plans. Except as required by
Section 4980B of the Code, the Employee Benefit Plans that
provide life or medical benefits for retirees or former
employees may be prospectively amended or terminated without
material liability to the Company or a Company Subsidiary.
(d) The Company has heretofore delivered or will
deliver to Buyer prior to the Closing Date true and correct
copies of the following with respect to each such Employee
Benefit Plan and all amendments thereto to the date hereof.
In addition, the Company will, during regular business hours
prior to the Closing Date, allow Buyer to review true and
correct copies of the following with respect to each
Employee Benefit Plan:
(i) A copy of each trust agreement
pertaining to the Employee Benefit Plan
(including a copy of any applicable
collective investment trust) and all
amendments to such documents adopted
prior to the date hereof.
(ii) The two most recent actuarial valuation
reports for the Employee Benefit Plan of
the Company for which an actuarial
valuation report is required to be
prepared.
(iii) Copies of any correspondence with the
Employee Benefit Plan's actuaries or
accountants regarding actuarial
assumptions or errors in connection with
the preparation of actuarial reports,
materials filed with the Internal Revenue
Service or the Department of Labor or the
administration of the Plan.
(iv) The two most recent Internal Revenue
Service Forms 5500 including all
schedules and related certificates or
reports, filed with respect to the
Employee Benefit Plans of the Company.
(v) A copy of the most recent summary plan
description prepared with respect to the
Employee Benefit Plans and copies of any
employee handbooks or other descriptive
materials supplied to employees or
retirees concerning employee benefits.
3.16 Employment Matters. Neither the Company nor any
Company Subsidiary is a party to, bound by, or negotiating in
respect of any collective bargaining agreement or any other
agreement with any labor union, association or other employee
group, nor is any employee of the Company or any Company
Subsidiary represented by any labor union or similar association.
No labor union or employee organization has been certified or
recognized as the collective bargaining representative of any
employees of the Company or any Company Subsidiary. Except as
set forth on Schedule 3.16 hereto, to the Knowledge of the
Company, there are no formal union organizational campaigns or
representation proceedings underway or formally threatened with
respect to any employees of the Company or any Company Subsidiary
nor are there any existing or threatened labor strikes, work
stoppages, slowdowns, disputes, grievances, unfair labor practice
charges, labor arbitration proceedings or other disturbances
affecting any employee of the Company or any Company Subsidiary,
or affecting operations at or deliveries to any mine or other
facility of the Company or any Company Subsidiary. To the
Knowledge of the Company, the Company and each Company Subsidiary
has been and is in material compliance with all applicable Law
respecting employment and employment practices, terms and
conditions of employment and wages and hours.
3.17 Taxes. Except as set forth in Schedule 3.17 hereto
or as otherwise provided in this Section 3.17:
(a) the Parent, the Seller or the Company has filed
or caused to be filed in a timely manner all tax returns and
reports required to have been filed by or for the Company
and each Company Subsidiary on or before the Effective Date
and there is no examination by any taxing authority in
progress with respect to the foregoing;
(b) all tax returns filed by the Company and each
Company Subsidiary were true and correct in all material
respects when filed and, to the Company's knowledge, no
event has occurred that would require the filing of an
amended or corrected return;
(c) the Company has paid or made adequate provision
for all taxes (including, without limitation, withholding
taxes), additions to tax, interest, and penalties that have
become due pursuant to those returns or reports or pursuant
to any assessment or adjustment made with respect thereto;
and
(d) neither the Company nor any Company Subsidiary
has granted (or is subject to) any waiver of the period of
limitations for the assessment of tax for any currently open
taxable period, and no unpaid tax deficiency has been
asserted against or with respect to the Company or any
Company Subsidiary by a taxing authority.
Notwithstanding the foregoing, the Company is under no
obligation to set forth in Schedule 3.17 any item for which
indemnity is provided by the Parent in Section 7.3 of this
Agreement, nor shall any provision of this Section 3.17 apply to
any matter for which indemnity is provided by the Parent in
Section 7.3.
3.18 Mining and Geological Information. The Company has
provided Buyer with a copy of the reserve audit prepared by
John T. Boyd & Co. dated March 14, 1994. The Company expressly
disclaims any warranty to Buyer or any other party in regard to
the accuracy, validity, completeness, quality, or otherwise, in
connection with the Boyd report. The Company has provided, and
will continue to provide pursuant to Section 5.7 hereof, Buyer
with access to all geological data, reserve data, mine maps, core
hole logs and associated data, coal measurements, coal samples,
lithologic data, coal reserve calculations or reports,
washability analyses or reports, mine plans, mining permit
applications and supporting data, engineering studies and all
other information, maps, reports and data in the possession of
the Company relating to or affecting the coal reserves, coal
ownership, coal leases to the Company, coal leases from the
Company to third parties, mining conditions, mines, and mining
plans of the Company as prepared and utilized by the Company in
its day to day operations (collectively the "Mining Data").
BUYER ACCEPTS THE COMPANY'S RESERVES IN OR UNDER THE REAL
PROPERTY, AS IS, WHERE IS, TOGETHER WITH THE MINING DATA, FREE OF
ANY WARRANTY (EXPRESS OR IMPLIED) WITH REGARD TO THE MINEABILITY,
WASHABILITY, VOLUME, LOCATION, OR QUANTITY OR QUALITY OF ANY
MINERAL RESERVE (INCLUDING, WITHOUT LIMITATION, COAL, OIL AND
GAS).
3.19 Transactions With Affiliates. Except as set forth in
Schedule 3.19, or as contemplated by this Agreement, since
March 31, 1994, neither the Company nor any Company Subsidiary
has, in the ordinary course of business or otherwise, purchased,
leased or otherwise acquired any material property or assets or
obtained any material services from, or sold, leased or otherwise
disposed of any material property or assets or provided any
material services to (except with respect to remuneration for
services rendered as a director, officer or employee of the
Company or any Company Subsidiary), any employee of the Company,
any Company Subsidiary, the Seller, the Parent or any person,
firm or corporation that directly or indirectly controls, is con-
trolled by or is under common control with the Parent
(collectively, an "Affiliate"). Except as set forth in
Schedule 3.12, (a) the Contracts do not include any obligation or
commitment between the Company or any Company Subsidiary and any
Affiliate, and (b) the assets of the Company or any Company
Subsidiaries do not include any receivable or other obligation or
commitment from an Affiliate to the Company.
3.20 No Broker. The Company has not had any dealings,
negotiations or communications with nor retained any broker or
other intermediary in connection with the transactions
contemplated by this Agreement and is not committed to any
liability for any brokers' or finders' fees or any similar fees
in connection with the conveyance of Company Common Stock, other
than Goldman, Sachs & Co., whose fees are included in the
Retained Liabilities.
3.21 Bank Accounts. Schedule 3.21 sets forth all of the
Company's bank accounts and all persons who are authorized as
signatories thereon.
3.22 Intellectual Property. Schedule 3.22 sets forth all
patents, copyrights, trademarks and licenses, registered or
unregistered, owed by the Company.
3.23 Hazardous Material. To the Knowledge of the Company,
since July 10, 1989 the Company has not caused or permitted any
Hazardous Material to be disposed on any of the Real Property and
there are no claims, pending or threatened, against the Company
with respect to the presence or discharge of Hazardous Materials.
