Free Appendix - District Court of Delaware - Delaware

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put into the computer. And we know how long it takes to band. So all yo u do is input the size of the pad and it will give you the cost per thousand. If it's $20 for 1,000 , and the re is 10 0,00 0 pads, it's $2,000. So he's been reimbursed fo r the ma terial, reimbursed fo r the labor, reim burse d for the twine, plastic and shrink wrap. B ut if he doesn't run them as fast as he should for whatever reason, he's only going to be paid the standard co sting. If he beats the estimate, it goes to the Paper Company's profit. If it cost him $1,700 and the estimate was 2,000, $300 goes to the Pap er Compa ny. We try to be as accurate as we can. I know the case that you are trying to pro ve. But that is exac tly why the two com panies were organized the way they are. They are separate. They have separate costing systems. Paper Com pany is losing money and the Packaging Company is making money. If you were the owner, you would want to know how much the Paper Co mpany is making or losing. You dump it all together and you don't know where you are. You know what the b ottom numb er is, but who's making the money and who isn't? Q. So if say, for examp le, if the Paper Co mpany buys seconds and they aren't sold, the loss then goes to the

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Paper Co mpa ny; is that correct? A. They're basica lly, it's either sold or baled. We -- I didn't agree with the general manager's de cision, but we once bought and still have some quarter of a million Mountaire poultry lids, white and red and blue printing. We bo ught them for $2 0 a thousand. And he is selling them to fish people, even though it says poultry, at $300 a tho usand . But I would have never, ever myself taken eight loads of something that's going to take you three ye ars to get rid of. So it's either cut into pads -- we also make what's called tree liners. Nurseries right about this time of the year are, I guess, planting small seedling s. And I never knew it, but dee r love to nibble on tho se. So we run some of the m aterial out of wax coa ted board , which will withstand rain and snow. It won't com e apa rt. And they will put these around , I guess, m aybe up to 2 4, 30 inches high o n the small part of the tree. So it's either going to be so ld or b aled o r cut into something. W e have custom ers that will take pad that says Perdue. They do n't care. Perdue does. Q. B ut if paper buys seconds, boxes, for exa mple -A. We are talking abo ut these big boxes? Q. Y eah. -- and they are not sold --

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A. But they get sold. I won't say it's an elastic

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market. It's a very good market right now because of the high cost of petro leum. S o we get calls -- I say we, Paper Company, Packaging, will get a call out of the blind, hi, do you handle bolt boxes? Yes. Now you have to describe them. I say, where did you get our name? From so and so. So our name gets handed around. I would say we are the largest supplier of second big boxes and second po ultry and fish boxes. (Morgan Deposition Exhibit No. 4, Job De scriptio n, was m arked for identification.) TH E W ITN ESS: Could I ask a question? MS. CL ICKN ER: Tha t's rather unorthodox. MR . NEU BER GER : Do you need a break? THE W ITNE SS: N o. MR . NEU BER GER : Let's move on. BY MS. CL ICK NE R: Q. Can you identify Exhibit 4? W hat is this document? A. It's a job description of a general manager. Q. Fo r the Paper Compa ny? A. Co rrect. Q. Who created this? Do you know? A. I believe at T om's urging in the p ast year o r so,

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we decided that we were going to have a job description for everybody. So this task was delegated to Rose

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Grabowski who, in discussions with Gary Eberhard and then submitted to me for additions and deletions, I approved all the job descriptions. Q. Now let me back up. I'm still trying to understand the relationship b etween Packaging and Pap er. A. I know it's difficult because it's two different comp anies. B ut we overlap . We pro vide se rvices, b ut they are separate, rea lly separate organiza tions. B ut they do business back and forth. Q. So the pads that are created at the Paper C omp any for the Packaging Company are created only per specification per order from the Packa ging Com pany; is that correct? A. Yes. Because they are being sold to som ebo dy where that pad ha s to fit in the bo x. And the best example I can use is about 10 years ago when there was a paper shortage, we were getting calls from people we don't even know for pads. You look at the back of a photo. What do you call them? Picture frame. Picture frame s always use -- this is chip b oard . You see d irt, all the dirt and whatnot in it. Chip b oard was in sho rt supply. So they went to corrugated, which is more

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expensive. But if you have a picture frame that's 12 by 12, you've got to m ake it 12 by 12. Otherwise, it won't fit.

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So we have a numb er of custome rs where they are repeat orders, o nce a month, twice a m onth. So that most orders are run fro m a sp ecific purchase ord er. Either somebod y issued a purchase order to the Paper Company or somebody issued a purchase order to the Packaging Company. If it was issued to the Packaging Company, it will in turn issue a purchase order to the Paper Company with all of the data, the costs, the delive ry date, how to stack it, et cetera. But we sell some people, we sell four different people that sell 30 dozen egg cartons. So we are constantly getting orders. So at times -- we've never run out of work; although, somebody in one of the reports said we ran out of work. I don't think we ran out of work in ab out six or eight years. So if there is no order, then they'll run for inventory knowing that we will be getting an order. But it will be a specific size. Q. When Packaging has an order for pads, it goes to Paper and invoices paper for an ord er. Not invo ices. Excuse me.

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A. A purchase order. We issue -- Packaging issues a purchase order. Q. Is Paper p aid for that final product in any amount in add ition to this re imbursement for labor costs,

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overhe ad, fuel, machinery? A. No. Q. So, basically, Packaging is only paying Paper the cost of producing, its co st of pro ducing that product? A. W e refer to that as the direct cost. You wouldn't have that cost if you didn't have the pad. So that's why it's got ma terial, labor, et ce tera. Q. So there is no profitability into that sale for the Paper Compa ny? A. That is correct. Just as if Paper Company sold a trucklo ad of those b ig boxes, Packaging Comp any wo uldn't get anything. Q. B oxes that Pa per C omp any has purchased . A. Co rrect. Q. But not boxes that the Packaging C omp any has purc hased . A. We don't really buy very many boxes that go into the Paper Compa ny. He's the guy that gets a pho ne call. Like yesterday, we have two trailer loads from International Paper. They are in route to you. He

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unloads them, puts them in inventory. You've got another trailer at Weyerhaeuser. Your trailer is full. Come and get it and drop and empty. Q. Those are Pap er purchases, those prod ucts? A. Yes.