For purposes of this Section 3.23, Hazardous Materials shall mean
a "Hazardous Substance" or "Waste" as defined in the
Comprehensive Environmental Response Compensation and Liability
Act or the Resource Conversation Recovery Act, and petroleum
crude oil or fraction thereof.
3.24 Disclosure. To the Knowledge of the Company, this
Agreement, including the exhibits and schedules hereto, does not
contain any untrue statement of a material fact.
3.25 Beneficiaries of UMWA Benefit Fund. Schedule 1.39
sets forth a true and correct list of the beneficiaries of the
UMWA Benefit Fund that have been assigned to the Company pursuant
to the Coal Industry Retiree Health Benefit Act of 1992.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE SUBSIDIARY
The Buyer and the Subsidiary each hereby represent and
warrant to the Company that:
4.1 Organization. Each of the Buyer and the Subsidiary
is a corporation, duly incorporated, validly existing and in good
standing under the laws of Tennessee and West Virginia,
respectively, and each has all requisite power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated herein.
4.2 Execution, Delivery and Performance. The execution,
delivery and performance of this Agreement and each agreement or
instrument executed in connection herewith or delivered pursuant
hereto and the consummation of the transactions contemplated
herein will not, with or without the giving of notice or the
passage of time, or both, (i) materially conflict with, or result
in a violation or breach of, or a default, right to accelerate or
loss of rights under, or result in the creation of any lien,
charge or encumbrance under or pursuant to, any provision of the
Buyer's or Subsidiary's Articles or Certificate of Incorporation
or Bylaws or of any franchise, mortgage, deed of trust, lease,
license, instrument, agreement, consent, approval, waiver or
understanding (in each case, whether written or oral), any Law,
or any finding, order, judgment, writ, injunction or decree to
which Buyer or Subsidiary is a party or by which Buyer,
Subsidiary, or their respective assets may be bound or affected;
or (ii) require the approval, consent or authorization of, or
prior notice to, filing with or registration with, any federal,
state or local governmental body or authority, regulatory agency,
court, or any other person or entity, except notices and
approvals required under the HSR Act and the filing of the
Articles of Merger with the West Virginia Secretary of State.
4.3 Authorization. Each of the Buyer and the Subsidiary
has full power and authority to enter into, deliver and perform
this Agreement, and each agreement or instrument (to which it is
a party) executed in connection herewith or delivered pursuant
hereto and to consummate the transactions contemplated hereby.
The Buyer's and the Subsidiary's execution, delivery and
performance of this Agreement and all agreements and instruments
executed in connection herewith or delivered pursuant hereto and
the transactions contemplated hereby have been duly authorized by
all requisite corporate action. This Agreement and all
agreements or instruments executed by the Buyer and the
Subsidiary in connection herewith or delivered by the Buyer and
the Subsidiary pursuant hereto have been duly executed and
delivered by the Buyer and the Subsidiary, as the case may be,
and this Agreement and all agreements and instruments executed by
the Buyer and the Subsidiary in connection herewith or delivered
by the Buyer or the Subsidiary pursuant hereto constitute the
Buyer's or the Subsidiary's legal, valid and binding obligation,
as the case may be, enforceable in accordance with their
respective terms.
4.4 No Broker. Neither the Buyer nor the Subsidiary has
had any dealings, negotiations or communications with any broker
or other intermediary in connection with the transactions
contemplated by this Agreement and is not committed to any
liability for any brokers' or finders' fees or any similar fees
in connection with the Merger.
4.5 Buyer's Due Diligence. As of the date of this
Agreement, to the Knowledge of Buyer, there is no fact that makes
any representation or warranty set forth in Article III hereof
untrue or incorrect.
ARTICLE V
CERTAIN MATTERS PENDING THE MERGER
5.1 Carry on in Regular Course. Except as provided in
this Agreement, the Company and each Company Subsidiary shall
carry on its respective business in the ordinary course and
substantially in the same manner as heretofore carried on and use
its reasonable best efforts to preserve its respective
properties, business, present insurance and relationships with
its respective suppliers and customers. The Company will advise
Buyer and the Subsidiary promptly in writing of any material
adverse change in the financial condition or business of the
Company and the Company Subsidiaries considered as a whole.
5.2 Distributions; Assignment of Retained Liabilities.
Notwithstanding the provisions of Section 5.1 hereof but subject
to satisfaction of the conditions set forth in subsection 6.2(g)
hereof, between the date hereof and the Closing Date the Company
may (i) make such distributions to its Shareholders, including
its regularly scheduled quarterly dividends as well as any
special dividends, as the Company determines in its sole
discretion, (ii) make such payments to the Seller and the Parent
as may be necessary to settle all intercompany accounts and (iii)
pay the Seller $9,241,000 for assuming the Retained Liabilities
pursuant to the Assignment and Assumption Agreement.
5.3 Indebtedness. Without the prior written consent of
the Buyer and the Subsidiary, neither the Company nor any Company
Subsidiary shall (a) create, incur or assume any indebtedness for
borrowed money, (b) mortgage, pledge or otherwise encumber any of
its properties or assets, except for Permitted Liens or (c)
create or assume any other indebtedness except accounts payable
and other liabilities incurred in the ordinary course of
business.
5.4 Issuance of Stock. Neither the Company nor any
Company Subsidiary shall issue any shares of capital stock of any
class or grant any warrants, options or rights to subscribe for
any shares of capital stock of any class or securities
convertible into or exchangeable for, or which otherwise confer
on the holder any right to acquire, any shares of capital stock
of any class.
5.5 Compensation. Neither the Company nor any Company
Subsidiary shall grant any increases, except for increases in the
ordinary course of the Company's business, in the rate of pay of
any of their respective employees. The Company shall not
institute any new employee benefit plan or program.
5.6 Compliance with Law. The Company and each Company
Subsidiary shall comply in all material respects with all
applicable Law and with all orders of any court or of any
federal, state, municipal or other governmental department, non-
compliance with which could cause a material adverse change in
the assets or properties of the Company or any Company Subsidiary
or a material impairment to the business of the Company or any
Company Subsidiary.
5.7 Access to Information. At the Buyer's and the
Subsidiary's expense, the Buyer, the Subsidiary and their
authorized agents, officers and representatives, including but
not limited to Buyer's lenders, for the purpose of confirming the
Company's representations and warranties contained in
Article III, (i) shall have reasonable access to the properties
(including mine sites), books, records, contracts, information
and documents of the Company and (ii) shall have the right to
contact the Company's major lessees; provided, however, that such
examinations and investigations: (a) shall be conducted during
the Company's normal business hours; and (b) shall not
unreasonably interfere with the Company's or such lessees'
operations and activities. The Company shall cooperate in all
reasonable respects with the Buyer's examinations and
investigations.
5.8 Cooperation; Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to
use its reasonable best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary,
proper and advisable under applicable Law (including, without
limitation, the WVCA), to consummate and make effective the
transactions contemplated by this Agreement, including, but not
limited to, all filings and other actions required under the HSR
Act. In case at any time after the Effective Date any further
action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party
to this Agreement shall take all such necessary action. The
Seller, the Company, the Buyer and the Subsidiary will execute
any additional instruments necessary to consummate the
transactions contemplated hereby.
5.9 Consents. The Seller, the Company, the Buyer and the
Subsidiary each will use its reasonable best efforts to obtain
consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by
this Agreement.