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Q. And if they sold by Packaging, Paper does not make a profit on them? A. That is correct. Q. Is Paper reimbursed for its cost of warehousing those products prior to Packaging selling them? MR. NEUBERGER: Prior to the sale? Q. Y es. A. No, because the items that are warehoused are really item s like these big bo xes and the wax bo xes that are generic and can be sold b y either co mpa ny. No w, at the end of December, there was $13,000 of Pa ckaging Company boxe s in inventory. And that's only because our largest count requires warehousing. If you do business with the p lastic compa nies, they can run 24 hours a day, 7 days a week. And they can ship by bulk rail, bulk truck, b oxes, bags. So they take an order on Thursda y afterno on. T hey are going to run it on Sunday. Y ou get an order to have boxes there the next day. A s part o f doing business with them, you must carry, in this

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particular case, one load of brand new bo xes. Q. So yo u are saying Packaging's largest acco unt requires warehousing because that account req uires instant availability? A. Because they will change our schedule. Now, we have another account, not quite as large, where we have

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been able to get our vendo r to warehouse. Nob ody likes to warehouse. You don't get paid for it. Yo u've got damage, ob solescence, et cetera . Q. I'm going to show you a document that will be marked Exhibit 5. (Morgan Deposition Exhibit No. 5, Schedule K-1 , was marked for identification.) THE W ITNE SS: I m ight add about P ackaging, Paper, in five prior years, I've worked for so me p retty good sized companies. I don't know that you've ever heard of M ead, but they are a huge co mpa ny. They got o ut of boxes now. Smart. But if a plant in Cincinnati had a branch plant of Procter & Gamble in their backyard, PG happens to be in Cincinnati headquarters, but there is a plant in Milwauke e, if there is a P &G plant in M ilwaukee, they will make like a national contract. You've got 10 locations. We've got 10 plants. And the profit on the order goes to national accounts. The local plant has to

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transfer at its cost. That's not uncommon. MS. CLICKN ER: I will just move to strike everything he said, this last business, because it's unresponsive to any question and really irrelevant to what is at stake here, b ut -BY MS. CL ICK NE R: Q. Let's look at Exh ibit 5.

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MR . NE UB ER GE R: Fo r the record, counsel, this has his Social Security number on it. I don't think this was in my appendix. I know he had tax stuff in there, b ut this is a K-1 Schedule. MS. CLICKNER: Do you have a black marker? Yo u can just black it out. MR. NE UB ER GE R: And on the seco nd page, too, right below the word "confidential," do you see it there? I think that's it, counsel. T hank you. BY MS. CL ICK NE R: Q. Can you identify this for the record? A. Yes. Q. W hat is it? A. Sha reholder's share of inco me, credits, deductions, et cetera. Q. Where are you reading? A. At the top, very top in the center.

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Q. W e have different -A. It's a Schedule K-1. MR. NEUBERG ER: This is 2002. MS. CLICKN ER: This is 2002 also but I have a tax return. MR . NE UB ER GE R: W hy don't you work off of this one and I will share this one? MS. CLICKNER: That's fine. I was going to

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ask about the tax return for the P aper C omp any. That's not the issue. (Thereupon, a discussion was had off the reco rd.) (Thereupon, a short recess was had.) BY MS. CL ICK NE R: Q. Mr. Morgan, can you identify this Exhibit 5? A. U.S Inco me T ax Return for an S C orporatio n. Q. And that's for P.T . Morgan Paper C omp any? A. Yes. MR. NEUBERGER: I'm sorry. We remarked it? Let's just change this to a 5 and keep the 5 the way it was. MS. CLICKNER: That's fine. This will be 6. (Morgan D eposition Exhibit No. 6, Tax Return for S C orporatio n, was m arked for identification.)

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MR . NEU BE RG ER: Fo r the record, this is Pages 157 through 162 since I don 't have a co py. BY MS. CL ICK NE R: Q. Is this an annual return or a quarterly return? Can you tell? A. Looking at the numb ers, it's annually. Q. And do yo u app rove the tax returns before they are submitted to the IRS? A. I sign them. But as you ca n see, they're done by

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a CP A. I loo k at the numbe rs, but I d on't study them. Let's put it that way. Q. Can you tell me on here where it reflects the cost that P.T. M organ Paper C ompany pays the Packaging Company for the administrative services, what line item would that be in? Do you know? A. I think it's under fixed cost. I would have to say I do n't see it. I know it's on the financ ial statements. But, obviously, this is the first time I've ever checked it. I will make the assumption that it's incorporated in some other line item. Q. B ut you d on't know where; is that right? A. I honestly do n't. Q. Do either of the companies, P.T. Morgan Pa per or P.T. Mo rgan Packaging obtain any sort of tax benefits for

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being a small business? A. No, not that I can think of. At one time we used to get waste out of D over Air Force Base, but not anymore. And we used to sell som e boxes to the U.S. House of R epresentatives. MR. N EUB ERG ER: The y buy trash? THE W ITNE SS: No, they were new. BY MS. CL ICK NE R: Q. Do you have any tax benefits for be ing a small business?

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A. Not that I'm aware of. Q. At any time during the existence of the two companies, has the Packaging Company and the Paper Com pany taken o ut joint loans? A. By joint, what are you referring to? Q. Both would be debtors on the same loan, both companies would be debtors on the same loan. A. I would say maybe a few times. Q. Do you recall when? A. That's a little difficult to answer that one only because our original bank was Maryland National Bank, who in the '90s went under. Actually, they started at MBNA here. And it became Nations Bank. And then a couple years ago, Nations Bank merged with Bank of America. So

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Bank of Am erica is who we have now. So from the days of almost a handshake to get a loan in the '80s, they were constantly changing the loan pa pers. B ut it used to be, at o ne time, that Packaging guaranteed the Paper Company. At least I believe so. I don't know how -- I guess maybe in researching some, that we were checking on -- could have been some information that you requested about a week ago. I was looking to see when the loans expired. On the line o f credit where we do n't have to repay every year, all we do is pay interest. And I believe that the

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latest is that the Pap er Com pany, of all things, is guaranteeing the Packaging loan. Q. Currently are you saying? A. I think so. I really, it's a question that I really don't like to answer because I'd rather not -- I'd rather say I don't know than give wrong information. And you've probably seen it that my wife and I have guaranteed all the bank loans. Q. What is the benefit for one company to, to one company, say to the Packaging Company, to guarantee a loan for the P aper Compa ny? A. Say it again. Q. What would be the benefit to the Packaging

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Company to take on that responsibility for guaranteeing a Paper Comp any loan? A. It could have been you either do it or the Paper Company doesn't get the loan. Nobody likes to guarantee a loan. I'm no t happ y that we're gu aranteeing. B ut if you are strictly a small business in dea ling with B ank of America, they d on't even know who yo u are. Q. So are you saying there is no benefit to Packaging Company to guaranteeing the loan of the Paper Compa ny? A. Only if that was a requirement for the bank to make the loan. If the bank said we're not going to give

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this line of credit of $10 0,00 0 to the Pap er Co mpa ny unless the Packaging Company guarantees it, obviously, we would guarantee it. Q. It's not obvious to me why you would guarantee it. So that's what I would like you to explain on the reco rd. A. My wife and I, a few years ago, used to make a lot of money in the Paper Company. And if somebody said you either guarantee that loan or we are not going to loan you, it would be silly to cut off our nose to spite ourselves. Financial cond itions of o ur compa nies right now are no t what they were in 200 2.

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Q. Okay. A. I mean the bank put it in there. And we could have said, well, we are not going to sign it. They would say thanks and good-bye. Q. So it is you and your wife's decision to use the assets of the Packaging Company to guarantee the Paper Company; is that correct? A. Yes. I would say so. And don't forget that we're the ultimate guarantor of all the loans. Q. So it's your decision to use the assets of one com pany to maintain the b usiness, the profitability of the other compa ny? A. Well, there is also the intercompan y business

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that we talked so long abo ut. Q. Do you know -- have you met each of the complainants in this case, who are Anthony Mo ore, Patrick Moore, Carlyle Moore and Bernard Tingle? A. I do n't know tha t I have sh ook hands with eac h of them. And aside fro m Anthony Moore, I know everybody else. N ow, I d on't know if I passe d An thony M oore by himself on the sid ewalk that I would rec ognize him. B ut the others that would be a very good chance. Q. T hat you would recognize them if you saw them out of context?

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A. Yes. A nd I'm getting over to the Pap er Co mpa ny more o ften than I used to, num ber o ne, the p rofitability of the company with a new manager. Number two, because of the EEOC and the move and also the problems that those four people have created for us. Now, I don't discipline anybody directly. But I, nowadays, know what they are doing. A nd if you check your letters, you know what they are doing. Q. Well, let me ask you this: Has any of these four men ever sp oken to you to compla in abo ut any kind of harassmen t? A. Never. Q. Have any of these four men ever spoken with you one on one ever?

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A. No. No one has asked to. I have spoken to the other people, but, you know, not about the job they are doing or what. We've got some employees that go back to the first day that we o pened the doo r. Q. H ave -A. I will tell you that I have gotten a phone call, two phone calls from an employee other than the people that you've mentioned. And I do get phone calls from the team leader where he's looking for instructions on how to load a trailer or something. I'm more apt to talk with

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him, Jerry B roussard, tha n anybody else. Q. And is that a recent turn o f events o r has that always been the case, that you receive phone calls directly from employee s? A. Well, recen t other than Jerry Broussard. Q. Let's back up. W ho have yo u received phone calls from, what emp loyees at the Paper plant? A. Aaron W alls, probab ly Goode rmuth, but not recently in as much as Jerry Broussard is the team leader. Q. When did A aron W alls call you? A. He's called twice. Once. MR. NEU BERG ER: Excuse me. Was there a time frame or are you saying ever? MS. CLICKNER: I'm starting with ever and

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then we will get more rec ent. I want to know if this is going back to the '80s, '90s. MR. NE UB ER GE R: I just want to understand. Your question is have any of the employees of Paper ever called you directly? MS. CLIC KN ER: Y es. THE W ITNE SS: A aron, I'm guessing, abo ut maybe two months ago . He had worked for us, I think this is the third time no w. Bu t he was engag ed to get

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married . And he had walked off the job and lost his job. But the lady he was engaged to was working for us on the pad operation. And he called me and said, M r. Mo rgan, is there any possibility I can get my job back? And he said my wife nee ds to go back to school to get her degree. I'm assuming high school. And I need a job so that she can go back to scho ol. So I only talke d to him one tim e. Although, he called me a co uple tim es. But I'm, unfortunately, not readily available with everything that's on the table right now. So I try, as I've mentioned before, to use a chain of command. I don't criticize people in front of other people. And it really was not my decision whether to take Aaro n W alls back or no t. That was the genera l manager's. So I called the general manager and I said

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Aaron Walls called me. And I told him why he wanted to com e bac k to wo rk. I said, Gary, that's your decision . I'm never happy with people that walk off the job or do other things that are no t kosher. So I d idn't give G ary any instructions. A nd he hired him back. Then as the continuing p roblem that exists with some employees, Aaron Walls almost came to fisticuffs with -- Aaron W alls happens to be white.