5.10 Publicity. All general notices, releases, statements
and communications to employees, suppliers, distributors and
customers of the Company and to the general public and the press
relating to the transactions covered by this Agreement and the
Plan of Merger shall be made only at such times and in such
manner as may be mutually agreed upon by the Seller and the
Buyer; provided, however, that any party hereto shall be entitled
to make a public announcement of the foregoing if, in the opinion
of its legal counsel, such announcement is required to comply
with Law or any listing agreement with any national securities
exchange or inter-dealer quotation system and if it first gives
notice to the other parties hereto of its intention to make such
public announcement; and provided further that the Proxy
Statement, notice to Shareholders of the Special Meeting and any
related material shall not be subject to the provisions of this
Section 5.10.
5.11 Confidentiality. Notwithstanding any other provision
of this Agreement to the contrary, the Buyer and the Subsidiary
agree that unless and until the transactions contemplated herein
are consummated, the Buyer and the Subsidiary shall remain
subject to all of the terms and conditions of the Confidentiality
Agreement, dated February 10, 1994, between the Parent and the
Buyer, the terms of which Confidentiality Agreement are
incorporated herein by reference; provided, however, the
provisions of the Confidentiality Agreement shall be waived as
and to the extent necessary to permit public announcements to the
extent provided in Section 5.10 hereof.
5.12 No Solicitation. Neither the Parent nor the Company
shall, after the date hereof until the earlier of the Closing or
the termination of this Agreement pursuant to Section 9.1 hereof,
directly or indirectly, through any officer, director, employee,
agent or otherwise, solicit, initiate or encourage submission of
proposals or offers from any person relating to any acquisition
or purchase of all or (other than in the ordinary course of
business) a substantial portion of the assets of, or any equity
interest in, the Company or any business combination with the
Company (a "Competing Transaction") or, participate in any
negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to do or seek any of the
foregoing.
5.13 Articles and Bylaws. The Company shall not amend its
Articles of Incorporation or Bylaws or merge or consolidate with
or into any other corporation.
5.14 Buyer's Conduct of Business. Between the date hereof
and the Effective Date, the Buyer shall conduct its business with
the Company, including the payment of Buyer's accounts payable to
the Company, in a manner consistent with its practices in effect
on the date hereof.
5.15 Assignment and Assumption Agreement. On or before
the Closing Date, Seller and the Company shall execute and
deliver the Assignment and Assumption Agreement.
5.16 Copy of Proxy Statement. Promptly following the
mailing of the Proxy Statement to the Company's stockholders, the
Company will provide the Buyer with a copy of the Proxy
Statement.
5.17 Buyer's Financing. On or before the Closing Date,
the Buyer shall obtain such financing as it requires to
consummate the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
6.1 Conditions Precedent to Each Party's Obligations to
Effect the Merger. The respective obligations of each party to
consummate the Merger are subject to the satisfaction at or prior
to the Closing Date of the following conditions precedent:
(a) the Plan of Merger shall have been adopted by
the affirmative vote of the holders of the Company's Common
Stock on the record date for the Special Meeting by the
requisite vote in accordance with the WVCA;
(b) no order, decree or injunction shall have been
enacted, entered, promulgated or enforced by any United
States court of competent jurisdiction or any United States
governmental authority which prohibits the consummation of
the Merger; provided, however, that the parties hereto shall
use their best efforts to have any such order, decree or
injunction vacated or reversed;
(c) all applicable requirements under state
securities or takeover laws shall have been satisfied;
(d) all applicable waiting periods under the HSR Act
shall have expired or terminated, and neither the Federal
Trade Commission nor the Department of Justice shall have
instituted, or threatened to institute, either before or
after the expiration of such waiting period, a proceeding
concerning this Agreement or the consummation of the
transactions contemplated hereby; and
(e) the Seller and the Company shall have executed
and delivered the Assignment and Assumption Agreement and
pursuant thereto the Retained Liabilities shall have been
assumed by the Seller.
6.2 Conditions Precedent to Obligations of the Buyer and
the Subsidiary. The obligations of the Buyer and the Subsidiary
to consummate the Merger are subject to the satisfaction or
waiver at or prior to the Closing Date of the following
conditions precedent:
(a) there shall have occurred no material adverse
change in the financial condition or results of operations
of the Company from the Balance Sheet Date to the Effective
Date;
(b) the representations and warranties of the
Company contained in Article III shall be true and correct
in all material respects when made and at and as of the
Effective Date with the same force and effect as if those
representations and warranties had been made at and as of
such time (with such exceptions, if any, necessary to give
effect to events or transactions expressly permitted
herein); provided, however, it shall not be a condition to
the obligations of the Buyer and the Subsidiary to
consummate the Merger that any such representation or
warranty be true and correct at the Effective Date if, to
the Knowledge of Buyer on the date of this Agreement, there
was any fact that made any such representation or warranty
not true and correct.
(c) the Company shall, in all material respects,
have performed all obligations and complied with all
covenants contemplated herein that are necessary to be
performed or complied with by it on or before the Effective
Date;
(d) the Buyer and the Subsidiary shall have received
the Company's Closing Certificate;
(e) all proceedings, corporate or other, to be taken
by the Company in connection with the transactions
contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and
substance to the Buyer and the Buyer's counsel;
(f) the Buyer and the Subsidiary shall have received
the Opinion of Company's Counsel;
(g) the Closing Date Balance Sheet shall have been
delivered to Buyer and shall reflect the Net Assets of the
Transferred Business (determined in accordance with the
accounting policies described in Schedule 1.26) as of the
Closing Date, after giving effect to the payments and other
transactions made or to be made pursuant to Sections 5.2 and
7.6 hereof, is not less than $7,000,000; for purposes of
this Section 6.2(g) "Net Assets of the Transferred Business"
shall mean the excess of the total assets of the Company and
the Company Subsidiaries over their liabilities as of the
Closing Date, determined on a consolidated basis in a manner
consistent with the Interim Balance Sheet and in accordance
with the policies set forth in Schedule 1.26.
(h) the officers and directors of the Company and
each Company Subsidiary shall have submitted their
resignations in writing effective as of the Closing Date;
(i) Buyer shall have received a written release from
the executive officers and directors of the Company and from
the Seller and the Parent that releases Buyer and the
Company from all claims, known or unknown, contingent or
direct, arising on or prior to the Closing Date, other than
any claims arising pursuant to this Agreement; and
(j) no action, investigation, inquiry or
administrative proceeding by any administrative agency or
governmental body shall have been instituted which seeks to
enjoin the consummation of the Merger.