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Some of the p eop le I can remembe r their names. BY MS. CL ICK NE R: Q. Yo u shou ld have a list here. A. Yeah. There is Jennifer Walls on there, Bernard Tingle. About a week to 10 d ays ago, the team leader needed some help on the balers. And the way it was told to me by Aaron was that he volunteered to go back and work on the baler. And when he got back there, the vulgarity spe wed out of B ernard T ingle's mouth like a lo t of other people that we have. And it almost came to fisticuffs. Both of those employees were suspended for the da y. I got a ca ll from A aron W alls and he said, M r. Morgan, I just want to tell you, I didn't start that. They, who I won't identify, feel that I've filled Gary in on the problem with Carlyle Moore and the other Moore boy, who Carlyle was listening to the Ipod. You've got a

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cop y of that letter so you know what happe ned. So they figured that Aaron told Gary about it. And -Q. Is this recent? MR. NE UB ER GE R: W ait a seco nd. I don't think she has a copy of any letters of things you've given me. Y ou're proceeding on a ssumption he re. She's asked me to look into so me things and I've done that.

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You gave me letters. I'm your lawyer. She can ask you whatever she wa nts abo ut any incidents. I haven't necessarily turned anything over to her at this time. So you are under a misconception here. TH E W ITNE SS: Ju st from o ne of her letters, it sounded like she got a phone call the next d ay. MR. N EUB ERG ER: Tha t's fine. She can ask you about where you found out about it. TH E W ITN ESS : So I said, well, Aaron , that's a decision that Gary has made. We are not going to have any kind of fighting. And, yeah, he may have called you some nam es that he should n't have and threa tened you. But what is done is done. And Gary has made the decision. And the only other employee recently would have been Jerry Broussard. But he, generally, is calling for specific instructions of what to do next or how to load this trailer, the jump we go t on a trailer. But he,

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generally, adds on some comm ents about when some thing is going to be done ove r here. BY MS. CL ICK NE R: Q. W hat do you mean b y that? A. Well, all I can say is too bad you don't have some of the letters. W ould you allow an employee to be

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late 17 times in 30 days? W ould you allow -- I can't think of his -- Patrick Moore yesterday was disciplined and walked off the job. Generally, you get terminated for that. Those are the kind of antics that are occurring for the people you are representing. And those are the only phone c alls. Q. So is it your testimony that, for example, in 2002 and 2003, no employees from the Paper Company called you for any reason? A. Not really. If they did, it would have been either Jerry or Do ug G ood ermuth. No t complaining about peo ple but asking how to solve this problem, whatever it was. But anybody can stop me any time I walk through the p lant. W e held a Christmas luncheon right before the holidays. And all the employees except one showed up. I take that back. They all showed up. The one guy showed up, hadn't been to wo rk in the m orning. And after lunch, he didn't com e to wo rk then.

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So there has been opportunities. I like to use the phrase "an open door policy." Somebody can stop me. They can call me on the phone. They may get an answer that they don't like. But I can be approached. Q. Is it your understanding that your telephone

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number in M aryland was easily accessible to all employee s at the Paper C omp any? A. The com pany numb er is always -- I won't say always but during working hours. Q. But how would Paper employees know what the company number was, where you could be reached? A. I can't answe r for the w hole group of people, but, certainly, Jerry Broussard, D oug G oodermuth, perhaps Roy James. I don't know if the Packaging Company number is posted. B ut they co uld certainly ask so meb ody o r call information. Q. Is it your testimony that if an employee had a claim of harassment say in 2003, that it was proper and acceptable for them to call you rather than go, for example, to Gary Eberhard? A. I would say, again, you wou ld go up the chain o f command. If you have a complaint, then it should be voiced to the team leader. If it's not handled to your satisfaction, then yo u can go to the general manager. And if it's not handled satisfactorily, it would come to

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me. Q. N ow, that's your opinion. W ere the emp loyees at the Pape r Com pany ever told that process? A. I would think not, but they would certainly know

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to go to the general manager. Q. That wasn't my question. My question is: Would they know to go to you? A. Some would and som e would no t. Q. And correct me if I'm wrong, but it's your testimony that the proper, they should go through the chain of comm and before going to you; is that correct? A. Yes. Q. But that was not written anywhere or there is no poster saying that? A. Uh-uh. Q. Is there a poster today telling people what to do if they have a claim of harassmen t? A. I persona lly do no t know. I know that immediately after the incident the re were posters that went up. But, unfortunately, there are some peo ple that work for us that tear things down and p ull the UPS labels off of boxes. So I don't know whether there is a poster there to day. Q. Well, what do you mean when you say the incident? What are you referring to?

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A. You wo uld have to d escribe in what context. Q. You just used the term, I know that after the incide nt posters were put up.

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A. Oh, the charge of racial harassment that was made and served on us b y Mark M add ox. Q. The EEO C charge? A. It was the day, I believe, that he came down to talk with the employees that were involved and he had a meeting with individual employees. He had a meeting with Doug Goo dermuth and myself and Gary Eberhard. Then I believe that the meeting continued with just the three of us. Q. Let's back up . A. So subsequent to that, there was a meeting held with employees and, I believe, posted on the bulletin board -- actually, there were two meetings with emp loyees that that type of harassment would no t be tolerated. Doug Goodermuth was told if it ever happens again, he would be discha rged. Then just last week, someone started talking abo ut harassment beca use D oug G ood ermuth supp osed ly whistled Dixie. But he can't whistle. Q. The charge of harassment relates to two things, a general racially hostile environment and an incident where Doug Goodermuth allegedly showed Anthony Moore a

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nigger application. Is that correct, is that how you understand it?

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A. Yes. Q. Do you know when the nigger a pplication inc ident occurred? A. I can't give you the exact day. But it wo uld be, I'm guessing, May to June of probably '94. Q. '94? A. 2004. Q. I think the evidence of record and in the charge is that the incident happened in November of 2003. And Mr. Anthony Moore quit working in February 2004. A. You are probably correct. It did not get known to me until it was warm in 2004, May, June, somewhere around there. Q. So it's your testimo ny you d idn't even hear about the incident until you received a copy of the EEOC charge; is that co rrect? A. I don't know whether I got a phone call -- I believe I got a phone call first from Mark Maddox. And then, perhap s, was give n the papers at the meeting tha t we had with him or right after the phone call maybe befo re the m eeting. I'm p retty sure that my first knowledge of it was a pho ne call. Then I contacted Gary Eb erhard imm ediately.

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Q. And what did Mr. Ebe rhard tell you?

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A. He said I had Anthony in the office and I said are you okay. He said throw it way. Crumple it up and throw it away. Are you okay with it? He asked him twice, I think. Are you okay with it? And I would have surmised that he said yes because he left the office. Q. Were you surprised that Mr. Eberhard had not told you about that incident prior to your notice from the EEOC? A. I will say kind of yes and no. I have been a produ ction manager myself. And I kno w that incidents occur and that's the end of it. Inasmuch as the guy had a meeting with the gene ral manager and, apparently, indicated that he was okay, and then the guy quit in No vember. I guess if I were in those shoes, I'd guess it passed over. MR. NE UB ER GE R: W hat did you say? A. Passed over. I mean, it occurred. We had a meeting. As far as we're concerned, the guy quit. He wouldn't answe r the phone. We, subsequently, when we go t in the following Monday, he was already working for W al-M art while he was, q uote, sick. Q. Did Mr. Eberhard tell you that he had done anything else about the allegation or the complaint other than speak with Mr. Moore?

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A. Well, I don't know. But I would assume that he spoke with Mr. Goodermuth too. Q. I don't want your assumption. I just want to know what you know or what he told you that you recall. A. I told you what I recall of the conversation. Q. And then you said after you became aware of the allegation, you called Mr. Eberhard. Did you talk to Mr. G ood ermuth yourself? A. Directly, no. Q. So who did? MR. NEUBERGER: You mean at that time? Q. At that time, who did? A. Eberhard. Q. And Mr. Eberhard told you that he had spoken to M r. Go ode rmuth, correct? A. I can't say that he said that he spoke with M r. Go ode rmuth, but I do kno w that I wa s mad e aware of what o ccurred. Q. Meaning what, what occurred where? A. Well, I was notified in May that something occurred the prior year. And the employee had worked and then d idn't work and sa id he was sick and then already had a job at W al-M art. That was all that I was aware of until the EEOC.

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Q. And when you received notice from the EEOC of the charge, you said you spoke with Mr. Eberhard. Did you direct Mr. Eberhard to do anything about the charge? A. I don't believe so beca use I wa s waiting to get the details. I b elieve M ark M add ox set up an appointment with me to meet at the Paper Company. So I was not aware of how se rious the situation was and what ac tually happened . Q. So when you previously testified that Mr. Eberhard o r that somebody spoke with Mr. Goo dermuth and told him if it ever happened again that he'd be fired -A. That was Eberhard. Q. But how do you know that? Do you know that from read ing do cuments in this ca se or d id M r. Eberhard tell you he said that or did M r. Go ode rmuth tell you that? A. No, Mr. Goodermuth didn't. No, it would have been Eberhard. Q. How do you know that Mr. Good ermuth had been chastised in some way or warned? A. Because I was told by Mr. Eberhard. Q. Do you know if Mr. Eberhard disciplined M r. Go ode rmuth in any other way? A. I don't believe he did.

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Q. Do you know if he put anything in his file, like any written warning or anything in his file? A. I don't know. Q. Do you know that in December o f 200 3, Mr. Go oderm uth was given a $5 00 bonus? A. Yes. Q. And if you had know n that he had b een accused of what you knew after that, would you have approved the $500 bonus for him? A. What was the time period again? Q. The charge, the incident complained of regarding the application occurred in November, 2003. So I'm talking about -A. True. T hen I was not aware of it. Q. M y question is: If you had been aware of that, would you have approved a bo nus for Mr. Good ermuth in December of 2003? A. Pe rhaps. But it wo uld have be en cut. Q. Have you ever hea rd that M r. Goo dermuth was charged with racial discrimination while he was in the service? A. No. Q. So subsequent to you finding out, you said you had a me eting with the employee s?

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A. Yes. Q. Do you remember when that occurred? A. It would have been sometime in close proximity to when the meeting was held with Mark Mad dox. Q. Do you recall if it was be fore or after that? A. It was after the meeting. Q. After the meeting with Mark M addox? A. Uh-huh. Q. No w, when you m et with M r. Madd ox, did you meet with him alone or did you meet with him in a group with Mr. Eberhard and Mr. Go odermuth? A. Initially, it was the four of us. Then I believe that Goodermuth left and the meeting continued with the three of us. Q. And did you hear Mr. Goodermuth admit to Mr. Maddox that he did, in fact, make racial jokes in the workplace? A. Yes. Q. And did you do anything about that? A. I did n't do anything. It was the general manager's, who is the first in line for the responsibility. Q. D id you say anything to G ary Eb erhard about that? A. Yeah.

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A. We can't have these kind o f things going on. Q. And what was his response? A. I agree with you. It's not going to happen again. (Morgan Deposition Exhibit No. 7, Letter to Mr. Madd ox Dated June 5 , 2004, was marked for identification.) BY MS. CL ICK NE R: Q. Let me give you a d ocument marked E xhibit 7. Take a mom ent to look at that. Can yo u identify this document? A. It's a letter that I sent to Mark M addox. Q. Dated June 15, 2004? A. Co rrect. Q. Mr. Maddox, is he an investigator for the EEOC? A. Co rrect. Q. And attached to this letter are answers to questions that Mr. Madd ox had po sed to the Pa per C omp any; is that correct? A. After Mr. Goodermuth left, Mr. Maddox said I'm going to give you a questionnaire that I would like you to complete and send it back to me by a certain date. I don't recall the date. I told Mr. Eberhard to complete

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the app lication himself. Q. To answer the questions you mean?