6.3 Conditions Precedent to Obligations of the Company
and the Seller. The obligation of the Company and the Seller to
consummate the Merger is subject to the satisfaction or waiver at
or prior to the Closing Date of the following conditions
precedent:
(a) the representations and warranties of the Buyer
and the Subsidiary contained in Article IV shall be true and
correct in all material respects when made and at and as of
the Effective Date with the same force and effect as if
those representations and warranties had been made at and as
of such time (with such exceptions, if any, necessary to
give effect to events or transactions expressly permitted
herein);
(b) each of the Buyer and the Subsidiary shall, in
all material respects, have performed all obligations and
complied with all covenants contemplated herein that are
necessary to be performed or complied with by it on or
before the Effective Date;
(c) the Company shall have received the Buyer's
Closing Certificate;
(d) all proceedings, corporate or other, to be taken
by the Buyer and the Subsidiary in connection with the
transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory
in form and substance to the Company and the Company's
counsel;
(e) all actions required of the Buyer to cause the
Parent and the Seller to be relieved, released or reimbursed
for all financial commitments, guaranties, collateral
agreements, surety bonds, or similar undertakings the Seller
or Parent has provided to the Company (on a direct or
indirect basis) which are listed on Schedule 3.10A and
remain outstanding as of the Closing Date have been taken
and no further action other than ministerial or regulatory
action by the Kentucky Cabinet or the passage of time are
required to accomplish the foregoing, and Buyer's counsel,
Wyatt, Tarrant & Combs, shall have delivered an opinion as
to the foregoing;
(f) the Company shall have received the Opinion of
Buyer's counsel;
(g) the Company shall have received from Buyer's
independent auditors, Price Waterhouse, a certification that
the Buyer's tangible consolidated net worth (determined in
accordance with generally accepted accounting principles) as
of December 31, 1993 was not less than $17,750,000 and
Buyer's chief financial officer shall provide a similar
certification as of June 30, 1994; and
(h) no action, investigation, inquiry or
administrative proceeding by any administrative agency or
governmental body shall have been instituted, which seeks to
enjoin the consummation of the Merger.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Continuing Employment. Schedule 7.1 sets forth
all current employees of the Company. At least three business
days prior to the Closing Date the Buyer shall provide the Seller
and the Company with a list of those employees that Buyer wishes
to retain following the Closing (the "Continuing Employees").
All employees of the Company, other than Continuing Employees,
shall be terminated prior to the Closing and Seller shall be
responsible for all obligations of the Company to such terminated
employees.
7.2 Employee Benefit Plan Matters.
(a) Welfare Plans.
(i) Continuing Employees.
(1) For purposes hereof, the term
"Parent's Welfare Plan" means an employee welfare benefit plan or
plans (as defined in section 3(1) of ERISA) maintained or
contributed to by the Parent and which cover employees of the
Company prior to the Closing Date. Parent and Parent's Welfare
Plans will remain responsible for administering and paying claims
incurred under Parent's Welfare Plans by all of the Company's
employees prior to the Closing Date. Buyer and Buyer's Welfare
Plans (as defined below) will be responsible for administering
and paying claims incurred under Buyer's Welfare Plans on and
after the Closing Date by the Continuing Employees who are
employed by Buyer or an affiliate of Buyer on or after the
Closing Date and are covered by one or more of Buyer's Welfare
Plans, as applicable. For purposes of this paragraph, a claim
will be deemed to have been incurred on the date the medical
service or medical supply is received by the Continuing Employee.
(2) For purposes hereof, the term
"Buyer's Welfare Plan" means an employee welfare benefit plan or
plans (as defined in section 3(1) of ERISA) maintained or
contributed to by Buyer or an affiliate of Buyer and which cover
Continuing Employees on and after the Closing Date. Buyer agrees
that the Continuing Employees shall be permitted to participate
in Buyer's Welfare Plans effective on the Closing Date. Buyer's
Welfare Plans will provide benefits to the Continuing Employees
which in the aggregate are approximately equal to the benefits
provided to similarly situated salaried or hourly employees of
Buyer and its affiliates, as applicable. Continuing employees
shall be covered by Buyer's Welfare Plans according to the terms
and conditions thereof. To the extent that Continuing Employees
have satisfied any internal limits, deductibles or co-payment
requirements under the Company's welfare plans for the calendar
year that includes the Closing Date, such amounts will be
credited toward the satisfaction of any such requirements under
Buyer's Welfare Plans.
(ii) Dependents and Beneficiaries.
Responsibility for welfare benefits of the dependents and
beneficiaries of Continuing Employees will be allocated in the
same manner as responsibility for the welfare benefits of such
Continuing Employees.
(b) Pension Plans. Buyer agrees that the Continuing
Employees shall be permitted to participate in the employee
pension benefit plans, if any, (as defined in section 3(2) of
ERISA) maintained or contributed to by Buyer or an affiliate of
Buyer ("Buyer's Pension Plans") that are available to similarly
situated salaried or hourly employees, as applicable, of Buyer
and its affiliates. The Parent covenants and agrees to
administer the current retirement and pension plans covering the
Company's employees (the "Retirement Plan") after the Effective
Date for the benefits accrued on or prior to the Effective Date.
The Buyer agrees to cooperate with the Parent in providing such
information as may be necessary to administer the Retirement
Plan.
(c) Service Credit. To the extent that service is
recognized under the Employee Benefit Plans as of the Closing,
each Continuing Employee's service with the Company and its ERISA
Affiliates will be recognized as service with the Buyer and its
affiliates under the Buyer's Pension Plans, if any, and the
Buyer's Welfare Plans and for purposes of vacation, service
awards, and any other employee or fringe benefit plan or program
of the Buyer and its affiliates. The preceding sentence shall
not apply, and no such service credit shall be recognized, for
benefit accrual purposes under Buyer's Pension Plans, if any.
(d) Nothing in this Section 7.2 expressed or implied
shall limit Buyer's right to terminate the employment of any
Continuing Employees at any time, or to modify, amend or
eliminate any of Buyer's Welfare Plans, Buyer's Pension Plans or
any other employee benefit plans or program maintained or
established by Buyer.
(e) Nothing in this Section 7.2 expressed or implied
shall require Parent, Seller or Parent's Welfare Plans to assume
any liabilities under the Coal Industry Retiree Health Benefit
Act of 1992 that is not a Retained Liability.
7.3 Income Tax Matters.
(a) Federal Income Taxes in General. The income and
other tax items of the Company and each Company Subsidiary
for periods ending on or before the Effective Date shall be
included in the consolidated federal income tax return of
the affiliated group, within the meaning of Section 1504(a)
of the Code, of which the Parent is a member (the "Parent
Group"). Except as otherwise provided in this Section 7.3,
the Parent shall be responsible for and shall hold the
Buyer, the Company, and each Company Subsidiary harmless
from any federal income taxes of the Company or a Company
Subsidiary not heretofore paid and shall be entitled to any
reductions in taxes or refunds (including interest) not
heretofore received for taxable periods of such affiliated
group ending before or including the Effective Date. If the
Buyer, the Company, or a Company Subsidiary receives any
such refund, the Buyer shall promptly pay (or cause the
Company or the Company Subsidiary to pay) the entire amount
of the refund (including interest) to the Parent.
The Buyer and the Company shall be responsible for
and shall hold the Parent and all other members of the
Parent Group harmless from all federal income taxes of the
Company and each Company Subsidiary for any taxable period
beginning on or after the Effective Date and for all federal
income taxes resulting from any action taken without the
Parent's written consent by the Buyer, the Company, or a
Company Subsidiary after the Closing (including, without
limitation, actions taken outside the ordinary course of
business and occurring on the Closing Date). The Buyer and
the Company shall be entitled to all refunds of such taxes
(including interest).
(b) State Income Taxes in General. For purposes of
this Agreement, the term "state income tax" means any tax,
imposed by a state in the United States, that is based on or
measured by net income. The Parent shall be responsible for
preparing and filing the state income tax returns of the
Company and each Company Subsidiary for taxable periods
ending on or before the Effective Date. Except as otherwise
provided in this Section 7.3, the Parent shall hold the
Buyer, the Company, and each Company Subsidiary harmless
from any state income taxes not heretofore paid and shall be
entitled to any reductions in taxes or refunds (including
interest) not heretofore received for such taxable periods.
If the Buyer, the Company, or a Company Subsidiary receives
any such refund, the Buyer shall promptly pay (or cause the
Company or the Company Subsidiary to pay) the entire amount
of such refund (including interest) to the Parent.
The Buyer and the Company shall be responsible for
and shall hold the Parent and all other members of the
Parent Group harmless from all state income taxes of the
Company and each Company Subsidiary for any taxable period
beginning on or after the Effective Date and for all state
income taxes resulting from any action taken without the
Parent's written consent by the Buyer, the Company, or a
Company Subsidiary after the Closing (including, without
limitation, actions taken outside the ordinary course of
business and occurring on the Closing Date). The Buyer and
the Company shall be entitled to all refunds of such taxes
(including interest).
If the Company or a Company Subsidiary is required to
file any state income tax return for a taxable period
covering days before and after the Effective Date, the Buyer
shall cause such return to be filed and shall be responsible
for the payment of any tax for such period. However, the
Seller shall pay to the Buyer, as an adjustment to the
Merger Consideration paid to the Seller, the amount by which
the state income tax attributable to the period through the
Effective Date (excluding any tax for which the Buyer and
the Company are responsible pursuant to the preceding
paragraph) exceeds the sum of the amount of such tax paid on
or before the Effective Date plus the amount of such tax
reflected on the Closing Date Balance Sheet. The tax
attributable to the period through the Effective Date shall
be determined (i) as if that period were a separate taxable
year and (ii) except as otherwise required by Law, by using
the tax accounting methods and tax elections used by the
Company or the Company Subsidiary before the Closing Date.
In no event, however, shall the tax attributable to the
period through the Effective Date exceed the amount of tax
actually payable by the Company or the Company Subsidiary
for the entire taxable period. The Parent shall compute the
amount of the Company's or the Company Subsidiary's tax
attributable to the period through the Effective Date
(excluding any tax for which the Buyer and the Company are
responsible pursuant to the preceding paragraph) and shall
notify the Buyer of such amount in writing no later than 90
days after the Effective Date. The Buyer shall notify the
Parent in writing of the amount of tax for the entire
taxable period at least 30 days before the due date for the
filing of the Company's or the Company Subsidiary's state
income tax return for the entire period. Within 30 days
after the date of such notification by the Buyer, the Seller
shall pay to the Buyer the excess of (a) the lesser of (i)
the amount of tax determined by the Parent as attributable
to the portion of the period through the Effective Date or
(ii) the amount of tax determined by the Buyer as payable
for the entire taxable period, over (b) the sum of the
amount of the tax for the taxable period paid on or before
the Effective Date plus the amount of such tax reflected on
the Closing Date Balance Sheet. If the Parent or the Buyer
disagrees with the other's computation of any such amount,
the Parent and the Buyer shall proceed in good faith to
determine the correct amount, and the Seller's payment to
the Buyer shall be due on the later of (i) the time
specified in the immediately preceding sentence and (ii) 10
days after the Parent and the Buyer agree to the amount
payable.
(c) Taxes Resulting From Section 338 Elections.
Notwithstanding any other provision of this Agreement, the
parties agree that, if the Buyer makes or is deemed to have
made an election under Section 338 of the Code with respect
to the Buyer's acquisition of the Company, the Buyer shall
prepare and file the returns for, shall pay and be
responsible for, and shall indemnify and hold the Parent and
all other members of the Parent Group harmless from any
taxes resulting from the election.
(d) Cooperation. The Buyer agrees to cooperate and
to cause the Company and each Company Subsidiary to
cooperate with the Parent to the extent reasonably required
after the Effective Date in connection with (i) the filing,
amendment, preparation, and execution of all federal and
state income tax returns and documents with respect to any
taxable period of the Company or a Company Subsidiary ending
on or before the Effective Date, (ii) contests concerning
the federal or state income tax due for any such period, and
(iii) audits and other proceedings conducted by income tax
authorities with respect to any such period. Within a
reasonable time (but not more than 10 days) after the Buyer,
the Company, or a Company Subsidiary receives official
notice of any such contest, audit, or other proceeding, the
Buyer shall notify or cause the Company or the Company
Subsidiary to notify the Parent in writing of such contest,
audit, or other proceeding. In any case where the Company
or a Company Subsidiary is responsible under applicable law
for the defense of such contest, audit, or other proceeding,
the Parent shall have the right to conduct the defense at
its expense, whether such contest, audit, or other
proceeding commenced before or commences after the Effective
Date. Notwithstanding the Parent's obligations under the
preceding provisions of this Section 7.3, the Parent shall
have no obligation to pay, indemnify or hold the Buyer, the
Company, or a Company Subsidiary harmless from any tax
imposed or assessed as a result of (i) the failure of the
Buyer, the Company, or a Company Subsidiary to notify the
Parent as required by this paragraph, if such failure
adversely affects the Parent's ability to respond adequately
in a timely manner to the notice of contest, audit, or other
proceeding, or (ii) any action taken by the Buyer, the
Company, or a Company Subsidiary with respect to any
contest, audit, or other proceeding without the Parent's
written consent. The amount of any income tax
indemnification otherwise payable by the Parent under this
Agreement shall be reduced by the amount or, in the case of
a tax benefit to be realized subsequently, the then-present
value of any federal or state income tax benefit to the
Buyer, the Company, or a Company Subsidiary resulting from
any adjustment to or change in any tax item relating to the
Company or a Company Subsidiary for any taxable period
ending before or including the Effective Date. Such present
value shall be based on a discount rate of 5% per annum.
The Parent agrees to make available to the Buyer, the
Company, and each Company Subsidiary records in the custody
of the Parent or of any member of the Parent Group, to
furnish other information, and otherwise to cooperate to the
extent reasonably required for the filing of federal and
state income tax returns and other documents relating to the
Company or a Company Subsidiary for any taxable period
ending after the Effective Date. However, no loss, credit,
or other item of the Company or a Company Subsidiary may be
carried back without the Parent's written consent, which the
Parent may withhold in its absolute discretion, to a taxable
period for which the Company or the Company Subsidiary and
the Parent or any other member of the Parent Group filed a
consolidated, unitary, or combined return.
The Parent agrees to cooperate with the Buyer, and
the Buyer agrees to cooperate (and cause the Company and
each Company Subsidiary to cooperate) with the Parent, to
the extent necessary in connection with the filing of any
information return or similar document relating to the
Buyer's acquisition of the Company and the Company
Subsidiaries; provided, however, that no election shall be
made under Section 338(h)(10) of the Code.
(d) Payment of Accrued Income Taxes. The Parent has
the right to receive from the Company and each Company
Subsidiary accrued but unpaid federal and state income taxes
for taxable periods ending on or before the Effective Date.
If funds for any such taxes have not been paid by the
Company or a Company Subsidiary to the Parent before
Closing, such funds shall be payable (and the Buyer shall
cause such funds to be paid) upon the Parent's demand to the
extent such taxes are reflected as a liability on the
Closing Date Balance Sheet.