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A. Yeah, answer the q uestions and forward it to me. And I proofread it and may have changed the spelling or diction or something, but not any facts, hard facts. Q. So you have appro ved what is in these answers; is that correct? A. Yes. Q. On the last page, Paragraphs 15, it says that our company is minority owned. W hat does that mean? A. Wo men are considered a minority, I think, by the federal gov ernment. Q. Okay. Is that what that means? A. Yes. I hate to say it, but that's the truth. Q. So P aragraph 5, it indicates that Mr. M addo x's visit was o n M ay 5th, 2 004 . Does that sound about right to you? A. Yeah. I said earlier May or June. Q. And it said, "W e have no written policy. It's verbal only." It says, "W e do co nduct team meetings covering this and other subjects." Do you know whether that's true or not true? A. Well, I believe that it was probably only a verbal policy. But we never had a complaint when Gene

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Fox was there. So I would think that it was, that there was no written po licy. Q. The question is: Do you know if there were team

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meetings cove ring, quote, this and other subjects? Now, I'm assuming that is referring to racial harassment. The question is: Do you know for sure of your own knowledge whether team m eetings covered issues of racial harassment? A. No. Q. D id you ever tell your general m anager that he, either Mr. Fo x or M r. Eberha rd, should b e covering this subject in team m eetings? A. Certainly not Mr. Fox beca use co ntrary to one o f the Mo ore bo ys' statements, racial harassm ent was occurring b efore Gary Eberhard. And that's the first time I had heard that. And M r. Fox, somewhere in this pap erwo rk it states they com plained to M r. Fox about it, Anthony Moore. And there was -- we contacted Mr. Fox who lives and wo rks in Sm yrna. And there was never any racial harassment charge. And Doug Good ermuth was there befo re Anthony M oore and after. Q. Now, are you aware of Delaware's state law regarding harassment in the workplace? A. I can't say that I am. I assume there is, but

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I've never seen a written po licy. Q. Are you aware then that, under Delaware law, you would be liable for this kind of conduct because you have four or more em ployees?

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A. No, I was no t aware of that. Q. Are you aware that Delawa re law requires emplo yers of four or m ore emplo yees to p ost anti-harassment signs? A. No, I'm not. MR. NEU BERG ER: For the record, I want the reco rd to reflect that I d isagree with any legal conclusions found in your questions, the last two. BY MS. CL ICK NE R: Q. Paragraph 10, it says, " Bo th named ha rassers, that would be M r. Gooderm uth and Mr. Eberhard , are in management." Is that true? A. No. It's a misnomer. Gooderm uth was not in managem ent. Q. In 2002 and 2003, would it have been appropriate for Mr. Eberhard to tell Paper employees that they could not call you to com plain about things? A. First of all, I don't believe that he was there in 2002 . I believe in 200 3, the two general managers overlapped until the 1st of the year. And your question

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again was -Q. W ould it have been appropriate for a general manager to tell a P aper emp loyee that they co uld no t call you to complain about things, that they needed to go through the general manager?

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A. No. Q. No, it would not have been appropriate? A. It would have not -- if someone wanted to contact me, they should be able to contact me. If there were instructions out there never to contact me, I'm not aware of it. Q. And subsequent to your becoming aware of the EEOC charge, did you create a harassment policy for the Paper Compa ny? A. I do n't know the re was a long-blown policy. But I believe that it, there would have been something posted about racial harassment. Plus, there had been two mee tings about it. Q. Two meetings. Did you attend both of those meetings? A. I believe just one. Q. How do you know there was a second meeting? A. The only thing I have is what I was told by Mr. Eberhard that there was a second meeting.

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Q. Have you ever been informed that Mr. Goode rmuth had no t received an d signed for a copy of the harassment policy? MR . NE UB ER GE R: I'm sorry? I d on't understand your question. The EEOC charge? MS . CLICK NE R: No. W e'll mark this d ocument

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8. (Morgan Deposition Exhibit No. 8, Letter to All Employees D ated August 3, 2004, was marked for identification.) BY MS. CL ICK NE R: Q. Can you identify this document? A. It's a memo that was issued to employees and pro bab ly posted on the bulletin board. Q. Did you draft this memo? A. In looking at the wording, I doubt that I drafted it. But it was probably taken from some other source and we decide d to use it as our policy on racial harassme nt. I mean, we may have been given something. We may have gone to the internet. Rose is very active on the internet where HR policies are d rafted a nd you can get posters and whatno t. But I would not have started it from scratch. Q. Did you adopt this as the policy for the Paper

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Company? A. Yes. Q. Yo u signed it at the bottom; is that correct? A. Yes. Q. Also on the second page is the signature of Carlyle M oore, 9/1/04; is that correct? A. Correct.

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Q. To your knowledge, was every employee of the Paper C omp any given a copy of this? A. I do n't honestly know. T hey sho uld have be en. And I believe it was posted on the company bulletin board. Q. Was there a policy for every employee to receive a copy of this and sign for it to put it in their personnel file? A. I believe it was, yes. Q. And do you know whether M r. Gooderm uth has ever received a copy of, signed for a copy o f this? A. I don't know for sure. I assumed so. But there was something that occurred right around here in, I believe, early September. He had a heart attack at the plant. And he was out from this period in September until January, I believe, '05. Q. D o you know if he has ev er been given a copy of

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this to sign for and have it plac ed in his perso nnel file? A. I don't know that, no. Q. W ould it bother you if he had no t received a c opy of this policy? A. It would bother me, but I would think that he's gotten the message. Q. Well, what does it mean to get the message?

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A. If you are told if it ever happens again yo u will be fired, that's a very strong message. Q. So if there is no copy of a signe d, a policy signed by M r. Go ode rmuth in his personnel file, is it safe to a ssume that he ha s not signed for a copy of it? A. I wouldn't say a hundred percent, but it would appear to. Q. H ave yo u received any other com plaints o f harassment since the complaint by Mr. Anthony Mo ore in Novemb er? A. Have I re ceived -Q. Has the company? MR . NEU BER GER : You mean except what you sent over to me and I sent to him? MS. CL ICKN ER: Other than my letters to you. THE W ITN ESS : Only one that I've seen is

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whistling Dixie. BY MS. CL ICK NE R: Q. And when you say there wa s something p osted at the Paper Company, is this document what you are referring to? A. Probably, but I can't say for sure. Q. Now, this document says that it would be appropriate for a complaining employee to call any member of mana gement, includ ing the comp any president; is that

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right? A. Yes. Q. And yo ur number is not bolded here in any way; is it? There is an accounting number at the top of the paper, but there is nowhere here that says what is the phone number to call you at; is there? A. No. If someone were working there, they would know that there is no acco unting d epartment in Smyrna. Therefore, they should go to the phone number that's near the head of the letterhead on the right-hand side, the numbers fo r Smyrna. Q. For the accounting department of P.T. Morgan Paper Com pany, right? It doesn't say that that's your pho ne num ber; d oes it? A. No.

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Q. And the employees, for ex amp le, the hourly employees such as Mr. Anthony Moore and Mr. Carlyle Moore and Mr. Patrick Moore and Mr. Tingle, they wouldn't know about the management structure of the P ackaging Comp any; would they? A. You mean the organization chart? Q. Yes. A. Well, they would know that I am G ary Eberhard's boss and next in line is Gary Eberhard. Q. But they wouldn't know that you work at the

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acco unting o ffice in Severna Park; would they? In fact, there was no ac counting office in an Severna Park; was there? A. We had m oved by that time. But the pho ne numb ers are for Arnold. Q. But do you have any reason to assume that the employees that I just mentioned w ould kno w that that was the ph one numb er to reach yo u at? A. I would make the assumption that if somebody were trying to get ahold of me, and I would start there. Q. That's what you would do? A. That's what I think most people would do. Q. Have you ever disciplined Ga ry Eberhard for his handling of the complaint by Anthony Moore?

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A. Other than saying we can't allow this to occur in the future. Q. Do you consider that a discipline? A. You pro bably have to do with the manner in which it was spoken. Q. You are saying these are words you spoke the Mr. Eberhard; is that true? A. Yes. Q. What manner did you use when you spoke those words to him? A. In a very stern manner.

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Q. Did you put anything into his personnel file? A. No. Q. And did you dock his -A. No. Q. -- bonus for 2 004 because of this incident? A. No. Q. Does Gene Fo x still have any kind of interest in the Paper Compa ny? Is he a vice presid ent or a nything o f the Paper Company? Was he ever a vice president of the Paper C omp any? A. Not -- I don't believe so, no. Q. Do you know why Dunn & Bradstreet reports that he is a vice presid ent of the Pap er Co mpa ny?

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A. No, I don't. Q. Have you ever heard Doug Goodermuth make any kind of racial jo ke or stateme nt or co mment? A. No. Q. Have you ever heard him make comments on the type of food that African-Americans eat such as referring to watermelon or fried chicken? A. I think the only time was in the meeting with Mark M addox. Q. If you had heard that he ha d ma de so me, a comm ent about African-Americans eating watermelon or eating fried chicken, would you have thought that was appropriate or

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inappropriate? A. I would have to hear it in the context of him talking ra ther than just lifting a phrase o ut. Q. So you don't have an op inion, at this tim e, whether him com menting on the type o f food that African-Am ericans eat wo uld be a violation of the P.T . Morgan policy; is that true? A. Say that again. Q. If you heard D ouglas G oodermuth ma king comments about the kind of food that African-Americans eat, such as watermelon or fried ch icken, would you think that that was a violation of the P .T. M organ anti-harassme nt

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policy? A. I couldn't answer it unless I heard the c ontext. That's the very first time I've ever heard tha t. I mean, my family eats chicken and my family eats watermelons. I don't think it's restricted to any race. It would -- I would have to hear it in the context of other than asking me a question like that. Q. Are yo u saying to me that you've never heard tha t it's derogatory, that people m ake dero gatory com ments about African-Americans in terms of them eating watermelon and fried chicken? A. Never. Let me tell you a little story about my background. It goes back a ways. But when I became a

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cadet, you walk in one door with your clothes on and you give up all your jewelry, all your money. You have a picture taken of your body in a supporter only. You are given a T-shirt, a pair of shorts and gym shoes and told to rep ort out that door. Plus, you have a little carry on bag. They say report to the male or female -- there were no females at that time -- who is wearing a red sash. And that's when they light into you. Eventually, they say go down and see C aptain Drummond and point you in the right direction. Do you remember the radio show Bulldog Drummond? Okay. In the

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'40s and '50s. Anyway, it was a burly red-haire d cad et captain. And after going through the standard of asking you something, then everything has to end in sir. You are either no, sir, yes, sir, no excuse sir. M organ, drop your bag. So I put the bag down on the -- he said I told you to dro p the b ag. After we went through that routine, he started, Morgan, do you have any racial prejudices? I said no, sir. He asked me three times. A nd I said no, sir. I was assigned a room on the second floor. When I got there, I had a black roo mmate. He was p retty sharp . He had been in the Air Force for three years. He knew how to put a uniform on. He knew how to spit, shine shoes that you take your two fingers at your waste and

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see the reflection in your shoes. And he was a great roo mmate. MR. NE UB ER GE R: Jim, maybe we are just going -THE W ITNE SS: O kay. En d of story. MR . NEU BER GER : That's enough. THE W ITNE SS: A nyway, I d on't have racial prejudice. My ranger bud dy was black . The people I went to pa rachute school were black. People I went to flight school were black. Some of my best friends were black

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and bosses. I forget to tell you, he quit. And you know why he quit? Because a black senior rode him day and night. Every time he saw him, he stopped him. He later sued the Army, later sued the Air F orce for racial discrimination. E nd of story. BY MS. CL ICK NE R: Q. Have you ever heard of Mr. Goodermuth make references to a plantation? A. The only time I've heard p lantation is Hillary Clinton. No. Q. Hillary Clinton? A. M artin Luther K ing Day? (Thereupon, a discussion was had off the record.)