(e) Taxes to Include Interest, Etc. For purposes of
this Section 7.3, the term "tax" or "taxes" includes any
addition to tax, interest, and penalty imposed with respect
to the tax or taxes. Thus, for example, any obligation to
hold a party harmless from federal income tax for a taxable
period includes the obligation to hold the party harmless
from any addition to tax, interest, or penalty imposed with
respect to such federal income tax.
(f) Termination of Tax-Sharing Agreement. After the
Effective Date, this Section 7.3 shall supersede any and all
tax-sharing or similar agreements to which (i) the Company
or a Company Subsidiary and (ii) the Parent or any
corporation affiliated with the Parent are parties. Neither
the Company, a Company Subsidiary, the Parent, nor any such
affiliated corporation shall have any obligation or rights
with respect to each other under any such prior agreement
after the Effective Date.
7.4 Financial Condition of Buyer. For so long as Buyer
is required to provide the indemnity set forth in Section 8.3(a)
hereof and thereafter so long as a Parent's Claim pursuant to
Section 8.3(a) remains outstanding:
(a) the Buyer will at all times keep and maintain a
consolidated tangible net worth, determined in accordance
with generally accepted accounting principles consistently
applied, of not less than $17,750,000;
(b) the Buyer will deliver to the Parent within 45
days after the end of each of its fiscal quarters a
certificate signed by the President or Chief Financial
Officer of the Buyer to the effect that Buyer is in
compliance as of the end of such quarter with Section 7.4(a)
hereof; and
(c) the Buyer will not merge or consolidate with any
person or sell, lease, transfer or otherwise dispose of all
or substantially all of its assets to any person, unless (i)
the Buyer shall be the continuing or successor corporation,
or the successor or acquiring corporation shall be a solvent
corporation organized under the laws of any state of the
United States that expressly assumes in writing the Buyer's
obligations under this Agreement, including without
limitation Article VIII hereof and (ii) after giving effect
to such merger, consolidation, sale, lease, transfer or
disposition, the Buyer or the successor or acquiring
corporation shall satisfy the requirements of Section 7.4(a)
hereof.
7.5 Access to Books and Records. At the Parent's
expense, the Parent and its authorized agents, officers and
representatives shall have reasonable access after the Effective
Date to the properties, books, records, contracts, information
and documents of the Company and any Company Subsidiary for any
reasonable business purpose, including but not limited to matters
relating to federal or state income taxes, the Retained
Liabilities or the Parent's indemnity under Section 8.2 hereof;
provided, however, such access by Parent (a) shall be conducted
during the Company's normal business hours and (b) shall not
unreasonably interfere with the Company's operations and
activities. The Buyer and the Company shall cooperate in all
reasonable respects with the Parent's review of such information.
u w Payment of Retained Liabilities. At the Closing the
Buyer will make a capital contribution to the Company of
$9,241,000 in order that the Company can pay the Parent the
amounts provided by clauses (ii) and (iii) of Section 5.2 on the
Closing Date; provided, however, that the Buyer shall not be
required pursuant to this Section 7.6 to contribute any amount in
excess of the amount that, when added to the aggregate Merger
Consideration paid pursuant to the Plan of Merger, would exceed
$71,000,000.
7.7 Release of Parent Financial Commitments. Buyer and
the Company shall use their best efforts to cause the Parent and
the Seller to be relieved, released or reimbursed for all
financial commitments, guaranties, collateral agreements, surety
bonds, or similar undertakings the Seller or Parent has provided
to the Company (on a direct or indirect basis), including without
limitation those listed on Schedule 3.10A, which remain
outstanding on the Closing Date as soon as possible following the
Closing Date.
7.8 Financial Condition of Parent. For so long as Parent
is required to provide the indemnity set forth in Section 8.2(a)
hereof and thereafter so long as a Buyer's Claim pursuant to
Section 8.2(a) remains outstanding:
(a) the Parent will at all times keep and maintain a
consolidated tangible net worth, determined in accordance
with generally accepted accounting principles consistently
applied, of not less than $17,750,000;
(b) the Parent will deliver to the Buyer within 45
days after the end of each of its fiscal quarters a
certificate signed by the President or Chief Financial
Officer of the Parent to the effect that Parent is in
compliance as of the end of such quarter with Section 7.8(a)
hereof; and
(c) the Parent will not merge or consolidate with
any person or sell, lease, transfer or otherwise dispose of
all or substantially all of its assets to any person, unless
(i) the Parent shall be the continuing or successor
corporation, or the successor or acquiring corporation shall
be a solvent corporation organized under the laws of any
state of the United States that expressly assumes in writing
the Parent's obligations under this Agreement, including
without limitation Article VIII hereof and (ii) after giving
effect to such merger, consolidation, sale, lease, transfer
or disposition, the Parent or the successor or acquiring
corporation shall satisfy the requirements of Section 7.8(a)
hereof.
7.9 Confidentiality. Following the Closing, Seller and
Parent shall keep confidential all information concerning the
business, operations, properties, assets and financial affairs of
the Company and may disclose such information only upon receipt
of prior written consent from Buyer or if such disclosure is
required (i) in connection with Seller's or Parent's filing of
any state or federal income tax returns, (ii) in connection with
filings made with the Securities and Exchange Commission or any
national securities exchange, or (iii) by order of any judicial
or administrative authority.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Limitation on, and Survival of Representations and
Warranties. (a) The Buyer and the Subsidiary acknowledge and
agree that no representations or warranties have been made by the
Parent, the Seller or the Company in connection with the
transactions contemplated by this Agreement, except for those
representations and warranties made by the Company in Article III
hereof. Except to the extent provided in Section 8.2(a) hereof,
the Buyer and the Subsidiary agree not to assert any claim that
the Parent, the Seller or the Company has made any false
representation, warranty or statement in connection with the
transaction contemplated by this Agreement or omitted to make any
statement necessary in order to make the representations,
warranties and statements so made not misleading and agree to
waive any right or remedy available by Law in connection with the
foregoing.
(b) Subject to paragraph (a) of this Section 8.1, any
party's remedy for a breach of any representation or warranty
contained in Article III or Article IV of this Agreement, or in
any agreements or instruments executed in connection herewith or
delivered pursuant hereto, shall survive for a period of eighteen
months beginning on the day next following the Effective Date,
but no longer, and shall only be effective with respect to any
breach or claim when notice of such breach or claim shall have
been given in writing to the other party in breach or against
whom indemnification is sought within such period prescribed,
provided, however, that the applicable period with respect to
Section 3.17 shall extend until all applicable statutes of
limitations and periods for assessments of tax have expired
(taking into account any extension of any statute of limitation)
and, with respect to Section 3.5, there shall be no expiration.
Any claim for indemnification for which notice has been given
within the prescribed period may be prosecuted to conclusion
notwithstanding the subsequent expiration of such period. No
party to this Agreement shall be entitled to pursue any remedy
for the breach of any representation or warranty to the extent
such party was aware of such breach prior to the Closing Date and
such party proceeds with the Closing.