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THE W ITNE SS: I kn ow what a plantation is,

BY MS. CL ICK NE R: Q. If you heard Mr. Goodermuth talking about a plantation to the black employees, do you have any idea if that would be offensive to them? A. I would know now. I wouldn't have known before Martin Luther King Day, 10 days ago, two weeks. Never heard any reference to that. And I was in Alabama when

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Martin Luther King made the walk to Selma. So I remem ber. Q. Did you ever hear that M r. Go ode rmuth, if Mr. G ood ermuth had referred to b lack em ployees as crows, do you believe that that would have been offensive to them? A. Yes. Q. W ould that have violated your current po licy? A. It would, yes. Q. Does the Pap er Com pany plant downsize its operation when it moves? A. Not currently. Q. Where is the new location? A. Two miles. Q. Do you have any idea why Gary Eberhard has a stack of blank termination forms?

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A. W e have n't terminated anyb ody -- we ll, take that back. No. No, I don't. Where does he keep it? Q. T hat I do n't know. A. I'm sure he's got them, but I don't know where they are. MS. C LICKN ER : Give me ab out five m inutes. (Thereupon, a short recess was had.) MS. C LICKN ER : I have no mo re questions.

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MR. NEU BERG ER: I thought I must have had a few. Let me just take a minute. EXAMINATION BY MR. NEUBERG ER: Q. Jimmy, I did have just a couple questions. You had put on the record a little earlier the sales figures for the Paper Compa ny for the years 2002 , '3, '4, and '5. They were a little bit over a million, a little bit under the million. Maybe for the Packaging Com pany, if you have a mem ory of -A. For what years? Q. We'll just try to take '5, then '4, then '3, then '2. The Packa ging, do you have some idea of what its, on the tax return, gross sales or whatever? A. That wo uld be gro ss sales. Q. Ordinary income for the business. A. '05 would be ab out five m illion. For '4,

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four-and-a-half. Three million -- I mean, '3, eight million. For '2, 75. Did you want for '1 too? Q. No. And this may or may not be clear on the record. That's why I wanted to ask you. You were explaining how Rose being present at Paper, you had talked about that. A. Right.

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Q. And am I correct that one of the reasons why you explaine d she was at P aper more than norm al was tha t she's involved in gathering data related to the lawsuit? Was that one of the things you talked about? You mentioned two situations she's over there more. A. This situa tion and -Q. This situation m eaning the lawsuit? A. Right. And the other one is the move from an old building into a brand new and where you are promised something and the deve loper or builder sa ys that's not what I said. Q. O kay. T hat's fine. A. And that's a lot of it right now. MR . NEU BER GER : That's all the questions I have, counsel. MS. C LICKN ER : Tha nk you. You are d one. (Thereupon, the deposition concluded at 4:40 p.m.)

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----INDEX TO TESTIMONY

JAMES MORGAN 22 23 24 Examination by Ms. Clickner Examination by Mr. Neuberger -----

PAGE 2 139

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INDEX TO EX HIBITS MORGAN DEPOSITION EXHIBIT NO. PAGE

1, Notice to Employees, Simple IRA......... 51:17 2, Paper Compa ny Organiza tion Charts....... 65:5 4 3, Handwritten Notes....................... 72:7 4, Job Description......................... 95:10 5 5, Schedule K-1........................... 100:12 6, Tax Return for S Corporation........... 102:23 6 7, Letter to Mr. Madd ox D ated J une 5, 200 4 12 3:6 8, Letter to All Emp loyees................ 128 :8 7 8 9 10 11 12 13 14 15 16 17 18

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 BY THE DEPONENT. COMPLETED AND SIGNED AFTER IT HAS BEEN WITH THE ERRATA SHEET REPLACE THIS PAGE

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State of Delaware ) ) New Ca stle Co unty ) CERTIFICATE OF REPORTER I, Anne L . Ada ms, Registered Professio nal Reporter and Notary Public, do hereby certify that there came before me on the 24th day of January, 2006, the deponent herein, JAMES M ORG AN, who was duly sworn by me and thereafter examined by counsel for the respective parties; that the questions asked of said deponent and the answers given were taken down by me in Stenotype notes and thereafter transcribed into typewriting under my direction. I further certify that the foregoing is a true and correct transcript of the testimony given at said examination of said witness. I further certify that I am not counsel, attorney, or relative of either party, or otherwise interested in the event of this suit.

Anne L. Adams Certification No. 105-RPR (Expires January 31, 2008)

DATED: January 27, 2005

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. ) ) ) ) ) Civil Action No. 04-1304 ) Judge Kent A. Jordan ) ) ) ) )

P.T. MORGAN PAPER COMPANY, an affiliate of P.T. MORGAN PACKAGING COMPANY, Defendant.

CERTIFICATE OF SERVICE

I, Seth M. Beausang, counsel for Plaintiff, hereby certify that on this 2nd day of February, 2006, a correct copy of the foregoing Commission's Supplemental Appendix was served by electronic filing:

Thomas S. Neuberger and Steven J. Neuberger Two East Seventh St., Suite 302 Wilmington, DE 19801-3725 Attorneys for Defendant

/s/ Seth M. Beausang SETH M. BEAUSANG, ASST. U.S. ATTORNEY