8.2 Indemnification by Seller and Parent. Subject to
the limitations set forth in Sections 8.1, 8.4 and 8.6 hereof,
each of Seller and Parent hereby agrees to indemnify and hold
Buyer harmless from and against any and all claims, demands,
suits, proceedings, judgments, losses, liabilities, damages,
costs and expenses of every kind and nature (including, but not
limited to, reasonable attorneys' fees) (collectively, "Losses")
imposed upon or incurred by Buyer, or the Company after the
Effective Date, (collectively, a "Buyer's Claim") as a result of
or in connection with any of the following:
(a) Any material misrepresentation or breach of
warranty made by the Company under Article III of this
Agreement;
(b) The breach of or default in the performance by
the Parent, the Seller or the Company of any covenant,
agreement or obligation to be performed by the Parent, the
Seller or the Company (but in the case of the Company only
those covenants, agreements or obligations to be performed
prior to the Effective Date) pursuant to this Agreement or
any agreement or instrument executed in connection herewith
or pursuant hereto;
(c) The Retained Liabilities;
(d) Any deficiency in the actual net assets of the
Transferred Business (determined in accordance with the
accounting policies described in Schedule 1.26) as of the
Closing Date, after giving effect to the transactions
contemplated by Sections 5.2 and 7.6 hereof, from the amount
thereof shown on the Closing Date Balance Sheet; or
(e) the exercise by any Shareholder of dissenters'
rights in connection with the transactions contemplated by
this Agreement to the extent such Losses exceed the Merger
Consideration to which such dissenting Shareholder would
have been entitled to pursuant to the Plan of Merger.
8.3 Indemnification by Buyer. Subject to the limitations
set forth in Sections 8.1, 8.4 and 8.6, Buyer hereby agrees to
indemnify and hold Seller and Parent harmless from and against
any and all Losses imposed upon or incurred by the Seller or
Parent (any of such losses by either Seller or Parent, a
"Parent's Claim"), as a result of or in connection with any of
the following:
(a) Any material misrepresentation or breach of
warranty made by Buyer or the Subsidiary under Article IV of
this Agreement;
(b) The breach of or default in the performance by
Buyer or the Subsidiary of any covenant, agreement or
obligation to be performed by Buyer or the Subsidiary
pursuant to this Agreement or any agreement or instrument
executed in connection herewith or pursuant hereto;
(c) The conduct of the Company's business after the
Effective Date; or
(d) any claims made on or after the Effective Date
in respect of any financial commitments, guaranties,
collateral agreements, surety bonds or similar
understandings provided directly or indirectly by Parent on
behalf of the Company.
8.4 Limitation of Liability. Buyer shall not have any
liability to indemnify Seller or Parent in respect of Losses
incurred by Seller or Parent pursuant to Section 8.3(a), and
Seller and Parent shall not have any liability to indemnify Buyer
in respect of Losses incurred by Buyer or the Company pursuant to
Section 8.2(a), in either case unless and until the aggregate
amount of such Losses exceeds $710,000, in which event the party
seeking indemnity may recover the full amount of such Losses,
other than the initial $710,000, provided that recovery by either
Buyer or Parent in respect of such Losses shall be limited to
$17,750,000. Notwithstanding the foregoing, Buyer may recover
all Losses incurred by the Company or Buyer pursuant to Sections
8.2(b), (c), (d) or (e) hereof, and each of Seller and Parent may
recover all Losses it incurs pursuant to Sections 8.3(b), (c) or
(d), without limitation.
8.5 Notice of Indemnity Claims. If a party intends to
assert a Buyer's Claim or a Parent's Claim (a Buyer's Claim or a
Parent's Claim being hereafter referred to as a "Indemnity Claim"
in this Section 8.5), the party intending to assert an Indemnity
Claim shall provide the party from whom indemnification is sought
with notice of such Indemnity Claim within thirty (30) days after
receiving notice of such Indemnity Claim. At the time the
Indemnity Claim is made and thereafter, any party asserting the
Indemnity Claim shall provide the party against which the
Indemnity Claim is asserted with copies of any materials in its
possession describing the facts or containing information
providing the basis for the Indemnity Claim. If the Indemnity
Claim involves a claim by a third party (a "Third Party Indemnity
Claim"), the party against which the Third Party Indemnity Claim
is asserted may assume at its expense the defense of the claim by
the third party, provided that such party against which the Third
Party Indemnity Claim is asserted agrees in writing with respect
to such Third Party Indemnity Claim that it is obligated
hereunder to indemnify and hold any party asserting the Third
Party Indemnity Claim harmless in accordance with the terms of
this Article 8; and provided, further, that the party asserting
the Third Party Indemnity Claim shall be entitled to participate
in the defense of such claim at its own expense. The failure of
any party against which the Third Party Indemnity Claim is
asserted to assume the defense of any such claim shall not affect
any indemnification obligation under this Agreement.
8.6 Arbitration. If any dispute should arise between the
parties hereto as to any matter covered by this Agreement,
including any claim for indemnification pursuant to Section 8.2
or 8.3, then, in lieu of any suit or action in regard to any such
matter, the controversy shall be submitted to arbitration in the
following manner:
The party desiring to submit such controversy to arbitration
shall give to the other party notice in writing, stating with
specificity the matter upon which an award is desired and naming
the arbitrator selected by such party. Within ten (10) days
following the receipt of such notice, the other party shall give
written notice to the party desiring such arbitration of the
arbitrator selected by it. Thereafter, the two arbitrators so
chosen shall select a third. If such two arbitrators are unable
to agree upon a third arbitrator within twenty (20) days from the
naming of the second arbitrator, the third arbitrator shall be
appointed, upon application of either of the parties hereto, by
the United States District Court for the Eastern District of
Virginia. The arbitrators thus chosen shall give to each of the
parties hereto written notice of the time and place of hearing,
which hearing shall be held not less than ten (10) days, nor more
than twenty (20) days, after the selection of the third
arbitrator, and at the time and place appointed, and shall
proceed with the hearing unless for some good cause, of which a
majority of the arbitrators shall be the judge, it shall be
postponed until some other day within a reasonable time. The
parties hereto shall have full opportunity to be heard on any
question thus submitted, and the determination by a majority of
the arbitrators shall be made in writing and a copy thereof
delivered to each of the parties hereto. The arbitrators shall
in every case deliver their decision within sixty (60) days after
the hearing, unless the parties shall otherwise agree to extend
the time. The arbitrators, as a part of their decision and
award, shall decide the amount of the costs of arbitration and by
whom they shall be borne and paid.
8.7 Relationship of Section 7.3 to Sections 8.2 through
8.6. Sections 8.2 through 8.6 shall not apply to any claim or
liability to which Section 7.3 applies. Sections 8.2 through 8.6
shall apply to tax claims and liabilities to which Section 7.3
does not apply.
8.8 Indemnity Amounts to be Computed on After-Tax Basis.
The amount of any indemnification payable under Section 7.3 or
any of the preceding provisions of this Article VIII shall be (i)
net of any federal or state income tax benefit realized or the
then-present value (based on a discount rate of 5%) of any such
income tax benefit to be realized by the indemnified party (or,
where the Buyer is the indemnified party, the Company or any
Company Subsidiary) by reason of the facts and circumstances
giving rise to the indemnification, and (ii) increased by the
amount of any federal or state income tax required to be paid by
the indemnified party on the accrual or receipt of the
indemnification payment. For purposes of the preceding sentence,
the amount of any state income tax benefit or cost shall take
into account the federal income tax effect of such benefit or
cost.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time
notwithstanding approval thereof by the Shareholders, but prior
to the Effective Date only as follows:
(a) by mutual written consent of the Buyer and the
Seller;
(b) by the Company, the Buyer or the Seller, if the
Effective Date shall not have occurred on or before
September 30, 1994 (provided that the right to terminate
this Agreement under this Section 9.1(b) shall not be
available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or has
resulted in the failure of the Effective Date to occur on or
before such date); or
(c) by the Buyer or the Company, if any court of
competent jurisdiction in the United States or other United
States governmental body shall have issued an order, decree
or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
nonappealable.
9.2 Effect of Termination. If this Agreement is
terminated and the Merger is not consummated pursuant to Section
9.1, all further obligations of the parties under or pursuant to
this Agreement shall terminate without further liability of
either party to the other, provided that the Buyer's obligations
contained in this Section 9.2 and Section 5.11 of this Agreement
shall survive any such termination. Nothing contained in this
Section 9.2 shall relieve any party from liability for any breach
of this Agreement.
9.3 Amendment. This Agreement may be amended by action
taken by the Parent, the Seller, the Company, the Buyer and the
Subsidiary at any time before adoption of the Plan of Merger by
the Shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
9.4 Extension; Waiver. At any time prior to the
Effective Date, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document, certificate
or writing delivered pursuant hereto or (c) waive compliance with
any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. Except as set forth in Section
5.11 hereof, this Agreement and the documents referred to herein
and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter
hereof, and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions of the parties,
whether oral or written, and there are no warranties,
representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically
set forth herein or therein.
10.2 Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, subject to the
provisions of Sections 5.2 and 7.6, each of the parties hereto
shall pay the fees and expenses of their respective counsel,
investment bankers, financial advisors, accountants and other
experts and the other expenses incident to the negotiation and
preparation of this Agreement and consummation of the
transactions contemplated hereby.
10.3 Governing Law. This Agreement shall be construed and
interpreted according to the laws of the Commonwealth of
Virginia, without regard to the conflicts of law rules thereof.
10.4 Assignment. This Agreement and each party's
respective rights hereunder may not be assigned at any time
except as expressly set forth herein without the prior written
consent of the other party.
10.5 Notices. All communications, notices and disclosures
required or permitted by this Agreement shall be in writing and
shall be deemed to have been given when delivered personally or
by messenger or by overnight delivery service, or when mailed by
registered or certified United States mail, postage prepaid,
return receipt requested, or when received via telecopy, telex or
other electronic transmission, in all cases addressed to the
person for whom it is intended at his address set forth below or
to such other address as a party shall have designated by notice
in writing to the other party in the manner provided by this
Section 10.5:
If to the Seller
or to the Parent: Tredegar Industries, Inc.
1100 Boulders Parkway
Richmond, Virginia 23225
Attention: Norman A. Scher,
Executive Vice President
With a copy to: Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attention: C. Porter Vaughan, III, Esq.
If to the Buyer
or the Subsidiary: Pen Holdings, Inc.
5110 Maryland Way
P. O. Box 2128
Brentwood, Tennessee 37027
Attention: William E. Beckner
President and Chief Executive
Officer
With a copy to: Pen Holdings, Inc.
5110 Maryland Way
P. O. Box 2128
Brentwood, Tennessee 37027
Attention: David G. Gray, Esq.
Vice President and General
Counsel
10.6 Counterparts; Headings. This Agreement may be
executed in several counterparts, each of which shall be deemed
an original, but such counterparts shall together constitute but
one and the same Agreement. The Table of Contents and Article
and Section headings in this Agreement are inserted for
convenience of reference only and shall not constitute a part
hereof.
10.7 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions
of this Agreement were not performed in accordance with the terms
hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy
at law or equity.
10.8 Interpretation. Unless the context requires
otherwise, all words used in this Agreement in the singular
number shall extend to and include the plural, all words in the
plural number shall extend to and include the singular and all
words in any gender shall extend to and include all genders. All
references to contracts, agreements, leases, Employee Benefit
Plans or other understandings or arrangements shall refer to oral
as well as written matters.
10.9 Severability. If any provision, clause or part of
this Agreement, or the application thereof under certain circum-
stances, is held invalid, the remainder of this Agreement, or the
application of such provision, clause or part under other circum-
stances, shall not be affected thereby.
10.10 No Reliance. No third party is entitled to rely on
any of the representations, warranties and agreements contained
in this Agreement and the Parent, the Seller, the Buyer, the
Subsidiary and the Company assume no liability to any third party
because of any reliance on the representations, warranties and
agreements of the Parent, the Seller, the Buyer, the Subsidiary
and the Company contained in this Agreement, other than Sections
7.1 and 7.2 (which are intended to be for the benefit of the
persons covered thereby and may be enforced by such persons).
10.11 Performance by the Subsidiary. The Buyer agrees to
cause the Subsidiary to comply with its obligations hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement
of Merger to be duly executed as of the day and year first above
written.
TREDEGAR INVESTMENTS, INC.
By: /s/ N. A. Scher
Its: President
THE ELK HORN COAL CORPORATION
By: /s/ N. A. Scher
Its: Vice President
PEN HOLDINGS, INC.
By: /s/ William E. Beckner
Its: President and CEO
PHI ACQUISITION CORP.
By: /s/ William E. Beckner
Its: President
Tredegar Industries, Inc., a Virginia corporation, has
executed and delivered this Agreement of Merger as of the day and
year first above written solely to evidence its agreement to its
obligations under Sections 5.12, 7.2, 7.3 and 8.2 hereof.
By: /s/ N. A. Scher
Its: Executive Vice President
Exhibit 11 - Computations of Earnings per Share
Tredegar Industries, Inc. and Subsidiaries
(In thousands, except per-share amounts)
(Unaudited)
Second Quarter Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Income (loss) from continuing operations $ 3,074 $ 674 $ (2,019) $ 2,384
Income from discontinued operations 1,772 2,154 10,465 3,995
Net income before extraordinary item
and cumulative effect of changes in
accounting principles 4,846 2,828 8,446 6,379
Extraordinary item - (1,115) - (1,115)
Cumulative effect of changes in accounting
for postretirement benefits other than
pensions (net of tax) and income taxes - - - 150
Net income $ 4,846 $ 1,713 $ 8,446 $ 5,414
Earnings per share as reported:
Income(loss)from continuing operations $ .29 $ .06 $ (.19) $ .22
Income from discontinued operations .16 .20 .97 .37
Net income before extraordinary item
and cumulative effect of changes in
accounting principles .45 .26 .78 .59
Extraordinary item - (.10) - (.10)
Changes in accounting principles - - - .01
Net income $ .45 $ .16 $ .78 $ .50
PRIMARY EARNINGS PER SHARE:
Shares issuable upon the assumed exercise
of outstanding stock options (1) 32 28 33 42
Weighted average common shares outstanding
during period 10,722 10,895 10,808 10,895
Weighted average common shares and
common stock equivalents 10,754 10,923 10,841 10,937
Primary earnings per share (2) $ .45 $ .16 $ .78 $ .50
FULLY DILUTED EARNINGS PER SHARE:
Shares issuable upon the assumed exercise
of outstanding stock options (3) 32 28 33 42
Weighted average common shares outstanding
during period 10,722 10,895 10,808 10,895
Weighted average common shares and
common stock equivalents 10,754 10,923 10,841 10,937
Fully diluted earnings per share (2) $ .44 $ .16 $ .77 $ .50
(1) Computed using the average market price during the related period.
(2) Common stock equivalents had an immaterial dilutive effect.
(3) Computed using the higher of the average market price during the related period and the
market price at the end of the related period.
